UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____.
Commission File Number: 001-41351
Denali Capital Acquisition Corp.
(Exact name of registrant as specified in its charter)
| Cayman Islands | 98-1659463 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| 437 Madison Avenue, 27th Floor | ||
| New York, New York | 10022 | |
| (Address of principal executive offices) | (Zip Code) |
(646) 978-5180
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one Class A ordinary share and one redeemable warrant | DECAU | The Nasdaq Stock Market LLC | ||
| Class A ordinary shares, par value $0.0001 per share | DECA | 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 |
DECAW | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☒ No ☐
The aggregate market value of the ordinary shares held by non-affiliates of the registrant, computed as of June 28, 2024 (the last business day of the registrant’s most recently completed second fiscal quarter) was $8,413,056.
As of April 1, 2025, there were 1,261,837 Class A ordinary shares and 2,062,500 Class B ordinary shares of the registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including with respect to our business combination with Semnur (as defined below). In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:
| ● | our ability to select an appropriate target business or businesses; |
| ● | our ability to complete our initial business combination, including the business combination with Semnur Pharmaceuticals, Inc. (“Semnur”) (the “Business Combination”); |
| ● | our expectations around the performance of the prospective target business or businesses; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business; |
| ● | our potential ability to obtain additional financing to complete our initial business combination; |
| ● | our pool of prospective target businesses; |
| ● | our ability to consummate an initial business combination due to the uncertainty resulting from the ongoing conflicts in the Middle East, ongoing military action with the country of Ukraine commenced by the Russian Federation and Belarus in February 2022, adverse changes in general economic industry and competitive conditions, or adverse changes in government regulation or prevailing market interest rates; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or |
| ● | the trust account not being subject to claims of third parties. |
The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors,” elsewhere in this Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission (the “SEC”), including in our definitive proxy statement filed March 27, 2025 (File No. 001-41351) and our preliminary prospectus/proxy statement included in our Registration Statement on Form S-4 (File No. 333-283019) that we filed with the SEC on November 6, 2024 relating to our proposed business combination with Semnur (as may be amended from time to time, the “Semnur Disclosure Statement”). Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
ii
PART I
References in this report to “we,” “our,” “us,” “Denali” or the “Company” refer to Denali Capital Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to Denali Capital Global Investments LLC. References to “founder shares” are to shares of our Class B ordinary shares initially purchased by our sponsor in a private placement prior to our initial public offering, and the shares of our Class A ordinary shares issued upon the conversion thereof as provided herein, and references to “initial shareholders” are to holders of our founder shares prior to our initial public offering.
Item 1. Business.
General
We are a blank check company incorporated 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, which we refer to throughout this report as our initial business combination. We have neither engaged in any operations nor generated any revenue to date. Based on our business activities, we are a “shell company” as defined under the Securities Exchange Act of 1934 (the “Exchange Act”) because we have no operations and nominal assets consisting almost entirely of cash. On April 11, 2022, we consummated our initial public offering (the “IPO”) of 8,250,000 units, which included 750,000 units issued pursuant to the partial exercise by the underwriters of their over-allotment option (the “Units”), each Unit consisting of one Class A ordinary share of the Company, par value $0.0001 per share (the “public shares”) and one redeemable warrant (each, a “Public Warrant”), each whole 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, and the IPO generated gross proceeds of $82,500,000. Simultaneously with the closing of the IPO, we consummated a private placement (the “Private Placement”) with our sponsor, of an aggregate of 510,000 units (the “Private Placement Units”) (including 30,000 Private Placement Units purchased pursuant to the partial exercise by the underwriters of their over-allotment option) at a price of $10.00 per Private Placement Unit, generating gross proceeds of $5,100,000. Each Private Placement Unit consists of one Class A ordinary share (the “Private Placement Shares”) and one warrant. The terms and provisions of the warrants in the Private Placement Units (the “Private Placement Warrants”) are identical to the Public Warrants, except that, subject to certain limited exceptions, they are subject to transfer restrictions until 30 days following the consummation of an initial business combination. On April 11, 2022, a total of $84,150,000 of the net proceeds from the IPO and the Private Placement was deposited in a trust account (the “Trust Account”) established for the benefit of the Company’s public shareholders at a U.S. based trust account, with Wilmington Trust, National Association, acting as trustee.
On January 25, 2023, we entered into an Agreement and Plan of Merger (the “Longevity Merger Agreement”), by and among Longevity Biomedical, Inc. (“Longevity”), Denali SPAC Holdco, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company (“Holdco”), Denali SPAC Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Holdco (“Denali Merger Sub”), Longevity Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Holdco (“Longevity Merger Sub”), and Bradford A. Zakes, solely in the capacity as seller representative (the “Seller Representative”). Pursuant to the Longevity Merger Agreement, the parties thereto agreed to enter into a business combination with Longevity (the “Longevity Business Combination”).
On October 11, 2023, our shareholders held an extraordinary general meeting (the “Extension Meeting”) to vote in favor of approving amendments to the Company’s amended and restated memorandum and articles of association (the “Articles”) to, amongst other things, extend the date by which we must consummate an initial business combination from October 11, 2023 to July 11, 2024 by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine times by an additional one month each time, subject to the sponsor (or its affiliates or permitted designees) depositing into the Trust Account for each such one-month extension the lesser of (a) an aggregate of $50,000 or (b) $0.03 per public share that remains outstanding and is not redeemed prior to any such one-month extension, unless the closing of our initial business combination has occurred.
Furthermore, in connection with the Extension Meeting, shareholders holding 3,712,171 public shares (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account. As a result, approximately $40.5 million (approximately $10.92 per share) was removed from the Trust Account to pay such holders. Following redemptions, we had 4,537,829 public shares outstanding.
On January 9, 2024, our shareholders held an extraordinary general meeting (the “Longevity Business Combination Meeting”) and voted in favor of approving the Longevity Business Combination.
On June 26, 2024, pursuant to Section 11.1(a) of the Longevity Merger Agreement, the parties to the Longevity Merger Agreement entered into a termination agreement (the “Termination Agreement”) pursuant to which the Longevity Merger Agreement was terminated effective as of the date of the Termination Agreement. As a result of the Termination Agreement, the Longevity Merger Agreement is of no further force and effect (other than certain customary limited provisions that survive the termination pursuant to the terms of the Longevity Merger Agreement) and ancillary agreements entered into in connection with the Longevity Merger Agreement also automatically terminated in accordance with their respective terms. As a result of the termination of the Longevity Merger Agreement, Holdco filed the Registration Withdrawal Request on Form RW on August 9, 2024, to withdraw its registration statement on Form S-4, as amended, initially filed with the SEC on March 29, 2023.
On July 2, 2024, the Company issued a press release to announce that it entered into a letter of intent with Semnur, a wholly owned subsidiary of Scilex Holding Company (“Scilex”), for a potential business combination.
1
On July 10, 2024, our shareholders held an extraordinary general meeting (the “Second Extension Meeting”) to consider and vote upon a proposal to amend, by way of special resolution, the Articles to extend the date by which we must (i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving Denali and one or more businesses or entities; (ii) cease its operations, except for the purpose of winding up, if it fails to complete such initial business combination; and (iii) redeem 100% of the public shares from July 11, 2024 to April 11, 2025, by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine (9) times by an additional one month each time (such date as extended, the “Extended Date”), unless the closing of the initial business combination has occurred, without the need for any further approval of our shareholders, provided that the sponsor (or its affiliates or permitted designees) will deposit into the Trust Account for each such one-month extension the lesser of (a) an aggregate of $20,000 or (b) $0.02 per public share that remains outstanding and is not redeemed prior to any such one-month extension, unless the closing of the initial business combination has occurred, in exchange for a non-interest bearing promissory note payable upon consummation of an initial business combination. In connection with the Second Extension Meeting, shareholders holding 3,785,992 public shares (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $43.4 million (approximately $11.47 per share) was removed from the Trust Account to pay such holders.
On July 10, 2024, we issued a promissory note (the “Sponsor Extension Convertible Promissory Note”) in the total principal amount of up to $180,000 to the sponsor. The Sponsor Extension Convertible Promissory Note was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at our request and upon the consent of the sponsor prior to the maturity of the Sponsor Extension Convertible Promissory Note. On July 10, 2024, the sponsor had deposited $15,037 drawn down from the Sponsor Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination to August 11, 2024.
On August 9, 2024, we issued a convertible promissory note (the “Scilex Convertible Note”) in the total principal amount of up to $180,000 to Scilex Holding Company (“Scilex”). The Scilex Convertible Note was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at our request and upon the consent of Scilex prior to the maturity of the Scilex Convertible Promissory Note.
On each of August 11, 2024, September 11, 2024, October 11, 2024, November 11, 2024, December 11, 2024, January 6, 2025, February 11, 2025 and March 11, 2025, Scliex had deposited $15,064 drawn down from the Scilex Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination to April 11, 2025.
On August 14, 2024, Denali Merger Sub Inc., a Delaware corporation, was incorporated as a direct wholly owned subsidiary of Denali (the “Merger Sub”).
On August 15, 2024, Holdco filed a Certificate of Ownership and Merger merging each of its wholly owned subsidiaries, Longevity Merger Sub and Denali Merger Sub, with and into Holdco, with Holdco as the sole surviving corporation. All of the outstanding shares of common stock of Holdco held by Denali was transferred to the Merger Sub, making Holdco a direct wholly owned subsidiary of the Merger Sub and making each of Denali Merger Sub and Longevity Merger Sub an indirect wholly-owned subsidiary of the Merger Sub.
On August 30, 2024, Denali entered into the Agreement and Plan of Merger (the “Merger Agreement”) with Semnur, a wholly owned subsidiary of Scilex, and Merger Sub.
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the time at which the Business Combination becomes effective (the “Effective Time”), Denali will change its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”) and (ii) at the Effective Time, and following the Domestication, Merger Sub will merge with and into Semnur (the “Business Combination” and together with the other transactions contemplated in the Merger Agreement, the “Transactions”), with Semnur continuing as the surviving entity and wholly owned subsidiary of Denali. In connection with the consummation of the Business Combination, Denali will be renamed as “Semnur Pharmaceuticals, Inc.” and Semnur will be renamed as Semnur, Inc. For more information about the Merger Agreement, see our Current Report on Form 8-K filed with the SEC on September 5, 2024 and the Semnur Disclosure Statement. In this document, we use the term “New Semnur” to refer to Denali after completion of the transactions contemplated by the Merger Agreement.
On November 6, 2024, we filed a preliminary prospectus/proxy statement included in our registration statement on Form S-4 (File No. 333-283019) relating to our proposed business combination with Semnur.
On March 27, 2025, we filed a definitive proxy to hold an extraordinary general meeting of shareholders to consider and vote upon a proposal to amend, by way of special resolution, the amended and restated memorandum and articles of association of the Company to extend the date by which the Company must either (i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company and one or more businesses or entities or (ii) cease its operations, except for the purpose of winding up, if it fails to complete such initial business combination and redeem 100% of the Company’s Class A ordinary shares, included as part of the units sold in the Company’s IPO that was consummated on April 11, 2022, from April 11, 2025 to December 11, 2025, by electing to extend the date to consummate an initial business combination on a monthly basis for up to eight (8) times by an additional one month each time, unless the closing of the Company’s initial business combination has occurred, without the need for any further approval of the Company’s shareholders, provided that the Sponsor (or its affiliates or permitted designees or a third party) will deposit into the Trust Account for each such one-month extension an extension fee, unless the closing of the Company’s initial business combination has occurred, in exchange for a non-interest bearing promissory note payable upon consummation of an initial business combination.
2
Business Strategy and Competitive Strengths
Our business strategy is to identify and complete our initial business combination with a company within the technology, hospitality or consumer services sector. Our selection process leveraged our team’s broad and deep relationship network, unique industry experiences and strong deal sourcing capabilities to access a broad spectrum of differentiated opportunities. This network has been developed through our team’s extensive experience and demonstrated success in both investing in and operating businesses in our target sectors and across a variety of industries.
We believe that our management team is well positioned to identify attractive business combination opportunities with a compelling industry backdrop and an opportunity for transformational growth. Our team’s objectives are to generate attractive returns for shareholders and enhance value through improving operational performance of the acquired company. In the process of identifying Semnur as a target for the Business Combination, we broadly focused on potential targets that we believed (i) had attractive long-term growth potential, (ii) had a core product that was or had the potential to be competitively positioned within the applicable industry and (iii) had an experienced management team with an attractive business plan that would benefit from being a public company due to the potential for access to a broader source of capital and greater visibility. In addition, Denali also considered the development stage of potential targets’ corresponding industries and any relevant regulatory risks associated with such target businesses and their respective industries.
Business Combination Criteria
Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We used these criteria and guidelines in evaluating acquisition opportunities, which we believe Semnur satisfied, as we looked to identify target companies that:
| ● | are fundamentally sound but are underperforming their potential; |
| ● | exhibit unrecognized value or other characteristics that we believe have been misevaluated by the marketplace; |
| ● | are at an inflection point where we believe we can drive improved financial performance; |
| ● | offer opportunities to enhance financial performance through organic initiatives and/or inorganic growth opportunities; |
| ● | can benefit from our founders’ knowledge of the target sectors, proven collection of operational strategies and tools, and past experiences in profitability and rapidly scaling businesses; |
| ● | are valued attractively relative to their potential for operational improvement; and |
| ● | offer an attractive potential return for our shareholders, weighing potential growth opportunities and operational improvements in the target business against any identified downside risks. |
These criteria and guidelines are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general criteria and guidelines as well as other considerations, factors and criteria that our management may deem relevant. We believe that Semnur met the above criteria, as described in the Semnur Disclosure Statement.
Business Combination with Longevity
On January 25, 2023, we entered into the Longevity Merger Agreement, by and among Longevity, Holdco, Denali Merger Sub, Longevity Merger Sub, and Bradford A. Zakes, solely in the capacity as seller representative.
On October 11, 2023, our shareholders held the Extension Meeting to vote in favor of approving amendments to the Articles to, amongst other things, extend the date by which we must consummate an initial business combination from October 11, 2023 to July 11, 2024 by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine times by an additional one month each time, subject to the sponsor (or its affiliates or permitted designees) depositing into the Trust Account for each such one-month extension the lesser of (a) an aggregate of $50,000 or (b) $0.03 per public share that remains outstanding and is not redeemed prior to any such one-month extension, unless the closing of our initial business combination has occurred.
Furthermore, in connection with the Extension Meeting, shareholders holding 3,712,171 public shares (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account. As a result, approximately $40.5 million (approximately $10.92 per share) was removed from the Trust Account to pay such holders. Following redemptions, we had 4,537,829 public shares outstanding.
In connection with the Second Extension Meeting, shareholders holding 3,785,992 public shares (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $43.4 million (approximately $11.47 per share) was removed from the Trust Account to pay such holders. Following redemptions, we had 751,837 public shares outstanding.
3
On January 9, 2024, our shareholders held the Longevity Business Combination Meeting and voted in favor of approving the Longevity Business Combination.
On June 26, 2024, pursuant to Section 11.1(a) of the Longevity Merger Agreement, the parties to the Longevity Merger Agreement entered into the Termination Agreement pursuant to which the Longevity Merger Agreement was terminated effective as of the date of the Termination Agreement. As a result of the Termination Agreement, the Longevity Merger Agreement is of no further force and effect (other than certain customary limited provisions that survive the termination pursuant to the terms of the Longevity Merger Agreement) and ancillary agreements entered into in connection with the Longevity Merger Agreement also automatically terminated in accordance with their respective terms. As a result of the termination of the Longevity Merger Agreement, Holdco filed the Registration Withdrawal Request on Form RW on August 9, 2024, to withdraw its registration statement on Form S-4, as amended, initially filed with the SEC on March 29, 2023.
Business Combination with Semnur
On August 30, 2024, Denali entered into the Agreement and Plan of Merger (the “Merger Agreement”) with Semnur and Merger Sub.
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the time at which the Business Combination becomes effective (the “Effective Time”), Denali will change its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”) and (ii) at the Effective Time, and following the Domestication, Merger Sub will merge with and into Semnur, with Semnur continuing as the surviving entity and wholly owned subsidiary of Denali. In connection with the consummation of the Business Combination, Denali will be renamed as “Semnur Pharmaceuticals, Inc.” and Semnur will be renamed as Semnur, Inc.
The consummation of the proposed Business Combination is subject to certain conditions as further described in the Merger Agreement.
For more information about the Merger Agreement and the Business Combination, see our Current Report on Form 8-K filed with the SEC on September 5, 2024 and the Semnur Disclosure Statement. Unless specifically stated, this Annual Report on Form 10-K does not give effect to the Transactions and does not contain the risks associated with the proposed Transactions. Such risks and effects relating to the Transactions are included in the Semnur Disclosure Statement.
Nasdaq rules require that we must complete one or more business combinations with a total aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (excluding any deferred underwriters’ fees and taxes payable on the interest income earned on the Trust Account) at the time of our signing of a definitive agreement in connection with our initial business combination. We refer to this as the 80% of net assets test. Our board of directors determined that the fair market value of the Business Combination equaled at least 80% of the value of the assets held in the Trust Account (excluding any deferred underwriters’ fees and taxes payable on the interest income earned on the Trust Account).
We initially had until April 11, 2023, 12 months after the closing of the IPO (or up to 18 months by resolution of our board if requested by our sponsor to extend the period of time to consummate a business combination by up to two times, each time by an additional three months), to consummate an initial business combination. On October 11, 2023, we announced that our shareholders approved to extend the date by which we must consummate an initial business combination from October 11, 2023 to July 11, 2024 by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine times by an additional one month each time. On July 10, 2024, we announced that our shareholders approved to extend the date by which we must consummate an initial business combination from July 11, 2024 to April 11, 2025, by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine times by an additional one month each time.
To the extent Semnur may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in the company or its business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors. For more information on the risks associated with the Business Combination, see the Semnur Disclosure Statement.
4
Acquisition Process
In evaluating a prospective target business, we conducted a due diligence review which encompassed, among other things, meetings with incumbent management, document reviews, as well as a review of financial, operational, legal and other information which were made available to us. We also utilized our management team’s expertise in analyzing and evaluating operating plans, financial projections and determining the appropriate return expectations given the risk profile of the target business as well as the suitability of the target to become a public company.
Members of our management team and board of directors, directly or indirectly, own founder shares and/or Private Placement Units and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. In particular, because the founder shares were purchased at approximately $0.012 per share, the holders of our founder shares (including our management team that directly or indirectly own founder shares) could make a substantial profit after our initial business combination even if our public shareholders lose money on their investment as a result of a decrease in the post-combination value of their ordinary shares (after accounting for any adjustments in connection with an exchange or other transaction contemplated by the business combination). Further, such officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
Redemption Rights for Public Shareholders upon Completion of Our Initial Business Combination
We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes, if any, divided by the number of then-issued and outstanding public shares, subject to the limitations described herein. The amount in the Trust Account was $12.00 per public share as of December 31, 2024. The per share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. The redemption rights will include the requirement that a beneficial owner must identify itself in order to validly redeem its shares. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Further, we will not proceed with redeeming our public shares, even if a public shareholder has properly elected to redeem its shares, if a business combination does not close. Our sponsor and each member of our management team and our directors and Scilex have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and public shares held by them in connection with (i) the completion of our initial business combination and (ii) a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A) that would modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by the Extended Date or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares.
Manner of Conducting Redemptions
We will provide our public shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of our initial business combination either (i) in connection with a general meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek shareholder approval under applicable law or stock exchange listing requirement or whether we were deemed to be a foreign private issuer (which would require a tender offer rather than seeking shareholder approval under SEC rules). Asset acquisitions and share purchases would not typically require shareholder approval while direct mergers with our company and any transactions where we issue more than 20% of our issued and outstanding ordinary shares or seek to amend our amended and restated memorandum and articles of association would typically require shareholder approval. We currently intend to conduct redemptions in connection with a shareholder vote unless shareholder approval is not required by applicable law or stock exchange listing requirement or we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq rules. If we held a shareholder vote to approve our initial business combination, we will, pursuant to our amended and restated memorandum and articles of association:
| ● | conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and |
| ● | file proxy materials with the SEC. |
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Submission of Our Initial Business Combination to a Stockholder Vote
In the event that we seek shareholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public shareholders with the redemption rights described above upon completion of the initial business combination.
If we seek shareholder approval of our initial business combination, we will complete our initial business combination only if we obtain the approval of an ordinary resolution under Cayman Islands law, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the company. In such case, our sponsor and each member of our management team and board of directors have agreed to vote their founder shares and public shares in favor of our initial business combination. As a result, assuming our sponsor and each member of our management team and board of directors continue to own the shares they currently own, we would not need any additional shares to be voted in favor of a transaction, in order to have such initial business combination approved. Each public shareholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction or vote at all. In addition, our sponsor and each member of our management team and Scilex and our directors have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and public shares held by them in connection with (i) the completion of a business combination and (ii) a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A) that would modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by April 11, 2025 (or as may be extended by a shareholder vote to further extend the time to complete an initial business combination, as applicable) or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares.
Limitation on Redemption upon Completion of our Initial Business Combination if We Seek Stockholder Approval
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provide that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the IPO, which we refer to as “Excess Shares,” without our prior consent. We believe this restriction will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public shareholder holding more than an aggregate of 15% of the shares sold in the IPO could threaten to exercise its redemption rights if such holder’s shares are not purchased by us, our sponsor or our management at a premium to the then-current market price or on other undesirable terms. By limiting our shareholders’ ability to redeem no more than 15% of the shares sold in the IPO without our prior consent, we believe we will limit the ability of a small group of shareholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash.
However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Redemption of Public Shares and Liquidation if No Initial Business Combination
Our amended and restated memorandum and articles of association provide that we will have until the Extended Date to complete an initial business combination. If we have not consummated an initial business combination within such prescribed time period, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us (less tax payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of the then issued and outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to consummate an initial business combination within the prescribed time period. Our amended and restated memorandum and articles of association provide that, if we wind up for any other reason prior to the consummation of our initial business combination, we will follow the foregoing procedures with respect to the liquidation of the Trust Account as promptly as reasonably possible but not more than ten business days thereafter, subject to applicable Cayman Islands law.
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Corporate Information
Our executive offices are located at 437 Madison Avenue, 27th Floor, New York, New York 10022, and our telephone number is 646-978-5180. We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material events in Current Reports on Form 8-K, and as applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website is located at http://www.sec.gov. In addition, we will provide copies of these documents without charge upon request from us by telephone at 646-978-5180.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative to a traditional initial public offering through a merger or other business combination with us. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our Class A ordinary shares (or shares of a new holding company) or for a combination of our Class A ordinary shares and cash, allowing us to tailor the consideration to the specific needs of the sellers. We believe target businesses will find this method a more expeditious and cost effective method to becoming a public company than a typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriter’s ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or have negative valuation consequences. Once public, we believe the target business would then have greater access to capital, an additional means of providing management incentives consistent with shareholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”) and as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have taken and intend to continue to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
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Competition
In identifying, evaluating and selecting a target business for our initial business combination, we have encountered, and expect to continue to encounter, intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups, leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public shareholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and potential future dilutions that our outstanding warrants represent, which may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Facilities
We currently maintain our executive offices at 437 Madison Avenue, 27th Floor, New York, New York 10022. We consider our current office space adequate for our current operations.
Employees
We currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on the status of the proposed Transactions and, if the proposed Transactions are not consummated, the stage of the business combination process we are in. We do not intend to have any full time employees prior to the completion of our initial business combination.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on us and our operations:
| ● | We are a recently incorporated blank check company incorporated as a Cayman Islands exempted company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective. |
| ● | Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.” |
| ● | Our public shareholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public shareholders do not support such a combination. |
| ● | If we seek shareholder approval of our initial business combination, our initial shareholders have agreed to vote in favor of such initial business combination, regardless of how our public shareholders vote. |
| ● | Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek shareholder approval of the business combination. |
| ● | The ability of our public shareholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target. |
| ● | The ability of our shareholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure. |
| ● | The ability of our shareholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares. |
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| ● | The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce value for our shareholders. |
| ● | We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, or less than such amount in certain circumstances, and our warrants will expire worthless. |
| ● | If the net proceeds of the IPO and the sale of the Private Placement Units not being held in the Trust Account are insufficient to allow us to operate until the Extended Date, it could limit the amount available to fund our search for a target business or businesses and our ability to complete the Business Combination, and we will depend on loans from our sponsor, its affiliates or members of our management team to fund our search and to complete the Business Combination. |
| ● | As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination. |
| ● | If we seek shareholder approval of our initial business combination, our sponsor, directors, executive officers, advisors and their affiliates may elect to purchase shares from public shareholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A ordinary shares or Public Warrants. |
| ● | If a public shareholder fails to receive notice of our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed. |
| ● | Nasdaq will suspend trading of our securities and commence delisting proceedings on or about April 7, 2025 due to the Company’s failure satisfy listing rule IM-5101-2 to consummate a business combination within 36 months of effectiveness of its initial public offering registration statement, which will adversely affect the trading market for our securities and may impair our ability to complete a business combination. |
| ● | Our shareholders will not be entitled to protections normally afforded to investors of many other blank check companies. |
| ● | We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers. |
| ● | You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss. |
| ● | We may be a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors. |
| ● | We may reincorporate in another jurisdiction in connection with our initial business combination and such reincorporation may result in taxes imposed on shareholders. |
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| ● | We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies. |
| ● | Potential economic downturns may lead to increased difficulty in completing our business combination. |
| ● | Recent volatility in capital markets may affect our ability to obtain financing for our business combination through sales of our ordinary shares or issuance of indebtedness. |
| ● | Military conflict in Ukraine, the Middle East, or elsewhere may lead to increased price volatility for public traded securities, which could make it difficult for us to consummate our business combination. |
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our registration statement on Form S-1 (File No. 333-263123) filed in connection with our IPO and in the Semnur Disclosure Statement.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We are a special purpose acquisition company with no business operations. Since our IPO, our sole business activity has been identifying and evaluating suitable acquisition transaction candidates. Therefore, we do not consider that we face significant cybersecurity risk and have not adopted any cybersecurity risk management program or formal processes for assessing cybersecurity risk. Our board of directors is generally responsible for the oversight of risks from cybersecurity threats, if there is any. We have not encountered any cybersecurity incidents since our IPO.
Item 2. Properties.
We do not own or lease any real estate or other physical properties materially important to our operation. We currently maintain our executive offices at 437 Madison Avenue, 27th Floor, New York, New York 10022. We consider our current office space adequate for our current operations.
Item 3. Legal Proceedings.
To the knowledge of our management, there is no material litigation, arbitration or governmental proceeding currently pending against us, any of our officers or directors in their capacity as such, any of our property.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our units, Class A ordinary shares and warrants are each traded on The Nasdaq Stock Market LLC under the symbols “DECAU,” “DECA” and “DECAW,” respectively. Our units commenced public trading on April 7, 2022, and our Class A ordinary shares and warrants commenced separate public trading on May 31, 2022.
Holders
On December 31, 2024, there were two holders of record of our units, one holder of record of our Class A ordinary shares, one holder of record of our warrants, and seven holders of record of our Class B ordinary shares.
Dividends
We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying cash dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
In February 2022, we issued an aggregate of 2,156,250 founder shares to our sponsor in exchange for a payment of $25,000 from our sponsor to cover for certain expenses on behalf of us, or approximately $0.012 per share. The sponsor later transferred 20,000 founder shares to our Chief Financial Officer and 110,000 founder shares to certain members of our board of directors and forfeited 93,750 founder shares pursuant to the underwriters partially exercising their over-allotment option. The sale of the founder shares was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.
As described above under the heading “Business - General” in Part I of this report, on April 11, 2022, we consummated the Private Placement, with our sponsor and the underwriters, of an aggregate of 510,000 Private Placement Units (including over-allotment of 30,000 units) at a purchase price of $10.00 per Private Placement Unit, to the sponsor, generating gross proceeds of $5,100,000. The private placement warrants in the Private Placement Units are substantially similar to the Public Warrants, except that if held by the sponsor or its permitted transferees, they may be exercised for cash or on a cashless basis and subject to certain limited exceptions and will be subject to transfer restrictions until 30 days following the consummation of an initial business combination. If the Private Placement Warrants are held by holders other than the sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us under all redemption scenarios and exercisable by holders on the same basis as the Public Warrants. The Private Placement Warrants have been issued pursuant to, and are governed by the Private Placement Units Purchase Agreement. The issuances of the Private Placement Units were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The sale of the Private Placement Warrants was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.
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On August 30, 2024, the sponsor and Scilex entered into a sponsor interest purchase agreement (the “Sponsor Interest Purchase Agreement”), pursuant to which Scilex purchased 500,000 Class B ordinary shares (the “Purchased Interests”), that were then-held by the sponsor. The aggregate consideration for the purchase and sale of the Purchased Interests is as follows: (i) $2,000,000 (the “Cash Consideration”) and (ii) 300,000 shares of common stock, par value $0.0001 per share, of Scilex (the “Scilex Shares”). Pursuant to the Sponsor Interest Purchase Agreement, Scilex paid the Cash Consideration and has agreed to issue the Scilex Shares to the sponsor contingent upon and following the occurrence of the Effective Time. The Purchased Interests will convert automatically, on a one-for-one basis, into one share of New Semnur Common Stock at the effective time of the Domestication (as defined in the Merger Agreement) pursuant to the terms of the Merger Agreement. The sale of the Purchased Interests was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.
Use of Proceeds from the Initial Public Offering
On April 11, 2022, we consummated our IPO of 8,250,000 Units, which included 750,000 Units issued pursuant to the partial exercise by the underwriters of their over-allotment option. The Units were sold at a price of $10.00 per Unit, and the IPO generated gross proceeds of $82,500,000. US Tiger Securities, Inc. and EF Hutton, division of Benchmark Investments, LLC (the “Denali Underwriters”) acted as the underwriters of the IPO. The securities sold in the IPO were registered under the Securities Act on a registration statement on Form S-1 (No. 333-263123). The SEC declared the registration statement effective on April 6, 2022.
On April 11, 2022, a total of $84,150,000 of the net proceeds from the IPO and the sale of the Private Placement Units was deposited in the Trust Account. In connection with the IPO, we incurred $5,105,315 in transaction costs, consisting of $1,650,000 of underwriting fees, $2,887,500 of deferred underwriting fees (the “Deferred Discount”) and $567,815 of other offering costs. Pursuant to the Deferred Discount Agreement (as defined below), the Denali Underwriters have agreed to receive $866,250 of the aggregate $2,887,500 Deferred Discount owed to them upon the closing of the Business Combination in the form of 86,625 shares of New Semnur Common Stock ($10 per share of New Semnur Common Stock) (the “Common Stock Consideration”). Upon the terms of the Deferred Discount Agreement, the Common Stock Consideration will be issued at the Closing and the remaining $2,021,250 of the aggregate Deferred Discount owed will remain payable at the Closing in cash in accordance with the terms of the Underwriting Agreement. Until June 4, 2024, the net proceeds of our IPO and the Private Placement held in the Trust Account were invested in U.S. government securities 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. However, on June 4, 2024, to mitigate the risk of being deemed to have been operating as an unregistered investment company under the Investment Company Act, the Company instructed Wilmington Trust, National Association, the trustee with respect to the Trust Account, to liquidate the U.S. government securities or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash in an interest-bearing bank deposit account. Interest on bank deposit accounts is variable and such accounts currently yield interest of approximately 3.5% per annum.
Repurchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Denali,” “our,” “us” or “we” refer to Denali Capital Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on January 5, 2022 (inception), for the purpose of effecting an initial business combination. While we will not be limited to a particular industry or geographic region in our identification and acquisition of a target company, we intend to focus on technology, consumer and hospitality and will not complete our initial business combination with a target that is headquartered in China (including Hong Kong and Macau) or conducts a majority of its business in China (including Hong Kong and Macau). We intend to effectuate our initial business combination using cash from the proceeds of our IPO and the sale of units in the Private Placement to the sponsor, additional shares, debt or a combination of cash, equity and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Recent Developments
On February 22, 2024, the Company received a letter (the “Letter”) from the staff at Nasdaq notifying the Company that, for the 30 consecutive business days prior to the date of the Letter, the Company’s Minimum Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A). The staff at Nasdaq also noted in the Letter that the Company is not in compliance with Nasdaq Listing Rule 5450(b)(3)(A), which requires listed companies to have total assets and total revenue of at least $50,000,000 each for the most recently completed fiscal year or for two of the three most recently completed fiscal years. The Letter is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has 180 calendar days, or until August 20, 2024, to regain compliance. The Letter notes that to regain compliance, the Company’s MVLS must close at or above $50 million for a minimum of ten consecutive business days during the compliance period. The Letter further notes that if the Company is unable to satisfy the MVLS requirement prior to such date, the Company may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that the Company then satisfies the requirements for continued listing on that market). If the Company does not regain compliance by August 20, 2024, Nasdaq staff will provide written notice to the Company that its securities are subject to delisting. At that time, the Company may appeal any such delisting determination to a hearings panel. The Company intends to actively monitor the Company’s MVLS between now and August 20, 2024, and may, if appropriate, evaluate available options to resolve the deficiency and regain compliance with the MVLS requirement. While the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with Nasdaq listing standards.
On October 2, 2024, the Company received a written notice (the “Notice”) from the staff at Nasdaq notifying the Company that the Company is not in compliance with Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Rule”), which requires the Company to maintain a MVLS of $50.0 million, and Nasdaq Listing Rule 5450(b)(3)(A) (the “Total Assets Rule” and, together with the MVLS Rule, the “Listing Rules”), which requires the Company to maintain total assets and total revenue of at least $50.0 million each for the most recently completed fiscal year or two of the three most recently completed fiscal years, for continued listing on the Nasdaq Global Market. The Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities on the Nasdaq Global Market.
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The Notice states that the Company has 180 calendar days, or until March 31, 2025, to regain compliance with the Listing Rules. To regain compliance, the Company’s MVLS must meet or exceed $50.0 million for a minimum of ten consecutive business days during the 180-day compliance period ending on March 31, 2025. In the event the Company does not regain compliance with the Listing Rules prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. At that time, the Company will have the opportunity to appeal the decision to a Nasdaq Hearing Panel. The Company intends to monitor its MVLS and consider its available options to regain compliance with the Listing Rules.
On January 25, 2023, we entered into the Longevity Merger Agreement, by and among Longevity, Holdco, Denali Merger Sub, Longevity Merger Sub, and the Seller Representative.
On March 29, 2023, Holdco filed a Form S-4 with the SEC to register shares of its common stock that will be issued in connection with the business combination contemplated by the Longevity Merger Agreement, as amended by Amendments Nos. 1, 2, 3, 4, 5 and 6 thereto, filed with the SEC on May 31, 2023, July 13, 2023, September 1, 2023, October 20, 2023, November 21, 2023 and December 6, 2023 respectively. On December 14, 2023, HoldCo filed a notice of effectiveness. On January 9, 2024, our shareholders held a Business Combination Meeting and voted in favor of approving the Longevity Business Combination.
On June 26, 2024, pursuant to Section 11.1(a) of the Longevity Merger Agreement, the parties entered into a termination agreement (the “Termination Agreement”) pursuant to which the Longevity Merger Agreement was terminated effective as of the date of the Termination Agreement.
As a result of the Termination Agreement, the Longevity Merger Agreement will be of no further force and effect (other than certain customary limited provisions that survive the termination pursuant to the terms of the Longevity Merger Agreement) and ancillary agreements entered into in connection with the Longevity Merger Agreement will also automatically terminate in accordance with their respective terms. As a result of the termination of the Longevity Merger Agreement, Holdco filed the Registration Withdrawal Request on Form RW on August 9, 2024, to withdraw its registration statement on Form S-4, as amended, initially filed with the SEC on March 29, 2023.
On July 2, 2024, the Company issued a press release to announce that it entered into a letter of intent with Semnur Pharmaceuticals, Inc. (“Semnur”), a wholly owned subsidiary of Scilex Holding Company (“Scilex”), for a potential business combination.
On July 10, 2024, the shareholders of the Company held an extraordinary general meeting of shareholders (the “Shareholder Meeting”) to consider and vote upon a proposal to amend, by way of special resolution, the Articles to extend the date by which the Company must: (i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company and one or more businesses or entities (an “initial business combination”); (ii) cease its operations, except for the purpose of winding up, if it fails to complete such initial business combination; and (iii) redeem 100% of the Company’s Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), included as part of the units sold in the Company’s IPO that was consummated on April 11, 2022, from July 11, 2024 to April 11, 2025, by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine (9) times by an additional one month each time, unless the closing of the Company’s initial business combination has occurred, without the need for any further approval of the Company’s shareholders, provided that the sponsor (or its affiliates or permitted designees) will deposit into the Trust Account for each such one-month extension the lesser of (a) an aggregate of $20,000 or (b) $0.02 per public share that remains outstanding and is not redeemed prior to any such one-month extension, unless the closing of the Company’s initial business combination has occurred, in exchange for a non-interest bearing promissory note payable upon consummation of an initial business combination.
In connection with the Shareholder Meeting, shareholders holding 3,785,992 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $43.4 million (approximately $11.47 per share) was removed from the Trust Account to pay such holders. Following redemptions, the Company had 751,837 public shares outstanding.
On July 10, 2024, the Company issued a convertible promissory note in the total principal amount of up to $180,000 to the sponsor (the “Sponsor Extension Convertible Promissory Note”). The Sponsor Extension Convertible Promissory Note was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at the Company’s request and upon the consent of the sponsor prior to the maturity of the Sponsor Extension Convertible Promissory Note. The Sponsor Extension Convertible Promissory Note matures upon the earlier of (i) the effective date of the consummation of the Company’s initial business combination and (ii) the date of the liquidation of the Company.
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On August 30, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Semnur and Denali Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).
Subject to the terms and conditions set forth in the Merger Agreement, the total consideration to be paid at Closing by the Company to Semnur’s equityholders will be an amount equal to the quotient of (a) $2,500,000,000 divided by (b) $10.00, and will be payable in shares of common stock of New Semnur (the “New Semnur Common Shares”). In accordance with the terms and subject to the conditions of the Merger Agreement, following the Domestication and at the effective time of the Merger (the “Effective Time”): (i) each share of common stock of Semnur issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive, without interest, a number of New Semnur Shares equal to the Exchange Ratio (as defined in the Merger Agreement); (ii) each share of preferred stock of Semnur issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive, without interest, (a) one share of Series A preferred stock of New Semnur (the “New Semnur Preferred Share”) and (b) one-tenth of one New Semnur Common Share, and (iii) subject to the Company’s receipt of the Option Exchange Approval (as defined in the Merger Agreement), each option to purchase a share of Semnur common stock that is then outstanding shall be converted into the right to receive an option to purchase a number of New Semnur Common Shares as determined by the Exchange Ratio upon substantially the same terms and conditions as are in effect with respect to such option immediately prior to the Effective Time, with the exercise price thereof adjusted by the Exchange Ratio. For purposes of the Merger Agreement, Semnur’s equity value is $2,500,000,000.
The Merger Agreement contemplates the execution of various additional agreements and instruments, on or before the closing of the Merger, including, among others, the following:
Concurrently with the execution of the Merger Agreement, the sponsor and each of the Company’s directors and executive officers entered into a sponsor support agreement with the Company and Semnur (the “Sponsor Support Agreement”), pursuant to which the sponsor and each of Company’s directors and executive officers has agreed to, among other things: (i) vote in favor of the Parent Shareholder Approval Matters (as defined in the Merger Agreement) and in favor of any proposal in respect of an Extension Amendment (as such terms are defined in the Merger Agreement); (ii) vote against (or otherwise withhold written consent of, as applicable) any “Business Combination” (as such term is defined in Denali’s organizational documents) or any proposal relating thereto (in each case, other than as contemplated by the Merger Agreement); (iii) vote against (or otherwise withhold written consent of, as applicable) any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company (other than the Merger Agreement and the transactions contemplated thereby); (iv) vote against (or otherwise withhold written consent of, as applicable) any change in the business, management or board of directors of the Company (other than in connection with the Merger Agreement and the transactions contemplated thereby); and (v) vote against (or otherwise withhold written consent of, as applicable) any proposal, action or agreement that would (a) impede, frustrate, prevent or nullify any provision of the Sponsor Support Agreement or the Merger Agreement or any of the transactions contemplated thereby, (b) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of Denali or Merger Sub under the Merger Agreement, (c) result in any of the conditions set forth in Article VIII of the Merger Agreement not being fulfilled or (d) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, the Company. Under the terms of the Sponsor Support Agreement, the sponsor also agreed to certain standstill provisions with respect to the ordinary shares and other equity securities of the Company held by the sponsor.
Concurrently with the execution of the Merger Agreement, the Company, Semnur and Scilex (as the sole stockholder of Semnur) entered into a company stockholder support agreement (the “Stockholder Support Agreement”), pursuant to which Scilex agreed to, among other things: (i) appear at any meeting of Semnur’s stockholders related to the transactions contemplated by the Merger Agreement, or otherwise cause its shares of Semnur common stock to be counted as present thereat for the purpose of establishing a quorum; (ii) vote (or execute and return an action by written consent), or cause to be voted at any such meeting of Semnur’s stockholders (or validly execute and return and cause such consent to be granted with respect to), all of its shares of Semnur common stock in favor of the Merger Agreement and the Business Combination; (iii) authorize and approve any amendment to Semnur’s certificate of incorporation or bylaws that is deemed necessary or advisable by Semnur for purposes of effecting the Business Combination; and (iv) vote (or execute and return an action by written consent), or cause to be voted at any such meeting of Semnur’s stockholders (or validly execute and return and cause such consent to be granted with respect to), all of its shares of Semnur common stock against any other action that would reasonably be expected to (a) impede, interfere with, frustrate, delay, postpone or adversely affect the Business Combination, (b) result in a breach of any covenant, representation or warranty or other obligation or agreement of Semnur under the Merger Agreement or (c) result in a breach of any covenant, representation or warranty or other obligation or agreement of Scilex contained in the Stockholder Support Agreement.
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In connection with the execution and delivery of the Merger Agreement, the sponsor and Scilex entered into a Sponsor Interest Purchase Agreement (the “Sponsor Interest Purchase Agreement”) dated August 30, 2024 (the “Signing Date”). Pursuant to the Sponsor Interest Purchase Agreement, Scilex agreed to purchase 500,000 Class B ordinary shares, par value $0.0001 per share (the “Purchased Interests”), of the Company that are currently held by the sponsor. The aggregate consideration for the purchase and sale of the Purchased Interests is as follows: (i) $2,000,000 (the “Cash Consideration”) and (ii) 300,000 shares of common stock, par value $0.0001 per share, of Scilex (the “Scilex Shares”). Pursuant to the Sponsor Interest Purchase Agreement, Scilex has paid the Cash Consideration on the Signing Date and has agreed to issue the Scilex Shares to the sponsor contingent upon and following the occurrence of the Effective Time. The Purchased Interests will convert automatically, on a one-for-one basis, into one New Semnur Common Share at the effective time of the Domestication pursuant to the terms of the Merger Agreement. The Merger Agreement contemplates that, at or prior to the closing of the Merger, the Company and Scilex will enter into an amended and restated registration rights agreement (the “Registration Rights Agreement”), which, among other things, will govern the registration of certain New Semnur Common Shares for resale and be effective as of the closing of the Merger.
The Merger Agreement contemplates that, at or prior to the closing of the Merger, the Company and Scilex will enter into an amended and restated registration rights agreement (the “Registration Rights Agreement”), which, among other things, will govern the registration of certain New Semnur Common Shares for resale and be effective as of the closing of the Merger.
Concurrently with the execution of the Merger Agreement, the Company entered into a Stockholder Agreement with Scilex (the “Stockholder Agreement”). Pursuant to the Stockholder Agreement, from and after the Effective Time, and for so long as Scilex beneficially owns any New Semnur Preferred Shares, among other things, (i) Scilex shall have the right, but not the obligation, to designate each director to be nominated, elected or appointed to the Board of Directors of New Semnur (“New Semnur Board”) (each, a “Stockholder Designee” and collectively, the “Stockholder Designees”), regardless of (i) whether such Stockholder Designee is to be elected to the New Semnur Board at a meeting of stockholders called for the purpose of electing directors (or by consent in lieu of meeting) or appointed by the New Semnur Board in order to fill any vacancy created by the departure of any director or increase in the authorized number of members of the New Semnur Board, or (ii) the size of the New Semnur Board, and New Semnur will be required to take all actions reasonably necessary, and not otherwise prohibited by applicable law, to cause each Stockholder Designee to be so nominated, elected or appointed to the New Semnur Board as more fully described in the Stockholder Agreement. Scilex shall also have the right to designate a replacement director for any Stockholder Designee that has been removed from the New Semnur Board and the right to appoint a representative of Scilex to attend all meetings of the committees of the New Semnur Board. The Stockholder Agreement also provides that New Semnur will be prohibited from taking certain actions without the consent of Scilex. Such actions include, among other things, amendments to the certificate of designations designating the New Semnur Preferred Shares, increases or decreases in the size of the New Semnur Board, the incurrence of certain amounts of indebtedness and the payment of dividends on New Semnur Common Shares. In addition, the Stockholder Agreement provides that New Semnur will be prohibited from taking certain actions without the consent of Oramed (but only until the date on which all payments under the Oramed Note and all other obligations under the Oramed Note have been paid in full in cash (such date, the “Release Date”)). The actions that require Oramed’s consent include, among other things, (i) amending certain agreements, including the Stockholder Agreement, the Merger Agreement, New Semnur’s certificate of incorporation or bylaws, Semnur’s 2024 Stock Option Plan, the Stockholder Support Agreement and the Debt Exchange Agreement, in each case that adversely affect the rights of capital stock held by Scilex in New Semnur, (ii) approval of the issuance of capital stock of New Semnur that would result in Scilex holding less than 55% of the outstanding shares or voting power of New Semnur, (iii) forming any subsidiary that is not wholly owned and controlled by New Semnur, (iv) permitting any option grants to Scilex Insiders (as defined therein) pursuant to Semnur’s 2024 Stock Option Plan prior to the execution of the Merger Agreement to be exercisable and (v) permitting certain compensation payments to Scilex Insiders (as defined therein).
During the year ended December 31, 2024, the sponsor lent an aggregate of $580,737 to the Company resulting in the aggregate principal amount of the Convertible Promissory Note and the Sponsor Extension Convertible Promissory Note being increased to $1,423,237.
During the year ended December 31, 2024, Scilex lent an aggregate of $75,292 to the Company resulting in the principal amount of the related Scilex Extension Convertible Promissory Note being increased to $75,292.
During the year ended December 31, 2024, FutureTech (as defined below) lent an aggregate of $300,000 to the Company resulting in the principal amount of the related convertible promissory note being increased to $1,275,000.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from January 5, 2022 (inception) through December 31, 2024, were organizational activities, those necessary to prepare for and complete the IPO, and, subsequent to the IPO, identifying a target company for a business combination and activities in connection with the proposed business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We are generating non-operating income in the form of interest income on marketable securities held after the IPO. We have incurred and will continue 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 in connection with searching for, and completing, a business combination.
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For the year ended December 31, 2024, we had a net loss of $167,306 which primarily consists of formation and operating expenses of $1,649,106 and interest expense of $96,242 being partially offset by income earned on investment held in the Trust Account of $1,578,042.
For the year ended December 31, 2023, we had a net income of $632,536 which primarily consists of income earned on investment held in the Trust Account of $3,843,271 being partially offset by formation and operating expenses of $3,173,826 and interest expense of $36,909.
Cash Flows from Operating Activities
For the year ended December 31, 2024, net cash used in operating activities was $753,296, primarily due to a net loss of $167,306 for the period and the changes in current assets and liabilities of $585,990, primarily due to decrease of prepaid expenses of $4,976 and increase in accounts payable, accrued expenses of $890,833, increase in accrued interest expense – related party of $56,534 and increase in accrued interest expense – others of $39,709. In addition, net cash used in operating activities includes non-cash adjustments to reconcile net loss from income on the Trust Account of $1,578,042.
For the year ended December 31, 2023, net cash used in operating activities was $632,783, primarily due to a net income of $632,536 for the year and the changes in current assets and liabilities of $2,577,950, primarily due to prepaid expenses of $83,113, accounts payable and accrued expenses of $2,457,940, accrued interest expense – related party of $18,021 and accrued interest expense – others of $18,878. In addition, net cash used in operating activities includes adjustments to reconcile net income from income on the Trust Account of $3,843,271.
Cash Flows from Investing Activities
For the year ended December 31, 2024, net cash used in investing activities was $43,425,328 primarily due to cash withdrawn from Trust Account in connection with redemption of 3,785,992 shares of our ordinary shares by our public shareholders.
For the year ended December 31, 2023, net cash provided by investing activities was $39,711,908 primarily due to cash withdrawn from Trust Account in connection with redemption of ordinary shares amounting to $40,536,908 partially offset by investment held in Trust Account of $825,000 to extend the period of time the Company has to consummate its initial business combination by an additional three months, from the then current deadline of July 11,2023 to October 11, 2023.
Cash Flows from Financing Activities
For the year ended December 31, 2024, net cash provided by financing activities was $42,859,628 primarily due to proceeds from issuance of promissory note to related party of $565,700, and redemption payments of $43,425,328 in connection with redemption of 3,785,992 shares of our ordinary shares by our public shareholders.
For the year ended December 31, 2023, net cash used in financing activities was $39,694,407 primarily due to redemption of ordinary shares amounting to $40,536,908 partially offset by proceeds from issuance of promissory note to related party of $842,500.
Liquidity and Capital Resources
Our liquidity needs prior to the consummation of the IPO were satisfied through a payment from the sponsor and the loan under an unsecured promissory note from the sponsor of up to $400,000 (the “Promissory Note”), which was repaid after the IPO.
On April 11, 2022, we consummated the IPO of 8,250,000 Units, inclusive of 750,000 Units issued pursuant to the partial exercise by the underwriters of their over-allotment option. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $82,500,000. Simultaneously with the closing of the IPO, we consummated the sale of 510,000 Private Placement Units, inclusive of 30,000 Private Placement Units sold to the sponsor pursuant to the underwriters’ partial exercise of their over-allotment option. Each whole Private Placement Unit consists of one Class A ordinary share and one warrant, each whole warrant entitling the holder thereof to purchase one Class A ordinary share at an exercise price of $11.50 per share. The Private Placement Units were sold at a price of $10.00 per Private Placement Unit, generating gross proceeds of $5,100,000.
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Following the closing of the IPO and sale of the Private Placement Units on April 11, 2022, a total of $84,150,000 was placed in the Trust Account, and we had $1,515,795 of cash held outside of the Trust Account, after payment of costs related to the IPO, and available for working capital purposes. In connection with the IPO, we incurred $5,105,315 in transaction costs, consisting of $1,650,000 of underwriting fees, $2,887,500 of deferred underwriting fees and $567,815 of other offering costs. As of December 31, 2024, we had investment held in the Trust Account of $9,021,005. We intend to use substantially all of the remaining funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our business combination. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a 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.
As of December 31, 2024, we had cash of $16,868 outside of the Trust Account. If we do not complete the proposed business combination, we intend to use the funds held outside the Trust Account primarily to 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.
For finance transaction costs in connection with a business combination, the sponsor or an affiliate of the sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”). If we complete the initial business combination, we would repay such loaned amounts, or at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into units of the post business combination entity at a price of $10.00 per unit. The units would be identical to the Private Placement Units. In the event that the initial business combination does not close, we may use a portion of the working capital held outside of the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment. On April 11, 2023, we issued a convertible promissory note (the “Convertible Promissory Note”) in the total principal amount of up to $825,000 to the sponsor. The Convertible Promissory Note bears an interest accruing on the unpaid and outstanding total principal amount at the lowest short-term Applicable Federal Rate as in effect on the date thereof and is payable in arrears on the maturity date. Interest will be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. The Convertible Promissory Note was issued with an initial principal balance of $412,500 (the “Initial Principal Balance”). The sponsor has further lent loans in the aggregate amount of $430,000 on July 18, 2023, October 12, 2023 and December 29, 2023. The sponsor further lent an aggregate of $565,700 to the Company against the Convertible Promissory Note during the year ended December 31, 2024. As of December 31, 2024, there was an amount of $1,408,200 outstanding under Working Capital Loans in the form of the Convertible Promissory Note issued to the sponsor. Further, an amount of $74,555 with interest at 4.86% on the amount borrowed from the sponsor was recognized as accrued interest expense – related party as of December 31, 2024. On April 2, 2024, the Company and the sponsor agreed that, in addition to the Initial Principal Amount, the Company may request an additional aggregate amount of up to $186,800, which may be drawn down in one or more tranches at any time prior to the maturity date raising the total limit up to $1,200,000. For the year ended December 31, 2024, the Company has drawn down a total of $208,200 of the additional aggregate amount available, exceeding the total principal amount permitted under the Convertible Promissory Note. To remediate this overdrawn balance, on January 24, 2025, we amended and restated the Convertible Promissory Note to increase the total principal amount to $2,000,000.
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On July 10, 2024, the Company issued a promissory note (the “Sponsor Extension Convertible Promissory Note”) in the total principal amount of up to $180,000 to the sponsor. The Sponsor Extension Convertible Promissory Note was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at the Company’s request and upon the consent of the sponsor prior to the maturity of the Sponsor Extension Convertible Promissory Note.
On July 11, 2023, the Company issued a convertible promissory note in the total principal amount of $825,000 to FutureTech Capital LLC, a Delaware limited liability company (“FutureTech”) (the “FutureTech Convertible Promissory Note”), and 100% of such amount has been utilized to fund the required payment in order to extend the period of time to consummate a business combination. On October 11, 2023, the Company issued another convertible promissory note in the total principal amount of up to $450,000 to FutureTech (the “Second FutureTech Convertible Promissory Note”). The Second FutureTech Convertible Promissory Note was issued with an initial principal balance of $50,000, with the remaining $400,000 drawable at the Company’s request and upon the consent of FutureTech prior to the maturity of the Second FutureTech Convertible Promissory Note. Consequently, $400,000 of such amount has been utilized to fund the required payment in order to extend the period of time to consummate a business combination from October 11, 2023 to July 11, 2024. As of December 31, 2024, there was an amount of $1,275,000 outstanding in the form of the Convertible Promissory Note issued to FutureTech. Further, the amount of $58,586 with interest at 4.80% on amount borrowed from Futuretech for the Extension was recognized as accrued interest expense – others as of December 31, 2024.
Based on the foregoing, management believes that we will not have sufficient working capital and borrowing capacity to meet our needs through the consummation of the initial business combination. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
In accordance with Accounting Standards Codification (“ASC”) Subtopic 205-40, “Presentation of Financial Statements – Going Concern”, the Company has evaluated that there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern through April 11, 2025 (as extended pursuant to amended and restated memorandum and articles of association of the Company dated July 10, 2024), the date that the Company will be required to cease all operations, except for the purpose of winding up, if a business combination is not consummated. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of our public shares upon completion of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2024 and 2023. We do not participate in transactions that create relationships with entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Other Contractual Obligations
Registration Rights
The holders of our founder shares, Private Placement Shares and Private Placement Warrants, including any of those issued upon conversion of any Working Capital Loans (and any Private Placement Shares issuable upon the exercise of the Private Placement Warrants that may be issued upon conversion of any Working Capital Loans) will be entitled to registration rights pursuant to a registration and shareholder rights agreement signed on April 6, 2022. 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 after the completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the costs and expenses of filing any such registration statements.
The Merger Agreement contemplates that, at or prior to the closing of the Business Combination (the “Closing”), Denali, Scilex, the Sponsor and certain shareholders of Denali will enter into an Amended and Restated Registration Rights Agreement (the “A&R Registration Rights Agreement”), which, among other things, will govern the registration of certain shares of New Semnur Common Stock for resale and be effective as of the Closing.
Underwriting Agreement
The underwriters received a cash underwriting discount of $0.20 per Unit, or $1,650,000 in the aggregate, paid upon the closing of the IPO. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit, or $2,887,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement. On November 20, 2023, the Company entered into a Deferred Discount Agreement with the underwriters and Holdco, pursuant to which the representatives of the IPO agreed to receive $866,250 of the aggregate $2,887,500 deferred fee owed to them upon the closing of the Business Combination in the form of 86,625 shares of the combined company’s common stock (the “Common Stock Consideration”). Upon the terms of the Deferred Discount Agreement, the Common Stock Consideration will be issued at the closing of the Business Combination and the remaining $2,021,250 of the aggregate deferred fee owed will remain payable at the closing of the Business Combination. The Deferred Discount Agreement will terminate in the event that the Company does not consummate the Business Combination.
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Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with U.S. 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 consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. Management does not believe that the Company has any critical accounting estimates.
Recent Accounting Pronouncements
On December 14, 2023, the FASB issued a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09, Improvements to Income Tax Disclosures, applies to all entities subject to income taxes. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. For entities other than public business entities (non-PBEs), the requirements will be effective for annual periods beginning after December 15, 2025. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently assessing the impact, if any, that ASU 2023-09 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Until June 4, 2024, the net proceeds of our IPO and the Private Placement held in the Trust Account were invested in U.S. government securities 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. However, on June 4, 2024, to mitigate the risk of being deemed to have been operating as an unregistered investment company under the Investment Company Act, the Company instructed Wilmington Trust, National Association, the trustee with respect to the Trust Account, to liquidate the U.S. government securities or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash in an interest-bearing bank deposit account. Interest on bank deposit accounts is variable and such accounts currently yield interest of approximately 3.5% per annum. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
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Item 8. Financial Statements and Supplementary Data.
Reference is made to Pages F-1 through F-28 comprising a portion of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
(a) Dismissal of Independent Registered Public Accounting Firm
Denali, at the direction of the board of directors, and upon the recommendation of the Audit Committee of the board of directors, dismissed its independent registered public accountant Marcum LLP (“Marcum”), effective as of July 15, 2024.
Marcum’s report on the Company’s consolidated financial statements for the fiscal years ended December 31, 2023 and 2022 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except that Marcum’s report contained an explanatory paragraph expressing substantial doubt about the ability of the Company to continue as a going concern.
During the fiscal years ended December 31, 2023 and 2022 and subsequent interim periods through the date of Marcum’s dismissal, there were (i) no disagreements with Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to Marcum’s satisfaction, would have caused it to make reference to the subject matter of any such disagreement in connection with its reports for such years and (ii) no “reportable events” requiring disclosure pursuant to paragraph (a)(1)(v) of Item 304 of Regulation S-K and the related instructions to Item 304 of Regulation S-K.
(b) Appointment of New Independent Registered Public Accounting Firm
At the direction of the board of directors, and upon the recommendation of the Audit Committee, the Company appointed Marcum Asia CPAs LLP (“Marcum Asia”) as the Company’s new independent registered public accounting firm for the fiscal year ending December 31, 2024, effective as of July 15, 2024. During the Company’s two most recent fiscal years ended December 31, 2023 and 2022, and the subsequent interim periods through the date of Marcum Asia’s engagement, neither the Company nor anyone on its behalf has consulted with Marcum Asia regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, where either a written report or oral advice was provided to the Company that Marcum Asia concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
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Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15f and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Management’s Report on Internal Controls over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting at December 31, 2024. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on our assessments and those criteria, management determined that we maintained effective internal control over financial reporting as of December 31, 2024.
This Report on does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2024, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Our directors and executive officers are as follows:
| Name | Age | Title | ||
| Lei Huang | 53 | Chief Executive Officer and Director | ||
| You (“Patrick”) Sun | 37 | Chief Financial Officer | ||
| Huifeng Chang | 59 | Director | ||
| Jim Mao | 57 | Director | ||
| Kevin Vassily | 58 | Director |
Lei Huang, Chief Executive Officer and Director
Mr. Huang has served as our director and Chief Executive Officer since its inception. Mr. Huang has also served as a member of the board of directors of US Tiger Securities, Inc. (“US Tiger”) since December 2019 and previously served as a director of its parent company, UP Fintech Holding Limited (Nasdaq: TIGR), from November 2020 until June 2022. Since December 2021, Mr. Huang has served as the Chief Executive Officer and has been a member of the board of directors of TradeUP Securities, Inc., a broker/dealer company.
He has also been a member of the board of directors of MDL and International Corporation since December 2020. He served as the Chief Executive Officer and was a member of the board of directors of Fortune Rise Acquisition Corporation (Nasdaq: FRLA), a special purpose acquisition company, since its incorporation in January 2021 until December 2022. Prior to joining US Tiger, Mr. Huang was the Chief Executive Officer of Haitong Securities USA LLC and also served as Chief Compliance Officer and Operation Manager of CICC US Securities, Inc. from 2010 through 2018. Prior to that, Mr. Huang served as a Compliance Officer at Morgan Stanley, Lehman Brothers and Barclays. Mr. Huang also formerly served as a Regulatory Supervisor at the National Association of Securities Dealers. Mr. Huang earned an M.S. degree in Global Financial Analysis from Bentley University.
You (“Patrick”) Sun, Chief Financial Officer
Mr. Sun has served as our Chief Financial Officer since its inception. Mr. Sun is an experienced banking and asset management professional. Since August 2020, Mr. Sun has served as the Chief Financial Officer of Lake Crystal Energy LLC, an oil and gas company. As the Chief Financial Officer, Mr. Sun evaluates and sources potential investments in oil and gas assets. He also oversees all financial functions of the company. Prior to this role, from August 2014 to December 2019, Mr. Sun served as a Vice President and an E&P Analyst of Seaport Global Securities LLC, a full-service investment bank, capital markets advisory and research platform based in New York. From July 2008 to May 2012, Mr. Sun served as Vice President of the Pacific Securities Co., Ltd., a Chinese investment bank and brokerage firm. Mr. Sun earned an MBA from Washington University in St. Louis, Olin Business School, and a B.S. degree in Mechanics from Peking University.
Huifeng Chang, Director
Dr. Chang has served as our director since April 2022. Since May 2016, Dr. Chang has served as Senior Vice President and Chief Financial Officer and, in September 2020, became a member of the board of directors of Canadian Solar Inc. (Nasdaq: CSIQ), a company that manufactures solar PV modules and develops large scale solar projects. He has 24 years of experience in capital markets, financial investment and risk management. From 2010 to 2015, Dr. Chang was the co-head of Sales & Trading at CICC U.S. Securities Inc. Prior to this role, from 2008 to 2010, he was the Chief Executive Officer of China Southern Oriental Patron Asset Management based in Hong Kong, investing funds from China in the international markets. From 2000 to 2008, Dr. Chang was an Equity Proprietary Trader at Citigroup Global Capital Markets Inc. in New York. Before going to New York, Dr. Chang worked at Kamakura Corporation in Hawaii as a derivative and risk modeler. Mr. Chang has also been an independent director of Scienjoy Holding Corporation since May 2020 and on the advisory board of Aquamarine Investment Partners Ltd. since 2015. Dr. Chang earned a Ph.D. in Soil Physics and an MBA from the University of Hawaii at Manoa. He also earned an M.S. degree from Academia Sinica and a B.S. degree from Nanjing Agricultural University.
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Jim Mao, Director
Mr. Mao has served as our director since April 2022. Since February 2020, Mr. Mao has served as a founding and managing partner of Citta Capital (“Citta”), a firm focused on investing in early growth stage technology startups in Enterprise/SaaS, Blockchain, ESG, AI applications, cloud computing and healthcare technology since 2020. As of December 31, 2024, Citta has a diverse portfolio of companies that includes Kintsugi (a leading AI based mental health diagnostics company), Openprise, Inc. (automation solutions), Sequoia Games, Inc. (combining the latest technology with professional sports), SetPoint (clinical stage neuro treatment), Zeit Medical (early heart stroke detection with FDA breakthrough destination), and Ryu Games (Web3.0 Gamify). Prior to that, from March 2015 to February 2020, Mr. Mao was a Partner at WestSummit Capital (“WSC”), a leading global technology growth capital venture firm. He has also co-authored five U.S. patents. He has over 20 years of working experience in private equity and technology sectors, including enterprise software, Internet, mobile applications, digital media, intelligent hardware, advanced manufacturing/ materials, medical devices and clean technology.
Kevin D. Vassily, Director
Mr. Vassily has served as our director and Chair of the Audit Committee since April 2022. Mr. Vassily has extensive working experience as a senior management team member serving private and public companies. In January 2021, he was appointed Chief Financial Officer, and since March 2021, is a member of the board of directors of iPower Inc. (Nasdaq: IPW), a leading online hydroponic equipment retailer and supplier. Mr. Vassily is also a member of the board of directors of Feutune Light Acquisition Corporation (Nasdaq: FLFV), a special purpose acquisition company incorporated in January 2022. On June 21, 2024, Feutune Light Acquisition Corporation consummated its business combination with Thunder Power Holdings Limited, an electric vehicle company and was renamed Thunder Power Holdings, Inc. The shares of common stock of Thunder Power Holdings, Inc. is trading on Nasdaq under the symbol “AIEV”. Mr. Vassily is currently an independent director of Thunder Power Holdings, Inc. Mr. Vassily also serves as an independent director of Aimfinity Investment Corp. I, a special purpose acquisition company incorporated in July 2021. Mr. Vassily also served as a director of Fortune Joy International Acquisition Corporation, a special purpose acquisition company incorporated in August 2021. Fortune Joy International Corporation’s registration statement was declared abandoned by the Securities and Exchange Commission on June 2024. Prior to this role, from 2019 to January 2021, Mr. Vassily served as Vice President of Market Development for Facteus, a financial analytics company focused on the asset management industry. From March 2019 through 2020, he served as an advisor at Woodseer, a financial technology firm providing global dividend forecasts. From 2018 through its acquisition in 2020, Mr. Vassily served as an advisor at Go Capture, where he was responsible for providing strategic, business development, and product development advisory services for the company’s emerging “Data as a Service” platform. Since November 2019, Mr. Vassily has served as a director of Zhongchao Inc., a provider of healthcare information, education and training services to healthcare professionals and the public in China. Since July 2018, Mr. Vassily has also served as an advisor at Prometheus Fund, a Shanghai-based merchant bank & private equity firm focused on the “green” economy. From 2015 through 2018, Mr. Vassily served as an Associate Director of Research at Keybanc Capital Markets, and helped to co-manage the technology research vertical. From 2010 to 2014, he served as the Director of Research at Pacific Epoch, where he was responsible for a complete product overhaul and a complete business model restart post- acquisition, re-focusing the firm around a “data-first” research offering. From 2007 to 2010, he served as the Asia Technology Business Development Representative and as a Senior Analyst at Pacific Crest Securities. In this role, he was responsible for establishing the firm’s presence and relevance covering Asia Technology. From 2003 to 2006, he served as a Senior Research Analyst in the semiconductor technology group at Susquehanna International Group, where he was responsible for research in semiconductor and related technologies. From 2001 to 2003, Mr. Vassily served as a Vice President and Senior Research Analyst for semiconductor capital equipment at Thomas Weisel Partners, where he was responsible for publishing research and maintaining financial models on each of the companies under coverage. Mr. Vassily began his career on Wall Street in 1998 as a Research Associate covering the semiconductor industry at Lehman Brothers. Mr. Vassily earned a B.A. degree from Denison University and an MBA from Dartmouth College, Tuck School of Business.
Number and Terms of Office of Officers and Directors
Our board of directors consists of three members. Holders of our founder shares will have the right to elect all of our directors prior to consummation of our initial business combination and holders of our public shares will not have the right to vote on the appointment of directors during such time. These provisions of our amended and restated memorandum and articles of association may only be amended if approved by holders of at least 90% of our issued and outstanding ordinary shares entitled to vote thereon. Each of our directors will hold office for a two-year term. Subject to any other special rights applicable to the shareholders, any vacancies on our board of directors may be filled by the affirmative vote of a majority of the remaining directors of our board or by a majority of the holders of our ordinary shares (or, prior to our initial business combination, a majority of the holders of our founder shares).
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate. Our amended and restated memorandum and articles of association provide that our officers may consist of one or more chair of the board, chief executive officer, president, chief financial officer, vice presidents, secretary, treasurer and such other offices as may be determined by the board of directors.
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Committees of the Board of Directors
Our board of directors has one standing committee: an audit committee. Subject to phase-in rules and a limited exception, the rules of Nasdaq and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. As described in Item 11 below, none of our executive officers or directors has received any cash compensation for services rendered to us.
Audit Committee
We have established an audit committee of the board of directors. Huifeng Chang, Jim Mao and Kevin Vassily are members of our audit committee. Our board of directors has determined that each of Huifeng Chang, Jim Mao and Kevin Vassily are independent under the Nasdaq listing standards and applicable SEC rules. Kevin Vassily serves as the Chair of the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent within one year of the listing of our Class A ordinary shares. Each member of the audit committee is financially literate and our board of directors has determined that Kevin Vassily qualifies as “audit committee financial expert” as defined in applicable SEC rules.
The audit committee is responsible for:
| ● | meeting with our independent registered public accounting firm regarding, among other issues, audits, and adequacy of our accounting and control systems; |
| ● | monitoring the independence of the independent registered public accounting firm; |
| ● | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
| ● | inquiring and discussing with management our compliance with applicable laws and regulations; |
| ● | pre-approving all audit services and permitted non-audit services to be performed by our independent registered public accounting firm, including the fees and terms of the services to be performed; |
| ● | appointing or replacing the independent registered public accounting firm; |
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| ● | determining the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; |
| ● | monitoring compliance on a quarterly basis and, if any non-compliance is identified, immediately taking all action necessary to rectify such non-compliance or otherwise causing compliance; and |
| ● | reviewing and approving all payments made to our existing shareholders, executive officers or directors and their respective affiliates. Any payments made to members of our audit committee will be reviewed and approved by our board of directors, with the interested director or directors abstaining from such review and approval. |
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, and in the past year has not served, as a member of the compensation committee of any entity that has one or more executive officers serving on our board of directors.
Code of Ethics
We have adopted a Code of Ethics applicable to our directors, officers and employees. A copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Trading Policies
The Company has adopted an insider trading policy that governs the purchase, sale, and/or other transactions of our securities by our directors, officers and employees. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition, with regard to the Company’s trading in its own securities, it is the Company’s policy to comply with the federal securities laws and the applicable exchange listing requirements.
Availability of Documents
We have filed a copy of our Code of Ethics and our audit committee charter as exhibits to the registration statement relating to our IPO. You can review these documents by accessing our public filings at the SEC’s website at www.sec.gov. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of the ordinary shares of the Company and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.
Based on a review of Section 16 filings with respect to the Company made during or with respect to the most recent fiscal year, we are not aware of any late Section 16(a) filings other than one late Form 4 report filed by the sponsor and one late Form 4 report by Jiandong Xu.
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Item 11. Executive Compensation.
Executive Officer and Director Compensation
None of our executive officers or directors have received any cash compensation for services rendered to us. Our sponsor, executive officers and directors, or their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, executive officers or directors, or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the Trust Account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with consummating an initial business combination. Other than these payments and reimbursements, no compensation of any kind, including finder’s and consulting fees, will be paid by to our sponsor, executive officers and directors, or their respective affiliates, prior to completion of our initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to shareholders, if applicable and to the extent then known, in the proxy solicitation materials in connection with the Business Combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the Business Combination, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our executive officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. We do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with the Business Combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of April 1, 2025, based on information obtained from the persons named below, with respect to the beneficial ownership of our ordinary shares, by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares; |
| ● | each of our executive officers and directors; and |
| ● | all of our executive officers and directors as a group. |
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Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them. The following table does not reflect record or beneficial ownership of the Private Placement Warrants as these warrants are not exercisable within 60 days of the date of this report.
| Class B ordinary shares | Class A ordinary shares | |||||||||||||||
| Name of Beneficial Owners | Number of Shares Beneficially Owned | Approximate Percentage of Class | Number of Shares Beneficially Owned | Approximate Percentage of Class | ||||||||||||
| Denali Capital Global Investments LLC (our sponsor) | 1,432,500 | 69.5 | % | 510,000 | (1) | 40.4 | % | |||||||||
| Lei Huang | 50,000 | 2.4 | % | - | - | |||||||||||
| You (“Patrick”) Sun | 20,000 | * | - | - | ||||||||||||
| Huifeng Chang | 20,000 | * | - | - | ||||||||||||
| Jim Mao | 20,000 | * | - | - | ||||||||||||
| Kevin Vassily | 20,000 | * | - | - | ||||||||||||
| All officers and directors as a group (5 individuals) | 130,000 | 6.3 | % | - | - | |||||||||||
| Scilex Holding Company | 500,000 | (2) | 40.4 | % | - | - | ||||||||||
| TD Securities (USA) LLC | - | 80,000 | (3) | 6.3 | % | |||||||||||
| Meteora Capital, LLC | - | - | 498,798 | (4) | 39.5 | % | ||||||||||
| Mizuho Financial Group, Inc. | - | - | 493,672 | (5) | 39.1 | % | ||||||||||
| * | Less than one percent. |
| (1) | 510,000 Private Placement Units, each Private Placement Unit consists of one Class A ordinary share and one warrant. |
| (2) | Consists of 500,000 Class B ordinary shares of the Company purchased from the sponsor under the Sponsor Interest Purchase Agreement. The business address of Scilex is 960 San Antonio Road, Palo Alto, CA 94303. Scilex has sole voting power of 500,000 Class B ordinary shares of the Company. |
| (3) | This information is based solely on a Schedule 13G filed by TD Securities (USA LLC), Cowen Financial Products LLC, TD Group US Holdings LLC, Toronto Dominion Bank and Toronto Dominion Holdings Bank (the “TD Reporting Persons”) with the SEC on December 26, 2024. TD Securities (USA) LLC has sole voting power of 30,000 shares and Cowen Financial Products LLC has sole voting power of 50,000 shares. The number of shares held by the TD Reporting Persons is reported as of December 16, 2024, as stated in the Schedule 13G, which does not reflect any redemption of shares by the TD Reporting Persons in connection with the Business Combination itself, or any other transactions after December 16, 2024. The business address of such holder is One Vanderbilt Avenue, New York, New York 10017. |
| (4) | This information is based solely on a Schedule 13G/A filed by Meteora Capital, LLC and Vik Mittal (the “Meteora Reporting Persons”) with the SEC on February 7, 2025. The Meteora Reporting Persons have a shared voting power of 498,798 shares and shared dispositive power of 498,798 shares. The number of shares held by Meteora Reporting Persons is reported as of January 31, 2025, as stated in the Schedule 13G/A, which does not reflect any redemption of shares by the Meteora Reporting Persons in connection with extensions of the deadlines to complete the Business Combination or the Business Combination itself, or any other transactions after January 31, 2025. The business address of such holder is 1200 N Federal Hwy, #200, Boca Raton FL 33432. |
| (5) | This information is based solely on a Schedule 13G filed by Mizuho Financial Group, Inc. (“Mizuho”) with the SEC on February 10, 2023. Mizuho has sole voting power of 493,672 shares and sole dispositive power of 493,672 shares. The number of shares held by Mizuho is reported as of December 31, 2022, as stated in the Schedule 13G, which does not reflect any redemption of shares by Mizuho in connection with extensions of the deadlines to complete the Business Combination or the Business Combination itself, or any other transactions after December 31, 2022. The business address of such holder is 1-5-5, Otemachi, Chiyoda-ku, Tokyo 100-8176, Japan. |
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As of April 1, 2025, our initial shareholders beneficially owned approximately 47% of issued and outstanding ordinary shares and have the right to appoint all of our directors prior to our initial business combination. Holders of our public shares will not have the right to appoint any directors to our board of directors prior to our initial business combination. Because of this ownership block, our sponsor may be able to effectively influence the outcome of all other matters requiring approval by our shareholders, including amendments to our amended and restated memorandum and articles of association and approval of significant corporate transactions including our initial business combination.
Our sponsor has agreed (a) to vote any founder shares and public shares held by it in favor of any proposed business combination and (b) not to redeem any founder shares or public shares held by it in connection with a shareholder vote to approve a proposed initial business combination.
Our sponsor, our officers, our directors and US Tiger are deemed to be our “promoters” as such term is defined under the federal securities laws.
Transfers of Founder Shares and Private Placement Warrants
The founder shares, Private Placement Units, Private Placement Shares, Private Placement Warrants and any Class A ordinary shares issued upon conversion or exercise thereof are each subject to transfer restrictions pursuant to lock-up provisions in the agreement entered into by our sponsor and management team. Our sponsor and each member of our management team have agreed not to transfer, assign or sell any of their founder shares until the earlier of (A) one year after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the closing price of our Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public shareholders having the right to exchange their ordinary shares for cash, securities or other property. The Private Placement Units and the securities within the units are not transferable, assignable or salable until 30 days after the completion of our initial business combination. The foregoing restrictions are not applicable to transfers (a) to our officers or directors, any affiliates or family members of any of our officers or directors, any members or partners of our sponsor or their affiliates, any affiliates of our sponsor, or any employees of such affiliates; (b) in the case of an individual, by gift to a member of one of the individual’s immediate family or to a trust, the beneficiary of which is a member of the individual’s immediate family, an affiliate of such person or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent and distribution upon death of the individual; (d) in the case of an individual, pursuant to a qualified domestic relations order; (e) by private sales or transfers made in connection with any forward purchase agreement or similar arrangement or in connection with the consummation of a business combination at prices no greater than the price at which the founder shares, Private Placement Units or Class A ordinary shares, as applicable, were originally purchased; (f) by virtue of our sponsor’s organizational documents upon liquidation or dissolution of our sponsor; (g) to us for no value for cancellation in connection with the consummation of our initial business combination; (h) in the event of our liquidation prior to the completion of our initial business combination; or (i) in the event of our completion of a liquidation, merger, share exchange or other similar transaction which results in all of our public shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property after our completion of our initial business combination; provided, however, that in the case of clauses (a) through (f) these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions and the other restrictions contained in the letter agreement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
In February 2022, we issued an aggregate of 2,156,250 founder shares to our sponsor in exchange for a payment of $25,000 from our sponsor to cover for certain expenses on behalf of us, or approximately $0.012 per share. Our sponsor later transferred 20,000 founder shares to our Chief Financial Officer and 110,000 founder shares to certain members of our board of directors and forfeited 93,750 founder shares pursuant to the underwriters partially exercising their over-allotment option. On August 30, 2024, the sponsor and Scilex entered into the Sponsor Interest Purchase Agreement, pursuant to which Scilex purchased the Purchased Interests that were then-held by the sponsor. The aggregate consideration for the purchase and sale of the Purchased Interests is as follows: (i) the Cash Consideration and (ii) 300,000 Scilex Shares. Pursuant to the Sponsor Interest Purchase Agreement, Scilex paid the Cash Consideration and has agreed to issue the Scilex Shares to the sponsor contingent upon and following the occurrence of the Effective Time. The Purchased Interests will convert automatically, on a one-for-one basis, into one share of New Semnur Common Stock at the effective time of the Domestication (as defined in the Merger Agreement) pursuant to the terms of the Merger Agreement.
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Our sponsor has purchased an aggregate of 510,000 Private Placement Units (with each Private Placement Unit consisting of one Private Placement Share and one Private Placement Warrant) at the price of $10.00 per unit. Each Private Placement Warrant entitles the holder to purchase one ordinary share at $11.50 per share, subject to adjustment. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of our initial business combination. In addition, we have agreed not to enter into a definitive agreement regarding an initial business combination without the prior consent of our sponsor.
If any of our founders, officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he, she or it has then-current fiduciary or contractual obligations, then, subject to their fiduciary duties under Cayman Islands law, he, she or it will need to honor such fiduciary or contractual obligations to present such business combination opportunity to such entity, before we can pursue such opportunity.
No compensation of any kind, including finder’s and consulting fees, will be paid by us to our sponsor, executive officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of an initial business combination. However, these individuals will be reimbursed for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial business combination. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, directors or our or their affiliates.
In addition, 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 on a non-interest basis. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds held in the Trust Account released to us. In the event that the 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. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $10.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. Except as set forth above, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. On April 11, 2023, we issued a convertible promissory note (the “Convertible Promissory Note”) in the total principal amount of up to $825,000 to the sponsor. The Convertible Promissory Note was issued with an initial principal balance of $412,500, with the remaining $412,500 drawable at our request prior to the maturity of the Convertible Promissory Note. On December 29, 2023, we issued an amended and restated promissory note (the “Restated Note”) in the total principal amount of up to $1,000,000; on April 2, 2024, we issued a second amended and restated promissory note (the “Second Restated Note”) in the total principal amount of up to $1,200,000. As of December 31, 2024, the outstanding amount under the Working Capital Loans in the form of the Convertible Promissory Note issued to our sponsor had exceeded this limit, reaching $1,408,200, resulting in an overdrawn position. To remediate this overdrawn balance, on January 24, 2025, we issued a third amended and restated promissory note (the “Third Restated Note”), increasing the total principal amount to $2,000,000. We may draw down on the Third Restated Note from time to time prior to the earlier of (i) the closing of Denali’s initial business combination and (ii) the date of the liquidation of the Company. In the event we do not consummate the Business Combination, the Third Restated Note will be repaid only to the extent that we have funds available to it outside of the Trust Account.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our shareholders, to the extent then known, in the proxy solicitation or tender offer materials, as applicable, furnished to our shareholders. It is unlikely the amount of such compensation will be known at the time of distribution of such proxy solicitation or tender offer materials or at the time of a general meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
31
We have entered into a registration and shareholder rights agreement with respect to the founder shares and Private Placement Warrants, which is described under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Other Contractual Obligations.”
Policy for Approval of Related Party Transactions
The audit committee of our board of directors has adopted a charter, providing for the review, approval and/or ratification of “related party transactions,” which are those transactions required to be disclosed pursuant to Item 404 of Regulation S-K as promulgated by the SEC, by the audit committee. At its meetings, the audit committee shall be provided with the details of each new, existing, or proposed related party transaction, including the terms of the transaction, any contractual restrictions that we have already committed to, the business purpose of the transaction, and the benefits of the transaction to us and to the relevant related party. Any member of the committee who has an interest in the related party transaction under review by the committee shall abstain from voting on the approval of the related party transaction, but may, if so requested by the chairman of the committee, participate in some or all of the committee’s discussions of the related party transaction. Upon completion of its review of the related party transaction, the committee may determine to permit or to prohibit the related party transaction.
Management will present to the audit committee each proposed related party transaction, including all relevant facts and circumstances relating thereto. Under the policy, we may consummate related party transactions only if our audit committee approves or ratifies the transaction in accordance with the guidelines set forth in the policy. The policy does not permit any director or executive officer to participate in the discussion of, or decision concerning, a related person transaction in which he or she is the related party.
Director Independence
We will be a “controlled company” within the meaning of the Nasdaq rules prior to the consummation of our initial business combination. As a controlled company, we will not be required to comply with the Nasdaq rules that require that a majority of our board of directors be independent. An “independent director” is defined generally as a person who has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). Our board of directors has determined that each of Huifeng Chang, Jim Mao and Kevin Vassily are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
32
Item 14. Principal Accountant Fees and Services.
The following is a summary of fees paid or to be paid to Marcum Asia CPAs LLP, for services rendered in 2024 and Marcum LLP for services rendered in 2023.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our financial statements, reviews of our quarterly financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings. The aggregate fees billed by Marcum Asia CPAs LLP for audit fees, inclusive of the interim review and review of the Registration Statement on Form S-4 and required filings with the SEC for the year ended December 31, 2024, totaled $108,544. The aggregate fees billed by Marcum LLP for audit fees, inclusive of the interim review and review of the Registration Statement on Form S-4 filed by Holdco in connection with the Longevity Business Combination and required filings with the SEC for the year ended December 31, 2023, totaled $236,665.
Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not incur any audit-related services for the year ended December 31, 2024 and 2023.
Tax Fees. Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice. We did not incur any services relating to tax compliance, tax planning and tax advice for the year ended December 31, 2024 and 2023.
All Other Fees. All other fees consist of fees billed for all other services. We did not incur other services for the year ended December 31, 2024 and 2023.
Pre-Approval Policy
The audit committee is responsible for the pre-approval of audit and permitted non-audit services to be performed by the Company’s independent auditor. The audit committee will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by the Company’s independent auditor. Thereafter, the audit committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by the Company’s independent auditor which are not encompassed by the audit committee’s annual pre-approval and are not prohibited by law. The audit committee has approved all audit and permitted non-audit services performed by its independent auditor, Marcum Asia CPAs LLP, for Fiscal 2024 and Marcum LLP, for Fiscal 2023.
33
PART IV
Item 15. Exhibit and Financial Statement Schedules.
| (a) | The following documents are filed as part of this report: |
| (1) | Financial Statements |
| (2) | Financial Statements Schedules |
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes herein.
| (3) | Exhibits |
We hereby file, furnish or incorporate by reference, as applicable, as part of this report the exhibits listed in the attached Exhibit Index. Copies of such material can be obtained on the SEC website at www.sec.gov.
Item 16. Form 10-K Summary.
Not applicable.
34
DENALI CAPITAL ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
F-1
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Denali Capital Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Denali Capital Acquisition Corp. (the “Company”) as of December 31, 2024, the related consolidated statements of operations, shareholders’ deficit and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 9 to the financial statements, the Company adopted ASU 2023-07, Segment Reporting (Topic 280) as of December 31, 2024. We also have audited the adjustments necessary to restate the 2023 segment information and to reflect the adoption of ASU 2023-07, Segment Reporting (Topic 280) to the 2023 segment information, as provided in Note 9. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the 2023 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2023 financial statements taken as a whole.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, to the financial statements, the Company is a Special Purpose Acquisition Corporation that was formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses on or before April 11, 2025 (unless further extended). There is no assurance that the Company will obtain the necessary approvals or raise the additional capital it needs to fund its business operations and complete any business combination prior to April 11, 2025 (unless further extended), if at all. The Company also has no approved plan in place to extend the business combination deadline beyond April 11, 2025 and lacks the capital resources needed to fund operations and complete any business combination, even if the deadline to complete a business combination is extended to a later date. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum Asia CPAs llp
Marcum Asia CPAs llp
We have served as the Company’s auditor since 2024.
New York, NY
April 1, 2025
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Denali Capital Acquisition Corp.
Opinion on the Financial Statements
We have audited, before the effects of the retrospective adjustments to the disclosures for the adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) discussed in Notes 2 and 9 to the consolidated financial statements, the accompanying consolidated balance sheet of Denali Capital Acquisition Corp. (the “Company”) as of December 31, 2023, the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”) (the 2023 financial statements before the effects of the adjustments discussed in Notes 2 and 9 to the financial statements are not presented herein). In our opinion, the 2023 financial statements, before the effects of the retrospective adjustments to the disclosures for the adoption of ASU 2023-07 discussed in Notes 2 and 9 to the financial statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the retrospective adjustments to the disclosures for the adoption of ASU 2023-07 discussed in Notes 2 and 9 to the financial statements, and accordingly, we do not express an opinion or any form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by Marcum Asia CPAs LLP.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company is a Special Purpose Acquisition Corporation that was formed for the purpose of completing a merger on or before April 11, 2024 (or July 11, 2024, if certain conditions are met). The Company entered into a definitive merger agreement with a business combination target on January 25, 2023, and the shareholders approved the merger on January 9, 2024. There is no assurance that the Company will satisfy the required closing conditions, raise the additional capital it needs to fund its operations, and complete the transaction prior to April 11, 2024 (or July 11, 2024, if certain conditions are met), if at all. The Company also has no approved plan in place to extend the business combination deadline and fund operations for any period of time after April 11, 2024 (or July 11, 2024, if certain conditions are met), in the event that it is unable to complete a business combination by that date. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor from 2022 to 2024.
Costa Mesa, CA
April 1, 2024
F-3
DENALI CAPITAL ACQUISITION CORP.
CONSOLDATED BALANCE SHEETS
| December 31, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Cash on hand | $ | 16,868 | $ | 204,464 | ||||
| Prepaid expenses | - | 4,976 | ||||||
| Total current assets | 16,868 | 209,440 | ||||||
| Cash and Investments held in trust | 9,021,005 | 50,477,963 | ||||||
| Total assets | $ | 9,037,873 | $ | 50,687,403 | ||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Accounts Payable and accrued offering costs and expenses | $ | 4,640,414 | $ | 3,749,581 | ||||
| Accrued interest expense -related party | 74,555 | 18,021 | ||||||
| Accrued interest expense - others | 58,586 | 18,878 | ||||||
| Promissory Note - related party | 1,423,237 | 842,500 | ||||||
| Promissory Note - Others | 1,350,292 | 975,000 | ||||||
| Total current liabilities | 7,547,084 | 5,603,980 | ||||||
| Deferred underwriter compensation | 2,887,500 | 2,887,500 | ||||||
| Total liabilities | 10,434,584 | 8,491,480 | ||||||
| Commitments and contingencies | ||||||||
| Class A ordinary shares subject to possible redemption 751,837 and 4,537,829 shares at redemption value of $12.00 and $11.12 per share as of December 31, 2024 and 2023, respectively | 9,021,005 | 50,477,963 | ||||||
| Shareholders’ Deficit: | ||||||||
| Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Class A ordinary shares, $0.0001 par value; 200,000,000 shares authorized, 510,000 shares issued and outstanding (excluding 751,837 and 4,537,829 shares subject to possible redemption as of December 31, 2024 and 2023, respectively subject to possible redemption) | 51 | 51 | ||||||
| Class B ordinary shares, $0.0001 par value; 20,000,000 shares authorized, 2,062,500 shares issued and outstanding | 206 | 206 | ||||||
| Accumulated deficit | (10,417,973 | ) | (8,282,297 | ) | ||||
| Total shareholders’ deficit | (10,417,716 | ) | (8,282,040 | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | 9,037,873 | $ | 50,687,403 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
DENALI CAPITAL ACQUISITION CORP.
CONSOLDATED STATEMENTS OF OPERATIONS
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Formation and operating costs | $ | 1,649,106 | $ | 3,173,826 | ||||
| Loss from operations | 1,649,106 | 3,173,826 | ||||||
| Other expense/(income) | ||||||||
| Interest expense | 96,242 | 36,909 | ||||||
| Income on Trust account | (1,578,042 | ) | (3,843,271 | ) | ||||
| Net (loss)/ income | $ | (167,306 | ) | $ | 632,536 | |||
| Basic and diluted weighted average redeemable ordinary shares outstanding | 2,722,627 | 7,416,033 | ||||||
| Basic and diluted net income per redeemable ordinary shares | $ | 0.32 | $ | 0.26 | ||||
| Basic and diluted weighted average non-redeemable ordinary shares outstanding | 2,572,500 | 2,572,500 | ||||||
| Basic and diluted net loss (income) per non-redeemable ordinary share | $ | (0.40 | ) | $ | (0.50 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
DENALI CAPITAL ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
| For the Year Ended December 31, 2024 | ||||||||||||||||||||||||
| Class A Ordinary Shares | Class B Ordinary Shares | Accumulated | Shareholders’ | |||||||||||||||||||||
| Shares | Amount | Shares | Amount | Deficit | Equity Deficit | |||||||||||||||||||
| Balance as of December 31, 2023 | 510,000 | $ | 51 | $ | 2,062,500 | $ | 206 | $ | (8,282,297 | ) | $ | (8,282,040 | ) | |||||||||||
| Net loss | - | - | - | - | (167,306 | ) | (167,306 | ) | ||||||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned on trust account and extension deposit) | - | - | - | - | (1,968,370 | ) | (1,968,370 | ) | ||||||||||||||||
| Balance as of December 31, 2024 | 510,000 | 51 | 2,062,500 | 206 | $ | (10,417,973 | ) | (10,417,716 | ) | |||||||||||||||
| For the Year Ended December 31, 2023 | ||||||||||||||||||||||||
| Class A Ordinary Shares | Class B Ordinary Shares | Accumulated | Shareholders’ | |||||||||||||||||||||
| Shares | Amount | Shares | Amount | Deficit | Deficit | |||||||||||||||||||
| Balance as of December 31, 2022 | 510,000 | $ | 51 | 2,062,500 | $ | 206 | $ | (3,271,562 | ) | $ | (3,271,305 | ) | ||||||||||||
| Net income | - | - | - | - | 632,536 | 632,536 | ||||||||||||||||||
| Subsequent measurement of ordinary shares subject to possible redemption (interest earned on trust account and extension deposit) | - | - | - | - | (5,643,271 | ) | (5,643,271 | ) | ||||||||||||||||
| Balance as of December 31, 2023 | 510,000 | $ | 51 | $ | 2,062,500 | $ | 206 | $ | (8,282,297 | ) | $ | (8,282,040 | ) | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
DENALI CAPITAL ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss)/income | $ | (167,306 | ) | $ | 632,536 | |||
| Adjustments to reconcile net (loss)/ income to net cash used in operating activities: | ||||||||
| Income from Trust | (1,578,042 | ) | (3,843,271 | ) | ||||
| Changes in current assets and liabilities: | ||||||||
| Prepaid Expenses | 4,976 | 83,113 | ||||||
| Accounts payable and accrued expenses | 890,833 | 2,457,940 | ||||||
| Accrued interest expense -related party | 56,534 | 18,021 | ||||||
| Accrued interest expense - others | 39,709 | 18,878 | ||||||
| Net cash used in operating activities | (753,296 | ) | (632,783 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment held in Trust Account | - | (825,000 | ) | |||||
| Cash withdrawn from Trust Account in connection with redemption | 43,425,328 | 40,536,908 | ||||||
| Net cash provided by investing activities | 43,425,328 | 39,711,908 | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of promissory note to related party | 565,700 | 842,500 | ||||||
| Redemption of ordinary shares | (43,425,328 | ) | (40,536,908 | ) | ||||
| Net cash used in financing activities | (42,859,628 | ) | (39,694,408 | ) | ||||
| Net change in cash | (187,596 | ) | (615,283 | ) | ||||
| Cash, beginning of the year | 204,464 | 819,747 | ||||||
| Cash, end of the year | $ | 16,868 | $ | 204,464 | ||||
| Supplemental disclosure of noncash investing and financing activities | ||||||||
| Increase in investment held in Trust Account through issuance of promissory note | $ | 390,329 | $ | 975,000 | ||||
| Remeasurement adjustment on class A ordinary shares subject to possible redemption | $ | 1,968,370 | $ | 5,643,271 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
NOTE 1 – ORGANIZATION AND BUSINESS OPERATION
Denali Capital Acquisition Corp. (the “Company” or “Denali”) is a newly organized blank check company incorporated in the Cayman Islands on January 5, 2022. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses (a “Business Combination”).
As of December 31, 2024, the Company had not commenced any operations. All activity for the period from January 5, 2022 (inception) through December 31, 2024, relates to the Company’s organizational activities, those necessary to prepare for and complete the initial public offering (“IPO”), identifying a target company for a business combination, and activities in connection with an initial business combination, including with respect to our proposed business combination with Semnur Pharmaceuticals, Inc (“Semnur”). The Company does not expect to generate any operating revenues until after the completion of an initial Business Combination. The Company is generating non-operating income in the form of income from the investment of proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Denali Capital Global Investments LLC, a Cayman Islands limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s IPO became effective on April 6, 2022. On April 11, 2022, the Company consummated the IPO of 8,250,000 units (including over-allotment of 750,000 units) (“Public Units”). Each Public Unit consists of one Class A ordinary share, $0.0001 par value per share (such shares included in the Public Units, the “Public Shares”), and one redeemable warrant (the “Public Warrants”), each whole Public Warrant entitling the holder thereof to purchase one Public Share at an exercise price of $11.50 per share. The Public Units were sold at a price of $10.00 per Public Unit, generating gross proceeds of $82,500,000, which is described in Note 3. Simultaneously with the closing of the IPO, the Company consummated the sale of 510,000 units (including over-allotment of 30,000 units) (the “Private Placement Units”) to the Sponsor at a price of $10.00 per Private Placement Unit in a private placement generating gross proceeds of $5,100,000, which is described in Note 4. Transaction costs amounted to $5,105,315, consisting of $1,650,000 of underwriting fees, $2,887,500 of deferred underwriters’ fees and $567,815 of other offering costs, and were all initially charged to shareholders’ equity.
Trust Account
Following the consummation of the IPO on April 11, 2022, a total of $84,150,000 of the net proceeds from the IPO and the sale of the Private Placement Units was deposited in a trust account (the “Trust Account”). The net proceeds were invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund and meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by the Company. Further, on April 12, 2023, the Company issued a press release announcing that it deposited $825,000 into the Trust Account, 50% of this amount being a loan from the Sponsor in the form of a convertible promissory note and other 50% amount was transferred directly from the remaining cash on hand balance at that time, in order to extend the period of time it has to consummate a business combination by an additional three months, from then current deadline of April 11, 2023 to July 11, 2023. On July 13, 2023, the Company issued a press release announcing that an aggregate of $825,000 has been deposited into the Company’s Trust Account in order to extend the period of time it has to consummate a business combination by an additional three months, from the then current deadline of July 11, 2023 to October 11, 2023. Furthermore, subsequently, on October 11, 2023, the Company issued another press release announcing that the Company’s shareholders extended the date by which the Company must consummate an initial business combination from October 11, 2023 to July 11, 2024 by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine times by an additional one month each time (the “Extension”). The Sponsor (or its affiliates or permitted designees) will deposit into the Trust Account for each such one-month extension the lesser of (a) an aggregate of $50,000 or (b) $0.03 per public share that remains outstanding and is not redeemed prior to any such one-month extension, unless the closing of the Company’s initial business combination has occurred, and hence, an aggregate of $150,000 has been deposited into the Company’s Trust Account through December 31, 2023 in order to extend the period of time it has to consummate a business combination by an additional three months, from the then current deadline of October 11, 2023 to January 11, 2024. Until June 2024, there has been further deposit of an aggregate of $300,000 into the Trust Account for extension from January 11, 2024 to July 11, 2024. However, on June 4, 2024, to mitigate the risk of being deemed to have been operating as an unregistered investment company under the Investment Company Act, the Company instructed Wilmington Trust, National Association, the trustee with respect to the Trust Account, to liquidate the U.S. government securities or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash in an interest-bearing bank deposit account until the earlier of (i) the completion of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below. Interest on bank deposit accounts is variable and such accounts currently yield interest of approximately 3.5% per annum.
F-8
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
During the shareholder’s meeting held on October 11, 2023, shareholders holding 3,712,171 public shares (after giving effect to withdrawals of redemptions) exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $40.5 million (approximately $10.92 per share) was removed from the Trust Account to pay such holders. Following redemptions and through December 31, 2023, the Company had 4,537,829 public shares outstanding.
On July 10, 2024, the shareholders of the Company held an extraordinary general meeting of shareholders to consider and vote upon a proposal to amend, by way of special resolution, the amended and restated memorandum and articles of association of the Company to extend (the “extension”) the date by which the Company must: (i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company and one or more businesses or entities; (ii) cease its operations, except for the purpose of winding up, if it fails to complete such initial business combination; and (iii) redeem 100% of the Company’s Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), included as part of the units sold in the Company’s IPO from July 11, 2024 to April 11, 2025, by electing to extend the date to consummate an initial business combination on a monthly basis for up to nine (9) times by an additional one month each time, unless the closing of the Company’s initial business combination has occurred, without the need for any further approval of the Company’s shareholders, provided that the Sponsor (or its affiliates or permitted designees) will deposit into the Trust Account for each such one-month extension the lesser of (a) an aggregate of $20,000 or (b) $0.02 per public share that remains outstanding and is not redeemed prior to any such one-month extension, unless the closing of the Company’s initial business combination has occurred, in exchange for a non-interest bearing promissory note payable upon consummation of an initial business combination.
In connection with the extraordinary general meeting on July 10, 2024, shareholders holding 3,785,992 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $43.4 million (approximately $11.47 per share) was removed from the Trust Account to pay such holders. Following redemptions, the Company had 751,837 public shares outstanding.
On July 10, 2024, Company issued a convertible promissory note (the “Convertible Promissory Note 2”) in the total principal amount of up to $180,000 to Sponsor. The Convertible Promissory Note 2 was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at the Company’s request and upon the consent of the Sponsor prior to the maturity of the Convertible Promissory Note 2. The Convertible Promissory Note 2 matures upon the earlier of (i) the effective date of the consummation of the Company’s initial business combination and (ii) the date of the liquidation of the Company.
On August 9, 2024, the Company issued a convertible promissory note in the total principal amount of up to $180,000 to Scilex (the “Extension Scilex Convertible Promissory Note”). The Extension Scilex Convertible Promissory Note was issued with an initial principal balance of $15,064, with the remaining $164,936 drawable at the Company’s request and upon the consent of Scilex prior to the maturity of the Extension Scilex Convertible Promissory Note. The Extension Scilex Convertible Promissory Note matures upon the earlier of (i) the effective date of the consummation of the Company’s initial business combination and (ii) the date of the liquidation of the Company.
F-9
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
As of December 31, 2024, Scilex deposited aggregated total of $75,292 drawn down from the Extension Scilex Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination to January 11, 2025.
On January 6, 2025, February 11, 2025 and March 11, 2025, Scilex had deposited an aggregate of $45,191 drawn down from the Extension Scilex Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination from January 11, 2025 to April 11, 2025.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the value of the assets held in the Trust Account (excluding any deferred underwriters’ fees and taxes payable on the interest income earned on the Trust Account). The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
Business Combination
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination (initially anticipated to be $10.20 per Public Unit, plus any pro rata interest then in the Trust Account, net of taxes payable). The Public Shares subject to redemption were recorded at a redemption value and classified as temporary equity upon the completion of the IPO in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). The Company will not redeem Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 (so that it does not then become subject to the “penny stock” rules of the Securities and Exchange Commission (the “SEC”)) either prior to or upon consummation of an initial Business Combination. However, a greater net tangible asset or cash requirement may be contained in the agreement relating to the Business Combination. In shareholders’ meeting held on October 11, 2023, it was resolved to eliminate this limitation that the Company may not redeem Public Shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 (the “Redemption Limitation Amendment”). If the Company is unable to complete the initial Business Combination within the Combination Period, including Extension (refer to Note 9), the Company will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s franchise and income taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then-issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining shareholders and its board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete the Business Combination within the Combination Period.
F-10
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
The founder shares are designated as Class B ordinary shares (the “founder shares”) and, except as described below, are identical to the Public Shares, and holders of founder shares have the same shareholder rights as Public Shareholders, except that (i) prior to the Company’s initial Business Combination, only holders of the founder shares have the right to vote on the appointment of directors, including in connection with the completion of the Company’s initial Business Combination, and holders of a majority of the founder shares may remove a member of the board of directors for any reason, (ii) the founder shares are subject to certain transfer restrictions, as described in more detail below, (iii) the Company’s initial shareholders have entered into an agreement with the Company, pursuant to which they have agreed to (A) waive their redemption rights with respect to their founder shares and Public Shares in connection with the completion of the Company’s initial Business Combination, (B) waive their redemption rights with respect to their founder shares and Public Shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association that would affect the substance or timing of the Company’s obligation to provide for the redemption of the Company’s Public Shares in connection with an initial Business Combination or to redeem 100% of the Company’s Public Shares if the Company has not consummated an initial Business Combination by April 11, 2025 (or as may be extended by a shareholder vote to further extend the time to consummate a business combination, as applicable), and (C) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails to complete its initial Business Combination by April 11, 2025 (or as may be extended by a shareholder vote to further extend the time to consummate a business combination, as applicable), although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete its initial Business Combination within the prescribed time frame, (iv) the founder shares will automatically convert into Public Shares concurrently with or immediately following the consummation of the Company’s initial Business Combination, or earlier at the option of the holder thereof, and (v) the founder shares are entitled to registration rights. If the Company submits its initial Business Combination to its Public Shareholders for a vote, the Sponsor and each member of the Company’s management team have agreed to vote their Founder Shares and Public Shares in favor of the Company’s initial Business Combination. During an extraordinary general meeting held on October 11, 2023, a proposal was approved that Class A ordinary shares will be issued to holders of Class B ordinary shares upon the exercise of the right of a holder of the Company’s Class B ordinary shares, par value $0.0001 per share, to convert such holder’s Class B ordinary shares into Class A ordinary shares on a one-for-one basis at any time and from time to time prior to the closing of an initial business combination at the election of the holder (the “Founder Share Amendment”). No such conversions have been made as of the date of this filing. Further, the Class B ordinary shares that convert into Class A ordinary shares do not possess redemption rights.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s registered public accounting firm) for services rendered or products sold to the Company, or by a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20 per Public Share or (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.20 per Public Share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party or prospective target business who executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended, (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Company’s Sponsor will not be responsible to the extent of any liability for such third party claims.
Merger Agreement – Longevity (termination)
On January 25, 2023, the Company entered into an Agreement and Plan of Merger (the “Longevity Merger Agreement”), by and among Longevity Biomedical, Inc., a Delaware corporation (“Longevity”), Denali SPAC Holdco, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company (“Holdco”), Denali SPAC Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Holdco (“Denali Merger Sub”), Longevity Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Holdco (“Longevity Merger Sub”), and Bradford A. Zakes, solely in the capacity as seller representative (the “Seller Representative”).
F-11
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
On June 26, 2024, pursuant to Section 11.1(a) of the Longevity Merger Agreement, the parties entered into a termination agreement (the “Termination Agreement”) pursuant to which the Longevity Merger Agreement was terminated effective as of the date of the Termination Agreement (the “Termination”).
As a result of the Termination Agreement, the Longevity Merger Agreement is of no further force and effect (other than certain customary limited provisions that survive the termination pursuant to the terms of the Longevity Merger Agreement) and ancillary agreements entered into in connection with the Longevity Merger Agreement also automatically terminated in accordance with their respective terms. As a result of the termination of the Longevity Merger Agreement, Holdco filed the Registration Withdrawal Request on Form RW on August 9, 2024, to withdraw its registration statement on Form S-4, as amended, initially filed with the SEC on March 29, 2023.
Merger Agreement – Semnur
On August 30, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Semnur Pharmaceuticals, Inc. (“Semnur”), a Delaware corporation and wholly owned subsidiary of Scilex Holding Company (“Scilex”), and Denali Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”). The term “New Semnur” is used to refer to the Company after completion of the transactions contemplated by the Merger Agreement.
Subject to the terms and conditions set forth in the Merger Agreement, the total consideration to be paid at Closing by the Company to Semnur’s equity holders will be an amount equal to the quotient of (a) $2,500,000,000 divided by (b) $10.00, and will be payable in New Semnur Common Shares. In accordance with the terms and subject to the conditions of the Merger Agreement, following the Company’s deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”) and at the effective time of the Merger (the “Effective Time”): (i) each share of common stock of Semnur issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive, without interest, a number of shares of common stock of New Semnur (the “New Semnur Common Shares”) equal to the Exchange Ratio (as defined in the Merger Agreement); (ii) each share of Series A preferred stock of Semnur issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive, without interest, (a) one share of Series A preferred stock of New Semnur (the “New Semnur Preferred Share”) and (b) one-tenth of one New Semnur Common Share, and (iii) subject to the Company’s receipt of the Option Exchange Approval (as defined in the Merger Agreement), each option to purchase a share of Semnur common stock that is then outstanding shall be converted into the right to receive an option to purchase a number of New Semnur Common Shares as determined by the Exchange Ratio upon substantially the same terms and conditions as are in effect with respect to such option immediately prior to the Effective Time, with the exercise price thereof adjusted by the Exchange Ratio. For purposes of the Merger Agreement, Semnur’s equity value is $2,500,000,000.
Other Agreements
The Merger Agreement contemplates the execution of various additional agreements and instruments, on or before the closing of the Merger, including, among others, the following:
F-12
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
Sponsor Support Agreement
Concurrently with the execution of the Merger Agreement, the Sponsor and each of the Company’s directors and executive officers entered into a sponsor support agreement with the Company and Semnur (the “Sponsor Support Agreement”), pursuant to which the Sponsor and each of Company’s directors and executive officers has agreed to, among other things: (i) vote in favor of the Parent Shareholder Approval Matters (as defined in the Merger Agreement) and in favor of any proposal in respect of an Extension Amendment (as such terms are defined in the Merger Agreement); (ii) vote against (or otherwise withhold written consent of, as applicable) any “Business Combination” (as such term is defined in Denali’s organizational documents) or any proposal relating thereto (in each case, other than as contemplated by the Merger Agreement); (iii) vote against (or otherwise withhold written consent of, as applicable) any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company (other than the Merger Agreement and the transactions contemplated thereby); (iv) vote against (or otherwise withhold written consent of, as applicable) any change in the business, management or board of directors of the Company (other than in connection with the Merger Agreement and the transactions contemplated thereby); and (v) vote against (or otherwise withhold written consent of, as applicable) any proposal, action or agreement that would (a) impede, frustrate, prevent or nullify any provision of the Sponsor Support Agreement or the Merger Agreement or any of the transactions contemplated thereby, (b) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement of Denali or Merger Sub under the Merger Agreement, (c) result in any of the conditions set forth in Article VIII of the Merger Agreement not being fulfilled or (d) change in any manner the dividend policy or capitalization of, including the voting rights of any class of capital stock of, the Company. Under the terms of the Sponsor Support Agreement, the Sponsor also agreed to certain standstill provisions with respect to the ordinary shares and other equity securities of the Company held by the Sponsor.
Stockholder Support Agreement
Concurrently with the execution of the Merger Agreement, the Company, Semnur and Scilex (as the sole stockholder of Semnur) entered into a company stockholder support agreement (the “Stockholder Support Agreement”), pursuant to which Scilex agreed to, among other things: (i) appear at any meeting of Semnur’s stockholders related to the transactions contemplated by the Merger Agreement, or otherwise cause its shares of Semnur common stock to be counted as present thereat for the purpose of establishing a quorum; (ii) vote (or execute and return an action by written consent), or cause to be voted at any such meeting of Semnur’s stockholders (or validly execute and return and cause such consent to be granted with respect to), all of its shares of Semnur common stock in favor of the Merger Agreement and the Business Combination; (iii) authorize and approve any amendment to Semnur’s certificate of incorporation or bylaws that is deemed necessary or advisable by Semnur for purposes of effecting the Business Combination; and (iv) vote (or execute and return an action by written consent), or cause to be voted at any such meeting of Semnur’s stockholders (or validly execute and return and cause such consent to be granted with respect to), all of its shares of Semnur common stock against any other action that would reasonably be expected to (a) impede, interfere with, frustrate, delay, postpone or adversely affect the Business Combination, (b) result in a breach of any covenant, representation or warranty or other obligation or agreement of Semnur under the Merger Agreement or (c) result in a breach of any covenant, representation or warranty or other obligation or agreement of Scilex contained in the Stockholder Support Agreement.
Sponsor Interest Purchase Agreement
In connection with the execution and delivery of the Merger Agreement, the Sponsor and Scilex entered into a Sponsor Interest Purchase Agreement (the “SIPA”) dated August 30, 2024 (the “Signing Date”). Pursuant to the SIPA, Scilex agreed to purchase 500,000 Class B ordinary shares, par value $0.0001 per share (the “Purchased Interests”), of the Company that are currently held by the Sponsor. The aggregate consideration for the purchase and sale of the Purchased Interests is as follows: (i) $2,000,000 (the “Cash Consideration”) and (ii) 300,000 shares of common stock, par value $0.0001 per share, of Scilex (the “Scilex Shares”). Pursuant to the SIPA, Scilex has paid the Cash Consideration on the Signing Date and has agreed to issue the Scilex Shares to the Sponsor contingent upon and following the occurrence of the Effective Time. The Purchased Interests will convert automatically, on a one-for-one basis, into one New Semnur Common Share at the effective time of the Domestication pursuant to the terms of the Merger Agreement.
Amended and Restated Registration Rights Agreement
The Merger Agreement contemplates that, at or prior to the closing of the Merger, the Company and Scilex will enter into an amended and restated registration rights agreement (the “Registration Rights Agreement”), which, among other things, will govern the registration of certain New Semnur Common Shares for resale and be effective as of the closing of the Merger.
F-13
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
Stockholder Agreement
Concurrently with the execution of the Merger Agreement, the Company entered into a Stockholder Agreement with Scilex (the “Stockholder Agreement”). Pursuant to the Stockholder Agreement, from and after the Effective Time, and for so long as Scilex beneficially owns any New Semnur Preferred Shares, among other things, (i) Scilex shall have the right, but not the obligation, to designate each director to be nominated, elected or appointed to the Board of Directors of New Semnur (“New Semnur Board”) (each, a “Stockholder Designee” and collectively, the “Stockholder Designees”), regardless of (i) whether such Stockholder Designee is to be elected to the New Semnur Board at a meeting of stockholders called for the purpose of electing directors (or by consent in lieu of meeting) or appointed by the New Semnur Board in order to fill any vacancy created by the departure of any director or increase in the authorized number of members of the New Semnur Board, or (ii) the size of the New Semnur Board, and New Semnur will be required to take all actions reasonably necessary, and not otherwise prohibited by applicable law, to cause each Stockholder Designee to be so nominated, elected or appointed to the New Semnur Board as more fully described in the Stockholder Agreement. Scilex shall also have the right to designate a replacement director for any Stockholder Designee that has been removed from the New Semnur Board and the right to appoint a representative of Scilex to attend all meetings of the committees of the New Semnur Board. The Stockholder Agreement also provides that New Semnur will be prohibited from taking certain actions without the consent of Scilex. Such actions include, among other things, amendments to the certificate of designations designating the New Semnur Preferred Shares, increases or decreases in the size of the New Semnur Board, the incurrence of certain amounts of indebtedness and the payment of dividends on New Semnur Common Shares. In addition, the Stockholder Agreement provides that New Semnur will be prohibited from taking certain actions without the consent of Oramed (but only until the date on which all payments under the Oramed Note and all other obligations under the Oramed Note have been paid in full in cash (such date, the “Release Date”)). The actions that require Oramed’s consent include, among other things, (i) amending certain agreements, including the Stockholder Agreement, the Merger Agreement, New Semnur’s certificate of incorporation or bylaws, Semnur’s 2024 Stock Option Plan, the Stockholder Support Agreement and the Debt Exchange Agreement, in each case that adversely affect the rights of capital stock held by Scilex in New Semnur (ii) approval of the issuance of capital stock of New Semnur that would result in Scilex holding less than 55% of the outstanding shares or voting power of New Semnur, (iii) forming any subsidiary that is not wholly owned and controlled by New Semnur, (iv) permitting any option grants to Scilex Insiders (as defined therein) pursuant to Semnur’s 2024 Stock Option Plan prior to the execution of the Merger Agreement to be exercisable and (v) permitting certain compensation payments to Scilex Insiders (as defined therein).
Liquidity, Capital Resources and Going Concern Consideration
The Company’s liquidity needs prior to the consummation of the IPO had been satisfied through a payment from the Sponsor of $25,000 (see Note 5) for the founder shares and the loan under an unsecured promissory note (the “Promissory Note”) from the Sponsor of up to $400,000 (see Note 5) which was fully repaid on April 12, 2022. Subsequent to the consummation of the IPO and sale of the Private Placement Units on April 11, 2022, a total of $84,150,000 was placed in the Trust Account, and the Company had $1,515,795 of cash held outside of the Trust Account, after payment of costs related to the IPO, and available for working capital purposes. In connection with the IPO, the Company incurred $5,105,315 in transaction costs, consisting of $1,650,000 of underwriting fees, $2,887,500 of deferred underwriting fees and $567,815 of other offering costs.
As of December 31, 2024, all of the assets of $9,021,005 held in the Trust Account have been held solely in cash in an interest-bearing demand deposit account at a bank. The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete the Business Combination. To the extent that the Company’s share capital or debt is used, in whole or in part, as consideration to complete a 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 the Company’s growth strategies.
As of December 31, 2024, the Company had cash of $16,868 outside of the Trust Account. If the Company does not complete the business combination, it intends to use the funds held outside the Trust Account primarily to 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.
F-14
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
As of December 31, 2024, the Company had a working deficit of $7,530,216. In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes the initial Business Combination, it will repay such loaned amounts without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. The units would be identical to the Private Placement Units. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside of the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment. On April 11, 2023, the Company issued the Convertible Promissory Note (“Convertible Promissory Note 1”) in the total principal amount of up to $825,000 to the Sponsor. The Convertible Promissory Note 1 bears an interest accruing on the unpaid and outstanding total principal amount at the lowest short-term Applicable Federal Rate as in effect on the date thereof and is payable in arrears on the earlier of (i) the closing of Denali’s initial business combination and (ii) the date of the liquidation of the Company (the “Maturity Date”). Interest will be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. The Convertible Promissory Note 1 was issued with an initial principal balance of $412,500 (the “Initial Principal Amount”). The Sponsor has further lent loans in the aggregate amount of $430,000 on July 18, 2023, October 12, 2023 and December 29, 2023. The Sponsor further lent an aggregate of $565,700 to the Company for the Convertible Promissory Note 1 during the year ended December 31, 2024. On April 2, 2024 the Company and Sponsor agreed that, in addition to the Initial Principal Amount, the Company may request an additional aggregate amount of up to $186,800, which may be drawn down in one or more tranches at any time prior to the Maturity Date raising the total limit up to $1,200,000. On January 24, 2025, the Company and Sponsor agreed that, in addition to the Initial Principal Amount, the Company may request an additional aggregate amount of up to $591,800, which may be drawn down in one or more tranches at any time prior to the Maturity Date, raising the total limit up to $2,000,000.
On July 10, 2024, the Company issued Convertible Promissory Note 2 in the total principal amount of up to $180,000 to Sponsor. The Convertible Promissory Note 2 was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at the Company’s request and upon the consent of the Sponsor prior to the maturity of the Convertible Promissory Note 2.
As of December 31, 2024, there was an amount of $1,408,200 and $15,037 outstanding under Working Capital Loans in the form of the Convertible Promissory Note 1 and 2, respectively, issued to the Sponsor.
As of December 31, 2024, the outstanding amount under the Working Capital Loans in the form of the Convertible Promissory Note 1 issued to the Sponsor had exceeded the limit of $1,200,000, reaching $1,408,200, resulting in an overdrawn position. To remediate this overdrawn balance, on January 24, 2025, the Company issued a third amended and restated promissory note (the “Third Restated Note”) to amend and restate Convertible Promissory Note 1, increasing the total principal amount to $2,000,000.
On July 11, 2023, the Company issued a convertible note (“FutureTech Convertible Promissory Note”) in the total principal amount of $825,000 to FutureTech Capital LLC (“FutureTech”) and 100% of such amount has been utilized to fund the required payment in order to extend the period of time to consummate a business combination. On October 11, 2023, the Company issued another convertible promissory note in the total principal amount of up to $450,000 to FutureTech. The Convertible Promissory Note was issued with an initial principal balance of $50,000, with the remaining $400,000 drawable at the Company’s request and upon the consent of FutureTech prior to the maturity of the Convertible Promissory Note. Consequently, $400,000 of such amount has been utilized to fund the required payment in order to extend the period of time to consummate a business combination from October 11, 2023 to July 11, 2024. As of December 31, 2024, there was an amount of $1,275,000 outstanding in the form of the Convertible Promissory Note issued to FutureTech. Further, the amount of $58,586 with interest at 4.80% on amount borrowed from Futuretech for the Extension was recognized as accrued interest expense – others as of December 31, 2024.
On August 9, 2024, the Company issued a convertible promissory note in the total principal amount of up to $180,000 to Scilex (the “Extension Scilex Convertible Promissory Note”). The Extension Scilex Convertible Promissory Note was issued with an initial principal balance of $15,064, with the remaining $164,936 drawable at the Company’s request and upon the consent of Scilex prior to the maturity of the Extension Scilex Convertible Promissory Note. The Extension Scilex Convertible Promissory Note matures upon the earlier of (i) the effective date of the consummation of the Company’s initial business combination and (ii) the date of the liquidation of the Company.
As of December 31, 2024, Scilex deposited aggregated total of $75,292 drawn down from the Extension Scilex Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination to January 11, 2025.
F-15
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
On January 6, 2025, February 11, 2025 and March 11, 2025, Scilex had deposited an aggregate of $45,191 drawn down from the Extension Scilex Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination from January 11, 2025 to April 11, 2025.
Based on the foregoing, management believes that the Company will not have sufficient working capital and borrowing capacity to meet its needs through the consummation of the initial Business Combination. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
In accordance with ASC Subtopic 205-40, “Presentation of Financial Statements – Going Concern”, the Company has evaluated that there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern through April 11, 2025 (as extended pursuant to amended and restated memorandum and articles of association of the Company dated July 10, 2024), the date that the Company will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action, related sanctions on the world economy and the ongoing hostilities in the Middle East are not determinable as of the date of these consolidated financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flow is also not determinable as of the date of these consolidated financial statements.
On February 22, 2024, the Company received a letter (the “Letter”) from the staff at Nasdaq notifying the Company that, for the 30 consecutive business days prior to the date of the Letter, the Company’s Minimum Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A). The staff at Nasdaq also noted in the Letter that the Company is not in compliance with Nasdaq Listing Rule 5450(b)(3)(A), which requires listed companies to have total assets and total revenue of at least $50,000,000 each for the most recently completed fiscal year or for two of the three most recently completed fiscal years. The Letter is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has 180 calendar days, or until August 20, 2024, to regain compliance. The Letter notes that to regain compliance, the Company’s MVLS must close at or above $50 million for a minimum of ten consecutive business days during the compliance period. The Letter further notes that if the Company is unable to satisfy the MVLS requirement prior to such date, the Company may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that the Company then satisfies the requirements for continued listing on that market). If the Company does not regain compliance by August 20, 2024, Nasdaq staff will provide written notice to the Company that its securities are subject to delisting. At that time, the Company may appeal any such delisting determination to a hearings panel. The Company intends to actively monitor the Company’s MVLS between now and August 20, 2024, and may, if appropriate, evaluate available options to resolve the deficiency and regain compliance with the MVLS requirement. While the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with Nasdaq listing standards.
On July 26, 2024, Denali, received a letter from the staff at Nasdaq informing Denali that it had regained compliance with Nasdaq Listing Rule 5450(b)(2)(A) and that Nasdaq is in compliance with the Nasdaq Global Market’s requirements. The Denali Units continue to trade on Nasdaq under the symbol “DECAU”, the Class A Ordinary Shares continue to trade on Nasdaq under the symbol “DECA” and Denali public warrants continue to trade on Nasdaq under the symbol “DECAW.”
F-16
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
On October 2, 2024, the Company received a written notice (the “Notice”) from the staff at Nasdaq notifying the Company that the Company is not in compliance with Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Rule”), which requires the Company to maintain a MVLS of $50.0 million, and Nasdaq Listing Rule 5450(b)(3)(A) (the “Total Assets Rule” and, together with the MVLS Rule, the “Listing Rules”), which requires the Company to maintain total assets and total revenue of at least $50.0 million each for the most recently completed fiscal year or two of the three most recently completed fiscal years, for continued listing on the Nasdaq Global Market. The Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities on the Nasdaq Global Market.
The Notice states that the Company has 180 calendar days, or until March 31, 2025, to regain compliance with the Listing Rules. To regain compliance, the Company’s MVLS must meet or exceed $50.0 million for a minimum of ten consecutive business days during the 180-day compliance period ending on March 31, 2025. In the event the Company does not regain compliance with the Listing Rules prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. At that time, the Company will have the opportunity to appeal the decision to a Nasdaq Hearing Panel. The Company intends to monitor its MVLS and consider its available options to regain compliance with the Listing Rules.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
F-17
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents on December 31, 2024 and 2023.
Cash and Investment Held in Trust Account
Prior to June 4, 2024, substantially all of the assets held in the Trust Account were invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Gains and losses resulting from the change in fair value of these securities are included in income on Trust Account in the accompanying condensed consolidated statements of operations. The estimated fair values of investment held in the Trust Account are determined using available market information.
Since June 4, 2024, all of the assets held in the Trust Account have been held solely in cash in an interest-bearing demand deposit account at a bank. Interest on bank deposit accounts is variable and such accounts currently yield interest of approximately 3.5% per annum.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 825, “Financial Instruments,” approximates the carrying amounts represented in the consolidated balance sheet, primarily due to its short-term nature.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480 and FASB ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under FASB ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the 8,250,000 Public Warrants (as defined in Note 3) and 510,000 Private Placement Warrants (as defined in Note 4) as equity-classified instruments.
F-18
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
Convertible Debt
The Company issues debt that may have conversion features.
Convertible debt – derivative treatment – When the Company issues debt with a conversion feature, the Company must first assess whether the embedded equity-linked component is clearly and closely related to its host instruments. If a component is clearly and closely related to its host instruments, then the Company has to assess whether the conversion feature meets the requirements to be treated as a derivative, as follows: a) one or more underlying, typically the price of our common stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The scope exception applies if the contract is both a) indexed to its own stock; and b) classified in shareholders’ equity in its statement of financial position.
If the conversion feature within convertible debt meets the requirements to be treated as a derivative, the Company estimates the fair value of the embedded derivative using the Black Scholes method upon the date of issuance. If the fair value of the embedded derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. The derivative shall be recorded at fair value as liability and the carrying value assigned to the host contract represents the difference between the previous carrying amount of the hybrid instrument and the fair value of the derivative; therefore, there is no gain or loss from the initial recognition and measurement of an embedded derivative that is accounted for separately from its host contract.
The ASU changes the accounting for convertible instruments by reducing the number of accounting models. It requires convertible debt instruments to be accounted for under one of the following three models: embedded derivative, substantial premium, or no proceeds allocated (traditional debt) models. It eliminates the cash conversion and beneficial conversion feature models, which will likely result in more convertible debt instruments being accounted for as a single unit.
The conversion feature in convertible promissory notes issued by the Company in for the year ended December 31, 2024 and 2023 does not qualify for either the derivative treatment. These convertible promissory notes are presented as traditional debt as of December 31, 2024 and 2023, in the consolidated balance sheets.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with ASC 480. Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and are subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2024, and 2023, 751,837 and 4,537,829 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, respectively, outside of the shareholders’ deficit section of the Company’s consolidated balance sheets.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into U.S. federal law. Among other provisions, the IR Act imposes a new 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations, effective for transactions occurring on or after January 1, 2023. Since the Company is incorporated in the Cayman Islands and is neither a U.S. domestic corporation nor a U.S. domestic subsidiary of a publicly traded foreign corporation, it is exempt from the 1% U.S. federal excise tax on stock repurchases.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid-in capital or accumulated deficit if additional paid-in capital equals to zero.
F-19
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
As of December 31, 2024 and 2023, the ordinary shares reflected in the consolidated balance sheets are reconciled in the following table:
| Shares | Amount | |||||||
| Ordinary shares subject to possible redemption – December 31, 2022 | 8,250,000 | 85,371,600 | ||||||
| Redemption of shares ($10.92 per share) | (3,712,171 | ) | (40,536,908 | ) | ||||
| Subsequent measurement of Class A ordinary shares subject to possible redemption (income earned on Trust Account) | - | 3,843,271 | ||||||
| Subsequent measurement of Class A ordinary shares subject to possible redemption (extension deposit) | - | 1,800,000 | ||||||
| Ordinary shares subject to possible redemption – December 31, 2023 | 4,537,829 | $ | 50,477,963 | |||||
| Redemption of shares ($11.47 per share) | (3,785,992 | ) | (43,425,328 | ) | ||||
| Subsequent measurement of Class A ordinary shares subject to possible redemption (income earned on Trust Account) | - | 1,578,042 | ||||||
| Subsequent measurement of Class A ordinary shares subject to possible redemption (extension deposit) | - | 390,328 | ||||||
| Ordinary shares subject to possible redemption – December 31, 2024 | 751,837 | 9,021,005 | ||||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
Net Income Per Ordinary Share
The Company complies with the accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” Net loss per redeemable and non-redeemable ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding between the redeemable and non-redeemable shares during the period, excluding ordinary shares subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 93,750 founder shares that were forfeited during the three months ended June 30, 2022, due to the underwriters’ partial exercise of their over-allotment option. In order to determine the net income attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income allocable to both the redeemable shares and non-redeemable shares and the undistributed income is calculated using the total net loss less dividends paid. The Company then allocated the undistributed income based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares.
Subsequent measurement adjustments recorded pursuant to ASC 480-10-S99-3A related to redeemable shares are treated in the same manner as dividends on redeemable shares. Class A ordinary shares are redeemable at a price determined by the Trust Account held by the Company. This redemption price is not considered a redemption at fair value. Accordingly, the adjustments to the carrying amount are reflected in the Earnings Per Share (“EPS”) using the two-class method. The Company has elected to apply the two-class method by treating the entire periodic adjustment to the carrying amount of the Class A ordinary shares subject to possible redemption like a dividend.
Based on the above, any remeasurement of the redemption value of the Class A ordinary shares subject to possible redemption is considered to be dividends paid to the Public Shareholders. Warrants issued are contingently exercisable (i.e., on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO). Further, Convertible Promissory Notes are also contingently exercisable upon the consummation of the initial Business Combination. For EPS purpose, the warrants and notes are anti-dilutive since they would generally not be reflected in basic or diluted EPS until the contingency is resolved. For the years ended December 31, 2024 and 2023, the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted income per ordinary share is the same as basic earnings per ordinary share for the periods presented.
F-20
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
The net income per share presented in the consolidated statements of operations is based on the following:
| For the year ended December 31, 2024 | For the year ended December 31, 2023 | |||||||
| Net (loss)/income | $ | (167,306 | ) | $ | 632,536 | |||
| Accretion of temporary equity to redemption value | (1,968,370 | ) | (5,643,271 | ) | ||||
| Net loss including accretion of temporary equity | $ | (2,135,676 | ) | $ | (5,010,735 | ) | ||
| For the Year Ended | For the Year Ended | |||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||
| Non- | Non- | |||||||||||||||
| Redeemable | Redeemable | Redeemable | Redeemable | |||||||||||||
| Common | Common | Common | Common | |||||||||||||
| Stock | Stock | Stock | Stock | |||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | (1,098,113 | ) | $ | (1,037,563 | ) | $ | (3,720,244 | ) | $ | (1,290,491 | ) | ||||
| Accretion of temporary equity to redemption value | 1,968,370 | - | 5,643,271 | - | ||||||||||||
| Allocation of net income/(loss) | $ | 870,257 | $ | (1,037,563 | ) | $ | 1,923,027 | $ | (1,290,491 | ) | ||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | 2,722,627 | 2,572,500 | 7,416,033 | 2,572,500 | ||||||||||||
| Basic and diluted net income/ (loss) per share | $ | 0.32 | $ | (0.40 | ) | $ | 0.26 | $ | (0.50 | ) | ||||||
Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2024 and 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company determined that the Cayman Islands is the Company’s only major tax jurisdiction and the location of all members of management, sponsors, directors, any employees, or assets to the extent employed is the United States.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next 12 months.
F-21
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
There is currently no taxation imposed on income by the Government of the Cayman Islands for the year ended December 31, 2024 and 2023.
Recent Accounting Pronouncements
On December 14, 2023, the FASB issued a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09, Improvements to Income Tax Disclosures, applies to all entities subject to income taxes. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. For entities other than public business entities (non-PBEs), the requirements will be effective for annual periods beginning after December 15, 2025. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently assessing the impact, if any, that ASU 2023-09 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3 – INITIAL PUBLIC OFFERING
On April 11, 2022, the Company consummated the IPO of 8,250,000 Public Units, inclusive of 750,000 Public Units issued pursuant to the underwriters’ partial exercise of their over-allotment option. The Public Units were sold at a purchase price of $10.00 per Public Unit, generating gross proceeds of $82,500,000. Each Public Unit consists of one Public Share and one Public Warrant. Each Public Warrant entitles the holder thereof to purchase one Public Share at a price of $11.50 per share.
The warrants will become exercisable on the later of 30 days after the completion of the Company’s initial Business Combination or 12 months from the closing of the IPO and will expire five years after the completion of the Company’s initial Business Combination or earlier upon redemption or liquidation (see Note 7).
NOTE 4 – PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Company consummated a private placement and the Sponsor purchased an aggregate of 510,000 Private Placement Units (including 30,000 Private Placement Units pursuant to the underwriters’ partial exercise of the over-allotment option) at a price of $10.00 per Private Placement Unit, generating gross proceeds to the Company of $5,100,000. Each whole Private Placement Unit consists of one Class A ordinary share (“Private Placement Shares”) and one warrant (“Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment. Certain of the proceeds from the sale of the Private Placement Units were added to the net proceeds from the IPO held in the Trust Account.
F-22
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
If the Company does not complete a Business Combination by April 11, 2025 (or as may be extended by a shareholder vote to further extend the time to consummate a business combination, as applicable)(refer to Note 1), the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Company’s Class A ordinary shares (subject to the requirements of applicable law) and the Private Placement Units and all underlying securities will expire worthless. The Private Placement Units will not be transferable, assignable, or saleable until 30 days after the completion of an initial Business Combination, subject to certain exceptions.
NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
On February 3, 2022, the Company issued an aggregate of 2,156,250 founder shares to the Sponsor in exchange for a payment of $25,000 from the Sponsor for deferred offering costs. In March 2022, the Sponsor transferred 20,000 founder shares to the Chief Financial Officer of the Company and 110,000 founder shares to certain members of the Company’s board of directors. On May 23, 2022, 93,750 founder shares were forfeited by the Sponsor as the underwriters did not exercise their over-allotment option on the remaining 375,000 Public Units (see Note 6), resulting in the Sponsor holding a balance of 1,932,500 founder shares.
The founder shares are identical to the Class A ordinary shares included in the units sold in the IPO, except that the founder shares will automatically convert into Class A ordinary shares at the time of the Company’s initial Business Combination (see Note 7). Also, the Sponsor and each member of the Company’s management team have entered into an agreement with the Company, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and Public Shares held by them.
The Sponsor and the Company’s directors and executive officers have agreed not to transfer, assign or sell any of their founder shares until the earlier of (A) one year after the completion of an initial Business Combination and (B) subsequent to the Company’s initial Business Combination, (x) if the closing price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after an initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all Public Shareholders having the right to exchange their Public Shares for cash, securities or other property. Any permitted transferees would be subject to the same restrictions and other agreements of the Sponsor and the Company’s directors and executive officers with respect to any founder shares.
The sale of the founder shares to the Company’s Chief Financial Officer and to certain members of the Company’s board of directors is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the 130,000 shares granted to the Company’s directors and executive officers was $1,005,964 or $7.74 per share. The founder shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the founder shares is recognized only when the performance condition is of probable occurrence under the applicable accounting literature in this circumstance. As of December 31, 2024, the Company determined that a Business Combination is not considered probable until it occurs and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of founder shares times the fair value per share at the grant date (unless subsequently modified) less the amount initially received for the purchase of the founder shares.
In connection with the execution and delivery of the Merger Agreement, the Sponsor and Scilex entered into a Sponsor Interest Purchase Agreement (the “SIPA”) dated August 30, 2024 (the “Signing Date”). Pursuant to the SIPA, Scilex agreed to purchase 500,000 Class B ordinary shares, par value $0.0001 per share (the “Purchased Interests”), of the Company that are currently held by the Sponsor. The aggregate consideration for the purchase and sale of the Purchased Interests is as follows: (i) $2,000,000 (the “Cash Consideration”) and (ii) 300,000 shares of common stock, par value $0.0001 per share, of Scilex (the “Scilex Shares”). Pursuant to the SIPA, Scilex has paid the Cash Consideration on the Signing Date and has agreed to issue the Scilex Shares to the Sponsor contingent upon and following the occurrence of the Effective Time. The Purchased Interests will convert automatically, on a one-for-one basis, into one New Semnur Common Share at the effective time of the Domestication pursuant to the terms of the Merger Agreement.
F-23
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
On August 30, 2024, Scilex paid the Cash Consideration under the SIPA, and on September 3, 2024, the Sponsor transferred 500,000 Class B Ordinary Shares to Scilex. The Company accounted for the SIPA in accordance with Staff Accounting Bulletin Topic 5T (“SAB Topic 5T”). The Company determined the SIPA represents a transfer of economic value that benefit to the Company as the SIPA is executed on the closing of the Merger that was contemplates by the Merger Agreement. According to SAB Topic 5T, if the Sponsor is settling an obligation or expense on behalf of the Company through a transfer of shares or other consideration, the fair value of the shares transferred less the consideration received would be recognized as an expense by the Company.
The Company estimated the fair value of the Company’s 500,000 Class B ordinary shares on September 3, 2024 transferred to Scilex by the Sponsor, which was less than the $2,000,000 Cash Consideration plus the fair value of 300,000 Scilex Shares. The Company determined that the 500,000 Class B ordinary shares were sold at premium and no expense should be recorded.
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors, may, but are not obligated to, provide the Company Working Capital Loans. If the Company completes a Business Combination, it would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. In the event that a Business Combination does not close the Company may use a portion of proceeds held outside of the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used for such repayment.
The Working Capital loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into units of the post-business combination entity at a price of $10.00 per unit. On April 11, 2023, the Company issued the Convertible Promissory Note in the total principal amount of up to $825,000 to the Sponsor. The Convertible Promissory Note bears an interest accruing on the unpaid and outstanding total principal amount at the lowest short-term Applicable Federal Rate as in effect on the date thereof and is payable in arrears on the Maturity Date. Interest will be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. The Convertible Promissory Note was issued with an initial principal balance of $412,500. The Sponsor has further lent loans in the aggregate amount of $430,000 on July 18, 2023, October 12, 2023 and December 29, 2023. On December 29, 2023 the Company and Sponsor agreed that, in addition to the Initial Principal Amount, the Company may request an additional aggregate amount of up to $157,500, which may be drawn down in one or more tranches at any time prior to the Maturity Date, raising the total limit up to $1,000,000. On April 2, 2024, the Company and Sponsor agreed that, in addition to the Initial Principal Amount, the Company may request an additional aggregate amount of up to $186,800, which may be drawn down in one or more tranches at any time prior to the Maturity Date raising the total limit up to $1,200,000. On January 24, 2025, the Company and Sponsor agreed that, in addition to the Initial Principal Amount, the Company may request an additional aggregate amount of up to $591,800, which may be drawn down in one or more tranches at any time prior to the Maturity Date, raising the total limit up to $2,000,000. The Sponsor further lent an aggregate of $565,700 to the Company against the Convertible Promissory Note during the year ended December 31, 2024. As of December 31, 2024, there was an amount of $1,408,200 outstanding under Working Capital Loans in the form of the Convertible Promissory Note issued to Sponsor. Further, an amount of $74,555 with interest at 4.86% on the amount borrowed from the Sponsor was recognized as accrued interest expense – related party as of December 31, 2024.
On July 10, 2024, the Company issued Convertible Promissory Note 2 in the total principal amount of up to $180,000 to Sponsor. The Convertible Promissory Note 2 was issued with an initial principal balance of $15,037, with the remaining $164,963 drawable at the Company’s request and upon the consent of the Sponsor prior to the maturity of the Convertible Promissory Note 2.
F-24
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares, Private Placement Shares and Private Placement Warrants, including any of those issued upon conversion of the Working Capital Loans (and any Private Placement Shares issuable upon the exercise of the Private Placement Warrants that may be issued upon conversion of the Working Capital Loans) will be entitled to registration rights pursuant to a registration and shareholder rights agreement signed on April 6, 2022. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed after the completion of the initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the costs and expenses of filing any such registration statements.
The Merger Agreement contemplates that, at or prior to the closing of the business combination between the Company and Semnur (the “Closing”), Denali, Scilex, the Sponsor and certain shareholders of Denali will enter into the Registration Rights Agreement, which, among other things, will govern the registration of certain New Semnur Common Shares for resale and be effective as of the Closing.
Underwriting Agreement
The underwriters received a cash underwriting discount of $0.20 per Public Unit, or $1,650,000 in the aggregate, paid upon the closing of the IPO. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Public Unit, or $2,887,500 in the aggregate, which is included in the accompanying consolidated balance sheets. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. On November 20, 2023, the Company’s Underwriters entered into an Underwriter Letter Agreement, pursuant to which the Company’s Underwriters have agreed to receive 30%, or $866,250, of the aggregate $2,887,500 deferred underwriting commission owed to them upon the closing of the Company’s initial business combination in the form of 86,625 shares of shares of common stock of the combined company. Under the terms of the Underwriter Letter Agreement, the shares of common stock of the combined company will be issued at the Closing and the remaining aggregate $2,021,250 of deferred underwriting compensation owed will remain payable at the Closing in cash under the original terms of the underwriting agreement.
NOTE 7 – SHAREHOLDER’S DEFICIT
Preference shares – The Company is authorized to issue 1,000,000 preference shares with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2024 and December 31, 2023, there were no preference shares issued and outstanding.
Class A Ordinary Shares – The Company is authorized to issue 200,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of December 31, 2024 and December 31, 2023, there were 510,000 Class A ordinary shares issued and outstanding, excluding 751,837 and 4,537,829 Class A ordinary shares subject to possible redemption, respectively.
Class B Ordinary Shares – The Company is authorized to issue 20,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of December 31, 2024 and December 31, 2023, there were 2,062,500 Class B ordinary shares issued and outstanding. On May 23, 2022, 93,750 Class B ordinary shares were forfeited as the underwriters did not exercise the over-allotment option on the remaining 375,000 Public Units.
Prior to the Company’s initial Business Combination, only holders of Class B ordinary shares will have the right to vote on the appointment of directors and holders of a majority of the Company’s Class B ordinary shares may remove a member of the board of directors for any reason. In addition, in a vote to continue the Company in a jurisdiction outside the Cayman Islands (which requires the approval of at least two-thirds of the votes of all ordinary shares voted at a general meeting), holders of founder shares will have ten votes for every founder share and holders of Class A ordinary shares will have one vote for every Class A ordinary share and, as a result, the Company’s initial shareholders will be able to approve any such proposal without the vote of any other shareholder.
F-25
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
The Class B ordinary shares will automatically convert into Class A ordinary shares on the consummation of the initial Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, approximately 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of the IPO, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination (after giving effect to any redemptions of Class A ordinary shares by Public Shareholders), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Units issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of the Working Capital Loans. Any conversion of Class B ordinary shares described herein will take effect as a compulsory redemption of Class B ordinary shares and an issuance of Class A ordinary shares as a matter of Cayman Islands law. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one. During a shareholders’ extraordinary general meeting held on October 11, 2023, a proposal was approved that Class A ordinary shares will be issued to holders of Class B ordinary shares upon the exercise of the right of a holder of the Company’s Class B ordinary shares, par value $0.0001 per share, to convert such holder’s Class B ordinary shares into Class A ordinary shares on a one-for-one basis at any time and from time to time prior to the closing of an initial business combination at the election of the holder (the “Founder Share Amendment”).
Warrants
All warrants (Public Warrants and Private Warrants) will become exercisable at $11.50 per share, subject to adjustment, on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO; provided in each case that the Company has an effective registration statement under the Securities Act covering the issuance of the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). The warrants will expire at 5:00 p.m., New York City time, five years after the completion of the initial Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any founder shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of an initial Business Combination on the date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of Class A ordinary shares during the 20-trading day period starting on the trading day prior to the day on which the Company consummates an initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value or the Newly Issued Price and the $16.50 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 165% of the higher of the Market Value or the Newly Issued Price.
The Company has not registered the Class A ordinary shares issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of the initial Business Combination, it will use commercially reasonable efforts to file with the SEC a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants, and it will use commercially reasonable efforts to cause the same to become effective within 60 business days following the initial Business Combination and to maintain a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed. Notwithstanding the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
F-26
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
Redemption of Warrants
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption, which is referred to as the 30-day redemption period; and |
| ● | if, and only if, the last reported sale price of ordinary shares equals or exceeds $16.50 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
The Company will not redeem the warrants unless a registration statement under the Securities Act covering the ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those ordinary shares is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the warrants for redemption as described above, its management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the Company’s management will consider, among other factors, the cash position, the number of warrants that are outstanding and the dilutive effect on the Company’s shareholders of issuing the maximum number of ordinary shares issuable upon the exercise of the Company’s warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall mean the volume weighted average price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
NOTE 8 – FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
F-27
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of December 31, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| As of December 31, 2024 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account | $ | 9,021,005 | $ | - | $ | 9,021,005 | - | |||||||||
| As of December 31, 2023 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account | $ | 50,477,963 | $ | 50,477,963 | $ | - | - | |||||||||
NOTE 9 — SEGMENT INFORMATION
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance. The Company has adopted the guidance in ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, in the accompanying financial statements using the retrospective method of adoption.
The Company’s chief operating decision maker has been identified as the Chief Executive Officer (“CODM”), who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that the Company only has one operating and reportable segment.
When evaluating the Company’s performance and making key decisions regarding resource allocation the CODM reviews several key metrics, which include the following:
| For the Year Ended December 31, 2024 | For the Year Ended December 31, 2023 | |||||||
| Professional services fee in connection with Business Combination | $ | (1,163,962 | ) | $ | (2,268,236 | ) | ||
| Other formation and operating costs | (485,144 | ) | (905,590 | ) | ||||
| Total formation and operating costs | (1,649,106 | ) | (3,173,826 | ) | ||||
| Interest expense | (96,242 | ) | (36,909 | ) | ||||
| Interest earned on investment held in Trust Account | 1,578,042 | 3,843,271 | ||||||
| Net (loss) income | $ | (167,306 | ) | $ | 632,536 | |||
F-28
Denali Capital Acquisition Corp.
Notes to Consolidated Financial Statements
The key measures of segment profit or loss reviewed by our CODM are interest earned on investment in Trust Account and formation and operating expenses. The CODM reviews interest earned on investment in Trust Account to measure and monitor shareholder value and determine the most effective strategy of investment with the Trust Account funds while maintaining compliance with the trust agreement. Within formation and operating costs, the CODM specifically reviews professional service fee in connection with the business combination, which are a significant segment expense, and include legal fees, and advisory fees, as these represent significant costs affecting the Company’s consummation of the Business Combination. Other formation and operating costs, including accounting expenses, printing expenses, and regulatory filing fees, are reviewed in aggregate to ensure alignment with budget and contractual obligations. These expenses are monitored to manage and forecast cash available to complete a business combination within the required period.
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through April 1, 2025 when these consolidated financial statements were issued and determined that there were no significant unrecognized events through that date other than those noted below.
On January 6, 2025, February 11, 2025 and March 11, 2025, Scilex had deposited an aggregate of $45,191 drawn down from the Extension Scilex Convertible Promissory Note to the Trust Account to extend the time the Company has to consummate an initial business combination from January 11, 2025 to April 11, 2025.
On January 24, 2025, the Company and Sponsor agreed that, in addition to the Initial Principal Amount under the Convertible Promissory Note 1, the Company may request an additional aggregate amount of up to $591,800, which may be drawn down in one or more tranches at any time prior to the Maturity Date, raising the total limit up to $2,000,000.
On March 27, 2025, the Company filed a definitive proxy to hold an extraordinary general meeting of shareholders to consider and vote upon a proposal to amend, by way of special resolution, the amended and restated memorandum and articles of association of the Company to extend the date by which the Company must either (i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving the Company and one or more businesses or entities or (ii) cease its operations, except for the purpose of winding up, if it fails to complete such initial business combination and redeem 100% of the Company’s Class A ordinary shares, included as part of the units sold in the Company’s IPO that was consummated on April 11, 2022 from April 11, 2025 to December 11, 2025, by electing to extend the date to consummate an initial business combination on a monthly basis for up to eight (8) times by an additional one month each time, unless the closing of the Company’s initial business combination has occurred, without the need for any further approval of the Company’s shareholders, provided that the Sponsor (or its affiliates or permitted designees or a third party) will deposit into the Trust Account for each such one-month extension an extension fee, unless the closing of the Company’s initial business combination has occurred, in exchange for a non-interest bearing promissory note payable upon consummation of an initial business combination.
F-29
EXHIBIT INDEX
35
| * | Filed herewith |
| ** | Furnished herewith |
36
| # | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). Denali Capital Acquisition Corp. agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |
| ^ | Certain identified information has been omitted pursuant to Item 601(b)(10) of Regulation S-K because such information is both (i) not material and (ii) information that the Registrant treats as private or confidential. Denali Capital Acquisition Corp. hereby undertakes to furnish supplemental copies of the unredacted exhibit upon request by the SEC. |
| (1) | Filed as an exhibit to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on March 22, 2022 (File No. 333-263123). |
| (2) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on April 12, 2022 (File No. 001-41351). |
| (3) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on October 11, 2023 (File No. 001-41351). |
| (4) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on April 12, 2023 (File No. 001-41351). |
| (5) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on July 13, 2023 (File No. 001-41351). |
| (6) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on November 20, 2023 (File No. 001-41351). |
| (7) | Filed as an exhibit to the Annual Report on Form 10-K filed with the SEC on March 17, 2023 (File No.001-41351). |
| (8) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on July 10, 2024 (File No. 001-41351). |
| (9) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on September 5, 2024 (File No. 001-41351). |
| (10) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on August 9, 2024 (File No. 001-41351). |
| (11) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on June 27, 2024 (File No. 001-41351). |
| (12) | Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on July 17, 2024 (File No. 001-41351). |
| (13) | Filed as an exhibit to the Annual Report on Form 10-K filed with the SEC on April 1, 2024 (File No. 001-41351). |
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| April 1, 2025 | Denali Capital Acquisition Corp. | ||
| By: | /s/ Lei Huang | ||
| Name: | Lei Huang | ||
| Title: | Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Lei Huang | Chief Executive Officer and Director | April 1, 2025 | ||
| Lei Huang | (Principal Executive Officer) | |||
| /s/ You (“Patrick”) Sun | Chief Financial Officer | April 1, 2025 | ||
| You (“Patrick”) Sun | (Principal Financial and Accounting Officer) | |||
| /s/ Huifeng Chang | Director | April 1, 2025 | ||
| Huifeng Chang | ||||
| /s/ Jim Mao | Director | April 1, 2025 | ||
| Jim Mao | ||||
| /s/ Kevin Vassily | Director | April 1, 2025 | ||
| Kevin Vassily |
38
