10-Q: Alchemy Investments SPAC to Merge with Cartiga

Alchemy Investments Acquisition Corp 1, a blank check company, announced a definitive business combination agreement with Cartiga, LLC, a significant step towards completing its initial merger.

Summary

• Reported a net loss of $220,257 for the three months ended June 30, 2025, a significant decline from a net income of $1,313,741 in the prior year period.
• Incurred a net loss of $521,753 for the six months ended June 30, 2025, compared to a net income of $2,727,570 for the same period in 2024.
• Operating and formation costs increased to $722,490 for the six months ended June 30, 2025, from $443,016 in the prior year.
• Gain on investments held in the Trust Account significantly decreased to $250,442 for the six months ended June 30, 2025, from $3,165,435 in 2024.
• Entered into a definitive business combination agreement with Cartiga, LLC on August 22, 2025, a subsequent event to the reporting period.
• The company faces substantial doubt about its ability to continue as a going concern, with a working capital deficit of $2,505,433 as of June 30, 2025.
• Shareholders approved an extension of the business combination deadline to September 9, 2025, with monthly deposits into the trust account.

Sentiment

Score: 6

Explanation: The company faces significant financial challenges, including net losses and a going concern warning, typical for a SPAC nearing its deadline. However, the recent announcement of a definitive business combination agreement with Cartiga, LLC, is a crucial positive development that provides a path forward, mitigating immediate liquidation risk, though execution remains key.

Positives

• Entered into a definitive Business Combination Agreement with Cartiga, LLC on August 22, 2025, which is a critical step for a SPAC.
• Shareholders approved an extension of the business combination deadline until September 9, 2025, providing more time to complete the merger.
• Investments held in the Trust Account increased to $12,252,250 as of June 30, 2025, from $11,851,808 at December 31, 2024.

Negatives

• Reported a net loss of $220,257 for the three months ended June 30, 2025, compared to net income of $1,313,741 in the prior year.
• Reported a net loss of $521,753 for the six months ended June 30, 2025, compared to net income of $2,727,570 in the prior year.
• Operating and formation costs increased to $722,490 for the six months ended June 30, 2025, from $443,016 in the prior year.
• Significant decrease in gain on investments held in Trust Account to $250,442 for the six months ended June 30, 2025, from $3,165,435 in the prior year.
• Substantial doubt about the company's ability to continue as a going concern due to a working capital deficit of $2,505,433 as of June 30, 2025, and insufficient cash outside the Trust Account.
• Total current liabilities significantly increased to $2,756,442 as of June 30, 2025, from $1,829,857 at December 31, 2024.
• Increased related party promissory notes to $1,130,000 as of June 30, 2025, from $530,000 at December 31, 2024, incurring interest expense.

Risks

• Substantial doubt about the ability to continue as a going concern if a Business Combination is not successfully closed.
• Inability to complete a Business Combination by the Extended Date of September 9, 2025, which would lead to liquidation.
• The company's ability to consummate a Business Combination or the operations of a target business may be materially and adversely affected by military actions (Russia/Ukraine, Israel/Gaza) and international trade policies.
• Ability to raise equity and debt financing may be impacted by increased market volatility or decreased market liquidity.
• Dependence on U.S. and multi-national financial institutions for banking services, with deposits exceeding insured limits, posing a risk of inability to access uninsured funds in case of institutional failure.
• Warrants will expire worthless if the company fails to complete an initial Business Combination within the Combination Period or during any Extension Period.
• The per share value of residual assets remaining for distribution upon liquidation may be less than $10.15.

Future Outlook

The company anticipates addressing its going concern uncertainty through the successful closing of the recently announced business combination with Cartiga, LLC. While the deadline for a business combination has been extended to September 9, 2025, there is no assurance that the transaction will be consummated by this date. The company will continue to incur significant costs in pursuit of its acquisition plans.

Management Comments

• Management plans to address this uncertainty [going concern] with the successful closing of a Business Combination.
• Our Certifying Officers concluded that, as of June 30, 2025, our disclosure controls and procedures were effective.
• Our 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.

Industry Context

Alchemy Investments Acquisition Corp 1 operates as a Special Purpose Acquisition Company (SPAC), a segment of the market that has seen increased scrutiny and redemptions in recent years. The announcement of a definitive business combination agreement with Cartiga, LLC, albeit after an extension, is a critical milestone for a SPAC, as many struggle to identify and close suitable targets within their initial deadlines. The significant redemptions and the need for extensions reflect broader market trends where SPACs face challenges in retaining capital and completing mergers, especially given current economic uncertainties and increased regulatory oversight.

Comparison to Industry Standards

• The company's situation, including the need for multiple extensions and significant redemptions (over 90% of IPO shares redeemed), is common among SPACs in the current market environment. Many SPACs have faced high redemption rates as investors opt for cash back rather than participating in de-SPAC transactions.
• The substantial working capital deficit and going concern warning are typical for SPACs nearing their liquidation deadline without a definitive merger, highlighting the financial pressures to close a deal.
• The reliance on related party loans to cover operating expenses is a standard practice for SPACs, as they generally have minimal cash outside the trust account for operations.
• The announcement of a definitive business combination agreement with Cartiga, LLC, while positive, comes after the initial deadline and significant redemptions, which is a common trajectory for SPACs that manage to find a target in a challenging market.

Corporate Governance

Related Party Transactions

• The Sponsor acquired 4,312,500 founder shares for $50,000.
• The Sponsor and the Underwriter purchased 595,500 private placement shares for $10.00 per share.
• The Sponsor loaned the Company an aggregate of $1,130,000 via promissory notes (as of June 30, 2025) to cover expenses, bearing 10% interest per annum.
• The Company pays Alchemy Investment Management LLC, an affiliate of the Sponsor, a monthly fee of $10,000 for secretarial and administrative services.
• The Sponsor or an affiliate, or certain officers and directors, may provide Working Capital Loans, with up to $1,500,000 potentially convertible into shares of the post-Business Combination entity.

Stakeholder Impact

• Shareholders: Public shareholders who did not redeem their shares will now have their shares converted into Pubco Class A Common Stock upon completion of the Cartiga merger. Those who redeemed received $10.95 per share. The value of remaining shares is tied to the success of the Cartiga merger.
• Warrant Holders: Warrants will convert to Pubco Warrants and become exercisable for Pubco Class A Common Stock, contingent on the business combination closing and an effective registration statement. If the merger fails, warrants expire worthless.
• Sponsor/Insiders: Their founder shares and private placement shares are subject to lock-up periods and redemption waivers, aligning their interests with the successful completion of the business combination. They have also provided significant loans to the company.
• Underwriters: Entitled to $5,175,000 in deferred underwriting fees upon completion of the business combination.
• Cartiga, LLC: The target company will become part of the combined entity, gaining access to public markets and capital.

Next Steps

• Complete the business combination with Cartiga, LLC.
• Convert ALCY shares, units, and warrants into Pubco Class A Common Stock, Pubco Units, and Pubco Warrants, respectively, following the business combination.
• File an effective registration statement covering Class A Ordinary Shares issuable upon exercise of warrants and maintain a current prospectus.
• Continue to make monthly deposits of $30,000 into the trust account until September 2025 for the extension.

Key Dates

Recommendation

The company, a SPAC, has announced a definitive business combination agreement with Cartiga, LLC, which is a critical positive development, mitigating the immediate risk of liquidation. However, the company has also reported significant net losses, a substantial working capital deficit, and a going concern warning, reflecting the challenges faced by SPACs in the current market. While the merger provides a path forward, the execution risk remains, and the ultimate value for shareholders will depend on the successful closing of the transaction and the future performance of the combined entity. Given the recent announcement, a 'hold' recommendation is appropriate as investors await further details and the closing of the merger, balancing the positive news of a target with the underlying financial pressures and execution risks.

Keywords

SPAC, Alchemy Investments Acquisition Corp 1, Cartiga LLC, Business Combination, Merger, 10-Q, Financial Report, Going Concern, Trust Account, Redemption, Warrants, DeepTech Capital