Alchemy Investments Acquisition 1(ALCY) - 2023 Q4 - Annual Report

Table of Contents (Introductory) Certain Terms Cautionary Statement Regarding Forward-Looking Statements Summary of Risk Factors PART I Part I outlines the company's business as a blank check company, its strategy for identifying and completing a business combination, and the associated risks and operational details. It emphasizes the focus on deep technology and data analytics, the role of its experienced management team, and the process for shareholder redemptions and potential liquidation if a business combination is not completed within the specified timeframe Item 1. Business Alchemy Investments Acquisition Corp 1 is a blank check company formed to complete a business combination, primarily targeting deep technology with a focus on data analytics. The company leverages its management team's experience and network to identify opportunities, offering a public listing alternative to target businesses. It details its acquisition criteria, the process for effecting a business combination, and its status as an emerging growth and smaller reporting company General Alchemy Investments Acquisition Corp 1 is a blank check company established in October 2021, with no current operations or revenue. Its sole purpose is to complete a business combination, focusing on deep technology and data analytics across various applications - The company was incorporated on October 27, 2021, as a Cayman Islands exempted company to complete a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination[22] - The company has not engaged in any operations or generated any revenue to date[22] - The company intends to focus on deep technology, with a particular emphasis on data analytics, including applications in remote sensing, telecommunications, financial trading, and environmental monitoring[23] Our Management Team The company's management team consists of experienced professionals in equity investments, finance, business operations, and deal negotiation, led by Steven M. Wasserman (Non-Executive Chairman), Mattia Tomba, and Vittorio Savoia (Co-CEOs). They aim to leverage their networks and expertise to identify and execute attractive business combinations, particularly in deep technology and data analytics - The management team consists of seasoned professionals with experience in equity investments, finance, business operations, management, and deal negotiation[24] - Key members include Steven M. Wasserman (Non-Executive Chairman), Mattia Tomba and Vittorio Savoia (Co-Chief Executive Officers), and Harshana Sidath Jayaweera (Chief Financial Officer)[26] - The team's contacts and relationships across various industries are expected to generate attractive transaction opportunities for shareholders[28] Business Strategy The company's business strategy is to pursue an initial business combination in deep technology, focusing on data analytics companies that acquire, process, and utilize data. It aims to unlock value by accessing international capital markets and providing growth capital, leveraging its management team's extensive networks and transactional experience - The company's strategy is to target deep technology companies with a focus on data analytics, which involve acquiring, processing, analyzing, and utilizing data from various sources[30] - The company believes its management team's extensive networks and experience are uniquely qualified to source and execute business combinations globally, potentially involving recapitalization or growth capital[31][32] Competitive Advantages The company highlights its experienced management team, led by Steven M. Wasserman, Mattia Tomba, and Vittorio Savoia, as a key competitive advantage. Its flexibility to explore both upstream (operational assets in space) and downstream (data-analytics) business combination opportunities, coupled with its status as a publicly listed acquisition company offering an alternative to traditional IPOs, and an established deal sourcing network, are also cited - The company's competitive advantages include its experienced management team, flexibility to explore upstream and downstream business combination opportunities (e.g., operational assets in space or data-analytics companies)[33][34] - Its status as a publicly listed acquisition company offers target businesses a potentially less expensive and more certain alternative to a traditional IPO[35] - An established deal sourcing network through its management team's contacts in government, private and public companies, and investment firms provides access to quality acquisition opportunities[36] Industry Opportunity The company identifies the deep tech industry, particularly data analytics, as a significant global economic opportunity. The data analytics market was valued at over $240 billion in 2021 and is projected to grow to over $650 billion by 2029, driven by advancements in artificial intelligence technologies - The deep tech industry, focusing on data analytics, is an emerging global industry with significant economic potential[38][39] Data Analytics Market Value | Year | Market Value | | :--- | :--- | | 2021 | >$240 billion | | 2029 (projected) | >$650 billion | - Data analytics development relies on AI technologies, with the applied AI sector having the highest innovation score and attracting an estimated $104 billion in investments in 2022[39] Acquisition Criteria The company's acquisition criteria focus on target businesses with strong growth potential, a unique market position (e.g., competitive technology, brand equity), and the ability to benefit from access to capital markets. It intends to target middle-market businesses with a total enterprise value of at least $500 million - Target businesses should demonstrate strong revenue growth, favorable future growth characteristics, and a durable business model[40] - The company seeks businesses with leading competitive technology, unique brand equity, or product competences, particularly those at a high-growth stage requiring additional expertise or capital[41] - Target businesses should benefit from capital markets access to accelerate growth and build capital profile, especially those with experienced operating management teams lacking capital market experience[42] - The company intends to seek middle-market businesses with a total enterprise value of at least $500 million[43] Initial Business Combination Nasdaq rules require the company to complete a business combination with an aggregate fair market value of at least 80% of its trust account assets. The board of directors will determine fair market value, potentially with an independent opinion. The company aims to acquire 100% of a target's equity or assets, or at least a controlling interest of 50% or more, and will conduct thorough due diligence - Nasdaq rules mandate that the aggregate fair market value of the business combination must be at least 80% of the value of assets in the trust account (excluding deferred underwriting commissions and taxes)[45] - The company anticipates structuring its initial business combination to own or acquire 100% of the target, or at least 50% or more of voting securities to gain a controlling interest[46][47] - A thorough due diligence review will be conducted, including meetings with management, document reviews, and inspection of facilities[49] Sourcing of Potential Initial Business Combination Targets Potential target businesses are sourced through the management team's extensive network in deep technology industries and from unaffiliated sources like investment market participants and private equity groups. However, conflicts of interest may arise due to management's ownership of founder shares and other fiduciary obligations, which could incentivize them to pursue certain transactions - Target business candidates are sourced through the management team's network in remote sensing, telecommunications, financial trading, environmental monitoring, and data science industries[51] - Additional candidates are anticipated from unaffiliated sources such as investment market participants, private equity groups, and investment banks[52] - Conflicts of interest may exist for the management team due to their ownership of founder shares and placement shares, which could become worthless if a business combination is not consummated within 18 months, potentially incentivizing them to complete a transaction that may not be profitable for public shareholders[53] Status as a Public Company The company's public status is presented as an attractive feature for target businesses, offering a faster and potentially more cost-effective route to becoming public compared to a traditional IPO. This status can enhance capital access, management incentives, and company profile. As an 'emerging growth company' and 'smaller reporting company,' it benefits from reduced disclosure requirements - Being a public company offers target businesses an alternative to traditional IPOs, potentially providing greater access to capital and improved management incentives[56][58] - The business combination process is generally more expeditious and cost-effective than a typical initial public offering[57] - The company qualifies as an 'emerging growth company' and 'smaller reporting company,' which allows for certain exemptions from reporting requirements and delayed adoption of new accounting standards[60][61][62][63] Financial Position As of December 31, 2023, the company had $115,489,565 available in its trust account, after accounting for deferred underwriting fees. This financial flexibility allows for various business combination options, including liquidity events for owners, growth capital, or balance sheet strengthening, though third-party financing may be required for larger acquisitions Funds Available for Business Combination (as of Dec 31, 2023) | Item | Amount | | :--- | :--- | | Funds in Trust Account | $115,489,565 | | Deferred Underwriting Fees | $5,175,000 | - The company has the flexibility to use cash, debt, equity, or a combination to complete a business combination, tailoring consideration to the target's needs[64] - No steps have been taken to secure third-party financing, and its availability is not assured[64] Effecting Our Initial Business Combination The company is a non-operating blank check company that will use proceeds from its IPO and private placement, along with potential equity or debt, to effect a business combination. Shareholders will have redemption rights, either through a general meeting vote or a tender offer. The company has 18 months from its IPO to complete a business combination, with potential for extension, or it will liquidate - The company will utilize cash from its IPO and private placement, along with equity, debt, or a combination, to effect a business combination[65] - Shareholders will have the opportunity to redeem their shares for a pro rata portion of the trust account, either through a shareholder vote or a tender offer[66] - The company has 18 months from the closing of its IPO to consummate an initial business combination; failure to do so will result in redemption of public shares and liquidation[67][68] - Additional funds may be raised through private offerings of debt or equity securities to complete a business combination, which could dilute existing shareholders or impose restrictive covenants[70] Sources of Target Businesses Target business candidates are identified through the management team's professional networks and unsolicited proposals from investment market participants. The company may engage professional firms for acquisitions, but its sponsor, officers, and directors will not receive finder's fees. Potential conflicts of interest exist due to management's ownership of founder shares and other fiduciary obligations, which are addressed by requiring independent opinions for affiliated transactions - Target business candidates are sourced from the management team's networks, investment bankers, private equity groups, and other unaffiliated sources[71] - The company may pay finder's fees to professional firms, but its sponsor, officers, or directors will not receive such fees for services rendered to effectuate a business combination[71] - Conflicts of interest may arise if a target is affiliated with the sponsor, officers, or directors, requiring an opinion from an independent investment banking firm that the business combination is fair to shareholders[74] - Officers and directors have pre-existing fiduciary or contractual obligations to other entities, which may require them to present business opportunities to those entities first[75] Selection of a Target Business and Structuring of our Initial Business Combination The company must acquire a target business with a fair market value of at least 80% of its trust account assets, as determined by the board or an independent firm. It aims to acquire a controlling interest (50% or more voting securities) and will conduct extensive due diligence. The management has broad flexibility in selection, but costs incurred for uncompleted acquisitions will result in losses - The target business must have an aggregate fair market value of at least 80% of the assets held in the trust account, determined by the board of directors or an independent investment banking firm[76] - The company will only complete a business combination where it owns or acquires 50% or more of the target's voting securities or a controlling interest[77] - Due diligence will include meetings with management, document reviews, and facility inspections[79] - Costs incurred for uncompleted acquisitions will result in losses and reduce funds available for other business combinations[80] Lack of Business Diversification The company's success will depend entirely on the future performance of a single business, as it is unlikely to have resources to diversify operations across multiple entities or industries. This lack of diversification exposes it to significant risks from economic, competitive, and regulatory developments within that single line of business - The company's success will depend entirely on the future performance of a single business due to limited resources for diversification[81] - Lack of diversification may subject the company to negative economic, competitive, and regulatory developments, and dependence on a single or limited number of products or services[84] Limited Ability to Evaluate the Target's Management Team The company's assessment of a target business's management may not be accurate, and future management may lack public company experience. The role of the company's current management in the combined entity is uncertain, and there's no guarantee that key personnel will remain or that additional qualified managers can be recruited - Assessment of a target business's management may not be correct, and future management may lack the necessary skills for managing a public company[82] - The future role of the company's management team in the target business is uncertain, and there is no assurance that key personnel will remain or that additional managers can be recruited[82][83][84] Shareholders May Not Have the Ability to Approve Our Initial Business Combination While the company intends to seek shareholder approval for its initial business combination, it may conduct redemptions via a tender offer without a shareholder vote if not legally required. Shareholder approval is typically required for transactions involving significant share issuance (20% or more), substantial shareholder interest in the target, or a change of control - The company may conduct redemptions without a shareholder vote via a tender offer, unless required by law or stock exchange listing rules, or if it chooses to seek approval for business reasons[85] Shareholder Approval Requirements for Business Combinations | Type of Transaction | Shareholder Approval Required | | :--- | :--- | | Purchase of assets | No | | Purchase of stock of target not involving a merger with the company | No | | Merger of target into a subsidiary of the company | No | | Merger of the company with a target | Yes | - Nasdaq rules require shareholder approval if the company issues Class A Ordinary Shares equal to or exceeding 20% of outstanding shares, if substantial shareholders have a 5% or greater interest in the target, or if the transaction results in a change in control[86] Permitted Purchases of our Securities The sponsor, directors, officers, advisors, or their affiliates may purchase public shares or warrants in privately negotiated transactions or on the open market, either before or after the business combination, to reduce outstanding warrants, satisfy closing conditions, or prevent redemptions. Such purchases would comply with securities laws and be reported, but would not use funds from the trust account prior to the business combination - The sponsor, directors, officers, advisors, or their affiliates may purchase public shares or warrants in privately negotiated transactions or on the open market[86] - The purpose of such purchases could be to reduce outstanding public warrants, or to satisfy closing conditions requiring a minimum net worth or cash amount[87] - Any such purchases would comply with Regulation M and other federal securities laws, and would be reported, but would not use funds from the trust account prior to the business combination[89] Redemption Rights for Public Shareholders upon Completion of our Initial Business Combination Public shareholders have the right to redeem their Class A Ordinary Shares upon completion of the initial business combination for a cash price equal to their pro rata share of the trust account, including interest (less taxes payable). The per-share redemption amount is not reduced by deferred underwriting commissions. The sponsor, officers, and directors waive their redemption rights for founder and public shares they hold - Public shareholders can redeem their Class A Ordinary Shares for a cash price equal to their pro rata share of the trust account, including interest (less taxes payable)[90] - The per-share redemption amount will not be reduced by deferred underwriting commissions[90] - The sponsor, officers, and directors have waived their redemption rights for any founder shares and public shares they hold[90] Manner of Conducting Redemptions Redemptions can occur either in connection with a shareholder meeting to approve the business combination or via a tender offer, at the company's discretion, unless a shareholder vote is legally required. If a vote is held, the business combination requires approval by a majority of shares voted, and public shareholders can redeem regardless of their vote. If a tender offer is used, it will remain open for at least 20 business days - Redemptions can be conducted either through a shareholder meeting to approve the business combination or by means of a tender offer, at the company's discretion, unless a shareholder vote is legally required[92] - If shareholder approval is sought, the business combination requires an ordinary resolution (majority vote) under Cayman Islands law, and public shareholders can redeem their shares regardless of their vote[94] - If a tender offer is used, it will remain open for at least 20 business days, and the business combination cannot be completed until the tender offer period expires[97] Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Shareholder Approval If shareholder approval is sought, public shareholders are restricted from redeeming more than 15% of the public shares sold in the IPO without prior consent. This measure aims to prevent large shareholders from blocking a business combination or forcing share purchases at a premium, while still allowing them to vote all their shares - Public shareholders are restricted from redeeming more than 15% of the public shares sold in the IPO without prior consent, if shareholder approval is sought for the business combination[98] - This restriction is intended to discourage large shareholders from using redemption rights to block a proposed business combination or force premium purchases[98] - Shareholders retain the ability to vote all their shares, including 'Excess Shares,' for or against the business combination[98] Tendering Share Certificates in Connection with Redemption Rights Public shareholders exercising redemption rights may be required to tender their share certificates to the transfer agent, either physically or electronically, by a specified date. This requirement ensures that a redemption election is irrevocable once the business combination is approved, differing from past practices that allowed an 'option window' after approval - Public shareholders exercising redemption rights may be required to tender their certificates to the transfer agent (physically or electronically) prior to the date specified in the proxy material[99] - This delivery requirement ensures that a redeeming holder's election to redeem is irrevocable once the initial business combination is approved, unlike previous 'option window' practices[102] - If the business combination is not approved or completed, certificates delivered for redemption will be promptly returned to holders[104] Redemption of Public Shares and Liquidation if no Initial Business Combination If a business combination is not completed within 18 months of the IPO, the company will cease operations, redeem all public shares for a pro rata portion of the trust account (approximately $10.15 per share, less taxes and dissolution expenses), and then liquidate. Warrants will expire worthless. The sponsor and management waive their rights to liquidating distributions for founder and placement shares, but not for any public shares they acquire - If a business combination is not completed within 18 months of the IPO, the company will redeem 100% of its public shares for a pro rata portion of the trust account and then liquidate[106] - The expected pro rata redemption price is approximately $10.15 per Class A Ordinary Share, without accounting for interest earned on funds[68][110] - Warrants will expire worthless if a business combination is not completed within the 18-month timeframe[106] - The sponsor, officers, and directors have waived their rights to liquidating distributions from the trust account for their founder and placement shares[107] - The sponsor has agreed to be liable for third-party claims that reduce the trust account below a certain threshold, provided the third party did not execute a waiver[112] Competition The company faces intense competition from other entities, including blank check companies, private equity groups, and operating businesses, for acquisition opportunities. Many competitors have greater resources and experience. The company's obligation to pay cash for redemptions and the potential dilution from warrants may put it at a competitive disadvantage, though its public entity status and access to public equity markets are considered advantages - The company faces intense competition from other entities with similar business objectives, including other blank check companies, private equity groups, and operating businesses[117] - Competitors often possess greater technical, human, and financial resources, giving them an advantage in pursuing target businesses[117] - The obligation to pay cash for redemptions and the potential dilution from outstanding warrants may place the company at a competitive disadvantage[117][118] - The company believes its status as a public entity and potential access to U.S. public equity markets may provide a competitive advantage[119] Facilities The company's principal executive office is located at 850 Library Avenue, Suite 204-F, Newark, DE 19711, and its current office space is considered adequate for its operations - The company's principal executive office is located at 850 Library Avenue, Suite 204-F, Newark, DE 19711[121] - The current office space is considered adequate for its current operations[121] Employees The company has three executive officers who are not obligated to devote full-time to its affairs and will allocate time as needed, particularly during the business combination process. The company does not intend to have full-time employees before completing a business combination - The company has three executive officers who are not obligated to devote a specific number of hours to its matters[122] - The amount of time devoted by officers will vary based on the stage of the business combination process[122] - The company does not intend to have any full-time employees prior to the consummation of a business combination[122] Periodic Reporting and Financial Information The company is subject to SEC reporting obligations, including filing annual, quarterly, and current reports. It must provide audited financial statements of target businesses, prepared in accordance with GAAP or IFRS, which may limit the pool of potential targets. As an 'emerging growth company,' it benefits from reduced disclosure requirements and an extended transition period for accounting standards - The company is registered under the Exchange Act and has reporting obligations, including filing annual, quarterly, and current reports with the SEC[123] - Audited financial statements of prospective target businesses, prepared in accordance with GAAP or IFRS, will be provided to shareholders, which may limit the pool of potential targets[124] - The company is an 'emerging growth company' and can take advantage of certain exemptions from reporting requirements and an extended transition period for new accounting standards[127][128][129][130] - The company is a Cayman Islands exempted company and has received a tax exemption undertaking from the Cayman Islands government for 20 years[126] Item 1A. Risk Factors This section details numerous risks associated with investing in the company, a blank check company with no operating history. Key risks include the uncertainty of completing a business combination within the 18-month timeframe, potential for sponsor profit despite poor public shareholder returns, dilution from future equity issuances, and the impact of regulatory changes, geopolitical events, and economic conditions. It also highlights risks related to warrants, management conflicts of interest, and the company's status as a Cayman Islands entity - The company is a blank check company with no operating history, providing no basis for evaluating its ability to achieve its business objective[132] - The independent registered public accounting firm's report expresses substantial doubt about the company's ability to continue as a 'going concern' due to a working capital deficit and the November 9, 2024, business combination deadline[133] - The sponsor, its affiliates, and management team stand to make a substantial profit from founder shares (purchased at $0.0116 per share) even if the business combination is unprofitable for public shareholders, creating a potential conflict of interest[137][190] - Failure to consummate a business combination within 18 months will result in the founder shares and placement shares expiring worthless, incentivizing management to complete a transaction[138] - Issuance of additional ordinary shares, preference shares, or debt securities to complete a business combination could significantly reduce current investors' equity interest and cause a change in control[139][140][141] - Third-party claims against the company could reduce the funds in the trust account, leading to a per-share liquidation price less than $10.15 for public shareholders[142][143] - Recent SEC rules (2024 SPAC Rules) impose additional disclosure requirements and increase potential liability, which may adversely affect the company's ability to negotiate and complete a business combination[152] - Geopolitical events (e.g., Russia-Ukraine, Israel-Hamas conflicts) and economic conditions (inflation, interest rates) may materially adversely affect the search for a business combination and the target business[153][154][155] - Warrants may expire worthless if a business combination is not completed, and holders may receive fewer shares if forced to exercise on a 'cashless basis' due to lack of an effective prospectus[157][158][159][161] - The company's sponsor is controlled by non-U.S. persons, which may subject a business combination with a U.S. business to CFIUS review, potentially delaying or blocking the transaction[198] - As a Cayman Islands exempted company, shareholders may face difficulties in protecting their interests and enforcing rights through U.S. federal courts, as Cayman Islands law differs from U.S. statutes[210][212][213][214] - A 1% U.S. federal excise tax may be imposed on redemptions of ordinary shares if the company domesticates as a Delaware corporation in connection with a business combination, potentially reducing cash available for redemptions[222][224] Risks Associated with Our Business The company, as a blank check entity, lacks an operating history, making it difficult for investors to assess its future performance. Its ability to continue as a 'going concern' is in substantial doubt due to its financial condition and the deadline for completing a business combination. Failure to meet this deadline could force liquidation, leaving public shareholders waiting over 18 months for distributions - The company is a blank check company with no operating history, providing no basis for evaluating its ability to achieve its business objective[132] - The independent registered public accounting firm's report expresses substantial doubt about the company's ability to continue as a 'going concern' due to a working capital deficit and the November 9, 2024, business combination deadline[133] - If a business combination is not consummated within 18 months, public shareholders may wait more than 18 months for liquidation distributions[134] - The time limit for completing a business combination may give target businesses leverage and limit due diligence time, potentially leading to less favorable terms[135] Sponsor Profit and Worthless Shares The sponsor, its affiliates, and management team acquired founder shares at a nominal price ($0.0116 per share), creating a significant profit incentive even if the business combination is unprofitable for public shareholders. If a business combination is not completed within 18 months, these founder and placement shares will expire worthless, further incentivizing management to complete a transaction - The sponsor paid approximately $0.0116 per founder share, creating a substantial profit potential for the sponsor, its affiliates, and management, even if the business combination is unprofitable for public shareholders[137][188] - If a business combination is not consummated within 18 months, founder shares and placement shares will expire worthless, which could incentivize officers and directors to complete a transaction that may not be in public shareholders' best interest[138] Issuance of Additional Securities The company may issue additional ordinary shares, preference shares, or debt securities to complete a business combination, which could significantly dilute current shareholders' equity, subordinate their rights, or cause a change in control. Issuing debt securities could lead to default, acceleration of obligations, inability to pay dividends, and limitations on financial flexibility - The company may issue a substantial number of additional Class A Ordinary Shares, Class B Ordinary Shares, or preference shares to complete a business combination, potentially reducing current investors' equity interest[139][140] - Issuing preference shares could subordinate the rights of Ordinary Share holders, and a substantial issuance of Ordinary Shares could cause a change in control[140] - Issuing debt securities could result in default, acceleration of obligations, inability to obtain additional financing, and limitations on the company's financial flexibility[141] Third-Party Claims and Shareholder Liability Funds in the trust account may not be protected from third-party claims, potentially reducing the per-share liquidation price below $10.15. While the company seeks waivers from vendors, there's no guarantee of enforceability. Shareholders could be held liable for claims to the extent of distributions received if the company enters insolvent liquidation, and directors could face fiduciary duty breach claims for distributions made prior to addressing creditor claims - Funds in the trust account may not be protected from third-party claims, potentially reducing the per-share liquidation price below $10.15[142][143] - The sponsor has agreed to be liable for certain third-party claims that reduce the trust account, but there's no assurance of its ability to satisfy these obligations[143][144] - Shareholders may be held liable for claims by third parties to the extent of distributions received if the company enters an insolvent liquidation[145][146] Directors and Officers Liability Insurance Changes in the market for directors and officers liability insurance, including increased premiums and less favorable terms, could make it more difficult and expensive to negotiate and complete a business combination. Failure to obtain adequate insurance could hinder the ability to attract and retain qualified officers and directors, and the need for 'run-off insurance' post-combination would add further expense - Increased costs and decreased availability of directors and officers liability insurance could make it more difficult and expensive to negotiate an initial business combination[147][148] - Failure to obtain adequate insurance could adversely impact the ability to attract and retain qualified officers and directors[148] - The need for 'run-off insurance' for pre-combination claims would be an added expense for the post-business combination entity[149] Dependence on Financial Institutions The company relies on major U.S. and multi-national financial institutions for banking services, holding cash and cash equivalents that may exceed insured limits. The default or failure of these institutions could adversely affect the company's liquidity, business, and financial condition due to potential inability or delays in accessing uninsured funds - The company maintains the majority of its cash and cash equivalents with major U.S. and multi-national financial institutions, with deposits sometimes exceeding insured limits