10-Q: Roth CH Acquisition Reports Q2 Loss, Extends SharonAI Merger

Roth CH Acquisition Co. reported a net loss of $74,009 for Q2 2025 and extended its business combination agreement with SharonAI Inc. to October 31, 2025, while also disclosing material weaknesses in internal controls.

Summary

• Reported a net loss of $74,009 for the three months ended June 30, 2025, a significant shift from a net income of $231,029 in the same period of 2024.
• Incurred a net loss of $1,350,520 for the six months ended June 30, 2025, compared to a net income of $510,213 for the prior year period.
• Cash balance increased slightly to $9,728 as of June 30, 2025, from $6,738 at December 31, 2024.
• Working capital deficit stood at $1,545,956 as of June 30, 2025.
• Total liabilities increased to $2,427,483 as of June 30, 2025, from $2,258,424 at December 31, 2024.
• Warrant liabilities significantly increased to $867,750 as of June 30, 2025, from $222,500 at December 31, 2024, primarily due to a change in fair value.
• A promissory note from related parties totaling $1,181,000 was converted into 39,366,667 Class A ordinary shares on January 24, 2025.
• The business combination agreement with SharonAI Inc. was amended to extend the closing date from July 31, 2025, to October 31, 2025.
• Management identified material weaknesses in internal control over financial reporting related to complex financial instruments and shareholder redemption approval procedures, leading to a conclusion that disclosure controls were not effective.

Sentiment

Score: 3

Explanation: The company reported significant net losses, has a substantial working capital deficit, and faces going concern doubts. The extension of the merger deadline, while not necessarily a deal-breaker, adds uncertainty. The identified material weaknesses in internal controls are a serious concern for investors.

Positives

• Secured an extension for the business combination with SharonAI Inc. until October 31, 2025, indicating continued progress towards a merger.
• Successfully converted a $1,181,000 promissory note from related parties into 39,366,667 Class A ordinary shares, reducing debt.
• Net cash used in operating activities decreased to $226,156 for the six months ended June 30, 2025, from $281,872 in the prior year period.
• Received additional advances from a related party totaling $157,558 as of June 30, 2025, and a subsequent advance of $75,408, providing liquidity.

Negatives

• Reported a net loss of $74,009 for the three months ended June 30, 2025, and a net loss of $1,350,520 for the six months ended June 30, 2025, a significant deterioration from net income in the prior year periods.
• Operating costs increased to $705,270 for the six months ended June 30, 2025, from $454,774 in the prior year.
• Accumulated deficit grew to $10,187,408 as of June 30, 2025.
• A working capital deficit of $1,545,956 as of June 30, 2025, raises substantial doubt about the company's ability to continue as a going concern.
• Warrant liabilities increased significantly by $645,250 for the six months ended June 30, 2025, representing a non-cash loss.
• Disclosure controls and procedures were deemed not effective due to material weaknesses in accounting for complex financial instruments and shareholder redemption approvals.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to limited cash ($9,728) and a significant working capital deficit ($1,545,956).
• The company may be unable to raise additional capital through loans or investments from its Sponsor, shareholders, officers, directors, or third parties.
• Geopolitical instability (Russia-Ukraine conflict, Israel-Hamas conflict) could lead to market disruptions, volatility in commodity prices, credit and capital markets, supply chain interruptions, and increased cyber-attacks, adversely affecting the search for and consummation of an initial business combination.
• Material weaknesses in internal control over financial reporting related to accounting for complex financial instruments and approval procedures for shareholder redemptions pose risks to financial reporting reliability.
• As an early-stage and emerging growth company, the company is subject to associated risks.
• The company will not generate operating revenues until after the completion of its initial business combination.

Future Outlook

The company expects to incur significant costs related to identifying a target business, undertaking due diligence, and negotiating an initial business combination. It anticipates needing to raise additional funds to meet operating expenditures prior to the business combination. The business combination with SharonAI Inc. is expected to close by the extended deadline of October 31, 2025.

Management Comments

• We expect that we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination.
• We expect to incur significant costs related to identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination.
• Management has determined that the liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern.
• Our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report, due to the material weaknesses in our internal control over financial reporting related to the Company’s accounting for complex financial instruments and the approval procedures for shareholder redemptions.
• We believe our efforts will enhance our controls relating to accounting for complex financial transactions and the process of shareholder redemption approvals, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practice may evolve over time.

Industry Context

The company operates as a Special Purpose Acquisition Company (SPAC), a vehicle designed to merge with a private company to take it public. The target, SharonAI Inc., is in the high-performance computing (HPC) and artificial intelligence (AI) industry, a sector experiencing rapid growth and significant investment. The extension of the merger deadline is common in SPAC transactions, reflecting the complexities of such deals. The delisting from Nasdaq to OTC Markets is a negative trend for SPACs that fail to complete a timely business combination or meet listing requirements.

Comparison to Industry Standards

• As a SPAC, direct operational comparisons to revenue-generating companies are not applicable.
• The extension of the business combination agreement to October 31, 2025, is a common occurrence in SPAC transactions, reflecting the challenges in completing complex mergers within initial timelines.
• The delisting from Nasdaq to OTC Markets on April 25, 2024, is generally viewed negatively, as it often indicates a failure to meet exchange requirements or a lack of investor interest, contrasting with successful SPACs that complete mergers and maintain major exchange listings.
• The disclosed material weaknesses in internal controls are a significant concern, as robust financial reporting and governance are critical for public companies, especially those undergoing complex transactions like a de-SPAC.

Corporate Governance

Related Party Transactions

• A promissory note from certain shareholders (related parties) totaling $1,181,000 was converted into 39,366,667 Class A ordinary shares on January 24, 2025.
• The Sponsor advanced $157,558 to the company as of June 30, 2025.
• Subsequent to June 30, 2025, the Sponsor advanced an additional $75,408 to the company.
• The company's officers, directors, and Sponsor may loan funds to meet working capital needs, though they are not obligated to do so.

Stakeholder Impact

• Shareholders face dilution from the conversion of the promissory note into Class A shares. The going concern doubt and internal control weaknesses pose risks to investment value. The extended merger deadline adds uncertainty.
• Creditors, particularly related party lenders, have converted debt to equity or provided advances, indicating continued support, but the overall financial health and going concern issues are a concern.
• Management and employees are focused on completing the business combination and addressing internal control deficiencies. Their ability to secure additional financing is critical.

Next Steps

• Complete the business combination with SharonAI Inc. by the extended deadline of October 31, 2025.
• Address and remediate the identified material weaknesses in internal control over financial reporting related to complex financial instruments and shareholder redemption approval procedures.
• Raise additional capital to fund working capital deficiencies and transaction costs for the business combination.
• Continue efforts to identify and evaluate target businesses, perform due diligence, and negotiate the initial business combination.

Key Dates

Recommendation

The company reported substantial net losses, has a significant working capital deficit, and explicitly states 'substantial doubt about the Company's ability to continue as a going concern.' Furthermore, management identified material weaknesses in internal control over financial reporting, which is a critical red flag for investors. While the business combination with SharonAI Inc. is still pending, the financial instability and governance issues present a high level of risk. The delisting from Nasdaq to OTC Markets also reflects a deteriorating market perception. Given these severe financial and operational challenges, a seasoned investor would likely recommend selling to mitigate further potential losses.

Keywords

SPAC, blank check company, SharonAI, business combination, merger, 10-Q, quarterly report, financial results, warrant liabilities, going concern, internal controls, high performance computing, artificial intelligence, HPC, AI