10-Q: Valuence Merger Corp. I Faces Delisting, Going Concern Doubt

Valuence Merger Corp. I reports significant redemptions, Nasdaq delisting, and raises substantial doubt about its ability to continue as a going concern as it seeks a business combination.

Summary

• Net income for the three months ended June 30, 2025, was $58,716, a significant decrease from $168,692 for the same period in 2024.
• Year-to-date net income for the six months ended June 30, 2025, was $83,692, down from $757,373 for the same period in 2024.
• Cash held in the trust account increased slightly to $22,713,372 as of June 30, 2025, from $22,206,637 at December 31, 2024.
• Total liabilities increased to $12,896,001 as of June 30, 2025, from $12,444,833 at December 31, 2024.
• The company has a working capital deficit of $4,652,885 as of June 30, 2025.
• Class A ordinary shares subject to possible redemption total 1,867,402, with a redemption value of $12.16 per share as of June 30, 2025.
• The company was delisted from Nasdaq on March 11, 2025, due to not completing an IPO within 36 months, and its securities now trade on the over-the-counter market.
• Management has raised substantial doubt about the company's ability to continue as a going concern.

Sentiment

Score: 2

Explanation: The company faces severe challenges, including Nasdaq delisting, significant redemptions, and a going concern warning. Its financial performance is deteriorating, and it relies heavily on related-party funding, indicating a highly precarious situation with a low probability of a successful business combination.

Positives

• Net cash used in operating activities decreased to $268,397 for the six months ended June 30, 2025, compared to $518,687 for the same period in 2024.
• General and administrative expenses decreased to $126,616 for Q2 2025 and $403,987 for H1 2025, compared to $465,800 and $723,269 respectively in 2024.
• The company successfully secured additional monthly extensions for its business combination deadline through August 3, 2025, with a potential to extend until March 3, 2026.

Negatives

• Net income significantly decreased to $58,716 for Q2 2025 from $168,692 for Q2 2024, and to $83,692 for H1 2025 from $757,373 for H1 2024.
• Interest earned on cash and investments in the Trust Account declined sharply to $185,332 for Q2 2025 and $366,679 for H1 2025, from $634,492 and $1,480,642 respectively in 2024, primarily due to significant share redemptions.
• The company has a substantial working capital deficit of $4,652,885 as of June 30, 2025.
• The company was delisted from Nasdaq on March 11, 2025, and its securities now trade on the over-the-counter market.
• Significant redemptions occurred in May 2023 ($167.8 million) and June 2024 ($49.9 million), drastically reducing the Trust Account balance and the number of public shares.
• The company relies heavily on non-interest bearing convertible promissory notes and advances from related parties for working capital and extension contributions.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to its liquidity condition and the mandatory liquidation of the Trust Account if a business combination is not consummated by March 3, 2026.
• Failure to complete a business combination by the extended deadline (March 3, 2026) will result in mandatory liquidation of the Trust Account and potential dissolution.
• The company's securities were delisted from Nasdaq and now trade on the over-the-counter market, which may reduce liquidity and investor interest.
• The per share value of assets remaining for distribution upon liquidation may be less than the initial public offering price of $10.00 per unit.
• The Sponsor is liable for third-party claims that reduce Trust Account funds below a certain threshold, but this liability has limitations.
• The company is an early-stage and emerging growth company, subject to associated risks.
• Geopolitical instability (Russia-Ukraine, Israel-Hamas conflicts) could impact the world economy and the company's financial condition, though the specific impact is not yet determinable.

Future Outlook

Management continues to seek a business combination partner, focusing on Asia (excluding China, Hong Kong, and Macau) in life sciences and sustainable technology. The company has extended its deadline to consummate a business combination to March 3, 2026, contingent on continued monthly contributions from the Sponsor. However, management has raised substantial doubt about the company's ability to continue as a going concern if a business combination is not completed by this deadline, which would lead to mandatory liquidation.

Management Comments

• Management believes that the Company will not have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company's officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.
• Management has determined that the liquidity condition and mandatory liquidation of the Trust Account, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern.
• The Company will be using available funds, including those from the Working Capital Loans, for the purpose of paying existing accounts payable, identifying and evaluating prospective Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

Industry Context

The filing highlights the significant challenges faced by Special Purpose Acquisition Companies (SPACs) that fail to identify and complete a business combination within their initial timeframe. Valuence Merger Corp. I's experience with substantial redemptions, declining trust account value, and subsequent Nasdaq delisting is indicative of the increasing investor skepticism and regulatory scrutiny in the SPAC market, particularly for those nearing their liquidation deadlines without a definitive target. The reliance on sponsor funding for extensions and working capital is a common, yet precarious, characteristic of distressed SPACs.

Comparison to Industry Standards

• The company's significant redemptions, totaling over $217 million from an initial $220 million IPO, are far worse than the average redemption rates seen in successful SPACs, which typically aim to minimize redemptions to preserve trust capital for the de-SPAC transaction.
• The delisting from Nasdaq due to failure to complete a business combination within 36 months is a critical failure point, contrasting sharply with SPACs like Gores Holdings VI (GHVI) or Churchill Capital Corp IV (CCIV) which successfully completed large mergers and maintained their listings.
• The current trust account value of $22.7 million, with 1,867,402 shares subject to redemption at $12.16 per share, indicates that the trust value per remaining public share is above the initial IPO price of $10.00, but the overall trust size is severely diminished, making a substantial business combination challenging.
• The company's reliance on non-interest bearing related-party loans and convertible notes for working capital and extension contributions is a common practice for SPACs struggling to find a target, but it also signals a lack of external funding options and increased financial strain compared to well-capitalized SPACs.

Corporate Governance

Related Party Transactions

• Sponsor paid $25,000 to cover certain offering costs in consideration for 5,750,000 Class B ordinary shares (Founder Shares) on October 4, 2021.
• Sponsor transferred 1,200,000 Founder Shares to Valuence Partners LP, an affiliated investment fund.
• Sponsor and Valuence Partners LP converted 5,502,488 Class B ordinary shares into Class A ordinary shares on June 3, 2024.
• Sponsor and Valuence Partners LP purchased Private Placement Warrants for an aggregate of $10,401,993.
• Sponsor or its designees are required to deposit funds into the Trust Account for monthly extensions of the Combination Period ($140,000 per month initially, then $30,000 or $0.015 per public share).
• Company issued a non-interest bearing convertible promissory note to the Sponsor for $613,207 on June 5, 2023.
• Company issued a non-interest bearing convertible promissory note to Valuence Partners LP for $1,650,941 on June 5, 2023.
• Company issued a non-interest bearing convertible promissory note to the Sponsor for $300,000 on June 4, 2024.
• Advances from a related party (Sponsor) totaled $1,448,460 as of June 30, 2025, which are non-interest bearing and payable on demand.
• The Sponsor agreed to pay an existing shareholder $75,000 in cash for a non-redemption agreement on June 3, 2024.

Stakeholder Impact

• Shareholders: Public shareholders who did not redeem their shares face significant uncertainty due to the company's going concern issues and Nasdaq delisting, which impacts liquidity and potential future value. Those who redeemed received a pro-rata portion of the Trust Account.
• Sponsor/Affiliates: The Sponsor and its affiliates have provided substantial funding through loans, convertible notes, and contributions for extensions, indicating a significant financial commitment to the company's survival and search for a business combination. Their investment is at high risk if a business combination is not completed.
• Underwriters: Entitled to $8,105,480 in deferred underwriting fees, which are contingent upon the completion of a business combination. These fees are at risk if the company liquidates.
• Potential Target Businesses: The company's reduced Trust Account size and going concern warning may make it a less attractive merger partner, potentially limiting its options for a business combination.

Next Steps

• Continue identifying and evaluating prospective business combination candidates.
• Perform due diligence on potential target businesses.
• Structure, negotiate, and consummate a business combination.
• Continue to seek monthly extensions for the business combination deadline, requiring additional contributions from the Sponsor.
• Manage liquidity to cover existing accounts payable and operational expenses.

Key Dates

Recommendation

The company is in a highly distressed state, evidenced by its Nasdaq delisting, significant share redemptions, and management's explicit 'substantial doubt' about its ability to continue as a going concern. Its core purpose as a SPAC – to complete a business combination – is severely jeopardized by its dwindling trust account and prolonged search. The reliance on related-party financing for survival is unsustainable long-term without a viable target. Investors face a high risk of total loss if the company liquidates, and the move to the OTC market further reduces liquidity and price discovery. There is no clear path to value creation, making it an unattractive investment.

Keywords

SPAC, Blank Check Company, Business Combination, SEC Filing, 10-Q, Valuence Merger Corp. I, Trust Account, Redemptions, Nasdaq Delisting, Going Concern, Convertible Notes, Related Party Transactions, Financial Report, Quarterly Results