Montana Technologies Corporation(AIRJ) - 2022 Q4 - Annual Report

Part I Business Power & Digital Infrastructure Acquisition II Corp. is a SPAC formed to acquire businesses in North American power and digital infrastructure sectors within a set timeframe - The company is a blank check company (SPAC) formed to effect a merger or similar business combination[11] Initial Public Offering (IPO) and Private Placement Details | Item | Details | | :--- | :--- | | IPO Date | December 14, 2021 | | Units Offered | 28,750,000 units (including over-allotment) | | Unit Price | $10.00 | | Gross Proceeds (IPO) | $287,500,000 | | Private Placement Warrants | 11,125,000 warrants | | Warrant Price | $1.00 | | Gross Proceeds (Warrants) | $11,125,000 | - The business strategy focuses on merging with North American power and digital infrastructure companies, including renewable energy and data centers[18] - The company has 18 months from IPO to complete a business combination, extendable by two three-month periods with sponsor funding[84] - Failure to complete a business combination within the timeframe will result in cessation of operations and liquidation[85] Risk Factors Significant risks include lack of operating history, deadline pressure, conflicts of interest, liquidation risk, and internal control weaknesses - As a recently incorporated company with no operating history, there is no basis for investors to evaluate its business objective[109][110] - The 18-24 month deadline for a business combination may grant targets leverage and limit due diligence[123] - A material weakness in internal control over financial reporting was identified as of December 31, 2022, regarding accrued expenses[184][185] - The independent auditor's report expresses substantial doubt about the company's ability to continue as a going concern due to liquidity and liquidation deadlines[187] - The Inflation Reduction Act of 2022's 1% excise tax on stock repurchases may reduce cash available for redemptions[273] - Conflicts of interest may arise as sponsor and management could profit from a business combination despite public stockholder losses[263][265] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[335] Properties The company does not own real estate, with executive offices leased from a sponsor affiliate - The company's executive offices are located in Chicago, with a $20,000 per month fee paid to a sponsor affiliate for space and services[100][336] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not presently party to any material legal proceedings[337] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[338] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Details the company's Nasdaq-listed securities, dividend policy, and initial founder share and private placement transactions - The company's units, Class A common stock, and warrants trade on Nasdaq under the symbols 'XPDBU', 'XPDB', and 'XPDBW' respectively[340] - The company has not paid and does not intend to pay dividends in the foreseeable future[342] - In March 2021, the sponsor acquired 7,187,500 Class B founder shares for $25,000[344] [Reserved] This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses the company's pre-combination SPAC status, financial results, liquidity challenges, and going concern qualification Results of Operations | Period | Net Income / (Loss) | Key Driver | | :--- | :--- | :--- | | Year Ended Dec 31, 2022 | $2.0 million | $4.2 million in income from investments held in Trust Account. | | Inception to Dec 31, 2021 | ($544,000) | Operating and franchise tax expenses. | - Management determined liquidity needs and liquidation deadline raise substantial doubt about the company's ability to continue as a going concern[362][530] - Critical accounting policies include classifying Class A common stock subject to redemption as temporary equity[378] - The company pays a sponsor affiliate $20,000 per month for office space and administrative support[373] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing market risk disclosures - The company is a smaller reporting company and is not required to provide this information[386] Financial Statements and Supplementary Data This section incorporates the company's audited financial statements and supplementary data by reference - This section refers to the financial statements appearing after Item 15 of the Annual Report[386] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants on financial disclosure - None reported[387] Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in internal control, leading to financial statement restatements - Disclosure controls and procedures were concluded to be not effective as of December 31, 2022[390] - Ineffectiveness stemmed from a material weakness overstating legal expenses and accounts payable by $87,187, leading to Q2 and Q3 2022 interim financial statement restatements[390] - Management plans to remediate the weakness by enhancing review processes and improving communication[395] Other Information This item is not applicable - Not applicable[396] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - Not applicable[396] Part III Directors, Executive Officers and Corporate Governance Provides biographies of directors and officers, details board structure, committee composition, and discloses potential conflicts of interest - The board of directors is classified into three classes, with directors serving three-year terms[411] - Messrs. Dabbar, Gaynor, and Widham are determined to be independent directors[415] - The company established Audit, Compensation, and Corporate Governance committees, all composed of independent directors[420][421][426][432] - A Code of Ethics applicable to directors, officers, and employees has been adopted[437] - Potential conflicts of interest are disclosed due to officers' and directors' obligations to other entities, including other SPACs[439][441] Executive Compensation No cash compensation paid to executive officers or directors; sponsor affiliate reimbursed for office and administrative support - No cash compensation has been paid to executive officers or directors for services rendered[454] - The company pays $20,000 per month to a sponsor affiliate for office space and administrative support[454] - The sponsor, executive officers, and directors are reimbursed for out-of-pocket expenses related to identifying target businesses[454] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Details beneficial ownership of common stock, including sponsor control of founder shares and significant institutional investors Beneficial Ownership of Common Stock (as of Dec 31, 2022) | Holder | Class B Shares Owned | % of Outstanding Common Stock | | :--- | :--- | :--- | | XPDI Sponsor II LLC | 7,097,500 | 19.7% | | All officers and directors as a group | 7,187,500 | 20.0% | | Aristeia Capital, L.L.C. | 2,160,000 (Class A) | 6.01% | | Blackrock, Inc. | 2,462,280 (Class A) | 8.5% | Certain Relationships and Related Transactions, and Director Independence Describes related party transactions, including sponsor's founder share and warrant purchases, administrative fees, and a repaid IPO loan - The sponsor purchased 7,187,500 Class B founder shares for $25,000[465] - The sponsor and anchor investors purchased 11,125,000 private placement warrants for $11,125,000[467] - The company pays a sponsor affiliate $20,000 per month for office space and administrative support[471] - The sponsor provided a loan of up to $300,000 for IPO expenses, fully repaid in December 2021[476] - The sponsor may provide up to $1.5 million in working capital loans, convertible into warrants[477] Principal Accounting Fees and Services Details accounting fees paid to Marcum LLP, primarily audit fees for fiscal year 2022 and the inception period Accounting Fees Paid to Marcum LLP | Fee Category | FY 2022 | Inception to FY 2021 | | :--- | :--- | :--- | | Audit Fees | $80,000 | $62,000 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | Part IV Exhibits and Financial Statement Schedules Lists documents filed as part of the Annual Report, including financial statement index and various exhibits - Provides an index to the financial statements, beginning on page F-1 of the report[487] - Lists all exhibits filed with the report, including corporate governance and related-party agreements[488] Form 10-K Summary This item is not applicable - Not applicable[489] Financial Statements Report of Independent Registered Public Accounting Firm Auditor's report confirms fair presentation but expresses substantial doubt about the company's going concern ability - The auditor's report expresses substantial doubt about the Company's ability to continue as a going concern[496] - Financial statements are management's responsibility, with the auditor's role to express an opinion based on the audit[497] Financial Statements Details the company's financial position, including $296.0 million in total assets, a $9.2 million stockholders' deficit, and $2.0 million net income Balance Sheet Summary (as of Dec 31, 2022) | Account | Amount (USD) | | :--- | :--- | | Total Assets | $295,968,237 | | Investments held in Trust Account | $294,395,846 | | Total Liabilities | $11,864,944 | | Deferred underwriting commissions | $10,062,500 | | Class A Common Stock Subject to Possible Redemption | $293,293,429 | | Total Stockholders' Deficit | ($9,190,136) | Statement of Operations Summary (Year Ended Dec 31, 2022) | Account | Amount (USD) | | :--- | :--- | | Loss from operations | ($1,343,153) | | Income from investments held in Trust Account | $4,187,504 | | Income tax expense | ($802,367) | | Net income | $2,041,984 | - The company has until June 14, 2023, to complete a business combination, with options to extend up to 24 months[521]