Global Partner Acquisition II(GPAC) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents Stardust Power Inc.'s unaudited condensed consolidated financial statements for Q3 2024, covering balance sheets, operations, equity changes, cash flows, and detailed notes Condensed Consolidated Balance Sheets Total liabilities and stockholders' deficit significantly increased from December 2023 to September 2024, driven by the Business Combination, despite asset growth Metric Comparison | Metric | September 30, 2024 | December 31, 2023 | Change (%) | | :------------------------------------ | :------------------- | :------------------ | :--------- | | Total Assets | $5,376,936 | $3,023,954 | +77.8% | | Total Liabilities | $18,681,546 | $6,758,716 | +176.4% | | Total Stockholders' Deficit | $(13,304,610) | $(3,734,762) | -256.2% | Key Liability Changes | Key Liability Changes | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------------- | :------------------ | | Accounts payable | $6,494,165 | $1,256,792 | | Accrued liabilities and other current liabilities | $4,129,258 | $208,107 | | Warrant liability | $4,693,859 | $0 | | Earnout liability | $2,972,800 | $0 | | SAFE notes | $0 | $5,212,200 | Key Asset Changes | Key Asset Changes | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------------- | :------------------ | | Cash | $1,587,086 | $1,271,824 | | Pre-acquisition capital project costs | $1,937,487 | $100,000 | Condensed Consolidated Statements of Operations No revenue reported; net loss significantly increased for Q3 and nine months ended September 30, 2024, due to higher G&A and warrant liability changes - The company reported no revenue for all periods presented[11] Metric Comparison (Three Months Ended Sep 30) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change (%) | | :------------------------------------ | :------------------------------ | :------------------------------ | :--------- | | Net Loss | $(10,092,312) | $(843,800) | -1096.0% | | General and administrative expenses | $8,980,965 | $778,455 | +1053.7% | | Change in fair value of warrant liability | $(2,753,964) | $0 | N/A | | Change in fair value of earnout shares | $1,636,100 | $0 | N/A | | Basic and Diluted Loss per Share | $(0.22) | $(0.02) | -1000.0% | Metric Comparison (Nine Months Ended Sep 30) | Metric | Nine Months Ended Sep 30, 2024 | Inception (Mar 16, 2023) through Sep 30, 2023 | Change (%) | | :------------------------------------ | :----------------------------- | :-------------------------------------------- | :--------- | | Net Loss | $(14,185,887) | $(2,828,585) | -401.5% | | General and administrative expenses | $11,483,389 | $1,902,653 | +503.5% | | Basic and Diluted Loss per Share | $(0.34) | $(0.07) | -385.7% | Condensed Consolidated Statements of Changes in Stockholders' Deficit Total stockholders' deficit significantly increased from December 2023 to September 2024, driven by net loss and transaction costs, partially offset by capital increases Metric Comparison | Metric | September 30, 2024 | December 31, 2023 | Change (%) | | :------------------------------------ | :------------------- | :------------------ | :--------- | | Total Stockholders' Deficit | $(13,304,610) | $(3,734,762) | -256.2% | Key Changes in Stockholders' Deficit (Nine Months Ended Sep 30, 2024) | Key Changes in Stockholders' Deficit (Nine Months Ended Sep 30, 2024) | | :-------------------------------------------------------------------- | | Net loss: $(14,185,887) | | Stock based compensation: $7,034,079 | | Shares issued upon conversion of SAFE notes: $6,367,200 | | Shares issued upon conversion of convertible notes: $2,571,400 | | Transaction costs: $(7,501,223) | | Merger Earnout shares (reclassified): $25,071,500 | Condensed Consolidated Statements of Cash Flows Significant cash outflows from operating and investing activities were largely offset by financing inflows, resulting in a net cash increase for the nine months ended September 30, 2024 Cash Flow Activity Comparison | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Inception (Mar 16, 2023) through Sep 30, 2023 | Change (%) | | :------------------------------------ | :----------------------------- | :-------------------------------------------- | :--------- | | Net cash used in operating activities | $(8,514,161) | $(1,582,429) | -438.0% | | Net cash used in investing activities | $(1,279,257) | $(25,000) | -5017.0% | | Net cash provided by financing activities | $10,108,680 | $2,565,090 | +294.1% | | Net (decrease)/increase in cash | $315,262 | $957,661 | -67.1% | | Cash at the end of the period | $1,587,086 | $957,661 | +65.7% | - Key financing inflows for the nine months ended September 30, 2024, included $11.6 million from the business combination and PIPE shares, $2.1 million from convertible notes, and $1.6 million from warrant exercises[16][223] - Significant financing outflows for the nine months ended September 30, 2024, included $4.1 million for deferred transaction costs and $1.6 million for repayment of sponsor promissory notes[16][223] Notes to Condensed Consolidated Financial Statements Detailed notes explain the company's business, accounting policies, and financial instruments, including recapitalization, stock compensation, warrants, investments, and subsequent events NOTE 1 – DESCRIPTION OF THE COMPANY Stardust Power Inc. develops battery-grade lithium products, completed a reverse recapitalization on July 8, 2024, and is developing a refinery without current revenue - Stardust Power Inc. is an American developer of battery-grade lithium products, aiming to foster energy independence in the United States[17] - The company has not earned any revenue yet and is developing a lithium refinery capable of producing up to 50,000 tons per annum of battery-grade lithium[17] - A business combination with Global Partner Acquisition Corp II (GPAC II) was completed on July 8, 2024, with GPAC II being renamed Stardust Power Inc. and accounted for as a reverse recapitalization[19][22] - The common stock and warrants of the Company are listed on the Nasdaq Global Market under the symbols 'SDST' and 'SDSTW', respectively[20] NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial statements adhere to U.S. GAAP; company is an emerging growth company with going concern doubt due to no revenue and significant losses, requiring additional capital - The financial statements are prepared in conformity with U.S. GAAP and SEC rules for interim financial reporting, relying on estimates and assumptions[22][26] - 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[27] - A net loss of $10,092,312 for the three months and $14,185,887 for the nine months ended September 30, 2024, along with an accumulated deficit of $43,050,972 and stockholders' deficit of $13,304,610, raise substantial doubt about the company's ability to continue as a going concern[28][29] - The company plans to raise additional capital from equity issuance or borrowings to fund its operating and investing activities[32] - Deferred transaction costs of $199,724 related to a new offering with B. Riley Principal Capital II are presented as current assets[38] - The company has capitalized $1,937,487 in pre-acquisition capital project costs as of September 30, 2024, including payments for an option to purchase land in Muskogee, Oklahoma, and costs for front-end loading and environmental studies[10][45] NOTE 3 – REVERSE RECAPITALIZATION Business Combination on July 8, 2024, was a reverse recapitalization, resulting in 47,736,650 outstanding shares, including liability-classified Sponsor Earnout Shares and equity-classified Merger Earnout Shares - The Business Combination, closed on July 8, 2024, was accounted for as a reverse recapitalization, with Legacy Stardust Power determined to be the accounting acquirer[50][51] - Immediately following the Business Combination, 47,736,650 shares of Common Stock were outstanding[52] - 1,000,000 Sponsor Earnout Shares were issued, subject to vesting based on stock price thresholds ($12.00 and $14.00 VWAP) and are classified as a liability with a fair value of $2,972,800 as of September 30, 2024[52][60][62] - 5,000,000 Merger Earnout Shares were issued to former Legacy Stardust Power holders, vesting at a $12.00 VWAP threshold, and are classified as equity[54][56] - The company received net cash proceeds of $9,154,761 upon closing of the Business Combination and PIPE financing[59] NOTE 4 – COMMON STOCK Common stock and warrants began trading on Nasdaq on July 8, 2024; 47,872,445 shares outstanding as of September 30, 2024, with 700,000,000 authorized - Common Stock and warrants began trading on Nasdaq on July 8, 2024, under the ticker symbols 'SDST' and 'SDSTW'[64] - As of September 30, 2024, the company had 47,872,445 shares of Common Stock issued and outstanding[66] - The company is authorized to issue 700,000,000 shares of Common Stock and 100,000,000 shares of Preferred Stock[66] NOTE 5 – STOCK BASED COMPENSATION Stock-based compensation expense for the nine months ended September 30, 2024, was primarily from RSUs and PSUs under 2023/2024 plans, with significant unvested costs Stock-Based Compensation Expense (Nine Months Ended Sep 30, 2024) | Stock-Based Compensation Expense (Nine Months Ended Sep 30, 2024) | | :---------------------------------------------------------------- | | Stock options: $139,945 | | 2023 Plan Restricted Stock Units (RSUs): $5,765,425 | | 2024 Plan Restricted Stock Units (RSUs): $1,082,031 | | 2024 Plan Performance Stock Units (PSUs): $46,678 | - Total unvested compensation cost for 2023 Plan RSUs was $12,051,682, expected to be recognized over approximately 3 years[84] - Total unvested compensation cost for 2024 Plan RSUs was $6,964,717 (employees/directors) and $10,293,051 (consultants), expected to be recognized over approximately 3.04 and 4 years, respectively[89][90] - The 2024 Equity Incentive Plan was adopted and approved in September 2024, authorizing various equity awards[86] NOTE 6 – ACCOUNTING FOR WARRANTS LIABILITY As of September 30, 2024, Stardust Power had 10,430,800 warrants outstanding with a fair value of $4,693,859, classified as derivative liabilities and revalued periodically Warrant Summary | Warrant Type | Number Outstanding (Sep 30, 2024) | Fair Value (Sep 30, 2024) | | :------------------------------------ | :-------------------------------- | :-------------------------- | | Public Warrants | 4,864,133 | $2,188,859 | | Private Placement Warrants | 5,566,667 | $2,505,000 | | Total Warrants | 10,430,800 | $4,693,859 | - During the three months ended September 30, 2024, 135,796 Public Warrants were exercised at $11.50, generating proceeds of $1,561,655[93] - Warrants are accounted for as derivative liabilities and are revalued at fair value each reporting period, with changes recognized in the statement of operations[98] - Public Warrants are redeemable by the company under certain stock price conditions ($18.00 or $10.00 per share), while Private Placement Warrants are not redeemable as long as held by the Sponsor or its permitted transferees[94][97] NOTE 7 – INVESTMENT Legacy Stardust Power invested $200,000 in QXR for strategic access to lithium feasibility studies; investment fair value was $67,562 as of September 30, 2024, resulting in a nine-month loss - In October 2023, Legacy Stardust Power invested $200,000 in QXR, an ASX-listed company, acquiring 1.26% of its total equity for strategic purposes related to lithium production feasibility studies[101] Fair Value of Investment in QXR | Metric | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------------- | :------------------ | | Fair Value of Investment in QXR | $67,562 | $218,556 | Change in Fair Value of Investment in Equity Securities | Change in Fair Value of Investment in Equity Securities | | :------------------------------------------------------ | | Three Months Ended Sep 30, 2024: $11,678 (gain) | | Nine Months Ended Sep 30, 2024: $(150,994) (loss) | NOTE 8 – SIMPLE AGREEMENT FOR FUTURE EQUITY (SAFE NOTES) SAFE notes totaling $5,200,000 were issued, classified as liabilities, and converted into 636,916 common shares upon the Business Combination on July 8, 2024 - Legacy Stardust Power received $2,000,000 in June 2023, $3,000,000 in November 2023, and $200,000 in February 2024 for SAFE notes[104][105] - The SAFE notes were classified as liabilities and presented at fair value, totaling $5,212,200 as of December 31, 2023[107][109] - Upon consummation of the Business Combination on July 8, 2024, the SAFE notes converted into 636,916 shares of the Company's Common Stock, eliminating the liability[109][216] NOTE 9 – CONVERTIBLE NOTES Convertible notes totaling $2,100,000 were classified as liabilities and converted into 257,216 common shares upon the Business Combination on July 8, 2024 - In April 2024, Legacy Stardust Power entered into convertible equity agreements totaling $2,100,000 ($2,000,000 with AIGD and $100,000 with other individuals)[110] - These convertible notes were classified as liabilities and presented at fair value[110] - Upon consummation of the Business Combination, the convertible notes converted into 257,216 shares of the Company's Common Stock[111][217] NOTE 10 – FAIR VALUE MEASUREMENTS Certain assets and liabilities are measured at fair value, including Level 1 equity investments and Level 3 Sponsor earnout shares; SAFE and convertible notes converted to common stock Fair Value Measurement Summary | Fair Value Measurement | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------------- | :------------------ | | Investment in equity securities (Level 1) | $67,562 | $218,556 | | Sponsor earnout shares (Level 3) | $2,972,800 | $0 | | SAFE notes (Level 3) | $0 | $5,212,200 | - Sponsor earnout shares are valued using the Monte Carlo Method, which is considered a Level 3 measurement due to unobservable inputs[117] - SAFE notes and convertible notes, previously classified as Level 3 liabilities, converted into common stock upon the Business Combination, eliminating their fair value measurement requirement[119] NOTE 11 – PROMISSORY NOTES Unsecured promissory notes totaling up to $1,000,000 with related parties, accruing 3.71% interest, were fully repaid by September 30, 2024 - In March 2023, Legacy Stardust Power entered into unsecured notes payable with three related parties, providing the ability to draw up to $1,000,000[120] - These loan facilities accrued interest, compounding semi-annually, at an effective rate of 3.71%[120] - As of September 30, 2024, the company had repaid all these notes payable[126] NOTE 12 – SEGMENT REPORTING Stardust Power operates as a single reportable operating segment, based on management's internal organization and decision-making - The company has a single reportable operating segment, operating as a single business platform[122] - This conclusion is based on how management internally organizes the business, defines it, and uses information for operating decisions and resource allocation[122] NOTE 13 – RELATED PARTY TRANSACTIONS Engaged in various related party transactions, including $1,306,935 in consulting services and $1,000,000 in promissory notes, which were fully repaid Related Party Consulting Expenses (March 16, 2023 - Sep 30, 2023) | Related Party Consulting Expenses (March 16, 2023 - Sep 30, 2023) | | :---------------------------------------------------------------- | | VIKASA Capital Partners LLC: $980,000 | | 7636 Holdings LLC: $180,806 | | VIKASA Capital LLC: $146,129 | | Total Consulting Expenses: $1,306,935 | - Other expenses paid on the company's behalf by related parties totaled $44,186 for the period from March 16, 2023, to September 30, 2023[125] - Legacy Stardust Power entered into $1,000,000 in notes payable agreements with related parties (Energy Transition Investors LLC, VIKASA Clean Energy I LP, Roshan Pujari), which were fully repaid by September 30, 2024[126] NOTE 14 - ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES Accrued liabilities and other current liabilities significantly increased to $4,129,258 as of September 30, 2024, primarily due to $3,000,000 in capital market advisory fees Accrued Liabilities Comparison | Metric | September 30, 2024 | December 31, 2023 | Change (%) | | :------------------------------------ | :------------------- | :------------------ | :--------- | | Accrued liabilities and other current liabilities | $4,129,258 | $208,107 | +1884.3% | Components of Accrued Liabilities (September 30, 2024) | Components of Accrued Liabilities (September 30, 2024) | | :----------------------------------------------------- | | Accrued expenses: $1,053,345 | | Capital market advisory fees: $3,000,000 | | Payroll liabilities: $75,913 | NOTE 15 – SUBSEQUENT EVENTS Subsequent events include a land payment extension and a 90-day exclusivity agreement with IRIS Metals for a potential strategic partnership after a $1.65 million investment - The company obtained an extension from the City of Muskogee until November 19, 2024, to complete payment and transfer of title for land in Muskogee[128] - On November 9, 2024, the company entered into a 90-day exclusivity agreement with IRIS Metals to explore a strategic partnership or investment[129] - This exclusivity agreement followed an investment of approximately $1.65 million (10 million shares) in IRIS Metals in November 2024[129] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Development-stage company focused on U.S. battery-grade lithium manufacturing, with no revenue and significant losses, raising going concern doubt and requiring substantial capital - Stardust Power is a U.S.-based development stage battery grade lithium manufacturer, developing a large-scale lithium refinery in Oklahoma primarily for the electric vehicle (EV) market[136][137] - The company has not earned any revenue and has been operating at a loss since inception, with an accumulated deficit of $43.0 million and stockholders' deficit of $13.3 million as of September 30, 2024[200][205] - These conditions raise substantial doubt about the company's ability to continue as a going concern, necessitating additional capital[205][206] - The total refinery cost is estimated at $1,165 million, which the company intends to finance through a mix of debt, equity, and potential government grants[201] - On October 7, 2024, the company entered into a Common Stock Purchase Agreement with B. Riley Principal Capital II, LLC, to sell up to $50,000,000 of newly issued shares of Common Stock[206] - The company entered into an engineering agreement with Primero USA, Inc. for approximately $4.7 million for engineering, design, and consultancy services for its Muskogee Lithium facility[147] Item 3. Quantitative and Qualitative Disclosures About Market Risk Exposed to various market risks including commodity price, demand, liquidity, and operational risks, mitigated through long-term contracts, partnerships, and internal controls - The company faces commodity price risk due to fluctuations in lithium prices, which it plans to mitigate through fixed-price off-take agreements and long-term partnerships[254] - Global demand and product pricing risk from new lithium supplies and emerging battery technologies are addressed by intending to enter into 10-year long-term sales contracts with cap and floor pricing, and refining to both lithium carbonate and hydroxide[256] - Liquidity risk is a concern as the company relies on equity financing and lacks substantial credit lines, impacting its ability to access necessary funding[262] - Operational risk, related to project plan delivery and timelines, will be mitigated through developing policies, procedures, business continuity plans, and leveraging industry best practices[265] - Human capital risk, concerning attracting and retaining skilled employees, is addressed by offering competitive compensation, benefits, educational opportunities, and promoting work-life balance[266] Item 4. Controls and Procedures Working to remediate material weaknesses in internal control over financial reporting, but management concluded financial statements fairly present the company's position - The company identified material weaknesses in its internal control over financial reporting, including issues with the COSO 13 Framework, lack of segregation of duties, and control surrounding contracts and complex financial instruments[274] - Management is designing and implementing measures to improve controls and remediate these material weaknesses[274] - Despite the identified material weaknesses, management concluded that the unaudited condensed consolidated financial statements fairly present the company's financial position, results of operations, and cash flows[274] - As an emerging growth company, Stardust Power is exempt from the independent registered public accounting firm attestation requirement on internal control over financial reporting[272] PART II. OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings reported for the period - The company reported no legal proceedings[278] Item 1A. Risk Factors High investment risk due to limited operating history, going concern doubt, uncertain commercial lithium production, feedstock viability, and internal control weaknesses - The company's limited operating history makes it difficult to evaluate its business and prospects, increasing investment risks[279] - Management has identified conditions that raise substantial doubt about the company's ability to continue as a going concern[280] - There is no guarantee that the company's development will result in the commercial production of lithium from brine sources, and the pipeline of lithium feedstock may prove non-viable[280] - The company's success is highly dependent on the capabilities of its partners for lithium extraction and its ability to secure capital for brine processing plants[283] - Material weaknesses in internal control over financial reporting could impact financial results and stock price[290] - The company entered into a Purchase Agreement with B. Riley Principal Capital II to sell up to $50,000,000 of common stock, but the actual number of shares and gross proceeds are unpredictable, and such sales could cause substantial dilution to stockholders[294][295][297][298] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds reported - No unregistered sales of equity securities or use of proceeds were reported[299] Item 3. Defaults Upon Senior Securities No defaults upon senior securities reported - No defaults upon senior securities were reported[299] Item 4. Mine Safety Disclosures No mine safety disclosures reported - No mine safety disclosures were reported[299] Item 5. Other Information No other information reported - No other information was reported[299] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including Business Combination Agreement, Certificate of Incorporation, Bylaws, Warrant Agreement, and various other agreements and certifications - Key exhibits include the Business Combination Agreement, Certificate of Incorporation, Bylaws, Warrant Agreement, Registration Rights Agreement, PIPE Subscription Agreement, Lock-Up Agreement, Stockholder Agreement, Indemnification Agreement, Stardust Power 2024 Equity Incentive Plan, Non-Redemption Agreement, and Engineering Agreement[299] - The filing also includes certifications from the Principal Executive Officer and Principal Financial Officer, along with Inline XBRL documents[299] Signature Signature Report signed on November 13, 2024, by Udaychandra Devasper, Chief Financial Officer (Principal Financial and Accounting Officer) of Stardust Power Inc - The report was signed by Udaychandra Devasper, Chief Financial Officer (Principal Financial and Accounting Officer), on November 13, 2024[301]