Company: SCAG
Filing Date: 2025-11-12
Form Type: 20-F
Source: 0001213900-25-109190
Chunk: 223

Company: Scage Future
Filing Date: 2025-11-12
Form: 20-F
Item: Item 19
Chunk 223
---
  12.      CONVERTIBLE    

Debt
from Early Bird Capital, Inc. (“ EBC”)

On
June 26, 2025, the Company entered into two Promissory Note Agreements with EarlyBirdCapital, Inc. (the “ Lender”) for a total
amount of $ 2,518,750

For
the first Promissory Note Agreement, the principal balance of $ 1,509,375 8 90 10.00

For
the second Promissory Note Agreement, the principal balance of $ 1,009,375 8 90 10.00 1,000,000 1,000,000

If
the Promissory Notes Agreements are not repaid on the Maturity Date or such earlier date as to which the repayment obligation may be
accelerated pursuant to the agreement terms, the rate of interest applicable to the remaining unpaid principal amount shall be
adjusted to 15 1,009,375 15

Accounting
for the debt with a conversion option in the scope of ASC 815

The
Group determined that embedded conversion option in the two Promissory Notes issued to Early Bird Capital, Inc. is not a freestanding
instrument, as the debt (principal plus interests accrued) must be repaid by the Group to EBC in full either in cash or in a variable
number of shares, at a price per share is the lesser of (a) 90 10.00

The
Group has not elected the fair value option for these instruments. The embedded conversion options within both Promissory Notes must
be bifurcated from their host debt contracts and accounted for separately as derivative liabilities. This accounting treatment is required
under ASC 815 because: (1) the economic characteristics and risks of the equity-based conversion options are not considered clearly and
closely related to the economic characteristics of the host debt instruments; (2) the hybrid instrument is not remeasured at fair value
with changes in fair value reported in earnings as they occur; and (3) the conversion option itself as a separate instrument meets the
definition of a derivative instrument under ASC 815-10-15-83.

At
contract inception, the fair value of the bifurcated conversion options is recognized as a derivative liability, and the remaining face
value of the Promissory Notes are allocated to the host debt. This allocation creates a debt discount, which is the