☒ | 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 one-third of one redeemable warrant | SCRMU | The Nasdaq Stock Market LLC | ||
Class A | SCRM | The Nasdaq Stock Market LLC | ||
Warrants, each whole warrant exercisable for one Class A | 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, 2023MARCH 31, 2024
TABLE OF CONTENTS
1 | |||||||
1 | |||||||
1 | |||||||
2 | |||||||
3 | |||||||
4 | |||||||
Notes to Unaudited | 5 | ||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
Item 3. Quantitative and Qualitative Disclosures | |||||||
Item 2. Unregistered Sales of Equity Securities and Use of | |||||||
ITEM 1. |
UNAUDITED | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
ASSETS: | ||||||||
Current assets: | ||||||||
Cash | $ | 437,163 | $ | 999,152 | ||||
Prepaid expenses | 78,082 | 158,142 | ||||||
Total current assets | 515,245 | 1,157,294 | ||||||
Cash / investments held in Trust Account | 804,228,813 | 794,750,266 | ||||||
Total assets | $ | 804,744,058 | $ | 795,907,560 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT: | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 6,458,295 | $ | 3,695,499 | ||||
PIPE with reduction right liability (1) | 19,399,127 | 18,253,010 | ||||||
Total current liabilities | 25,857,422 | 21,948,509 | ||||||
Warrant liability | 234,667 | 469,333 | ||||||
Deferred underwriting compensation | 8,925,000 | 26,250,000 | ||||||
Total liabilities | 35,017,089 | 48,667,842 | ||||||
Commitments and contingencies | ||||||||
Class A ordinary shares subject to possible redemption; 75,000,000 and 75,000,000 shares at $10.72 and $10.60 redemption value at March 31, 2024 and December 31, 2023, respectively | 804,128,813 | 794,650,266 | ||||||
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 and 18,750,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023, | 1,875 | 1,875 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (34,403,719 | ) | (47,412,423 | ) | ||||
Total shareholders’ deficit | (34,401,844 | ) | (47,410,548 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 804,744,058 | $ | 795,907,560 | ||||
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 | ||||
(1) | Equity linked contract that is classified as a liability given potential for variable share settlement at close of the Business Combination. PIPE reflects common equity in the pro forma, combined company post-close of the Business Combination with StudioCo (Note 10). |
For the three months ended September 30, | For the nine months ended September 30, | For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||
General and administrative costs | $ | 602,985 | $ | 411,769 | $ | 1,611,287 | $ | 1,204,953 | ||||||||||||||||
General and administrative | $ | 3,404,845 | $ | 540,513 | ||||||||||||||||||||
Loss from operations | (602,985 | ) | (411,769 | ) | (1,611,287 | ) | (1,204,953 | ) | (3,404,845 | ) | (540,513 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest from investments held in Trust Account | 10,111,278 | 3,235,822 | 27,340,680 | 3,540,845 | 9,478,547 | 8,079,826 | ||||||||||||||||||
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 | 234,666 | 469,333 | |||||||||||||||||
Change in fair value of PIPE with reduction right liability | (1,146,117 | ) | — | |||||||||||||||||||||
Net income | $ | 9,156,293 | $ | 5,288,053 | $ | 27,020,059 | $ | 17,217,043 | $ | 5,162,251 | $ | 8,008,646 | ||||||||||||
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 | 75,000,000 | 75,000,000 | ||||||||||||||||||
Basic and diluted net income per share, Class A ordinary shares subject to redemption | $ | 0.10 | $ | 0.06 | $ | 0.29 | $ | 0.19 | $ | 0.06 | $ | 0.09 | ||||||||||||
Weighted average number of Class B ordinary shares outstanding (1) | 18,750,000 | 18,750,000 | 18,750,000 | 18,750,000 | ||||||||||||||||||||
Weighted average number of Class B ordinary shares outstanding | 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 | $ | 0.06 | $ | 0.09 | ||||||||||||
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’ Deficit | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at December 31, 2023 (audited) | — | $ | — | 18,750,000 | $ | 1,875 | $ | — | $ | (47,412,423 | ) | $ | (47,410,548 | ) | ||||||||||||||
Waiver of offering costs allocated to Class A ordinary shares subject to possible redemption | — | — | — | — | — | 17,325,000 | 17,325,000 | |||||||||||||||||||||
Accretion of Class A ordinary shares subject to possible redemption | — | — | — | — | — | (9,478,547 | ) | (9,478,547 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 5,162,251 | 5,162,251 | |||||||||||||||||||||
Balance at March 31, 2024 | — | $ | — | 18,750,000 | $ | 1,875 | $ | — | $ | (34,403,719 | ) | $ | (34,401,844 | ) | ||||||||||||||
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 | ) | ||||||||||||||
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 (audited) | — | $ | — | 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 | ) | ||||||||||||||
For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 5,162,251 | $ | 8,008,646 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Interest income from investments held in Trust Account | (9,478,547 | ) | (8,079,826 | ) | ||||
Change in fair value of warrant liability | (234,666 | ) | (469,333 | ) | ||||
Change in fair value of PIPE with reduction right liability | 1,146,117 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | 80,060 | 82,583 | ||||||
Accounts payable and accrued expenses | 2,762,796 | 162,754 | ||||||
Net cash used in operating activities | (561,989 | ) | (295,176 | ) | ||||
Cash flows from investing activities: | ||||||||
Cash withdrawn from Trust Account for working capital | — | 250,000 | ||||||
Net cash provided by investing activities | — | 250,000 | ||||||
Net change in cash | (561,989 | ) | (45,176 | ) | ||||
Cash at beginning of period | 999,152 | 117,696 | ||||||
Cash at end of period | $ | 437,163 | $ | 72,520 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Waiver of portion of deferred underwriting fee payable for no consideration | $ | 17,325,000 | $ | — | ||||
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 | $ | 750,000,000 | ||||
Less: | ||||||||
Fair value of Public Warrants at issuance | (36,750,000 | ) | (36,750,000 | ) | ||||
Class A ordinary share issuance costs | (42,110,034 | ) | ||||||
Class A Ordinary Share issuance costs | (42,110,034 | ) | ||||||
Plus: | ||||||||
Accretion of carrying value to redemption value | 85,722,976 | 123,510,300 | ||||||
Class A ordinary shares subject to possible redemption, December 31, 2022 | 756,862,942 | |||||||
Class A Ordinary Shares subject to possible redemption, December 31, 2023 | 794,650,266 | |||||||
Plus: | ||||||||
Waiver of offering costs allocated to Class A Ordinary Share subject to possible redemption | 17,325,000 | |||||||
Less: | ||||||||
Accretion of carrying value to redemption value | 27,340,679 | (7,846,453 | ) | |||||
Class A ordinary shares subject to possible redemption, September 30, 2023 | $ | 784,203,621 | ||||||
Class A Ordinary Shares subject to possible redemption, March 31, 2024 | $ | 804,128,813 | ||||||
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 |
For the Three Months Ended Ma r ch 31, 2024 | For the Three Months Ended March 31, 2023 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income per ordinary share s | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 4,129,801 | $ | 1,032,450 | $ | 6,406,917 | $ | 1,601,729 | ||||||||
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 s | $ | 0.06 | $ | 0.06 | $ | 0.09 | $ | 0.09 |
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 |
Quoted Prices in Active Markets (Level 1) | ||||
Money market fund as of December 31, 2023 | $ | 794,750,266 |
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 a30-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 |
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Private placement warrants as of March 31, 2024 | $ | — | $ | — | $ | 234,667 | ||||||
PIPE with reduction right liability as of March 31, 2024 | $ | — | $ | — | $ | 19,399,127 |
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Private placement warrants as of December 31, 2023 | $ | — | $ | — | $ | 469,333 | ||||||
PIPE with reduction right liability as of December 31, 2023 | $ | — | $ | — | $ | 18,253,010 |
September 30 ,2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
Ordinary share price | $ | 10.46 | $ | 9.94 | $ | 10.70 | $ | 10.60 | ||||||||
Exercise price | $ | 11.50 | $ | 11.50 | $ | 11.50 | $ | 11.50 | ||||||||
Volatility | 3.5 | % | 31.0 | % | 40 | % | 45 | % | ||||||||
Term | 5.53 | 5.75 | 5.11 | 5.28 | ||||||||||||
Risk-free rate | 4.6 | % | 3.98 | % | 4.21 | % | 3.85 | % | ||||||||
Dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Probability of completing Business Combination (1) | 11 | % | 9 | % | ||||||||||||
Probability of completing Lionsgate Business Combination (1) | 94.9 | % | 91.0 | % | ||||||||||||
Probability of completing a different business combination | 0.6 | % (2) | 0.8 | % ( 3 ) |
Note: | The private placement will be forfeited for no consideration if the announced Lionsgate Business Combination is completed (estimated probability of 94.9% as of March 31, 2024). |
(1) |
(2) | Derived as follows: 11%*(1-94.9%), where 11% |
(3) | Derived as follows: 9%*(1-91%), where 9% represents the probability of completing a different business combination |
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 | ||
Level 3 Derivative warrant liability at December 31, 2023 | $ | 469,333 | ||
Change in fair value of derivative warrant liability | (234,666 | ) | ||
Level 3 Derivative warrant liability at March 31, 2024 | $ | 234,667 | ||
Level 3 Derivative warrant liability at December 31, 202 2 | $ | 3,285,333 | ||
Change in fair value of derivative warrant liability | (469,333 | ) | ||
Level 3 Derivative warrant liability at March 31, 202 3 | $ | 2,816,000 | ||
Inputs: | As of March 31, 2024 | As of December 31, 2023 | ||||||
Ordinary share stock price | $ | 10.70 | $ | 10.60 | ||||
Term (1) | 0.11 | 0.28 | ||||||
Risk-free rate of interest (2) | 5.37 | % | 5.20 | % | ||||
Probability of completing the Lionsgate Business Combination (3) | 94.9 | % | 91 | % |
(1) | Assumes the transaction closes on May 10, 2024 as of March 31, 2024 and April 10, 2024 as of December 31, 2023. |
(2) | Reflects 1-month U.S. treasury bill rate as of March 31, 2024 and3-month U.S. treasury bill rate as of December 31, 2023. |
(3) | Estimated by solving for the implied probability of completing the Lionsgate Business Combination based on the public warrant price and the contemplated exchange price of $0.50, adjusted for the time value of money. |
Level 3 PIPE reduction right liability December 31, 2022 | $ | — | ||
Issuance of PIPE with reduction right liability on December 22, 2023 | 18,797,300 | |||
Change in fair value of PIPE redu c tion right liability | (544,290 | ) | ||
Level 3 PIPE reduction right liability December 31, 2023 | 18,253,010 | |||
Change in fair value of PIPE redu c tion right liability | 1,146,117 | |||
Level 3 PIPE reduction right liability March 31, 2024 | $ | 19,399,127 | ||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
References in this report (the “Quarterly Report”) to “we,” “us”“us,” “SEAC” 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 StatementsSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (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 SECSecurities and Exchange Commission (the “SEC”) on March 1, 2023.February 29, 2024. 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.
OverviewOVERVIEW
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.businesses (the “initial business combination”). Our efforts to identify a prospective initial business combination target willhave not bebeen 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.
On January 10, 2022, the Company consummated the initial public offering (the “Initial Public Offering”) of 75,000,000 units (the “units”). Each unit consists of one of the Company’s Class A ordinary shares, par value $0.0001 per share (the “Class A Ordinary Shares” or “Public Shares”) and one-third of one redeemable warrant (the “public warrants”), with each public warrant entitling the holder thereof to purchase one Class A Ordinary Share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds of $750,000,000. Simultaneously with the consummation of the Initial Public Offering, we completed the private sale (the “private placement”) of an aggregate of 11,733,333 private placement warrants (the “private placement warrants” and, together with the public warrants, the “warrants”) at a purchase price of $1.50 per warrant.
Prior to the consummation of the Initial Public Offering, on November 5, 2021, the Sponsor paid an aggregate of $25,000 to cover certain offering and formation costs of the Company in consideration for 17,250,000 of the Company’s Class B Ordinary Shares, par value $0.001 per share (the “Founder Shares”).
A total of $750,000,000 comprised of $735,000,000 of the proceeds from the Initial Public Offering (which amount included $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 a trust account (the “Trust Account”). In accordance with the terms of the investment management trust agreement, dated as of January 5, 2022, by and between the Company and Continental Stock Transfer & Trust Company, as trustee (as amended, the “Trust Agreement”), the proceeds were invested in U.S. government treasury obligations with a maturity of 185 days or 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 until January 2024. On January 26, 2024, the Company amended the Trust Agreement, to permit Continental Stock Transfer & Trust Company (the “Trustee”), to hold the assets in the Trust Account in an interest-bearing demand deposit account or cash until the earlier of the consummation of an initial business combination or the Company’s liquidation. On the same day, the Company instructed the Trustee to liquidate the investments held in the Trust Account and move the funds to an interest-
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bearing demand deposit account, with Continental Stock Transfer & Trust Company continuing to act as Trustee. As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the Initial Public Offering and the sale of the private placement warrants are no longer invested in U.S. government securities or money market funds.
We intend to effectuate our initial business combination, including the Business Combination (as defined below), 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 aan initial 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 |
may subordinate the rights of holders of Class A ordinary sharesOrdinary Shares if preferred shares are issued with rights senior to those afforded our Class A ordinary shares;Ordinary Shares;
could cause a change in control if a substantial number of our Class A ordinary sharesOrdinary 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 sharesOrdinary Shares and/or warrants.
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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;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 sharesOrdinary 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,March 31, 2024, we had an unrestricted cash balance of $808,103$437,163 as well as cash and investments held in the Trust Account of $785,533,621.$804,228,813. 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
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Business Combination with StudioCo
On December 22, 2023, the Company, SEAC II Corp., a Cayman Islands exempted company (“New SEAC”), Lions Gate Entertainment Corp., a British Columbia company (“Lions Gate Parent”), LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of OperationsLions Gate Parent (“Studio HoldCo”), LG Orion Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of Lions Gate Parent (“StudioCo”), SEAC MergerCo, a Cayman Islands exempted company and a direct, wholly-owned subsidiary of New SEAC (“MergerCo”) and 1455941 B.C. Unlimited Liability Company (“New BC Sub”), entered into the Business Combination Agreement, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement (as amended on April 11, 2024 and as may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”) and the plan of arrangement (the “Plan of Arrangement”), (i) SEAC will merge with and into MergerCo (the “SEAC Merger”) with MergerCo surviving the SEAC Merger as a direct, wholly-owned subsidiary of New SEAC (the resulting entity referred to herein as MergerCo or, where specified, the “SEAC Merger Surviving Company”), (ii) SEAC Merger Surviving Company will distribute all of its assets lawfully available for distribution to New SEAC by way of a cash dividend, (iii) SEAC Merger Surviving Company will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Cayman Islands Companies Act (as revised) (the “Companies Act”) and the Business Corporations Act (British Columbia) (the “BC Act”) and convert to a British Columbia unlimited liability company in accordance with the applicable provisions of the BC Act, (iv) New SEAC will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and continue as a British Columbia company in accordance with the applicable provisions of the BC Act, and (v) pursuant to an arrangement under Division 5 of Part 9 of the BC Act (the “Arrangement”) on the terms and subject to the conditions set forth in the Plan of Arrangement, (A) SEAC Merger Surviving Company and New BC Sub will amalgamate (the “MergerCo Amalgamation”) to form one corporate entity (“MergerCo Amalco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, (B) New SEAC and MergerCo Amalco will amalgamate (the “SEAC Amalgamation”) to form one corporate entity (“SEAC Amalco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement and (C) StudioCo and SEAC Amalco will amalgamate (the “StudioCo Amalgamation” and together with the MergerCo Amalgamation and the SEAC Amalgamation, the “Amalgamations”) to form one corporate entity (“Pubco”), in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement. The Arrangement is subject to the approval by the Supreme Court of British Columbia under the BC Act. The transaction contemplated by the Business Combination Agreement, the Plan of Arrangement and all other agreements, certificates and instruments entered into in connection therewith, are referred to herein as the “Business Combination.” The closing of the Business Combination is referred to herein as the “Closing.”
Promissory Note
On May 7, 2024, the Company issued a promissory note to the Sponsor with a principal amount of up to $2.0 million to cover advancements made by the Sponsor to finance certain transaction expenses on behalf of the Company (the “Note”). The Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the Company’s Business Combination, and (b) the date of the Company’s liquidation. If the Company does not consummate a Business Combination, the Note will be repaid only from funds held outside of the Trust Account (to the extent there are any) or will be forfeited, eliminated or otherwise forgiven.
RECENT DEVELOPMENTS
Extension Meeting
On April 9, 2024, the Company held an extraordinary general meeting of its shareholders (the “Extension Meeting”), at which the Company received approval to amend its Amended and Restated Memorandum and Articles of Association (as amended, the “Articles”) to, among other things, extend the date by which the Company must consummate an initial business combination from April 10, 2024 to June 15, 2024. In connection with the Extension Meeting, holders of 57,824,777 Public Shares properly exercised their right to redeem such shares for cash at a redemption price of approximately $10.74 per share, representing an aggregate of approximately $620.8 million. After the satisfaction of such redemptions, the balance in the Trust Account was approximately $184.4 million.
Amendment No. 1 to The Business Combination Agreement
On April 11, 2024, the Business Combination Agreement was amended to, among other things: (i) upsize the private investments in public equities (“PIPE”) from $175,000,000 to $225,000,000; (ii) upsize the amount of aggregate transaction proceeds to be no greater than $409,500,000 and no less than $350,000,000, from the prior requirement of $350,000,000 in aggregate transaction proceeds; and (iii) based on the net cash in the Trust Account following the Extension Meeting, remove the provisions requiring cash to potentially be paid to non-redeeming holders of Public Shares as part of the merger consideration for their Class A Ordinary Shares, which requirement had been intended to limit dilution of Lions Gate Parent’s ownership in the combined company, and instead provide that the holders of Public Shares who do not redeem their Class A Ordinary Shares at the extraordinary general meeting of the Company’s shareholders to be held to approve the Business Combination will receive only common shares of Pubco (“Pubco Common Shares”) in exchange for their Class A Ordinary Shares on a one-for-one basis.
Additional PIPE Subscription Agreement
On April 11, 2024, the Company, Pubco and Lions Gate Parent entered into an additional Subscription Agreement (the “Additional Subscription Agreement”), pursuant to which an additional PIPE Investor agreed to purchase from Pubco an aggregate of approximately 4,918,839 Pubco Common Shares at a purchase price of $10.165 per share, for an aggregate cash amount of $50,000,000. The Additional Subscription Agreement is in substantially the same form as the Initial Subscription Agreement, expect that it does not provide the reduction right to the investor therein.
Non-Redemption Agreements
On April 24, 2024, SEAC and Pubco entered into share purchase and non-redemption agreements (the “Non-Redemption Agreements”) with certain investors, pursuant to which such investors agreed, among other things, to: (i) certify that they had purchased an aggregate of approximately $20 million of Public Shares in the open-market at a price no greater than the Redemption Price (as defined in the Articles), no later than one business day prior to the mailing date of the registration statement on Form S-4 (the “Registration Statement”) filed by Pubco with the SEC relating to the Business Combination (such shares, the “Purchase Commitment Shares”); (ii) not redeem the Purchase Commitment Shares; (iii) not vote the Purchase Commitment Shares in favor of any of the proposals presented at the SEAC Shareholders’ Meeting (as defined herein); and (iv) not transfer any Purchase Commitment Shares or NRA Additional Shares (as defined below) held by them until the earlier of (x) the consummation of the Business Combination, (y) the termination of the Business Combination Agreement in accordance with its terms and (z) the termination of the Non-Redemption Agreements in accordance with their terms.
Pursuant to the Non-Redemption Agreements, if the investors meet the foregoing conditions, then, for every Purchase Commitment Share purchased by such investors thereunder, such investors will be entitled to purchase from the Company 0.0526 newly issued Class A Ordinary Shares, at a purchase price of $0.0001 per whole share, which shares will be issued by the Company prior to the SEAC Merger (the “NRA Additional Shares”).
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.Offering and identifying and evaluating a target company for an initial business combination and activities in connection with the Business Combination. We will not generate any operating revenues until after completion of our initial business combination.combination, at the earliest. We have generated non-operating income in the form of interest income on cash and cash equivalents afterfrom the proceeds derived from 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.
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We expect to incur increasedare incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.and other expenses in connection with completing our initial business combination.
For the three months ended September 30,March 31, 2024, we had a net income of $5,162,251, a loss from operations of $3,404,845, comprised of general and administrative expenses of $3,404,845, and non-operating income of $8,567,096, comprised of a gain from change in fair value of warrant liability of $234,666, interest earned in the Trust Account of $9,478,547, and a loss from change in fair value of PIPE with reduction right liability of $1,146,117. For the three months ended March 31, 2023, we had a net income of $9,156,293,$8,008,646, a loss from operations of $602,985,$540,513, comprised of general and administrative expenses, and non-operating income of $9,759,278,$8,549,159, comprised of interest earned in the Trust Account of $10,111,278 offset by a lossgain 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$469,333 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.$8,079,826.
Through September 30, 2023,March 31, 2024, our efforts have been limited to organizational activities, activities relating to the Initial Public Offering, activities relating to identifying and evaluating prospective acquisition candidates and activities in connection with the Business Combination and those relating to general corporate matters. We have not generated any revenue, other than interest income earned on the proceeds held in the Trust Account. As of March 31, 2024, $804,228,213 was held in the Trust Account (including up to $8,925,000 of deferred underwriting discounts and commissions). We had cash outside of the Trust Account of $473,163 and $6,458,295 in accounts payable and accrued expenses.
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Liquidity and Capital Resources
As of September 30, 2023,March 31, 2024, we had an unrestricted cash balance of $808,103$437,163 as well as cash and investments held in the Trust Account of $785,553,621.$804,228,813. Our liquidity needs had beenthrough March 31, 2024 were 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 theour Sponsor which(which was paid in full on January 11, 2022. The Company’s working capital needs will be satisfied through2022), the fundsproceeds from the consummation of the private placement of private placement warrants not held outside ofin the Trust Account fromand the Public Offering. In addition, the Company is permitted to withdrawwithdrawal of certain interest earned on the Trust Account to fund the Company’s working capital requirements (subject to an aggregate maximum releasein accordance with the terms 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, ourTrust Agreement.
Further, the Sponsor or an affiliate of ourthe Sponsor or certain of ourthe Company’s officers and directors may, but are not obligated to, loan usthe Company funds as may be required. If we complete our initial business combination, we would repayUp to $1,500,000 of 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 postpost-initial 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. PriorBased on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the completionearlier of ourthe consummation of an initial business combination we do notor one year from the issuance of the financial statements.
In accordance with the terms of the Articles, the Company has until June 15, 2024, to consummate an initial business combination (the “Completion Window”). Although the Company plans to complete an initial business combination, including the Business Combination, before the Completion Window, there can be no assurance that the Company will be able to consummate an initial business combination by the Completion Window. In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete an initial business combination and raise additional funds to alleviate liquidity needs and 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 the Completion Window. Management plans to consummate an initial business combination prior to Completion Window, however there can be no assurance that one will be completed.
We expect our primary liquidity requirements during that period prior to seek loans from partiesthe initial business combination to include approximately $416,000 for legal, accounting, due diligence, travel and other than our Sponsor orexpenses associated with structuring, negotiating and documenting successful initial business combinations, $360,000 for administrative and support services, and approximately $224,000 for Nasdaq and other regulatory fees and approximately $850,000 for director and officer liability insurance premiums. We will also reimburse Global Eagle Acquisition LLC (“GEA”), an affiliate of our Sponsor, asfor office space and administrative services provided to members of our management team in an amount not to exceed $15,000 per month in the event such space and/or services are utilized and we do not believepay a third parties willparty directly for such services.
These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in the Trust Account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current obligation or intention to do so. If we enter into an agreement for an alternative initial business combination where we pay for the right to receive exclusivity from a target business, the amount that would be willingused as a down payment or to loanfund a
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“no-shop” provision would be determined based on the terms of the specific initial business combination and the amount of our available funds at the time. Our forfeiture of such funds and provide(whether as a waiver against any and all rights to seek access to fundsresult of our breach or otherwise) could result in our trust account.not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
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 accountTrust Account or because we become obligated to redeem a significant number of our public sharesPublic Shares upon completion of the initial business combination, in which case we may issue additional securities or incur debt in connection with such initial 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,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.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 dateCompletion Window of January 10,June 15, 2024, unlessbecause a definitive agreement has been executed, in which case the scheduled liquidationCompletion Window was April 10, 2024, and because on April 9, 2024, the Company held the Extension Meeting in which the Shareholders approved, by special resolution, a proposal to amend the Articles to extend the date isby which the Company must consummate an initial business combination from April 10, 2024 to June 15, 2024. Although the Company plans to complete the transaction before the scheduled liquidation date,Completion Window, there can be no assurance that the Company will be able to consummate aan initial business combination by January 10, 2024 or April 10,June 15, 2024. In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)FASB’s ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete an initial business combination and raise additional funds to alleviate liquidity needs and 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,June 15, 2024. Management plans to consummate aan initial business combination prior to January 10, 2024 or April 10,June 15, 2024, however there can be no assurance that one will be completed.
Commitments and Contractual Obligations; Quarterly ResultsCOMMITMENTS AND CONTRACTUAL OBLIGATIONS
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. No unauditedaudited 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.Agreement with our Sponsor and GEA (the “Administrative Services and Indemnification Agreement”). We agreed to pay GEA, 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 aan initial business combination or the Company’s liquidation, we will cease paying these monthly fees. ForIn the three months ended September 30,2024 and 2023, and September 30, 2022, the Company incurred $45,000$15,000 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,March 31, 2024 and 2023, and December 31, 2022, $45,000$15,000 and $45,000, respectively, is included in accounts payable and accrued expenses in the accompanying condensedconsolidated balance sheets.
Underwriting Agreement
On January 5, 2022, the Company entered into an Underwriting Agreement.underwriting agreement (the “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 bewere 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.Underwriting Agreement.
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The deferred underwriting commissions will become payable to the underwriters from the amounts held in the trust accountTrust Account solely in the event that the Company completes an initial business combination, subject to the terms of the Underwriting Agreement.
In consideration of Citigroup Global Markets Inc.’s (“Citi”) engagement as the Company’s financial advisor and placement agent in the PIPE financing raised in connection with the Business Combination, and the fees it is expected to receive in connection with such roles, on January 3, 2024, Citi agreed to make adjustments to its entitlement to a portion of the $26,250,000 deferred underwriting agreement.fee payable to it pursuant to the Underwriting Agreement. Such adjustments modified Citi’s entitlement to its portion of the deferred underwriting fee to be equal to a specific percentage of the amount remaining in the Trust Account, after giving effect to the redemption rights exercised by the Company’s public shareholders and certain other adjustments.
In addition, on January 3, 2024, the Company received a letter from Goldman Sachs & Co. LLC (“Goldman Sachs”) whereby Goldman Sachs waived its entitlement to its portion of the $26,250,000 deferred underwriting fee payable pursuant to the Underwriting Agreement. The Company did not seek out the reasons why Goldman Sachs waived its deferred underwriting fee, despite Goldman Sachs having already completed its services under the Underwriting Agreement. Goldman Sachs received no additional consideration for the waiver of its entitlement to the deferred underwriting fee. Upon receipt of the waiver, offering costs of $17,325,000 were adjusted to temporary equity on the accompanying consolidated statements of changes in shareholders’ equity (deficit).
Registration RightsBusiness Combination Agreement and Related Agreements
Business Combination Agreement
On December 22, 2023, the Company, New SEAC, Lions Gate Parent Studio HoldCo, StudioCo, MergerCo and New BC Sub, entered into the Business Combination Agreement, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement and the Plan of Arrangement, (i) the Company will merge with and into MergerCo with SEAC Merger Surviving Company as the resulting entity, (ii) SEAC Merger Surviving Company will distribute all of its assets lawfully available for distribution to New SEAC by way of a cash dividend, (iii) SEAC Merger Surviving Company will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and convert to a British Columbia unlimited liability company in accordance with the applicable provisions of the BC Act, (iv) New SEAC will transfer by way of continuation from the Cayman Islands to British Columbia in accordance with the Companies Act and the BC Act and continue as a British Columbia company in accordance with the applicable provisions of the BC Act, and (v) in pursuant to the Arrangement and on the terms and subject to the conditions set forth in the Plan of Arrangement, (A) SEAC Merger Surviving Company and New BC Sub will amalgamate to form MergerCo Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement, (B) New SEAC and MergerCo Amalco will amalgamate to form SEAC Amalco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement and (C) StudioCo and SEAC Amalco will amalgamate to form Pubco, in accordance with the terms of, and with the attributes and effects set out in, the Plan of Arrangement. The Arrangement is subject to the approval by the Supreme Court of British Columbia under the BC Act.
On April 11, 2024, the Business Combination Agreement was amended to, among other things: (i) upsize the PIPE from $175,000,000 to $225,000,000; (ii) upsize the amount of aggregate transaction proceeds to be no greater than $409,500,000 and no less than $350,000,000, from the prior requirement of $350,000,000 in aggregate transaction proceeds; and (iii) based on the net cash in the Trust Account following the Extension Meeting, remove the provisions requiring cash to potentially be paid to non-redeeming holders of Public Shares as part of the foundermerger consideration for their Class A Ordinary Shares, which requirement had been intended to limit dilution of Lions Gate Parent’s ownership in the combined company, and instead provide that the holders of Public Shares who do not redeem their Class A Ordinary Shares at the extraordinary general meeting of the Company’s shareholders to be held to approve the Business Combination will receive only common shares private placement warrants, warrants that may be issued upon conversion of working capital loans (andPubco (“Pubco Common Shares”) in exchange for their Class A Ordinary Shares on a one-for-one basis.
PIPE Subscription Agreements
Concurrently with the execution of the Business Combination Agreement, the Company, New SEAC and Lions Gate Parent entered into subscription agreements (the “Initial Subscription Agreements”) with certain institutional and accredited investors (the “PIPE Investors”) pursuant to which the PIPE Investors have agreed, subject to the terms and conditions set forth therein, to subscribe for and purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 18,172,378 Pubco Common Shares (the “PIPE Shares”), at a purchase price of $9.63 per share, for an aggregate cash amount of $175,000,000.
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Pursuant to the Initial Subscription Agreements, the PIPE Investors therein have the right to elect to offset their total commitments under their respective Initial Subscription Agreement, on a one-for-one basis, up to the total amount of PIPE Shares subscribed thereunder, to the extent such PIPE Investor (i) purchases Class A Ordinary Shares in open market transactions at a price of less than the Closing redemption price per-share prior to the record date established for voting at the extraordinary general meeting of the Company’s shareholders (the “SEAC Shareholders’ Meeting”) (the “Open-Market Purchase Shares”), but only if the PIPE Investor agrees, with respect to such Open-Market Purchase Shares, to (A) not sell or transfer any such Open-Market Purchase Shares prior to the Closing (B) not vote any such Open-Market Purchase Shares in favor of approving the Business Combination and instead submits a proxy abstaining from voting thereon and (C) to the extent such investor has the right to have all or some of its Open-Market Purchase Shares redeemed for cash in connection with the Closing, not exercise any such redemption rights; and (ii) beneficially owned any Class A ordinary shares issuable upon the exerciseOrdinary Shares as of the private placement warrantsdate of its Initial Subscription Agreement (the “Currently Owned Shares”), but only if the PIPE Investor agrees, with respect to such Currently Owned Shares, to (A) not sell or transfer any such Currently Owned Shares prior to the Closing, (B) vote all of its Currently Owned Shares in favor of approving the Business Combination at the SEAC Shareholders’ Meeting, and warrants that may be issued upon conversion(C) to the extent such investor has the right to have all or some of working capital loansits Currently Owned Shares redeemed for cash in connection with the Closing, not exercise any such redemption rights.
If any such PIPE Investors exercise their reduction rights and upon conversion ofmeet the founder shares)foregoing conditions, then for every Class A Ordinary Share for which such PIPE Investor exercises its reduction right, such PIPE Investor will be entitled to registration rightspurchase from the Company 0.1111 newly issued Class A Ordinary Shares, at a purchase price of $0.0001 per share, which shares will be issued by the Company prior to the SEAC Merger (such shares, the “Newly Issued Reduction Right Shares”).
On April 11, 2024, SEAC, New SEAC and Lions Gate Parent entered into the Additional Subscription Agreement, pursuant to which an additional PIPE Investor agreed to purchase from Pubco, immediately following the Amalgamations, an aggregate of approximately 4,918,839 Pubco Common Shares, at a registration rights agreement signed onpurchase price of $10.165 per share, for an aggregate cash amount of $50,000,000. The Additional Subscription Agreement is in substantially the effectivesame form as the Initial Subscription Agreements, expect that it does not provide the reduction right to the investor therein.
Non-Redemption Agreements
On April 24, 2024, SEAC and Pubco entered into the Non-Redemption Agreements with certain investors, pursuant to which such investors agreed, among other things, to: (i) certify that they had purchased an aggregate of approximately $20 million of Public Shares in the open-market at a price no greater than the Redemption Price (as defined in the Articles), no later than one business day prior to the mailing date of the initial public offering, requiring usRegistration Statement filed by Pubco with the SEC relating to register such securities andthe Business Combination (such shares, the “Purchase Commitment Shares”); (ii) not redeem the Purchase Commitment Shares; (iii) not vote the Purchase Commitment Shares in favor of any of our other securities they holdthe proposals presented at the SEAC Shareholders’ Meeting; and (iv) not transfer any Purchase Commitment Shares or acquireNRA Additional Shares held by them until the earlier of (x) the consummation of the Business Combination, (y) the termination of the Business Combination Agreement in accordance with its terms and (z) the termination of the Non-Redemption Agreements in accordance with their terms.
Pursuant to the Non-Redemption Agreements, if the investors meet the foregoing conditions, then, for every Purchase Commitment Share purchased by such investors thereunder, such investors will be entitled to purchase from the Company 0.0526 newly issued Class A Ordinary Shares, at a purchase price of $0.0001 per whole share, which shares will be issued by the Company 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.SEAC Merger (the “NRA Additional Shares”).
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Critical Accounting EstimatesCRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements and related disclosures in conformity with GAAPaccounting principles generally accepted in the United States of America (“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 income and expenses during the period reported. Actual results could materially differ from those estimates. 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.policies:
Warrant liability
The Company accounts for the private placement warrants as liabilities at fair value on the consolidated 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 consolidated 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. This accounting estimate is subject to uncertainty given there is significant judgment in certain inputs, such as implied volatility and the probability of completing the Business Combination or a different initial business combination. Any changes in the inputs could have a significant impact on the results of operations. For the three months ended March 31, 2024 and 2023, the Company recognized a gain resulting from a decrease in the fair value of the private placement warrants of $234,666 and $469,333, respectively. These gains are presented as a change in fair value of warrant liability in other income in the accompanying consolidated statements of operations.
PIPE with reduction right liability
The Company accounts for the Initial Subscription Agreements and the Additional Subscription Agreement (together, the “Subscription Agreements”) as a liability at fair value on the consolidated balance sheets (the “PIPE with reduction right liability”). The Subscription Agreements 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 consolidated statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the closing of the transactions contemplated by the Subscription Agreements or expiration of the Subscription Agreements. At that time, the PIPE with reduction right liability will be reclassified to additional paid-in capital. This accounting estimate is subject to uncertainty given there is significant judgment in certain inputs, such as the probability of completing the Business Combination. Any changes in the inputs could have a significant impact on the results of operations. For the three months ended March 31, 2024, the Company recorded a loss resulting from an increase in the fair value of the PIPE with reduction right liability of $1,146,117. This loss is presented as a change in fair value of PIPE with reduction right liability in other income in the accompanying consolidated statement of operations.
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and ProceduresEVALUATION 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 officerChief Executive Officer and chief financial officer,Vice President of Finance, 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,March 31, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2023,March 31, 2024, 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 ReportingCHANGES 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.
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PART II—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.February 29, 2024. 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.February 29, 2024.
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.
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ITEM 5. | OTHER INFORMATION. |
None.On May 7, 2024, the Company issued a promissory note to the Sponsor with a principal amount of up to $2.0 million to cover advancements made by the Sponsor to finance certain transaction expenses on behalf of the Company (the “Note”). The Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the Company’s Business Combination, and (b) the date of the Company’s liquidation. If the Company does not consummate a Business Combination, the Note will be repaid only from funds held outside of the Trust Account (to the extent there are any) or will be forfeited, eliminated or otherwise forgiven.
The foregoing description is qualified in its entirety by reference to the Note, copy of which is attached as Exhibit 10.3 hereto and is incorporated herein by reference.
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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. |
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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, 2023May 8, 2024
SCREAMING EAGLE ACQUISITION CORP. | ||
| ||
Name: | Eli Baker | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
| ||
Name: | Ryan O’Connor | |
Title: | Vice President of Finance | |
(Principal Financial and Accounting Officer) |
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