Climaterock(CLRCU) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides ClimateRock's unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2024 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS This section presents ClimateRock's unaudited consolidated financial statements for the quarter ended March 31, 2024, including the balance sheets, statements of operations, changes in shareholders' deficit, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and significant transactions Consolidated Balance Sheets This section presents a snapshot of the company's assets, liabilities, and shareholders' deficit at specific points in time Consolidated Balance Sheet Highlights | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Cash | $316,030 | $57,290 | | Total current assets | $390,317 | $57,702 | | Cash in Trust Account | $29,105,841 | $28,508,214 | | TOTAL ASSETS | $29,496,158 | $28,565,916 | | Total current liabilities | $4,533,938 | $3,226,185 | | Total non-current liabilities | $2,362,500 | $2,412,500 | | TOTAL LIABILITIES | $6,896,438 | $5,638,685 | | Total shareholders' deficit | $(6,506,121) | $(5,580,983) | Unaudited Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss or income over specific periods Consolidated Statements of Operations (Three Months Ended March 31) | Metric | March 31, 2024 | March 31, 2023 | | :-------------------------- | :------------- | :------------- | | Operating expenses | $(700,161) | $(386,791) | | Net loss from operations | $(700,161) | $(386,791) | | Total other income | $372,650 | $838,643 | | Net (loss) income | $(327,511) | $451,852 | | Basic and diluted EPS (Redeemable) | $0.03 | $0.07 | | Basic and diluted EPS (Non-redeemable) | $(0.20) | $(0.04) | - The company reported a net loss of $327,511 for the three months ended March 31, 2024, a significant decrease from a net income of $451,852 in the same period of 2023. This change is primarily driven by increased operating costs and a decrease in dividend income from the Trust Account[13][148][149] Unaudited Consolidated Statements of Changes in Shareholders' Deficit This section outlines the changes in the company's accumulated deficit and total shareholders' deficit over a period Changes in Shareholders' Deficit | Metric | January 1, 2024 | March 31, 2024 | | :-------------------------- | :-------------- | :------------- | | Accumulated Deficit | $(5,581,192) | $(6,506,330) | | Total Shareholders' Deficit | $(5,580,983) | $(6,506,121) | - The total shareholders' deficit increased from $(5,580,983) at January 1, 2024, to $(6,506,121) at March 31, 2024, primarily due to a net loss of $(327,511) and an adjustment to increase Class A ordinary shares subject to possible redemption[15] Unaudited Consolidated Statements of Cash Flows This section reports the cash generated and used by the company across operating, investing, and financing activities Consolidated Statements of Cash Flows (Three Months Ended March 31) | Cash Flow Activity | March 31, 2024 | March 31, 2023 | | :-------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(582,392) | $(407,253) | | Net cash used in investing activities | $(225,000) | $0 | | Net cash provided by financing activities | $1,066,132 | $50,000 | | Net increase (decrease) in cash and cash equivalents | $258,740 | $(357,253) | | Cash and cash equivalents at end of period | $316,030 | $54,458 | - Net cash used in operating activities increased to $(582,392) in Q1 2024 from $(407,253) in Q1 2023. Investing activities saw a net cash outflow of $225,000 in Q1 2024, compared to no activity in Q1 2023. Financing activities provided significantly more cash, $1,066,132 in Q1 2024 versus $50,000 in Q1 2023, primarily from related party loans and convertible promissory notes[17][19] Notes to the Unaudited Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS This note describes ClimateRock's formation, business purpose as a SPAC, and its current operational status - ClimateRock is a Cayman Islands blank check company incorporated on December 6, 2021, focused on effecting a business combination in climate change, environment, renewable energy, and clean technologies. As of March 31, 2024, the company had not commenced operations, with all activities related to its formation, IPO, and search for a target[20][22][131] - The company consummated its Initial Public Offering (IPO) on May 2, 2022, raising $78,750,000 from 7,875,000 units at $10.00 per unit. Simultaneously, a private placement of 3,762,500 warrants generated $3,762,500[23][24] - The company extended its business combination period to May 2, 2025, following shareholder approval at the 2024 EGM. This extension involved redemptions of 111,915 shares, removing approximately $1.27 million from the Trust Account[31][123] - As of March 31, 2024, the company had a cash balance of $316,030 and a working capital deficit of $4,143,621, raising substantial doubt about its ability to continue as a going concern without additional funding from the Sponsor or related parties[32][161] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the company's financial statements - The financial statements are prepared in conformity with GAAP for interim financial information. The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[34][41][42] Cash and Cash Equivalents | Account | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Working Capital Account | $316,030 | $57,290 | | Trust Account | $29,105,841 | $28,508,214 | | Dividend income on Trust Account (3 months ended March 31) | $372,627 | $858,477 | - Ordinary shares subject to possible redemption are classified as temporary equity and adjusted to redemption value at each reporting period, with changes affecting additional paid-in capital or accumulated deficit[44] NOTE 3. INITIAL PUBLIC OFFERING This note details the proceeds, structure, and key terms of the company's Initial Public Offering - On May 2, 2022, the Company consummated its IPO of 7,875,000 Units at $10.00 per Unit, generating gross proceeds of $78,750,000. Each unit consists of one Class A ordinary share, one-half of one redeemable warrant, and one right[58][59] Class A Ordinary Shares Subject to Possible Redemption | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Gross proceeds | $78,750,000 | $78,750,000 | | Redemption of shares | $(55,265,334) | $(55,265,334) | | Accretion to redemption value | $16,342,377 | $15,969,750 | | Monthly extension fees | $825,000 | $600,000 | | Ordinary shares subject to possible redemption | $29,105,841 | $28,508,214 | NOTE 4. PRIVATE PLACEMENT This note describes the private placement of warrants and the proceeds generated from this transaction - On May 2, 2022, the Company sold 3,762,500 Private Placement Warrants at $1.00 per warrant, generating gross proceeds of $3,762,500. These warrants are exercisable to purchase one Class A ordinary share at $11.50 per share and will expire worthless if a Business Combination is not completed within the Combination Period[63] NOTE 5. RELATED PARTY TRANSACTIONS This note discloses financial transactions and agreements between the company and its related parties, including the Sponsor and affiliates - The Sponsor initially received 2,156,250 Class B ordinary shares (Founder Shares) for $25,000. After partial exercise of the over-allotment option, 1,968,750 Founder Shares remained outstanding. On March 31, 2023, 1,968,749 Class B shares were converted to Class A shares[65][66] Related Party Loans (Eternal B.V.) | Loan Type | March 31, 2024 Outstanding Balance | December 31, 2023 Outstanding Balance | | :------------------ | :--------------------------------- | :------------------------------------ | | Second Eternal Loan | $170,603 | $170,603 | | Third Eternal Loan | $300,000 | $300,000 | | Fourth Eternal Loan | $50,000 | $50,000 | | Fifth Eternal Loan | $653,619 | $500,000 | | Sixth Eternal Loan | $1,123,434 | $357,302 | | Total Loan Payable | $2,297,656 | $1,481,524 | - The company has multiple unsecured, interest-free loans from Eternal B.V., an affiliate, totaling $2,297,656 as of March 31, 2024. These loans become interest-bearing at 5% per month if not repaid within 10 days of a Business Combination[72][9] - A convertible promissory note (2023 Extension Note) of $900,000 was issued to the Sponsor on May 2, 2023, for monthly deposits into the Trust Account. As of March 31, 2024, the outstanding balance was $900,000[74] - The company pays a monthly administrative service fee of $10,000 to Gluon Group, an affiliate of the Sponsor. As of March 31, 2024, $214,941 was accrued for these services[75] - Advisory services agreements with Gluon Partners LLP include a Transaction Success Fee, initially up to $1,000,000, later reduced to $250,000 for transactions over $400,000,000. Additional fees apply for financing introduced by Gluon[76][78][79] - On December 30, 2023, ClimateRock entered into a Business Combination Agreement with GreenRock, a related party through shared management, for a merger transaction[81][101] NOTE 6. COMMITMENTS AND CONTINGENCIES This note outlines the company's contractual obligations, potential liabilities, and contingent agreements - Holders of Founder Shares and Private Placement Warrants have registration rights. The company bears the expenses for filing registration statements[82] - The underwriters received an initial cash discount of $1,181,250 and are entitled to a deferred underwriting commission of $2,362,500, payable only upon completion of a Business Combination[84] - The company issued 118,125 Class A ordinary shares (Representative Shares) to Maxim and/or its designees as an offering cost, valued at $946,181. These shares are subject to transfer restrictions and waiver of redemption rights[87] - The company has various transaction expense agreements, including with Ellenoff, Grossman & Schole LLP (EGS), Maxim, ALANTRA Corporate Finance, and MZHCI, LLC, for legal, financial advisory, and consulting services, with fees often contingent on the successful completion of a Business Combination[90][92][93][96] - The Business Combination Agreement with E.E.W. Eco Energy World PLC (EEW) was terminated on November 29, 2023, as closing conditions were not met. Subsequently, on December 30, 2023, ClimateRock entered into a new merger agreement with GreenRock[100][101] NOTE 7. SHAREHOLDERS' EQUITY This note details the authorized and outstanding shares, warrants, and rights, along with their key terms Authorized and Outstanding Shares (March 31, 2024) | Share Class | Authorized Shares | Issued and Outstanding Shares | | :------------------ | :---------------- | :---------------------------- | | Class A Ordinary | 479,000,000 | 2,086,874 | | Class B Ordinary | 20,000,000 | 1 | | Preference Shares | 1,000,000 | 0 | - Warrants become exercisable 30 days after a Business Combination or 12 months from IPO closing, provided a registration statement is effective. The company may call warrants for redemption under specific conditions, including if the ordinary share price exceeds $18.00 for 20 trading days[108][109] - Each Right entitles the holder to receive one-tenth (1/10) of one ordinary share upon consummation of a Business Combination. Rights will expire worthless if a Business Combination is not completed within the Combination Period[115][117] NOTE 8. SUBSEQUENT EVENTS This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - On April 10, 2024, Nasdaq notified the company of non-compliance with the 400 Public Holders minimum requirement for continued listing[119] - Two independent directors, Ms. Caroline Harding and Mr. Randolph Sesson, Jr., resigned effective April 26, 2024, for personal reasons[121][122] - On April 29, 2024, the 2024 EGM approved extending the Business Combination period to May 2, 2025. This resulted in 111,915 shares being redeemed, removing approximately $1.27 million from the Trust Account[123] - On April 30, 2024, the company issued a $600,000 convertible promissory note (2024 Extension Note) to the Sponsor, to be deposited into the Trust Account in monthly installments to benefit unredeemed Public Shares[124] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on ClimateRock's financial condition and operational results, highlighting its status as a blank check company, its search for a business combination, and the financial implications of its activities, including liquidity challenges and related-party transactions Overview This section provides a general description of ClimateRock's business as a blank check company and its primary objective of effecting a business combination - ClimateRock is a blank check company formed to effect an initial Business Combination, focusing on environmental protection, renewable energy, and climate change industries. It has not yet commenced operations and generates non-operating income from interest on IPO proceeds[129][130][131] - The company's IPO on May 2, 2022, raised $78,750,000, with proceeds placed in a Trust Account. The initial Business Combination must have a fair market value of at least 80% of the net assets in the Trust Account[132][135][136] Business Combination with EEW This section details the termination of the previously announced business combination agreement with E.E.W. Eco Energy World PLC - The Business Combination Agreement with E.E.W. Eco Energy World PLC (EEW), initially signed on October 6, 2022, and amended on August 3, 2023, was terminated on November 29, 2023, due to unmet closing conditions[138][139] Extensions of Our Business Combination Period This section outlines the company's efforts and shareholder approvals to extend the deadline for completing a business combination - The company extended its Business Combination period to May 2, 2024, at the 2023 EGM, leading to redemptions of 5,297,862 shares and the issuance of a $900,000 convertible promissory note to the Sponsor[141] - Further extension to May 2, 2025, was approved at the 2024 EGM, resulting in redemptions of 111,915 shares and the issuance of a new $600,000 convertible promissory note to the Sponsor[142][143] GreenRock Business Combination This section describes the new merger agreement entered into with GreenRock, outlining the structure of the proposed transaction - On December 30, 2023, ClimateRock entered into the GreenRock Merger Agreement, which involves a merger of ClimateRock into a subsidiary of Holdings, with ClimateRock becoming a wholly-owned subsidiary of Pubco, and Holdings acquiring GreenRock shares[144] Results of Operations This section analyzes the company's financial performance, focusing on net loss, operating costs, and non-operating income for the period - For the three months ended March 31, 2024, the company reported a net loss of $327,511, compared to a net income of $451,852 for the same period in 2023. This shift is primarily due to higher formation and operating costs ($670,161 in 2024 vs. $356,791 in 2023) and lower dividend income from the Trust Account ($372,627 in 2024 vs. $858,477 in 2023)[148][149] - The company does not generate operating revenues and expects increased expenses as a public company and for due diligence related to a Business Combination[146] Liquidity, Capital Reserves and Going Concern This section discusses the company's cash position, working capital deficit, and its ability to continue operations without additional funding - As of March 31, 2024, the company had a cash balance of $316,030 and a working capital deficit of $4,143,621. These conditions raise substantial doubt about the company's ability to continue as a going concern for one year from the financial statement issuance date[161] - The company relies on additional funding from the Sponsor or other related parties to finance transaction costs and address its working capital deficit, with no assurance of successful Business Combination by May 2, 2025[151][161] Related Party Loans Outstanding | Loan Type | March 31, 2024 Outstanding Balance | | :------------------ | :--------------------------------- | | Second Eternal Loan | $170,603 | | Third Eternal Loan | $300,000 | | Fourth Eternal Loan | $50,000 | | Fifth Eternal Loan | $653,619 | | Sixth Eternal Loan | $1,123,434 | | 2023 Extension Note | $900,000 | Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The company has no obligations, assets, or liabilities considered off-balance sheet arrangements as of March 31, 2024[162] Contractual Obligations This section details the company's various contractual commitments, including deferred underwriting commissions and advisory fees - The company has contractual obligations including registration rights for founder shares and private placement warrants, deferred underwriting commissions of $2,362,500 payable upon a Business Combination, and various transaction-related fees to legal and financial advisors (EGS, Maxim, ALANTRA, MZHCI) that are often contingent on the successful completion of a Business Combination[163][164][166][167][169][173] Related Party Transactions This section provides further details on financial dealings and agreements with the company's Sponsor and affiliated entities - The Sponsor initially purchased 2,156,250 Founder Shares for $25,000. After forfeiture and conversion, the Sponsor holds 1,968,749 Class A ordinary shares and one Class B ordinary share[174][175][176] - The company has six unsecured, interest-free loans from Eternal B.V., an affiliate, totaling $2,297,656 as of March 31, 2024. These loans accrue 5% monthly interest if not repaid within 10 days of a Business Combination[177][178][179][180][181][182] - Two convertible promissory notes (2023 and 2024 Extension Notes) were issued to the Sponsor for $900,000 and $600,000, respectively, to fund monthly deposits into the Trust Account for public shareholders[185][186] - Administrative services are provided by Gluon Group, an affiliate, for a monthly fee of $10,000, with $214,941 accrued as of March 31, 2024. Advisory services from Gluon Partners LLP involve success fees and financing fees[187][188][190][191] Critical Accounting Estimates This section highlights the significant judgments and assumptions made by management in preparing the financial statements - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, as detailed in Note 2, 'Summary of Significant Accounting Policies'[195] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, ClimateRock is not required to provide quantitative and qualitative disclosures about market risk - ClimateRock is a smaller reporting company and is exempt from providing quantitative and qualitative disclosures about market risk[197] ITEM 4. CONTROLS AND PROCEDURES Management evaluated the effectiveness of the company's disclosure controls and procedures, concluding they were effective as of March 31, 2024. No material changes to internal control over financial reporting occurred during the quarter - The Certifying Officers concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[199] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2024[201] PART II - OTHER INFORMATION This section covers various non-financial disclosures, including legal proceedings, risk factors, and equity security sales ITEM 1. LEGAL PROCEEDINGS There are no legal proceedings currently pending or contemplated against ClimateRock or its officers and directors - To the knowledge of management, there is no litigation currently pending or contemplated against the company, its officers, or directors[201] ITEM 1A. RISK FACTORS As a smaller reporting company, ClimateRock is not required to include risk factors in this Quarterly Report but refers readers to previous filings for comprehensive risk disclosures - As a smaller reporting company, ClimateRock is not required to include risk factors in this Quarterly Report. Readers are directed to previous filings (IPO Registration Statement, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and definitive proxy statements) for additional risks[202] - Risks related to GreenRock and the GreenRock Business Combination are detailed in the Registration Statement on Form F-4 filed by Pubco[203] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities during the period, and the use of proceeds from the IPO and Private Placement remains consistent with prior disclosures - There were no unregistered sales of equity securities during the quarterly period[203] - The planned use of proceeds from the Initial Public Offering and Private Placement has not materially changed from previous disclosures[204] - No repurchases of equity securities by the company or affiliates occurred during the quarter[205] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[205] ITEM 4. MINE SAFETY DISCLOSURES Mine safety disclosures are not applicable to ClimateRock - Mine safety disclosures are not applicable to the company[205] ITEM 5. OTHER INFORMATION No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter - None of the company's directors or officers adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the quarterly period ended March 31, 2024[206] ITEM 6. EXHIBITS This section lists all exhibits filed as part of, or incorporated by reference into, this Quarterly Report, including merger agreements, promissory notes, consulting agreements, and certifications - Key exhibits include the Agreement and Plan of Merger with GreenRock (December 30, 2023), an amendment to the Memorandum and Articles of Association (May 3, 2024), a Promissory Note with U.N. SDG Support LLC (April 30, 2024), and a Consulting Agreement with MZHCI, LLC (January 4, 2024)[208] - Certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Rule 13a-14(a) and 18 U.S.C. 1350) are included, along with Inline XBRL Instance Document and Taxonomy Extension Documents[208] SIGNATURES This section formally attests to the accuracy and completeness of the report by the company's principal officers - The report is signed by Per Regnarsson, Chief Executive Officer, and Abhishek Bawa, Chief Financial Officer, on May 15, 2024[210]