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Integrated Rail and Resources Acquisition (IRRX) - 2023 Q4 - Annual Report
IRRXIntegrated Rail and Resources Acquisition (IRRX)2024-04-16 22:53

Business Combination and Extensions - Integrated Rail has engaged in extensive research to identify potential targets for its initial business combination, focusing on railroad companies and related sectors in North America[34]. - The company has extended its initial business combination period multiple times, with the latest extension allowing until November 15, 2024, for completion[36]. - The company has the right to extend the business combination period up to 36 months, subject to certain conditions[36]. - The company must complete its initial business combination by April 15, 2024, with a possible extension until November 15, 2024[99]. - The first extension of the business combination period was approved on February 8, 2023, allowing for additional time to complete a merger or acquisition[69]. - The Combination Period has been extended to September 15, 2023, with the possibility of five additional one-month extensions, contingent upon Board resolution and Sponsor request[70]. - The Company extended the Combination Period through March 15, 2024, with the right to extend it monthly up to eight times until November 15, 2024[156]. - The Company may complete an initial business combination even if a substantial majority of public stockholders do not agree, as there is no specified maximum redemption threshold[155]. - The Company will proceed with a Business Combination if it has net tangible assets of at least 5,000,001uponconsummation[212].ShareRedemptions−InconnectionwiththeFirstExtensionAmendmentProposal,9,155,918shareswereredeemedat5,000,001 upon consummation[212]. Share Redemptions - In connection with the First Extension Amendment Proposal, 9,155,918 shares were redeemed at 10.32 per share, totaling 94,489,075[44].−FortheSecondExtensionAmendmentProposal,7,354,836shareswereredeemedat94,489,075[44]. - For the Second Extension Amendment Proposal, 7,354,836 shares were redeemed at 10.83 per share, totaling 79,652,874[44].−TheThirdExtensionAmendmentProposalresultedintheredemptionof4,573,860sharesat79,652,874[44]. - The Third Extension Amendment Proposal resulted in the redemption of 4,573,860 shares at 11.00 per share, totaling 50,312,460[44].−AsofFebruary12,2024,therewere1,915,386sharesofClassAcommonstockissuedandoutstanding[44].−Publicstockholdersmayonlyreceiveapproximately50,312,460[44]. - As of February 12, 2024, there were 1,915,386 shares of Class A common stock issued and outstanding[44]. - Public stockholders may only receive approximately 11.01 per share on redemption as of December 31, 2023, or potentially less in certain circumstances[121]. - If too many public stockholders exercise their redemption rights, the company may not meet the minimum net tangible asset requirement of 5,000,001,hinderingthecompletionoftheinitialbusinesscombination[109].−Stockholderswillnothaverightstofundsinthetrustaccountexceptunderlimitedcircumstances,whichmayforcethemtosellsharesataloss[119].−Theper−shareredemptionamountforpublicstockholdersmaybelessthan5,000,001, hindering the completion of the initial business combination[109]. - Stockholders will not have rights to funds in the trust account except under limited circumstances, which may force them to sell shares at a loss[119]. - The per-share redemption amount for public stockholders may be less than 10.10 due to potential claims against the trust account[124]. - Stockholders redeemed 4,573,860 shares for approximately 50,312,460,resultinginaredemptionvalueofabout50,312,460, resulting in a redemption value of about 11.00 per share[166]. Financial Position and Funding - The Company has approximately 1,750,000availableoutsidethetrustaccountforworkingcapital,withadditionalfundingdependentonloansfromtheSponsorormanagementteam[123].−TheCompanyhasnotexperiencedlossesonitscashaccount,whichmayexceedtheFederalDepositoryInsuranceCoverageof1,750,000 available outside the trust account for working capital, with additional funding dependent on loans from the Sponsor or management team[123]. - The Company has not experienced losses on its cash account, which may exceed the Federal Depository Insurance Coverage of 250,000[223]. - As of December 31, 2023, the Company held 72,731,536inMoneyMarketFundsprimarilyinvestedinU.S.TreasurySecurities,downfrom72,731,536 in Money Market Funds primarily invested in U.S. Treasury Securities, down from 237,537,270 in Investments in the Trust Account at fair value in United States Treasury Bills as of December 31, 2022[162]. - The Company has incurred significant costs in pursuit of its acquisition plans and has less than 12 months to complete a Business Combination, raising substantial doubt about its ability to continue as a going concern[218]. - The Company has 6,489,246 shares of Class A common stock subject to possible redemption, valued at 10.10pershare,totalingapproximately10.10 per share, totaling approximately 65,000,000[227]. - The Company issued an additional unsecured promissory note allowing it to borrow up to 750,000tofundcostsrelatedtoaninitialbusinesscombination[165].ManagementandStrategy−Themanagementteamhasextensiveexperienceinoperatingrailroadcompaniesanddevelopingmarket−accessstrategiesforbulkcommoditycustomers[58].−Thecompanyaimstoleveragesynergiesandeconomiesofscaleinthetransportationofbulkcommodities,whichincludegrains,ores,andenergyfuels[45].−Thecompanyistargetingbusinesseswithsignificantbarrierstoentry,particularlyintherailroadandbulkcommoditysectors,toachieveintegratedefficiencies[63].−Thecompanybelievesthatintegrationofproductionandtransportationwillenhancemarketshare,pricingpower,andprofitabilityforbothproducersandtransportationproviders[56].−Thecompanyaimstoacquirebusinessesthatareundervaluedduetolackofcost−effectivetransportorregulatorychallenges[62].−Thecompanyplanstoleverageitsexpertisetounlockstrandedorunderutilizedproductionandtransportationassetsthroughstrategicbusinesscombinations[54].−ThecompanyhasfocusedonidentifyingandconductingduediligenceonpotentialtargetcompaniessinceitsIPOonNovember16,2021[66].RegulatoryandComplianceIssues−TheCompanyisclassifiedasan"emerginggrowthcompany"andwillmaintainthisstatusuntilNovember16,2026,unlessitmeetscertainrevenueormarketvaluethresholds[92].−ThecompanyisrequiredtoevaluateitsinternalcontrolproceduresforthefiscalyearendingDecember31,2023,asmandatedbytheSarbanes−OxleyAct[97].−CompliancewiththeSarbanes−OxleyActmayincreasethetimeandcostsnecessarytocompletetheinitialbusinesscombination[144].−TheCompanyisexemptfromcertainSECrulesprotectinginvestorsinblankcheckcompaniesduetohavingnettangibleassetsexceeding750,000 to fund costs related to an initial business combination[165]. Management and Strategy - The management team has extensive experience in operating railroad companies and developing market-access strategies for bulk commodity customers[58]. - The company aims to leverage synergies and economies of scale in the transportation of bulk commodities, which include grains, ores, and energy fuels[45]. - The company is targeting businesses with significant barriers to entry, particularly in the railroad and bulk commodity sectors, to achieve integrated efficiencies[63]. - The company believes that integration of production and transportation will enhance market share, pricing power, and profitability for both producers and transportation providers[56]. - The company aims to acquire businesses that are undervalued due to lack of cost-effective transport or regulatory challenges[62]. - The company plans to leverage its expertise to unlock stranded or underutilized production and transportation assets through strategic business combinations[54]. - The company has focused on identifying and conducting due diligence on potential target companies since its IPO on November 16, 2021[66]. Regulatory and Compliance Issues - The Company is classified as an "emerging growth company" and will maintain this status until November 16, 2026, unless it meets certain revenue or market value thresholds[92]. - The company is required to evaluate its internal control procedures for the fiscal year ending December 31, 2023, as mandated by the Sarbanes-Oxley Act[97]. - Compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete the initial business combination[144]. - The Company is exempt from certain SEC rules protecting investors in blank check companies due to having net tangible assets exceeding 5,000,000[120]. - The Company has not secured waivers from independent registered public accounting firm Marcum LLP and underwriters regarding claims to the trust account[126]. Market and Competitive Landscape - Demand for bulk commodities, including essential metals for electric vehicles, is expected to grow at least 5-fold by 2050, with potential pricing power for producers and transportation providers[55]. - The company faces competition from other entities with similar business objectives, which may limit its ability to complete an initial business combination[122]. - The anchor investors purchased approximately 86.96% of the units issued in the IPO, significantly reducing the available public float for the company's securities[39]. - The anchor investors collectively owned approximately 89.57% of the outstanding shares of common stock immediately following the IPO, which may limit other investors' influence on corporate decisions[152]. Delisting and Stockholder Rights - The NYSE commenced delisting of the Company's securities on March 11, 2024, and they were officially delisted on March 26, 2023[81]. - The Company intends to seek a listing on the Nasdaq Stock Market prior to or in connection with any business combination[81]. - The Company has the right to appeal the NYSE's delisting determination, and an application to the SEC for delisting is pending[168]. - The Company has agreed with its initial stockholders and anchor investors to vote in favor of the initial business combination, increasing the likelihood of approval[101]. - The Company’s certificate of incorporation allows for amendments with the approval of 65% of common stockholders, potentially facilitating business combinations that some stockholders may not support[157]. Financial Instruments and Valuation - The fair market value of the initial business combination must be at least 80% of the value of the assets held in the trust account[81]. - The fair value of the Company's warrant liabilities decreased from 1,316,000atJanuary1,2023,to1,316,000 at January 1, 2023, to 940,000 at December 31, 2023, reflecting a change in fair value of (376,000)[161].−Thefairvalueofprivateplacementwarrantswasestimatedat(376,000)[161]. - The fair value of private placement warrants was estimated at 0.10 as of December 31, 2023, compared to $0.14 as of December 31, 2022[161]. - The risk-free interest rate used in the valuation of warrants was 3.77% as of December 31, 2023, down from 3.91% as of December 31, 2022[161]. - The fair value of the Public Warrants and Private Placement Warrants was estimated using an independent third-party valuation[228]. - The Company evaluates financial instruments to determine if they are derivatives or contain embedded derivatives according to ASC Topic 815[230]. - Derivative financial instruments classified as liabilities are recorded at fair value on the grant date and re-valued at each reporting date[230]. - The fair value hierarchy in ASC 820 requires maximizing observable inputs and minimizing unobservable inputs[232].