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Power & Digital Infrastructure Acquisition II (XPDB) - 2025 Q1 - Quarterly Report

Part I Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2025 show net income driven by non-cash gains, contrasting with a prior year's one-time IP contribution gain Condensed Consolidated Balance Sheets Total assets slightly decreased to $365.6 million as of March 31, 2025, while total liabilities significantly decreased to $95.4 million, leading to an increase in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents and restricted cash | $23,001 | $28,022 | | Investment in AirJoule, LLC | $340,948 | $338,179 | | Total Assets | $365,606 | $369,852 | | Liabilities | | | | Earnout Shares liability | $11,692 | $24,524 | | Subject Vesting Shares liability | $2,345 | $7,819 | | Total Liabilities | $95,423 | $117,742 | | Total Stockholders' Equity | $270,183 | $252,110 | Condensed Consolidated Statements of Operations Net income for Q1 2025 was $14.9 million, driven by non-cash gains from liability fair value changes, contrasting with $181.6 million in Q1 2024 due to a one-time IP contribution gain Condensed Consolidated Statements of Operations Highlights (in thousands) | Account | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Loss from operations | $(3,190) | $(56,391) | | Gain on contribution to AirJoule, LLC | $0 | $333,500 | | Change in fair value of Earnout Shares liability | $12,832 | $(7,672) | | Change in fair value of Subject Vesting Shares liability | $5,474 | $(2,425) | | Net Income | $14,879 | $181,555 | | Diluted Net Income Per Share | $0.26 | $4.18 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $72.2 million in Q1 2025, while overall cash and equivalents decreased by $5.0 million, ending at $23.0 million Cash Flow Summary (in thousands) | Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $72 | $(6,425) | | Net cash used in investing activities | $(5,135) | $(10,000) | | Net cash provided by financing activities | $42 | $43,467 | | Net (decrease) increase in cash | $(5,021) | $27,042 | Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail the company's formation, liquidity, joint venture accounting, and share-based liabilities, including key events like the AirJoule JV formation and subsequent PIPE financing - The company is a water technology firm commercializing its proprietary AirJoule system, becoming a public company via a reverse recapitalization with XPDB on March 14, 20241819 - On March 25, 2025, the company secured a $30 million committed equity facility with B. Riley, providing access to future capital24 - The company formed a 50/50 joint venture, AirJoule, LLC, with GE Vernova to commercialize its technology, contributing an IP license that resulted in a non-cash gain of $333.5 million in Q1 2024239299 - The company has significant liabilities related to Earnout Shares, True Up Shares, and Subject Vesting Shares, which are measured at fair value each period, causing volatility in reported earnings586465 - Subsequent to the quarter end, in April 2025, the company raised approximately $15 million through a PIPE financing, selling 3.78 million shares at $3.98 per share169 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's pre-revenue status, commercialization plans, Q1 2025 operating loss reduction, reliance on equity financing, and critical accounting estimates for complex financial instruments Company Overview and Growth Strategy AirJoule, a water technology company, plans to launch demonstration units in 2025 and scale commercial sales in 2026, targeting a $450 billion market through strategic partnerships - The company aims to produce pure distilled water from air, targeting industrial users with waste heat, such as data centers and advanced manufacturing174 - The company plans to manufacture AirJoule units for customer demonstrations in 2025, with commercial sales expected to scale in 2026174 - The growth strategy relies on global collaborations with GE Vernova and Carrier to leverage their R&D, supply chains, and sales channels174177 Results of Operations Loss from operations significantly decreased in Q1 2025 to $3.2 million from $56.4 million in Q1 2024, primarily due to the absence of prior year's one-time business combination costs Comparison of Operations (in thousands) | Expense/Income Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | General and administrative | $2,786 | $813 | $1,973 | | Research and development | $388 | $846 | $(458) | | Transaction costs (Business Combination) | $0 | $54,693 | $(54,693) | | Loss from operations | $(3,190) | $(56,391) | $53,201 | | Gain on contribution to AirJoule, LLC | $0 | $333,500 | $(333,500) | | Equity loss from investment in AirJoule, LLC | $(2,230) | $(26) | $(2,204) | Liquidity and Capital Resources The company's liquidity relies on equity capital, with $23.0 million cash as of March 31, 2025, supplemented by a $30 million committed equity facility and future JV capital commitments - As of March 31, 2025, the company had $23.0 million in cash, cash equivalents, and restricted cash199 - Entered into a $30 million common stock purchase agreement (Equity Line) with B. Riley in March 2025, which had not been utilized as of quarter-end197 - The company is expected to make additional capital contributions to the AirJoule JV, having contributed $5.0 million in February 2025 and an initial $10.0 million in March 2024198201206 Critical Accounting Estimates Critical accounting estimates involve significant judgment, particularly for share-based compensation, fair value measurement of complex liabilities, business combinations, and equity method investments - Share-based compensation for awards with market conditions (e.g., Earnout Shares, certain RSUs) is valued using Monte-Carlo simulation models, which require subjective assumptions about volatility and stock price paths215216217 - Earnout Shares, Subject Vesting Shares, and True Up Shares liabilities are classified as derivatives and remeasured to fair value each period, with changes impacting earnings, and valuations are complex using Monte Carlo simulations219221223 - Accounting for the equity method investment in the AirJoule JV involves determining the fair value of contributed assets, identifying basis differences, and assessing for impairment, all of which require significant estimates229230231 Quantitative and Qualitative Disclosures About Market Risk The company indicates that quantitative and qualitative disclosures about market risk are not applicable for this reporting period - The report indicates that quantitative and qualitative disclosures about market risk are not applicable244 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no significant changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2025245 - No significant changes to internal control over financial reporting occurred during the quarter ended March 31, 2025246 Part II Legal Proceedings The company reports no material legal proceedings expected to adversely affect its business, financial condition, or operations - The company reports no material legal proceedings as of the filing date249 Risk Factors For a detailed discussion of risk factors, the company refers investors to its Annual Report on Form 10-K for the year ended December 31, 2024 - For a detailed discussion of risk factors, the company refers investors to its previously filed Annual Report on Form 10-K250 Unregistered Sales of Equity Securities and Use of Proceeds The company entered into an agreement on March 25, 2025, for the unregistered sale of up to 4.25 million shares of Class A common stock, with no sales occurring by quarter-end - On March 25, 2025, the company entered into an Equity Line Purchase Agreement to sell up to 4,250,000 shares of Class A common stock in a transaction exempt from registration under Section 4(a)(2) of the Securities Act252 Exhibits This section lists exhibits filed with the quarterly report, including merger agreements, corporate governance documents, financing agreements, and officer certifications