Climaterock(CLRCU) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This part presents ClimateRock's unaudited consolidated financial statements and management's financial analysis Item 1. Consolidated Financial Statements This section presents ClimateRock's unaudited consolidated financial statements, including balance sheets, statements of operations, changes in shareholders' deficit, and cash flows for the periods ended September 30, 2024, and December 31, 2023 (for balance sheet) or September 30, 2023 (for income and cash flow statements). It also includes detailed notes explaining the company's organization, significant accounting policies, IPO and private placement details, related party transactions, commitments, contingencies, and shareholders' equity Consolidated Balance Sheets This section presents ClimateRock's unaudited consolidated balance sheets as of September 30, 2024, and December 31, 2023 | Metric | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | Change ($) | Change (%) | | :--------------------------- | :----------------------- | :----------- | :--------- | :--------- | | Cash (Current) | $3,708 | $57,290 | $(53,582) | -93.53% | | Prepaid expenses | $20,250 | $412 | $19,838 | 4815.05% | | Total current assets | $23,958 | $57,702 | $(33,744) | -58.48% | | Cash in Trust Account | $28,895,303 | $28,508,214 | $387,089 | 1.36% | | Total non-current assets | $28,895,303 | $28,508,214 | $387,089 | 1.36% | | TOTAL ASSETS | $28,919,261 | $28,565,916 | $353,345 | 1.24% | | Total current liabilities | $5,310,885 | $3,226,185 | $2,084,700 | 64.62% | | Total non-current liabilities| $2,362,500 | $2,412,500 | $(50,000) | -2.07% | | TOTAL LIABILITIES | $7,673,385 | $5,638,685 | $2,034,700 | 36.09% | | Accumulated deficit | $(7,649,636) | $(5,581,192) | $(2,068,444)| 37.06% | | Total shareholders' deficit | $(7,649,427) | $(5,580,983) | $(2,068,444)| 37.06% | Unaudited Consolidated Statements of Operations This section presents ClimateRock's unaudited consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Formation and operating costs | $165,800 | $301,201 | $1,428,607 | $1,087,201 | | Administrative service fees - related party | $30,000 | $30,000 | $90,000 | $90,000 | | Net loss from operations | $(195,800) | $(331,201) | $(1,518,607) | $(1,177,201) | | Dividend income on Trust Account | $368,522 | $357,678 | $1,109,332 | $1,762,208 | | Total other income | $368,522 | $357,729 | $1,109,495 | $1,762,379 | | Net (loss) income | $172,722 | $26,528 | $(409,112) | $585,178 | | Basic and diluted EPS (Redeemable shares) | $0.13 | $0.11 | $0.21 | $0.22 | | Basic and diluted EPS (Non-redeemable shares) | $(0.08) | $(0.12) | $(0.45) | $(0.22) | Unaudited Consolidated Statements of Changes in Shareholders' Deficit This section presents ClimateRock's unaudited consolidated statements of changes in shareholders' deficit for the periods ended September 30, 2024 and 2023 | Metric | Jan 1, 2024 Balance | Sep 30, 2024 Balance | Change ($) | | :------------------------------------------------------------------ | :------------------ | :------------------- | :--------- | | Total Shareholders' Deficit | $(5,580,983) | $(7,649,427) | $(2,068,444)| | Adjustment to increase Class A ordinary shares subject to possible redemption to maximum redemption value | N/A | N/A | $(1,659,332)| | Net (loss) income | N/A | N/A | $(409,112) | Unaudited Consolidated Statements of Cash Flows This section presents ClimateRock's unaudited consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 | Metric | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | Change ($) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net (loss) income | $(409,112) | $585,178 | $(994,290) | | Net cash used in operating activities | $(1,303,063) | $(972,788) | $(330,275) | | Net cash provided by investing activities | $722,243 | $54,890,334 | $(54,168,091)| | Net cash provided by (used in) financing activities | $527,238 | $(54,249,442) | $54,776,680| | Net decrease in cash and cash equivalents | $(53,582) | $(331,896) | $278,314 | | Cash and cash equivalents at end of period | $3,708 | $79,815 | $(76,107) | Notes to the Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS This note describes ClimateRock's formation as a SPAC, its IPO, private placement, and current operational status - ClimateRock is a blank check company (SPAC) incorporated on December 6, 2021, focused on effecting a Business Combination in climate change, environment, renewable energy, and clean technologies[13][15][128] - The Initial Public Offering (IPO) was consummated on May 2, 2022, raising $78,750,000 from 7,875,000 units at $10.00 per unit[16][55][131] - A private placement of 3,762,500 warrants at $1.00 per warrant generated gross proceeds of $3,762,500[17][61][133] - $79,931,250 from the IPO and Private Placement was placed in a Trust Account, invested in U.S. government securities or money market funds[19] - The company extended its Business Combination deadline to May 2, 2025, following shareholder approval at the 2024 EGM[28][144] - Nasdaq issued a deficiency letter on April 10, 2024, and a delisting notice on October 8, 2024, due to the company falling below the 400 Public Holders minimum requirement. The company has requested an appeal[24][212][213] - As of September 30, 2024, the company had a cash balance of $3,708 and a working capital deficit of $5,286,927, raising substantial doubt about its ability to continue as a going concern[30][164] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the significant accounting policies used in preparing ClimateRock's financial statements - The financial statements are presented in U.S. dollars in conformity with GAAP for interim financial information[31] - 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[36][37] - Cash and cash equivalents held in the Trust Account are invested in U.S. government securities or money market funds and are classified as cash equivalents[33][34] - Ordinary shares subject to possible redemption are classified as temporary equity and adjusted to redemption value at the end of each reporting period[39] - The Cayman Islands is the company's only major tax jurisdiction, and no income taxes are levied[42] NOTE 3. INITIAL PUBLIC OFFERING This note details the terms and proceeds of ClimateRock's Initial Public Offering, including unit components and redemption provisions - The IPO was completed on May 2, 2022, with 7,875,000 units sold at $10.00 per unit, generating $78,750,000[55] - Each unit consists of one Class A ordinary share, one-half of one redeemable warrant, and one right[56] - Class A ordinary shares subject to redemption are classified outside of permanent equity due to redemption provisions[57][39] IPO Proceeds and Redemptions (as of Sep 30, 2024) | IPO Proceeds and Redemptions (as of Sep 30, 2024) | Amount ($) | | :------------------------------------------------ | :--------- | | Gross proceeds | 78,750,000 | | Less: Proceeds allocated to public warrants and public rights | (6,898,500)| | Less: Offering costs of public shares | (4,647,702)| | Less: Redemption of shares | (56,537,577)| | Plus: Accretion of carrying value to redemption value | 17,079,082 | | Plus: Monthly extension fees | 1,150,000 | | Ordinary shares subject to possible redemption | 28,895,303 | NOTE 4. PRIVATE PLACEMENT This note describes the private placement of warrants and the allocation of proceeds to the Trust Account - On May 2, 2022, the company sold 3,762,500 Private Placement Warrants at $1.00 per warrant, generating $3,762,500[61][17] - A portion of the net proceeds from the Private Placement was added to the Trust Account[61] - Private Placement Warrants will expire worthless if a Business Combination is not completed within the Combination Period[61] NOTE 5. RELATED PARTY TRANSACTIONS This note discloses transactions with related parties, including founder shares, loans, and administrative and advisory service agreements - Founder Shares (Class B ordinary shares) were issued to the Sponsor for $25,000. On March 31, 2023, 1,968,749 Class B ordinary shares were converted to Class A ordinary shares[62][64][178][180] - The company has multiple unsecured, interest-free loan agreements (Second through Seventh Eternal Loans) with Eternal B.V., an affiliate controlled by the Executive Chairman, Charles Ratelband V[66][74][182][189] Related Party Loan (Outstanding Balance) | Related Party Loan (Outstanding Balance) | Sep 30, 2024 | Dec 31, 2023 | | :--------------------------------------- | :----------- | :----------- | | Second Eternal Loan | $170,603 | $170,603 | | Third Eternal Loan | $300,000 | $300,000 | | Fourth Eternal Loan | $50,000 | $50,000 | | Fifth Eternal Loan | $500,000 | $653,619 | | Sixth Eternal Loan | $335,000 | $357,302 | | Seventh Eternal Loan | $1,425,402 | N/A | - Convertible promissory notes (2023 and 2024 Extension Notes) were issued to the Sponsor to fund monthly deposits into the Trust Account for the benefit of public shares not redeemed during extension periods[75][76][191][192] - An administrative services agreement with the Sponsor (assigned to Gluon Group, an affiliate) incurs a monthly fee of $10,000[78][193] - An advisory services agreement with Gluon Partners LLP (an affiliate) includes a Transaction Success Fee (reduced to $250,000 for transactions >$400M) and financing fees (2.0% for debt, 5.0% for equity)[79][80][81][195][196][197] NOTE 6. COMMITMENTS AND CONTINGENCIES This note outlines ClimateRock's contractual commitments, contingent liabilities, and details of business combination agreements - Holders of Founder Shares and Private Placement Warrants are entitled to registration rights[84][166] - Underwriters are entitled to a deferred underwriting commission of $2,362,500, payable solely upon the completion of a Business Combination[87][167] - The company issued 118,125 Class A ordinary shares (Representative Shares) to Maxim and/or its designees as an offering cost[89] - The Business Combination Agreement with E.E.W. Eco Energy World PLC was terminated on November 29, 2023, due to unmet closing conditions[104][140] - On December 30, 2023, the company entered into a GreenRock Merger Agreement, which was amended on November 6, 2024, to remove the $15M minimum cash closing condition, extend the outside date to May 2, 2025, and reduce the overall merger consideration to GreenRock shareholders from 44,658,000 to 32,000,000 Pubco ordinary shares[105][123][141][142] - Transaction expenses include legal fees (EGS Agreement, with 50% deferred and a 20% premium upon closing of Business Combination), Maxim Success Fee (contingent on cash in Trust Account), ALANTRA Success Fee (contingent on transaction value), and MZHCI consulting fees[93][95][97][98][100][170][171][174][175][177] NOTE 7. SHAREHOLDERS' EQUITY This note details the authorized and outstanding share capital, as well as the terms of warrants and rights - The company is authorized to issue 479,000,000 Class A ordinary shares (2,086,874 outstanding as of Sep 30, 2024) and 20,000,000 Class B ordinary shares (1 outstanding)[106][107] - Warrants become exercisable on the later of 30 days after Business Combination completion or 12 months from IPO closing, subject to an effective registration statement, and expire five years after Business Combination or earlier upon redemption/liquidation[111] - The company may call warrants for redemption at $0.01 per warrant if the ordinary share price equals or exceeds $18.00 for 20 trading days within a 30-trading day period[113] - Rights entitle holders to receive one-tenth (1/10) of one ordinary share upon consummation of a Business Combination, without additional consideration[119] - Warrants and Rights will expire worthless if a Business Combination is not completed within the Combination Period and the Trust Account is liquidated[115][121] NOTE 8. SUBSEQUENT EVENTS This note describes significant events occurring after the reporting period, including amendments to the GreenRock Merger Agreement - On November 6, 2024, the GreenRock Merger Agreement was amended[123] - Key amendments include removing the $15,000,000 minimum cash closing condition, extending the outside date to May 2, 2025, and reducing the overall merger consideration payable to GreenRock shareholders from 44,658,000 to 32,000,000 Pubco ordinary shares[123] - Escrow share release provisions were revised to provide for full release if GreenRock's adjusted EBITDA for fiscal year 2025 equals or exceeds $25,000,000, otherwise the escrowed shares will be forfeited[123] 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. It outlines the company's status as a blank check company, details its IPO and private placement, discusses the terminated EEW business combination and the ongoing GreenRock business combination, and covers liquidity, related-party loans, convertible notes, and the going concern uncertainty. It also addresses factors that may adversely affect operations and critical accounting estimates Cautionary Note Regarding Forward-Looking Statements This section advises that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ - This Quarterly Report includes forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from expectations[126] Overview This section provides an overview of ClimateRock's formation as a SPAC, its IPO, and the regulatory environment - ClimateRock is a Cayman Islands blank check company incorporated on December 6, 2021, formed to effect an initial Business Combination, focusing on environmental protection, renewable energy, and fighting climate change[128][129] - The company has not yet commenced operations and will not generate operating revenues until the completion of its initial Business Combination. Non-operating income is generated from interest on IPO proceeds held in the Trust Account[130][146] - The IPO on May 2, 2022, raised $78,750,000 from 7,875,000 units, and 3,762,500 Private Placement Warrants were sold[131][133] - Nasdaq rules require the initial Business Combination to have a fair market value equal to at least 80% of the net assets held in the Trust Account[134] - New SEC 2024 SPAC Rules, effective July 1, 2024, require additional disclosures and may materially affect the company's ability to negotiate and complete its initial Business Combination[137] Business Combination with EEW This section details the terminated business combination agreement with E.E.W. Eco Energy World PLC - The original Business Combination Agreement with E.E.W. Eco Energy World PLC was entered into on October 6, 2022, and amended on August 3, 2023[139] - The agreement with EEW was terminated on November 29, 2023, because the conditions to closing the initial Business Combination were not satisfied or waived by the outside date of September 30, 2023[140] GreenRock Business Combination This section describes the ongoing GreenRock Merger Agreement, including recent amendments to its terms - On December 30, 2023, the company entered into the GreenRock Merger Agreement[141] - The GreenRock Merger Agreement was amended on November 6, 2024, to remove the $15,000,000 minimum cash closing condition, extend the outside date to May 2, 2025, and reduce the overall merger consideration payable to GreenRock shareholders from 44,658,000 to 32,000,000 Pubco ordinary shares[142] - Escrow share release provisions were revised to provide for full release if GreenRock's adjusted EBITDA for fiscal year 2025 equals or exceeds $25,000,000, otherwise the escrowed shares will be forfeited[142] Extensions of Our Business Combination Period This section explains the extensions of the business combination deadline and associated redemptions and funding - The 2023 EGM approved an extension of the Business Combination deadline to May 2, 2024, leading to the redemption of 5,297,862 Class A ordinary shares and the removal of approximately $55,265,334 from the Trust Account[143] - The 2024 EGM approved a further extension to May 2, 2025, resulting in the redemption of 111,915 Class A ordinary shares and the removal of approximately $1.27 million from the Trust Account[144] - The Sponsor issued the 2023 Extension Note ($900,000) and the 2024 Extension Note ($600,000) to fund monthly deposits into the Trust Account for the benefit of public shares not redeemed during the extension periods[143][145] Results of Operations This section analyzes ClimateRock's financial performance, focusing on net income/loss and key operational costs | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $172,722 | $26,528 | $(409,112) | $585,178 | | Dividend income on Trust Account | $368,522 | $357,678 | $1,109,332 | $1,762,208 | | Formation and operating costs | $165,800 | $301,201 | $1,428,607 | $1,087,201 | | Administrative service fees - related party | $30,000 | $30,000 | $90,000 | $90,000 | Factors That May Adversely Affect our Results of Operations This section discusses various factors that could negatively impact ClimateRock's financial results and business combination efforts - The company's results of operations and ability to complete an initial Business Combination may be adversely affected by economic uncertainty, financial market volatility, inflation, interest rate increases, supply chain disruptions, and geopolitical instability[150] Liquidity, Capital Reserves and Going Concern This section addresses ClimateRock's cash position, working capital deficit, and the going concern uncertainty - As of September 30, 2024, the company has a cash balance of $3,708 and a working capital deficit of $5,286,927, raising substantial doubt about its ability to continue as a going concern[164][30] - The company relies on additional funding from the Sponsor or other related parties (e.g., Eternal Loans, Convertible Promissory Notes) to finance transaction costs and extensions[152][161][163] - There is no assurance that the company's plans to consummate a Business Combination will be successful by May 2, 2025[164] Off-Balance Sheet Arrangements This section confirms that ClimateRock has no off-balance sheet arrangements as of the reporting date - The company has no obligations, assets, or liabilities considered off-balance sheet arrangements as of September 30, 2024[165] Contractual Obligations This section details ClimateRock's contractual commitments, including registration rights, deferred underwriting commissions, and various fees - The company has registration rights agreements for holders of founder shares and private placement warrants[166] - A deferred underwriting commission of $2,362,500 is payable to underwriters upon completion of an initial Business Combination[167] - Agreements with EGS, Maxim, ALANTRA, and MZHCI involve various fees (retainers, success fees, equity compensation) contingent on Business Combination completion or specific financing activities[170][171][174][175][177] Related Party Transactions This section provides further details on transactions with related parties, including founder shares, loans, and service agreements - Founder Shares were issued to the Sponsor, with a portion forfeited due to the underwriters' partial exercise of the over-allotment option. Most Class B shares were converted to Class A ordinary shares[178][179][180] - Multiple unsecured, interest-free loans (Second through Seventh Eternal Loans) from Eternal B.V., an affiliate controlled by the Executive Chairman, are outstanding[182][183][184][185][186][188][189] - Convertible promissory notes (2023 and 2024 Extension Notes) were issued to the Sponsor to fund Trust Account deposits for extensions[191][192] - Administrative services are provided by Gluon Group (an affiliate) for a monthly fee of $10,000[193] - Advisory services from Gluon Partners LLP (an affiliate) include a Transaction Success Fee and financing fees[195][196][197] Critical Accounting Estimates This section highlights the significant accounting estimates and assumptions made in preparing ClimateRock's financial statements - The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts, and actual results could materially differ from these estimates[201] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, ClimateRock is not required to provide detailed quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide detailed quantitative and qualitative disclosures about market risk[203] Item 4. Controls and Procedures The Certifying Officers evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2024, and concluded they were effective. The company acknowledges that controls provide reasonable, not absolute, assurance and that 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 September 30, 2024[205] - Disclosure controls and procedures provide reasonable, not absolute, assurance that objectives are met[206] - No changes to internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended September 30, 2024[207] PART II - OTHER INFORMATION This part provides additional information including legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings To the knowledge of management, there is no litigation currently pending or contemplated against ClimateRock or its officers or directors - To management's knowledge, there is no litigation currently pending or contemplated against the company, its officers, or directors[209] Item 1A. Risk Factors This section highlights key risks, including the Nasdaq delisting notice due to failing the Public Holders Requirement and the potential delisting if a Business Combination is not consummated by April 27, 2025, under new Nasdaq rules. High redemption rates of public shares also pose a significant risk to completing a desirable Business Combination - The company received a Nasdaq delisting notice on October 8, 2024, for failing to meet the 400 Public Holders minimum requirement and has submitted a request to appeal[211][212][213] - The company's securities will be suspended from trading on Nasdaq and delisted if it does not consummate its initial Business Combination by April 27, 2025, as per new Nasdaq rules[216][217][218] - High rates of redemption of Public Shares increase the likelihood of significant redemptions, which may affect the company's ability to complete an initial Business Combination in the most desirable manner or at all, potentially requiring significant outside financing[222][225] - In connection with the 2024 EGM, 111,915 Public Shares were redeemed at approximately $11.37 per share, reducing outstanding Public Shares to 2,465,223 and the Trust Account to $28,895,303[224] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarterly period. The use of proceeds from the Initial Public Offering and Private Placement remains consistent with previously disclosed plans - No unregistered sales of equity securities occurred during the quarterly period[226] - The planned use of proceeds from the Initial Public Offering and Private Placement has not materially changed from prior disclosures[226] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the quarterly period - There were no defaults upon senior securities[227] Item 4. Mine Safety Disclosures This item is not applicable to ClimateRock - This item is not applicable to the company[227] Item 5. Other Information During the quarterly period, none of the company's directors or officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarterly period ended September 30, 2024[228] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, the Quarterly Report, including amendments to the merger agreement, officer certifications, and Inline XBRL documents - The report includes various exhibits, such as the Amendment to Agreement and Plan of Merger, officer certifications (pursuant to Sarbanes-Oxley Act), and Inline XBRL documents[229] SIGNATURES This section contains the official signatures of ClimateRock's Chief Executive Officer and Chief Financial Officer, certifying the report - The report was signed on November 14, 2024, by Per Regnarsson, Chief Executive Officer, and Abhishek Bawa, Chief Financial Officer (Principal Financial and Accounting Officer)[231]