10-Q: Alchemy Investments Reports Q3 Loss, Advances Cartiga Merger

Alchemy Investments Acquisition Corp 1 reported a net loss for Q3 2025 and a significant working capital deficit, while progressing towards a business combination with Cartiga, LLC expected to close in Q1 2026.

Summary

• Alchemy Investments Acquisition Corp 1 (ALCY) is a blank check company formed for the purpose of completing a business combination.
• A definitive Business Combination Agreement was entered into with Cartiga, LLC on August 22, 2025.
• The transaction involves ALCY domesticating from the Cayman Islands to Delaware, merging with Pubco (which will become Cartiga Holdings, Inc.), and Cartiga becoming a wholly-owned subsidiary (OpCo) in an Up-C structure.
• The proposed transaction is expected to close in the first quarter of 2026, subject to shareholder approvals and customary closing conditions.
• A net loss of $341,897 was reported for the three months ended September 30, 2025, a decrease from net income of $1,456,069 for the same period in 2024.
• For the nine months ended September 30, 2025, a net loss of $863,650 was reported, compared to net income of $4,183,639 for the same period in 2024.
• Operating and formation costs significantly increased to $428,114 for Q3 2025 from $158,154 for Q3 2024.
• Investments held in the Trust Account decreased from $11,851,808 at December 31, 2024, to $8,662,826 at September 30, 2025.
• A working capital deficit of $3,049,242 was reported as of September 30, 2025.
• The deadline to complete a business combination was extended by shareholders until September 9, 2026, requiring monthly deposits into the trust account.
• The Equity Value for Cartiga in the proposed business combination is $540,000,000.
• A minimum Available Closing Buyer Cash condition of $40,000,000 is required for the merger, with potential sponsor share forfeiture if this condition is waived and cash is lower.

Sentiment

Score: 3

Explanation: The company faces significant financial challenges, including net losses and a going concern warning, and relies heavily on related-party funding. While a business combination agreement is in place, the financial health and repeated extensions indicate underlying difficulties and high execution risk.

Positives

• A definitive Business Combination Agreement has been signed with Cartiga, LLC, providing a clear path for the SPAC to complete its objective.
• Shareholders approved an extension to complete a business combination until September 9, 2026, providing additional time to finalize the merger.
• The combined company will operate in an Up-C structure, which is designed to offer tax benefits to existing Cartiga equity holders.
• The Sponsor, officers, and directors have agreed to waive redemption rights and vote in favor of the business combination, indicating commitment to the transaction.

Negatives

• Reported a net loss of $341,897 for the three months ended September 30, 2025, a significant reversal from net income in the prior year period.
• Reported a net loss of $863,650 for the nine months ended September 30, 2025, compared to net income of $4,183,639 in the prior year period.
• A substantial working capital deficit of $3,049,242 as of September 30, 2025, indicates insufficient cash for ongoing operations.
• Management explicitly states that "substantial doubt about the Company's ability to continue as a going concern exists."
• Operating and formation costs have significantly increased year-over-year, contributing to the net losses.
• Investments held in the Trust Account have decreased due to redemptions, reducing the capital available for the business combination.
• Related party promissory notes increased to $1,710,000 as of September 30, 2025, from $530,000 at December 31, 2024, highlighting reliance on sponsor funding for operations.

Risks

• Substantial doubt about the Company's ability to continue as a going concern due to insufficient cash held outside of the Trust Account.
• Inability to consummate a Business Combination by the Extended Date of September 9, 2026, would lead to mandatory liquidation and warrants expiring worthless.
• Geopolitical events (e.g., military actions in Ukraine, conflict in Israel/Gaza) and international trade policies may materially and adversely affect the ability to consummate a Business Combination or the operations of a target business.
• The ability to raise equity and debt financing may be impacted by increased market volatility or decreased market liquidity.
• Default or failure of financial institutions where cash and cash equivalents are held could adversely affect liquidity, business, and financial condition, as deposits exceed insured limits.
• The Sponsor may be required to forfeit a portion of its shares in the combined company if the Available Closing Buyer Cash is less than $40,000,000 and Cartiga elects to waive the minimum cash condition.
• Payments under the Tax Receivable Agreement (TRA) could be substantial and may exceed 85% of actual cash tax savings in certain acceleration scenarios (e.g., breach, bankruptcy, change of control), potentially negatively impacting liquidity.
• Pubco's ability to make payments under the TRA depends on OpCo's ability to make distributions, and deferred payments will accrue interest.

Future Outlook

The proposed business combination with Cartiga, LLC is expected to close in the first quarter of 2026, contingent on shareholder approvals and the fulfillment of customary closing conditions. The combined entity, Cartiga Holdings, Inc., will operate in an Up-C structure. The company anticipates incurring significant costs in pursuit of its acquisition plans and relies on the successful closing of the business combination to address its going concern uncertainty.

Management Comments

• Management plans to address the uncertainty regarding the Company's ability to continue as a going concern with the successful closing of a Business Combination.
• Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
• Certifying Officers concluded that, as of September 30, 2025, disclosure controls and procedures were effective.

Industry Context

Alchemy Investments Acquisition Corp 1 is a Special Purpose Acquisition Company (SPAC) that has identified a target, Cartiga, LLC, and entered into a definitive business combination agreement. This aligns with the typical lifecycle of a SPAC, moving from initial public offering and search to a de-SPAC transaction. The Up-C structure is a common arrangement in SPAC mergers, offering tax efficiency for pre-existing owners of the target company. The challenges faced, such as the need for multiple extensions and reliance on sponsor funding, are not uncommon for SPACs nearing their deadline without a completed merger. The geopolitical risks mentioned are broad industry concerns that can impact financing and market conditions for such transactions.

Comparison to Industry Standards

• The company's need for multiple extensions, pushing its business combination deadline to September 2026, is significantly longer than the typical 18-24 month timeframe for many successful SPACs, indicating potential difficulties in securing or closing a suitable target.
• The substantial redemptions of Class A ordinary shares (over 10 million in November 2024 and over 300,000 in September 2025) are consistent with the trend of high redemption rates observed across the broader SPAC market, which reduces the cash available in the trust account for the business combination.
• The significant decrease in the trust account balance from an initial $116.7 million to $8.66 million, coupled with a $40 million minimum cash condition for the merger, suggests a challenging capital structure that may require additional financing (e.g., PIPE) to meet the closing requirements, a common hurdle for SPACs with high redemptions.
• The increasing reliance on related-party promissory notes ($1.71 million as of September 30, 2025) for working capital is a common characteristic of SPACs that have exhausted their initial operating capital and require additional funding to cover expenses and extensions while pursuing a merger.
• The adoption of an Up-C structure and a Tax Receivable Agreement (TRA) for the business combination with Cartiga is a standard and widely used approach in SPAC transactions involving privately held companies, designed to optimize tax outcomes for the target's existing owners.

Management Changes

Corporate Governance

Related Party Transactions

• The Sponsor (Alchemy DeepTech Capital LLC) acquired 4,312,500 Founder Shares for an aggregate purchase price of $50,000.
• The Sponsor purchased 538,000 Private Placement Shares at $10.00 per share.
• The Sponsor has provided promissory notes totaling $1,710,000 as of September 30, 2025, to cover company expenses, bearing 10% interest per annum.
• Alchemy Investment Management LLC, an affiliate of the Sponsor, receives a monthly fee of $10,000 for secretarial and administrative services.
• Working Capital Loans may be provided by the Sponsor or its affiliates, or certain officers and directors, to finance transaction costs, potentially convertible into shares of the post-Business Combination entity up to $1,500,000.
• A Tax Receivable Agreement (TRA) will be entered into with certain Cartiga Members (TRA Holders), providing them 85% of certain cash tax benefits.
• Melodeon LBS GP, LLC and the Arizona State Retirement System (ASRS) will enter into a Shareholders Agreement with Pubco and the Company, granting them governance and consent rights, including director nomination rights.

Stakeholder Impact

• **Shareholders (Public)**: Face the risk of warrants expiring worthless if the Business Combination is not completed. They have the opportunity to redeem shares in connection with the Business Combination. There is potential for dilution if sponsor shares are forfeited or new capital is raised.
• **Shareholders (Sponsor/Private Placement)**: Have waived redemption rights and are obligated to vote in favor of the Business Combination. They face the risk of Private Placement Shares becoming worthless if no Business Combination occurs and potential forfeiture of shares if the minimum cash condition for the merger is waived and not met.
• **Cartiga Equity Holders (Sellers)**: Will receive OpCo Units and Class B Common Stock in Pubco, benefiting from the tax-efficient Up-C structure and the Tax Receivable Agreement.
• **Underwriter**: Is entitled to $5,175,000 in deferred underwriting fees upon the completion of a Business Combination, but will waive these rights if no Business Combination is completed.
• **Creditors (Related Party)**: The Sponsor's promissory notes, totaling $1,710,000, bear 10% interest and are repayable upon the Business Combination, or only from funds outside the trust account if the Business Combination does not close.
• **Employees (of Cartiga)**: The combined company's business will continue to operate through Cartiga and its subsidiaries, implying continuity for employees.

Next Steps

• Prepare and file a Registration Statement on Form S-4, including a preliminary proxy statement/prospectus, with the SEC.
• Call an extraordinary general meeting of ALCY shareholders to vote on the Domestication and Business Combination Agreement.
• Obtain required approvals from ALCY shareholders (special resolution for Domestication, simple majority for Business Combination).
• Fulfill customary closing conditions for the Business Combination, including the $40,000,000 minimum Available Closing Buyer Cash.
• Complete the Domestication of ALCY from Cayman Islands to Delaware.
• Complete the merger of Newco into Cartiga, with Cartiga surviving as OpCo.
• Pubco will change its name to Cartiga Holdings, Inc.
• Appoint new officers and directors for New Cartiga.
• File a shelf registration statement for resale of New Cartiga equity held by Holders within 30 calendar days after the Business Combination.
• Continue monthly deposits into the trust account until September 9, 2026, for the extension.

Key Dates

Recommendation

The company is a SPAC facing significant financial distress, evidenced by a net loss, a substantial working capital deficit, and an explicit 'going concern' warning. While a business combination agreement with Cartiga is in place, the repeated extensions to the merger deadline and heavy reliance on related-party loans for operational funding indicate a challenging and uncertain path to closing. The potential for sponsor share forfeiture if cash conditions are not met, coupled with the inherent risks of SPACs failing to close, makes this a high-risk investment. The negative financial performance and the going concern warning outweigh the positive of having identified a target. Investors should consider the high probability of further redemptions and the uncertainty surrounding the successful and timely completion of the business combination.

Keywords

SPAC, Business Combination, Cartiga, 10-Q, SEC Filing, Financial Results, Going Concern, Merger, Acquisition, Special Purpose Acquisition Company, ALCY, Delaware Domestication, Up-C Structure, Trust Account, Redemption, Warrants, Related Party Loans