Rigel Resource Acquisition (RRAC) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements for Q1 2024 show a net loss, driven by derivative liability fair value changes and increased operating costs Condensed Balance Sheets Condensed balance sheets outline the company's financial position, including assets, liabilities, and shareholders' deficit Condensed Balance Sheets | Metric | As of March 31, 2024 (Unaudited) (USD) | As of December 31, 2023 (Audited) (USD) | | :----------------------------------- | :----------------------- | :---------------------- | | Assets: | | | | Cash | $46,323 | $70,748 | | Prepaid Expenses | $120,744 | $55,414 | | Cash and Investments in Trust Account | $274,689,822 | $270,667,736 | | Total Assets (USD) | $274,856,889 | $270,793,898 | | Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit | | | | Accounts Payable and Accrued Expenses | $629,806 | $706,279 | | Accrued Offering Costs | $378,324 | $378,324 | | Convertible Notes - Related Party | $6,998,386 | $5,556,896 | | Derivative Liabilities | $12,793,663 | $8,491,527 | | Deferred Underwriting Commissions | $- | $10,500,000 | | Total Liabilities (USD) | $20,800,179 | $25,633,026 | | Class A Ordinary Shares Subject to Possible Redemption | $274,689,822 | $270,667,736 | | Total Shareholders' Deficit (USD) | $(20,633,112) | $(25,506,864) | - As of March 31, 2024, cash and investments in the trust account increased to $274.7 million from $270.7 million as of December 31, 2023[9] - Total liabilities decreased from $25.63 million as of December 31, 2023, to $20.80 million as of March 31, 2024, primarily due to the waiver of deferred underwriting commissions[9][81] - Shareholders' deficit improved from $25.51 million as of December 31, 2023, to $20.63 million as of March 31, 2024[9] Condensed Statements of Operations Condensed statements of operations present the company's financial performance, including revenues, expenses, and net income or loss Condensed Statements of Operations | Metric | For the Three Months Ended March 31, 2024 (USD) | For the Three Months Ended March 31, 2023 (USD) | | :----------------------------------- | :----------------------- | :----------------------- | | Expenses: | | | | Management Fees - Related Party | $30,000 | $30,000 | | General and Administrative Expenses | $652,622 | $342,890 | | Total Expenses (USD) | $682,622 | $372,890 | | Other Income (Expense): | | | | Income from Cash and Investments in Trust Account | $2,972,086 | $3,319,794 | | Gain from Deferred Underwriting Commission Waiver | $680,400 | $- | | Fair Value Change in Convertible Notes - Related Party | $(6,858) | $(1,168) | | Fair Value Change in Derivative Liabilities | $(4,302,136) | $(1,660,512) | | Net Other Income (Expense) (USD) | $(656,508) | $1,658,114 | | Net (Loss) Income (USD) | $(1,339,130) | $1,285,224 | | Basic and Diluted Net (Loss) Income Per Class A Ordinary Share (USD) | $(0.04) | $0.03 | | Basic and Diluted Net (Loss) Income Per Class B Ordinary Share (USD) | $(0.04) | $0.03 | - For the three months ended March 31, 2024, the company reported a net loss of $1,339,130, compared to a net income of $1,285,224 in the prior-year period[11][116][117] - The net loss was primarily driven by a $4,302,136 loss from fair value changes in derivative liabilities and $682,622 in operating costs, partially offset by $2,972,086 in trust account interest income and $680,400 from deferred underwriting commission waiver[11][116] Condensed Statements of Changes in Shareholders' Deficit Condensed statements of changes in shareholders' deficit track the movements in equity components over the reporting period Condensed Statements of Changes in Shareholders' Deficit | Metric | Balance as of January 1, 2024 (USD) | Balance as of March 31, 2024 (USD) | | :----------------------------------- | :----------------- | :----------------- | | Class B Ordinary Shares (Number) | 7,500,000 | 7,500,000 | | Class B Ordinary Shares (Amount, USD) | $750 | $750 | | Additional Paid-in Capital (USD) | $- | $5,797,514 | | Accumulated Deficit (USD) | $(25,507,614) | $(26,431,376) | | Total Shareholders' Deficit (USD) | $(25,506,864) | $(20,633,112) | | Key Changes: | | | | Related Party Note Proceeds in Excess of Fair Value (USD) | $- | $415,368 | | Class A Ordinary Shares Remeasurement (USD) | $- | $(415,368) | | Class A Ordinary Shares Redemption Value Accrual (USD) | $- | $(4,022,086) | | Deferred Underwriting Commission Waiver (USD) | $- | $9,819,600 | | Net Loss (USD) | $- | $(1,339,130) | - As of March 31, 2024, shareholders' deficit decreased from $25,506,864 on January 1, 2024, to $20,633,112, mainly due to a $9,819,600 gain from deferred underwriting commission waiver, partially offset by a $1,339,130 net loss for the period[12] Condensed Statements of Cash Flows Condensed statements of cash flows categorize cash inflows and outflows from operating, investing, and financing activities Condensed Statements of Cash Flows | Cash Flow Category | For the Three Months Ended March 31, 2024 (USD) | For the Three Months Ended March 31, 2023 (USD) | | :----------------------- | :----------------------- | :----------------------- | | Net Cash from Operating Activities (USD) | $(824,425) | $(161,277) | | Net Cash from Investing Activities (USD) | $(1,050,000) | $- | | Net Cash from Financing Activities (USD) | $1,850,000 | $150,277 | | Net Change in Cash (USD) | $(24,425) | $(11,000) | | Cash, End of Period (USD) | $46,323 | $98,595 | - For the three months ended March 31, 2024, cash outflow from operating activities was $824,425, investing activities outflow was $1,050,000 (primarily cash deposited into the trust account), and financing activities inflow was $1,850,000 (mainly from convertible notes)[15][122][123] - The ending cash balance was $46,323, a decrease from $70,748 at the beginning of the period[15] Notes to Condensed Financial Statements Notes to condensed financial statements provide essential details and explanations supporting the primary financial statements NOTE 1. Description of Organization and Business Operations and Going Concern Rigel Resource Acquisition Corp, a SPAC, faces significant going concern doubts regarding its business combination deadline and liquidity - The company was incorporated on April 6, 2021, as a special purpose acquisition company (SPAC) to effect a business combination with one or more businesses[18] - The company completed its IPO on November 9, 2021, issuing 27,500,000 units for $275 million in gross proceeds, and concurrently issued 14,000,000 warrants in a private placement for $14 million in gross proceeds[20][21] - As of March 31, 2024, the trust account held approximately $274.7 million in cash and investments, designated for a future business combination or redemption of public shares[9][44] - The company must complete a business combination by August 9, 2024 (the 'Combination Period'), or it will liquidate and redeem all public shares[33] - The company has substantial doubt about its ability to continue as a going concern due to insufficient liquidity to sustain operations and no assurance of completing a business combination or raising necessary funds within the Combination Period[36] NOTE 2. Summary of Significant Accounting Policies This section outlines the company's significant accounting policies, including US GAAP compliance and fair value measurements - As an 'emerging growth company,' the company elected not to opt out of the extended transition period, allowing it to adopt new accounting pronouncements on the private company timeline[41] - As of March 31, 2024, the trust account held approximately $274.7 million in cash, with the trustee instructed to invest funds in an interest-bearing demand deposit account[44] - Class A ordinary shares are classified as temporary equity due to their redemption features and are measured at redemption value, with their carrying value adjusted at each period-end to equal the redemption value[46][47] - Convertible notes and derivative financial instruments, including public warrants, private placement warrants, and forward purchase agreements, are measured at fair value, with changes recognized in the statements of operations[54][55][57] NOTE 3. Initial Public Offering The company raised $300 million via its IPO, selling 30,000,000 units each with a Class A ordinary share and half a warrant - The company sold 30,000,000 units in its IPO at $10.00 per unit, generating $300 million in gross proceeds[61] - Each unit comprised one Class A ordinary share and one-half of one redeemable warrant, with each whole warrant exercisable for one Class A ordinary share at $11.50[61] NOTE 4. Private Placement The company raised $14 million from selling 14,000,000 private placement warrants concurrently with its IPO - The company sold 14,000,000 private placement warrants at $1.00 per warrant in a private placement, generating $14 million in gross proceeds[62] - The private placement warrants and their underlying Class A ordinary shares are not transferable, assignable, or salable within 30 days following the completion of a business combination[64] NOTE 5. Related Party Transactions This section details various transactions with the sponsor and its affiliates, impacting the company's capital structure and liquidity - The sponsor holds 7,500,000 Class B ordinary shares (founder shares), with no change as of March 31, 2024, and December 31, 2023[65] - The company entered into multiple convertible notes with the sponsor (First Extension Loan, Second Extension Loan, Working Capital Loan, and December 2023 Working Capital Loan) to extend the business combination period and provide working capital[68][69][77][78] Related Party Convertible Notes Balances | Loan Type | As of March 31, 2024 (USD) | As of December 31, 2023 (USD) | | :----------------------- | :----------------- | :----------------- | | First Extension Loan (USD) | $3,000,000 | $3,000,000 | | Second Extension Loan (USD) | $3,048,387 | $1,998,387 | | Working Capital Loan (USD) | $1,500,000 | $1,500,000 | | December 2023 Working Capital Loan (USD) | $1,400,000 | $600,000 | | Total (USD) | $8,948,387 | $7,100,000 | - The company pays the sponsor $10,000 per month for administrative services, with $287,500 and $257,500 payable as of March 31, 2024, and December 31, 2023, respectively[75] NOTE 6. Commitments and Contingencies The company has various commitments and contingencies, notably a $10.5 million deferred underwriting commission waiver in Q1 2024 - The company granted registration rights to holders of founder shares, private placement units, and warrants issued from convertible notes[79] - The company received a waiver of deferred underwriting commissions during the three months ended March 31, 2024, resulting in a $10,500,000 reduction in deferred underwriting commission liability and recognition of a deferred underwriting commission waiver gain[81] - The company entered into a forward purchase agreement with Orion Mine Finance, an affiliate of the sponsor, to purchase up to 5,000,000 units at $10.00 per unit upon business combination completion[83] - The fair value of the forward purchase agreement was $5,833,663 and $5,011,527 as of March 31, 2024, and December 31, 2023, respectively, recorded as a derivative liability[86] NOTE 7. Shareholders' Deficit This section describes the company's authorized share capital, including Class A and Class B ordinary shares, and their respective rights - As of March 31, 2024, 24,570,033 Class A ordinary shares and 7,500,000 Class B ordinary shares were issued and outstanding[89][90] - Class B ordinary shareholders hold exclusive voting rights for director appointments prior to a business combination and convert to Class A ordinary shares on a one-for-one basis upon business combination[91][92] NOTE 8. Warrants Public and private placement warrants, classified as liabilities and measured at fair value, have specific exercise and redemption terms - Public warrants become exercisable 30 days after a business combination or 12 months after the IPO closing, and expire five years after the business combination[93] - The company may redeem public warrants at $0.01 per warrant if the Class A ordinary share price equals or exceeds $18.00[96][97] - The company may redeem public warrants at $0.10 per warrant if the Class A ordinary share price equals or exceeds $10.00, with holders having the option for a cashless exercise[101] - Private placement warrants have similar terms to public warrants but are non-transferable, non-redeemable, and exercisable on a cashless basis when held by initial purchasers or permitted transferees[99] - All warrants are classified as liabilities under ASC 815-40 and measured at fair value[100] NOTE 9. Fair Value Measurements The company measures financial assets and liabilities at fair value using a three-level hierarchy, detailing valuation inputs for various instruments - The company utilizes a three-level fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[58] Fair Value Measurement of Assets and Liabilities | Description | Level | As of March 31, 2024 (USD) | As of December 31, 2023 (USD) | | :----------------------------------- | :--- | :------------- | :-------------- | | Assets: | | | | | Cash in Trust Account (USD) | 0 | $274,689,822 | $270,667,736 | | Liabilities: | | | | | Convertible Notes - Related Party (USD) | 3 | $6,998,386 | $5,556,896 | | Warrant Liability - Private Placement Warrants (USD) | 2 | $3,360,000 | $1,680,000 | | Warrant Liability - Public Warrants (USD) | 1 | $3,600,000 | $1,800,000 | | Forward Purchase Agreement (USD) | 3 | $5,833,663 | $5,011,527 | | Total Derivative Liabilities (USD) | | $19,792,049 | $14,048,423 | - As of March 31, 2024, the total fair value of convertible notes, private placement warrants, public warrants, and forward purchase agreements was $19,792,049, an increase from $14,048,423 as of December 31, 2023[104][109] - Convertible notes and forward purchase agreements are valued using modified Black-Scholes and valuation models, incorporating unobservable inputs such as volatility, risk-free rates, expected lives, and business combination probabilities[105][107][108] NOTE 10. Subsequent Events Management assessed subsequent events, noting an additional $350,000 contribution to the trust account by the sponsor on April 30, 2024 - On April 30, 2024, the sponsor made an additional $350,000 contribution to the trust account under the Second Extension Loan[111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion covers Q1 2024 financial condition and operating results, highlighting a net loss and significant going concern doubts Overview The company, a blank check company, aims to complete a business combination, having signed an agreement with Aurous, a South African gold mining company - The company is a blank check company, incorporated on April 6, 2021, with the purpose of effecting a business combination with one or more businesses[114] - The company plans to target the global mining industry and entered into a business combination agreement with Aurous, a South African gold mining company, on March 11, 2024[114] Results of Operations Operating results for Q1 2024 show a net loss, primarily driven by increased fair value losses on derivative liabilities - As of March 31, 2024, the company had not commenced any operations, generated any revenue, with its primary income source being interest earned on the trust account[115] Results of Operations | Metric | For the Three Months Ended March 31, 2024 (USD) | For the Three Months Ended March 31, 2023 (USD) | | :----------------------------------- | :----------------------- | :----------------------- | | Net (Loss) Income (USD) | $(1,339,130) | $1,285,224 | | Loss from Fair Value Change in Derivative Liabilities (USD) | $4,302,136 | $1,660,512 | | Loss from Fair Value Change in Convertible Notes (USD) | $6,858 | $1,168 | | Operating Costs (USD) | $682,622 | $372,890 | | Trust Account Interest Income (USD) | $2,972,086 | $3,319,794 | | Gain from Deferred Underwriting Commission Waiver (USD) | $680,400 | $- | - Net loss for Q1 2024 was $1,339,130, compared to a net income of $1,285,224 in Q1 2023, primarily due to increased fair value losses on derivative liabilities[116][117] Liquidity and Capital Resources The company's liquidity and capital resources are primarily held in the trust account, with significant going concern doubts regarding its operational funding - As of March 31, 2024, $274,689,822 was held in the trust account, primarily designated for completing a business combination[121] - As of March 31, 2024, the company held $46,323 in cash outside the trust account for identifying and evaluating target businesses and due diligence[127] Liquidity and Capital Resources | Cash Flow Category | For the Three Months Ended March 31, 2024 (USD) | For the Three Months Ended March 31, 2023 (USD) | | :----------------------- | :----------------------- | :----------------------- | | Net Cash from Operating Activities (USD) | $(824,425) | $(161,277) | | Net Cash from Investing Activities (USD) | $(1,050,000) | $- | | Net Cash from Financing Activities (USD) | $1,850,000 | $150,277 | - The company faces significant going concern doubts due to its deadline to complete a business combination within 12 months and insufficient liquidity to sustain operations[133][134] Off-balance Sheet Financing Arrangements As of March 31, 2024, the company had no obligations, assets, or liabilities considered off-balance sheet arrangements - As of March 31, 2024, the company had no obligations, assets, or liabilities considered off-balance sheet arrangements[135] Contractual Obligations The company has contractual obligations including administrative fees, legal expenses, and a forward purchase agreement with an affiliate - The company pays an affiliate of the sponsor $10,000 per month for office, administrative, and support services[136] - The company incurred approximately $552,300 in legal fees, of which approximately $378,300 is payable only upon business combination completion[137] - The company entered into a forward purchase agreement with an affiliate of the sponsor, committing to purchase up to 5,000,000 units upon business combination completion[138] Critical Accounting Policies and Estimates This section outlines critical accounting policies and estimates, including fair value measurements for complex financial instruments and Class A ordinary shares - The company's critical accounting estimates include the fair value of related party convertible notes and changes in derivative liability fair value[139] - The company measures financial instruments at fair value in accordance with ASC 820, utilizing a three-level fair value hierarchy[140][144] - Class A ordinary shares are classified as temporary equity due to redemption rights and measured at redemption value[142][143] - Convertible notes and derivative financial instruments, including warrants and forward purchase agreements, are measured at fair value, with changes recognized in the statements of operations[146][147][148] - As an emerging growth company, the company elected not to opt out of the extended transition period, allowing it to adopt new accounting pronouncements on the private company timeline[150][151] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[152] Item 4. Controls and Procedures Management assessed disclosure controls as ineffective due to material weaknesses in internal financial reporting controls, with remediation plans underway Evaluation of Disclosure Controls and Procedures As of March 31, 2024, management assessed disclosure controls and procedures as ineffective, primarily due to ineffective GAAP compliance processes - As of March 31, 2024, management assessed disclosure controls and procedures as ineffective, primarily because processes to ensure GAAP-compliant financial statements were not operating effectively[153] - The company developed a plan to remediate material weaknesses in internal control over financial reporting, including allocating additional resources to improve accounting for complex financial instruments and increasing management oversight[154] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred in Q1 2024, beyond the ongoing remediation efforts - No material changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2024, other than the aforementioned remediation efforts[157] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company has no ongoing legal proceedings as of the end of this reporting period - The company has no legal proceedings[159] Item 1A. Risk Factors No material changes occurred in the risk factors disclosed in the company's 2024 Form 10-K annual report - As of the date of this quarterly report, no material changes occurred in the risk factors disclosed in the company's Form 10-K annual report filed on March 22, 2024[160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold, and the use of IPO and private placement proceeds remains unchanged - No unregistered equity securities were sold for the three months ended March 31, 2024[161] - No material changes occurred in the planned use of proceeds from the initial public offering and private placement[161] Item 3. Defaults Upon Senior Securities The company has no defaults upon senior securities - The company has no defaults upon senior securities[162] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine safety disclosures are not applicable[163] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers for the three months ended March 31, 2024[164] Item 6. Exhibits This section lists exhibits filed or incorporated by reference, including key agreements and certification documents - Exhibits include the business combination agreement, exchange agreement, certificate of incorporation amendments, sponsor support agreement, subscription agreements, executive certifications, and XBRL data files[167]