UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from _____ to _____
Commission File No.
| |
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| Not Applicable |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer |
| ☒ | |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of May 15, 2024, there
were
CLIMATEROCK
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CLIMATEROCK
CONSOLIDATED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Cash and cash equivalents held in Trust Account | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, COMMITMENTS AND CONTINGENCIES, AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accrued liabilities | $ | $ | ||||||
| Administrative service fee payable - related party | ||||||||
| Loan payable - related party | ||||||||
| Convertible promissory note payable - related party | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Loan payable - related party | ||||||||
| Deferred underwriting commission payable | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Class A ordinary shares, $ | ||||||||
| Total commitments and contingencies | ||||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Preference shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, COMMITMENTS AND CONTINGENCIES, AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
CLIMATEROCK
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended March 31, 2024 | Three Months Ended | |||||||
| Operating expenses | ||||||||
| Formation and operating costs | $ | $ | ||||||
| Administrative service fees - related party | ||||||||
| Net loss from operations | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest income | ||||||||
| Dividend income on Trust Account | ||||||||
| Unrealized foreign exchange loss | ( | ) | ||||||
| Total other income | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted income (loss) earnings per share | ||||||||
| $ | $ | |||||||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
CLIMATEROCK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
| CLASS A ORDINARY SHARES | CLASS B ORDINARY SHARES | PREFERENCE SHARES | ADDITIONAL PAID-IN | ACCUMULATED | TOTAL SHAREHOLDERS’ | |||||||||||||||||||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | SHARES | AMOUNT | CAPITAL | DEFICIT | DEFICIT | ||||||||||||||||||||||||||||
| Balances - January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Adjustment to increase Class A ordinary shares subject to possible redemption to maximum redemption value | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balances - March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Balances - January 1, 2023 | $ | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Adjustment to increase Class A ordinary shares subject to possible redemption to maximum redemption value | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Conversion of | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Balances - March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
CLIMATEROCK
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustment to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Dividend income received in Trust Account | ( | ) | ( | ) | ||||
| Unrealized foreign exchange loss | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued liabilities, excluding unrealized foreign exchange loss | ( | ) | ||||||
| Administrative service fee payable - related party | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash deposited in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | $ | ( | ) | $ | ||||
| Cash flows from financing activities: | ||||||||
| Proceed from related party loan | ||||||||
| Proceeds from convertible promissory note - related party | ||||||||
| Net cash provided by financing activities | ||||||||
Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Non-cash investing and financial activities: | ||||||||
| Remeasurement adjustment on public shares subject to possible redemption | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
ClimateRock (the “Company”) is a Cayman Islands exempted company incorporated as a blank check company on December 6, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that the Company has not yet identified (“Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company focuses on opportunities in climate change, environment, renewable energy and emerging, clean technologies.
In order to affect a Business Combination, the Company owns subsidiary ClimateRock Holdings Limited, a Cayman Islands exempted company (“Holdings” or “Pubco”), and its subsidiary ClimateRock Merger Sub Limited, a Cayman Islands exempted company and a wholly-owned subsidiary of Pubco (” Merger Sub”).
As of March 31, 2024, the Company had not yet commenced operations. All activity through March 31, 2024 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below, and post-offering activities in search for a target to consummate a Business Combination. The Company has selected December 31 as its fiscal year end.
The registration statement
for the Company’s Initial Public Offering was declared effective on April 27, 2022. On May 2, 2022, the Company consummated its
Initial Public Offering of
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Offering costs amounted to
$
Upon the closing of the Initial
Public Offering and Private Placement, $
At March 31, 2024, the
Company had $
5
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company will provide
holders of its Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares
upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (approximately $
The Company initially had
until 12 months from the closing of the Initial Public Offering to consummate an initial Business Combination. However, if the Company
anticipated that it may not be able to consummate the initial Business Combination within 12 months, it may extend the period of time
to consummate a Business Combination by two additional 3-month periods (for a total of up to 18 months) without submitting proposed extensions
to its shareholders for approval or offering its public shareholders redemption rights in connection therewith. The Company’s sponsor
or its affiliates or designees, upon five days advance notice prior to the applicable deadline, would have been required to deposit into
the Trust Account $
On April 27, 2023, the Company
held the 2023 EGM and approved, among other things, an amendment to the Company’s amended and restated memorandum and articles of
association to (i) extend the date by which the Company would be required to consummate a Business Combination from November 2, 2023 (assuming
the Sponsor was to have effected and paid extensions as described in the definitive proxy statement as filed with the SEC on April 11,
2023) to May 2, 2024 (or such earlier date as determined by the Company’s board of directors in its sole discretion) (the “Extension
Amendment”) and (ii) to permit its board of directors, in its sole discretion, to elect to wind up the Company’s operations
on, or on an earlier date than May 2, 2024 (including prior to May 2, 2023). In connection with the 2023 EGM, shareholders holding
On April 29, 2024, the Company
held an extraordinary general meeting in lieu of an annual general meeting of shareholders (the “2024 EGM”) and approved,
among other things, an amendment to our amended and restated memorandum and articles of association to (i) extend the date by which we
would be required to consummate a Business Combination from May 2, 2024 to May 2, 2025 (or such earlier date as determined by the board
of directors in its sole discretion) (“Combination Period”), and (ii) to permit our board of directors, in its sole discretion,
to elect to wind up our operations on, or on an earlier date than May 2, 2025. In connection with the 2024 EGM, shareholders holding
Going concern and management’s plan
As of March 31, 2024,
the Company has a cash balance of $
6
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements as of March 31, 2024, and for the three months ended March 31, 2024 and 2023 presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the period ending December 31, 2024, or any future period.
The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Form 10-K filed by the Company with the SEC on March 18, 2024.
Prior period reclassifications
To conform with the current period presentation, management has reclassified a portion of the amount previously presented within “Formation and operating costs” on the statement of operations for the quarter ended March 31, 2023, and “Accrued liabilities, excluding unrealized foreign exchange loss” on the statement of cash flows for the quarter ended March 31, 2023 to report “Administrative service fees - related party” and “Administrative service fee payable - related party”, respectively.
Cash and cash equivalents
The Company considers all
short-term investments with a maturity of three months or less when purchased to be cash equivalents. As of March 31, 2024 and December 31,
2023, the Company had a cash balance of $
Cash and cash equivalents in Trust Account
The funds held in the Trust Account can be invested in United States government treasury bills, notes or bonds having a maturity of 180 days or less or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act until the earlier of the consummation of its first Business Combination and the Company’s failure to consummate a Business Combination within the Combination Period.
The Company’s cash and cash equivalents held in the Trust Account are classified as cash equivalents. Gains and losses resulting from the change in the balance of the cash and cash equivalents held in Trust Account are included in dividend income on Trust Account in the accompanying statements of operations. Dividend income earned is fully reinvested into the cash and cash equivalents held in Trust Account and therefore considered as an adjustment to reconcile net (loss) income to net cash used in operating activities in the consolidated statements of cash flow. Such interest income reinvested will be used to redeem all or a portion of the ordinary shares upon the completion of Business Combination (See Note 1).
As of March 31, 2024
and December 31, 2023, the Company had $
Emerging growth company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
7
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, the actual results could differ significantly from those estimates.
Ordinary shares subject to possible redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Public Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital or accumulated deficit if additional paid in capital equals zero. Accordingly, ordinary shares subject to possible redemption are presented at redemption value (plus any interest earned and/or dividends on the Trust Account) as temporary equity, outside of the shareholders’ equity section of the Company’s consolidated balance sheets.
Income taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
8
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s consolidated financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net (loss) income per share
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” In order to determine the net (loss) income attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed (loss) income allocable to both the redeemable shares and non-redeemable shares and the undistributed (loss) income is calculated using the total net (loss) income less interest income in Trust Account less any dividends paid. We then allocated the undistributed (loss) income ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders. At March 31, 2024 and 2023, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the periods presented.
| Three months ended March 31, 2024 | Three months ended March 31, 2023 | |||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Less: Monthly extension fees | ||||||||
| Less: Dividend income on Trust Account to be allocated to redeemable shares | ||||||||
| Net loss excluding monthly extension fees and dividend income on Trust Account | $ | ( | ) | $ | ( | ) | ||
| Three months ended March 31, 2024 | ||||||||
| Redeemable shares | Non-redeemable shares | |||||||
| Basic and diluted net income (loss) per share: | ||||||||
| Numerators: | ||||||||
| Allocation of net loss including accretion of temporary equity to redemption value and excluding monthly extension fees and dividend income on Trust Account | $ | ( | ) | $ | ( | ) | ||
| Monthly extension fees | ||||||||
| Dividend income on Trust Account | ||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | ||||
| Denominators: | ||||||||
| Weighted-average shares outstanding | ||||||||
| $ | $ | ( | ) | |||||
9
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Three months ended March 31, 2023 | ||||||||
| Redeemable shares | Non-redeemable shares | |||||||
| Basic and diluted net income (loss) per share: | ||||||||
| Numerators: | ||||||||
| Allocation of net loss including accretion of temporary equity to redemption value and excluding dividend income on Trust Account | $ | ( | ) | $ | ( | ) | ||
| Dividend income on Trust Account | ||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | ||||
| Denominators: | ||||||||
| Weighted-average shares outstanding | ||||||||
| $ | $ | ( | ) | |||||
Fair value of financial instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC Topic 825, “Financial Instruments” approximates the carrying amounts represented in the consolidated balance sheet, primarily due to its short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Description | Level | March 31, 2024 | December 31, 2023 | |||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents held in Trust Account | 1 | $ | $ | |||||||||
Except for the foregoing, the Company does not have any assets measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023.
10
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recent accounting pronouncements
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
On May 2, 2022, the Company
consummated its Initial Public Offering of
Each unit consists of one
Class A ordinary share, one-half of one redeemable warrant and one right. Each whole warrant entitles the holder thereof to purchase one
ordinary share for $
All of the
| As of March 31, 2024 | As of December 31, 2023 | |||||||
| Gross proceeds | $ | $ | ||||||
| Less: | ||||||||
| Proceeds allocated to public warrants and public rights | ( | ) | ( | ) | ||||
| Offering costs of public shares | ( | ) | ( | ) | ||||
| Redemption of shares | ( | ) | ( | ) | ||||
| Plus: | ||||||||
| Accretion of carrying value to redemption value | ||||||||
| Monthly extension fees | ||||||||
| Ordinary shares subject to possible redemption | $ | $ | ||||||
NOTE 4. PRIVATE PLACEMENT
On May 2, 2022, the Company
sold
11
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder shares
On December 30, 2021, the
Company issued
Since the underwriters partially
exercised the over-allotment option in respect of
On March 31, 2023, the Sponsor
elected to convert
Loans with related party
On September 21, 2022, the
Company entered into a loan agreement with Eternal B.V., an affiliate of the Company through common ownership, (the “Lender”)
in the principal amount of up to $
Additionally, on November
12, 2022, the Company entered into a loan agreement with the Lender in the principal amount of up to $
On January 29, 2023, the
Company entered into a loan agreement with the Lender in the principal amount of up to $
On April 12, 2023, the Company
entered into a loan agreement with the Lender for a loan facility in the principal amount of up to $
On November 1, 2023, the
Company entered into a loan agreement with the Lender in the principal amount of up to $
12
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On November 1, 2023, the
Company and the Lender agreed to the Eternal Loan Amendment requiring that in the event that Company does not repay each of the Second
Eternal Loan, Third Eternal Loan, Fourth Eternal Loan, and Fifth Eternal Loan within 10 days of the consummation of the initial Business
Combination of the Company, the Company will pay an interest of five percent (
Eternal is controlled by Charles Ratelband V, the Company’s Executive Chairman of the board of directors. Each member of the Company’s board of directors has been informed of Mr. Ratelband’s material interest in the loan agreements, and upon the approval and recommendation of the audit committee, the Company’s board of directors has determined that the loans are fair and in the best interests of the Company and has voted to approve the loans.
Convertible Promissory Note
On May 2, 2023, the Company
issued a convertible promissory note (the “2023 Extension Note”) in the aggregate principal amount of $
Administrative Service Fee
The Company entered into
an administrative services agreement (the “Administrative Services Agreement”) with the Sponsor on April 27, 2022 whereby
the Sponsor will perform certain services for the Company for a monthly fee of $
Advisory Services
On September 21, 2022, the
Company entered into an agreement (the “Letter Agreement”) with Gluon Partners LLP (“Gluon”) to pay a fee (the
“Transaction Success Fee”) upon completion of one or more successful transactions. The Company will pay Gluon $
13
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On October 5, 2022, the Company
and Gluon agreed to lower the Transaction Success Fee to a total payment of $
In addition, the Letter Agreement
was amended to entitle Gluon, with respect to any financing undertaken by the Company introduced by Gluon during the term of the Letter
Agreement, to the following fees: (i) for a financing involving an issuance of the Company’s senior, subordinated and/or mezzanine
debt securities, a cash fee payable at any closing equal to two percent (
In addition to the Transaction Success Fee, the Company agreed to pay Gluon Group for any reasonable and documented out-of-pocket expenses incurred in connection with providing the services for the transactions. In the event of a successful initial Business Combination, Gluon also agreed to waive any accrued fees owed by the Company.
Business Combination Agreement
On December 30, 2023, ClimateRock entered into a Business Combination Agreement with GreenRock, a related party through shared management. (See Note 6).
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration rights
The holders of the Founder Shares and Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement signed on April 27, 2022. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting agreement
On October 21, 2021, the
Company engaged Maxim Group LLC (“Maxim”) as its underwriter. The Company granted the underwriters a 45-day option until June
11, 2022 to purchase up to
The underwriters were entitled
to an underwriting discount of $
In addition to the underwriting
discount, the Company has agreed to pay or reimburse the underwriters for travel, lodging and other “road show” expenses,
expenses of the underwriters’ legal counsel and certain diligence and other fees, including the preparation, binding and delivery
of bound volumes in form and style reasonably satisfactory to the representative, transaction Lucite cubes or similar commemorative items
in a style as reasonably requested by the representative, and reimbursement for background checks on our directors, director nominees
and executive officers, which such fees and expenses are capped at an aggregate of $
14
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Representative Shares
The Company has issued to
Maxim and/or its designees,
The shares have been deemed compensation by the Financial Industry Regulatory Authority (“FINRA”) and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the registration statement for the Initial Public Offering pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following April 27, 2022, nor may they be sold, transferred, assigned, pledged, or hypothecated for a period of 180 days immediately following April 27, 2022 except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.
Subject to certain conditions, the Company granted Maxim, for a period beginning on May 2, 2022 and ending 12 months after the date of the consummation of the Business Combination, a right of first refusal to act as book-running managing underwriter or placement agent for any and all future public and private equity, equity-linked, convertible and debt offerings for the Company or any of its successors or subsidiaries. In accordance with FINRA Rule 5110(g)(6), such right of first refusal shall not have a duration of more than three years from April 27, 2022.
Transaction Expenses
On May 31, 2022, the Company
entered into an agreement (the “EGS Agreement”) with Ellenoff, Grossman & Schole LLP to act as U.S. securities council
to the Company in connection with pending acquisition targets for the Company to acquire consistent with its initial public offering and
assist in U.S. securities work related to the initial Business Combination. The fee structure for this agreement is as follows: (i) an
upfront retainer of $
On March 30, 2023, the Maxim
Letter Agreement (as defined below) was amended (“Amendment No. 4”) to state that the Company will owe a cash fee payable,
at each closing of the Alliance Global Partners equity or equity-linked offering in connection with the contemplated initial Business
Combination with EEW (as defined below), equal to one percent (
On August 17, 2022, the Company
entered into an agreement (the “Maxim Letter Agreement”) with Maxim to pay a fee (the “Maxim Success Fee”) upon
completion of one or more successful transactions. On October 3, 2022, the Company amended its agreement with Maxim (the “Maxim
Amendment”). The amendment states that the Company shall pay to Maxim, upon closing of such transaction(s), a fee based upon the
amount of cash the Company has in the Trust Account immediately prior to consummation of the transaction and/or contributed to the transaction.
If the amount of such cash is less than $
15
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On July 11, 2022, the Company
entered into an agreement (the “ATLANTRA Letter Agreement”) with ALANTRA Corporate Finance, S.A.U. (“ALANTRA”)
and U.N. SDG Support Holdings LLC (“Sponsor Entity”). On October 3, 2022, the Company amended its agreement with ALANTRA (the
“ALANTRA Letter Agreement”). The Company will pay ALANTRA a retainer of $
The Company will also have transactions fees (“ALANTRA Success Fee”), if a transaction which is introduced by ALANTRA, or by another institution to which no fees are due by the Company (e.g. an institution acting on behalf of a Target) is Completed (as defined below) the following remuneration will be due to ALANTRA as a remuneration for its services:
| ● | $ | |
| ● | $ |
If a transaction is completed in North America, Asia, or Africa which is not introduced by ALANTRA and such Transaction requires an introductory, co-advisory, or similar fee due by the Company, the Company shall pay ALANTRA an ALANTRA Success Fee in the form of:
| ● | For the first $ | |
| ● | For the aggregated value of the transaction above the first $ |
Notwithstanding the above,
it is agreed that the ALANTRA Success Fee will be subject to a minimum of EUR
Each ALANTRA Success Fee shall be payable upon consummation of the applicable transaction (i.e. when the transaction is closed, following fulfillment, if applicable, of conditions precedent) regardless of (i) the calendar for the payment of the price, (ii) how the purchase price is funded, (iii) and any deferred payment subsequent to consummation of the transaction, or (iv) any adjustment to the price of the transaction subsequent to consummation (“Completed”).
On January 4, 2024, the
Company entered into an agreement (the “MZHCI Agreement”) with MZHCI, LLC (“MZHCI”) wherein MZHCI would act as
consultant and advise, counsel, and inform designated officers and employees of the Company as it relates to pre & post IPO, De-SPAC
readiness assessment, post transaction close preparation advisory, overall capital markets climate related to global macroeconomic conditions,
world-leading exchanges, Company’s competitors, related business acquisitions in the relevant market segments, and other aspects
of/or concerning the Company’s business about which MZHCI has knowledge or expertise. The MZHCI Agreement became effective upon
execution and will remain active for a period of six months with automatic renewal every six months thereafter. Prior to the De-SPAC
of the Company, the Company shall pay MZHCI $
Business Combination Agreement
On October 6, 2022, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with Pubco, Merger Sub, and E.E.W. Eco Energy World PLC, a company formed under the laws of England and Wales (the “EEW”).
The total consideration to
be offered by Pubco to the holders of EEW securities (each, a “Seller”) shall be a number of ordinary shares of Pubco (the
“Pubco Ordinary Shares”) with an aggregate value equal to Six Hundred Fifty Million U.S. Dollars ($
16
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On August 3, 2023, the Company
entered into an Amended and Restated Business Combination Agreement (as amended and restated, the “Business Combination Agreement”)
with Pubco, Merger Sub and EEW. The Original Agreement was amended, among other things, to (i) extend the date that either the Company
or EEW can terminate the Business Combination Agreement if the closing does not occur by September 30, 2023, and (ii) provide for a contingent
earn out of USD $
On November 29, 2023, the Company notified E.E.W. that the Company had elected to terminate the Amended and Restated Business Combination Agreement among, the Company, E.E.W. and the other parties thereto, dated as of August 3, 2023, effective immediately, pursuant to Section 9.1(b) and 9.2 thereof, since the conditions to the closing of the initial Business Combination were not satisfied or waived by the outside date of September 30, 2023. As a result, the Business Combination Agreement is of no further force and effect, except for certain specified provisions in the Business Combination Agreement, which shall survive the termination and remain in full force and effect in accordance with their respective terms.
On December 30, 2023, ClimateRock entered into the GreenRock Merger Agreement with Holdings, Merger Sub, and GreenRock. Pursuant to the GreenRock Merger Agreement, (a) Merger Sub will merge with and into ClimateRock, with ClimateRock continuing as the Merger, as a result of which, (i) ClimateRock shall become a wholly-owned subsidiary of Holdings, and (ii) each issued and outstanding security of ClimateRock immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled, in exchange for the right of the holder thereof to receive a substantially equivalent security of Holdings, and (b)(i) Holdings will make an offer to acquire each issued and outstanding GreenRock ordinary share in exchange for Holdings Ordinary Shares and (ii) Holdings shall also offer each holder of GreenRock’s outstanding vested options to purchase GreenRock ordinary shares, replacement options to purchase Holdings Ordinary Shares, all upon the terms and subject to the conditions set forth in the Business Combination Agreement and in accordance with the applicable provisions of the Cayman Act.
NOTE 7. SHAREHOLDERS’ EQUITY
Class A Ordinary Shares
— The Company is authorized to issue
Class B Ordinary Shares
— The Company is authorized to issue
Preference Shares
— The Company is authorized to issue
Warrants — The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering (together, the “Warrants”), except that the Private Placement Warrants will be subject to certain restrictions on transfer and entitled to registration rights.
The Warrants may only be exercised for a whole number of shares. The Private Placement Warrants (including ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable, or salable until 30 days after the completion of the initial Business Combination. Following such period, the Private Placement Warrants (including the ordinary shares issuable upon exercise of the Private Placement Warrants) will be transferable, assignable, or salable, except that the Private Placement Warrants will not trade. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade.
17
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the ordinary shares issuable upon exercise of the Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the ordinary shares issuable upon exercise of the Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the ordinary shares issuable upon exercise of the warrants is not effective by the ninetieth (90th) day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. The Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company may call the Warrants for redemption, once they become exercisable :
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of |
| ● | if, and only if, the last reported last sale price of the ordinary
shares equals or exceeds $ |
If the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share capitalization, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants shares. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
If: (i) the Company issues
additional ordinary shares or securities convertible into or exercisable or exchangeable for shares of ordinary shares for capital raising
purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $
18
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company accounts for the Public Warrants and the Private Placement Warrants as equity instruments, so long as the Company continues to meet the accounting requirements for equity instruments.
Rights — Each holder of a right included in the unit (the “Right”) will automatically receive one-tenth (1/10) of one share of ordinary shares upon consummation of a Business Combination, except in cases where we are not the surviving company in a Business Combination, and even if the holder of such Right redeemed all shares of ordinary shares held by it in connection with a Business Combination. No additional consideration will be required to be paid by a holder of a Right in order to receive its additional shares upon consummation of a Business Combination, as the consideration related thereto has been included in the unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of Rights to receive the same per share consideration the holders of shares of ordinary shares will receive in the transaction on an as-exchanged for ordinary shares basis, and each holder of a Right will be required to affirmatively exchange its Rights in order to receive the 1/10 share underlying each Right (without paying any additional consideration) upon consummation of a Business Combination. More specifically, the Rights holder will be required to indicate its election to exchange the Right for the underlying shares within a fixed period of time after which period the Rights will expire worthless.
Pursuant to the Rights agreement, a Rights holder may exchange Rights only for a whole number of shares of ordinary shares. This means that the Company will not issue fractional shares in connection with an exchange of Rights and Rights may be exchanged only in multiples of 10 Rights (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like). Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law.
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any such funds with respect to their Rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Rights, and the Rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to holders of the rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the Rights. Accordingly, the Rights may expire worthless.
NOTE 8. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the consolidated balance sheet date but before the consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2024, up through the date the Company issued the consolidated financial statements.
On April 10, 2024, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of Nasdaq notifying the Company that the Company’s public holders of its Class A ordinary shares (“Public Holders”) were below the 400 Public Holders minimum requirement for continued inclusion on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(2) (the “Public Holders Requirement”). The notifications received have no immediate effect on the Company’s Nasdaq listing. The Nasdaq rules provide the Company 45 calendar days to submit a plan to regain compliance and a compliance period of up to 180 calendar days in which to evidence compliance.
19
CLIMATEROCK
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On April 19, 2024, the Company received a notice from Ms. Caroline Harding, an independent director of the Company, of her decision to resign as a member of the Company’s board of directors and all committees thereof, effective April 26, 2024. Ms. Harding has been an independent director of the Company for approximately 2 years since April 2022. The resignation of Ms. Harding is for personal reasons and does not result from any dispute with the Company.
On April 24, 2024, the Company received a notice from Mr. Randolph Sesson, Jr., an independent director of the Company, of his decision to resign as a member of the board of directors and all committees thereof, effective April 26, 2024. Mr. Sesson, Jr. has been an independent director of the Company for more than 2 years since the inception of the Company in December 2021. The resignation of Mr. Sesson, Jr. is for personal reasons and does not result from any dispute with the Company.
April 29, 2024, the Company
held the 2024 EGM and approved, among other things, an amendment to the amended and restated memorandum and articles of association to
(i) extend the date by which the Company would be required to consummate a Business Combination from May 2, 2024 to May 2, 2025 (or such
earlier date as determined by the board of directors in its sole discretion) and (ii) to permit the Company’s board of directors,
in its sole discretion, to elect to wind up operations on, or on an earlier date than May 2, 2025. In connection with the 2024 EGM, shareholders
holding
On April 30, 2024, the Company
issued a convertible promissory note (the “2024 Extension Note”) in the aggregate principal amount of $
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to ClimateRock. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to U.N. SDG Support LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.
Overview
The Company is a Cayman Islands exempted company incorporated as a blank check company on December 6, 2021. The Company was formed for the purpose of effecting an initial Business Combination.
Although the Company is not limited to a particular industry or geographic region for purposes of consummating an initial Business Combination, the Company focuses on opportunities in environmental protection, renewable energy, fighting climate change, and any other related industries. We will target companies with established operating models that have strong management teams, realigned capital structures, positive cash flows prospects, and a clear and well-defined pathway for growing profitably over the long-term. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2024, the Company had not yet commenced any operations. All activity through March 31, 2024 relates to the Company’s formation and our Initial Public Offering, which is described below, and post-offering activities in search for a target to consummate an initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate nonoperating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering (the “IPO Registration Statement”) was declared effective on April 27, 2022. On May 2, 2022, the Company consummated its Initial Public Offering of 7,875,000 units at $10.00 per Unit, including 375,000 Units that were issued pursuant to the underwriters’ partial exercise of their over-allotment option, generating gross proceeds of $78,750,000.
21
The Company commenced operations after obtaining adequate financial resources through (i) the Initial Public Offering of 7,875,000 Units at $10.00 per Unit (which includes 375,000 units in connection with the underwriter’s partial exercise of the over-allotment option) and (ii) the sale of 3,762,500 Private Placement Warrants with an exercise price of $11.50 per warrant at a price of $1.00 per Private Placement Warrant to the Sponsor.
The Units were listed on Nasdaq Global Market (“Nasdaq”). The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating an initial Business Combination. Nasdaq rules provide that the initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes). The Company will only complete an initial Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect an initial Business Combination.
Upon the closing of the Initial Public Offering, $10.15 per Unit sold in the Initial Public Offering was placed in the Trust Account and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of an initial Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Sponsor, officers, directors and advisors (the “Initial Shareholders”) have agreed (a) to vote their Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of an initial Business Combination, (b) not to propose an amendment to the Company’s amended and restated memorandum and articles of association with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve an initial Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the amended and restated certificate of incorporation relating to shareholders’ rights of pre-Business Combination activity and (d) that the Founder Shares and the Private Placement Warrants (including underlying securities) shall not participate in any liquidating distributions upon winding up if an initial Business Combination is not consummated. However, the Initial Shareholders will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its initial Business Combination.
Business Combination with EEW
On October 6, 2022, the Company entered into the Original Business Combination Agreement with Pubco, Merger Sub, and EEW. On August 3, 2023, the Company entered into the Business Combination Agreement with Pubco, Merger Sub and EEW. The Original Business Combination Agreement was amended, among other things, to (i) extend the date that either the Company or EEW can terminate the Business Combination Agreement if the closing does not occur by September 30, 2023, and (ii) provide for a contingent earn out of USD $150,000,000 in shares based on the achievement of a 2023 revenue milestone of USD $52,000,000.
On November 29, 2023, the Company notified EEW that the Company had elected to terminate the Business Combination Agreement among effective immediately, pursuant to Section 9.1(b) and 9.2 thereof, since the conditions to the closing of the initial Business Combination were not satisfied or waived by the outside date of September 30, 2023. As a result, the Business Combination Agreement is of no further force and effect, except for certain specified provisions in the Business Combination Agreement, which shall survive the termination and remain in full force and effect in accordance with their respective terms.
22
Extensions of Our Business Combination Period
On April 27, 2023, the Company held the 2023 EGM and approved, among other things, amendment to the Company’s amended and restated memorandum and articles of association to (i) extend the date by which the Company would be required to consummate a Business Combination from November 2, 2023 (assuming the Sponsor was to have effected the paid extensions as described in the definitive proxy statement as filed with the SEC on April 11, 2023) to May 2, 2024 (or such earlier date as determined by the Company’s board of directors in its sole discretion) , and (ii) to permit its board of directors, in its sole discretion, to elect to wind up the Company’s operations on, or on an earlier date than May 2, 2024 (including prior to May 2, 2023). In connection with the 2023 EGM, shareholders holding 5,297,862 Class A ordinary shares issued in the Company’s Initial Public Offering exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $55,265,334 (approximately $10.43 per share) will be removed from the Company’s Trust Account to pay such holders. On May 2, 2023, the Company issued the 2023 Extension Note in the aggregate principal amount of $900,000 to the Sponsor, which will be deposited into the Trust Account in monthly installments for the benefit of each Public Share that was not redeemed in connection with the Extension Amendment. As of March 31, 2024 and May 10, 2024, $825,000 and $900,000 had been deposited into the Trust Account, respectively.
On April 29, 2024, the Company held the 2024 EGM and approved, among other things, an amendment to our amended and restated memorandum and articles of association to (i) extend the date by which we would be required to consummate a Business Combination from May 2, 2024 to May 2, 2025 (or such earlier date as determined by the board of directors in its sole discretion) and (ii) to permit our board of directors, in its sole discretion, to elect to wind up our operations on, or on an earlier date than May 2, 2025. In connection with the 2024 EGM, shareholders holding 111,915 shares of our ordinary shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, approximately $1.27 million (approximately $11.37 per share) was removed from the Trust Account to pay such holders.
On April 30, 2024, the Company issued the 2024 Extension Note in the aggregate principal amount of $600,000 to the Sponsor, which will be deposited into the Trust Account in monthly installments for the benefit of each Public Share that was not redeemed in connection with the 2024 EGM. The Sponsor agreed to pay $50,000 per month that the board of directors decides to take to complete an initial Business Combination, commencing on May 2, 2024 and continuing through May 2, 2025 (or such earlier date as determined by the Company’s board of directors in its sole discretion). The 2024 Extension Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the initial Business Combination, and (b) the date of the Company’s liquidation. As of May 10, 2024, $50,000 had been deposited into the Trust Account.
GreenRock Business Combination
On December 30, 2023, we entered into the GreenRock Merger Agreement with GreenRock, Pubco, Company Merger Sub and SPAC Merger Sub. Pursuant to the GreenRock Merger Agreement, subject to the terms and conditions set forth therein, (i) SPAC Merger Sub will merge with and into our Company, with our Company continuing as the surviving entity and wholly-owned subsidiary of Pubco, in connection with which all of our existing securities will be exchanged for rights to receive securities of Pubco as set forth in the GreenRock Merger Agreement, and (ii) Company Merger Sub will merge with and into GreenRock, with GreenRock continuing as the surviving entity and wholly-owned subsidiary of Pubco.
For a full description of the GreenRock Merger Agreement and the proposed GreenRock Business Combination, please see Note 6 — “Commitments and Contingencies, Business Combination Agreement” and Part I, Item 1. Business, — “GreenRock Business Combination” of our Annual Report on Form 10-K for the year ended December 31, 2023.
Results of Operations
Our entire activity since inception up to March 31, 2024 is related to our formation, and our Initial Public Offering, and we will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest. We will generate nonoperating income in the form of interest income from the proceeds derived from the Initial Public Offering. We also expect to incur increased expenses as a result of becoming a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in search for a target to consummate an initial Business Combination.
23
For the three months ended March 31, 2024, the Company reported a net loss of $327,511, comprised of $372,627 of dividend income earned on the Trust Account and $23 of interest income offset by formation and operating costs of $670,161 and administrative service fees - related party of $30,000.
For the three months ended March 31, 2023, the Company reported a net income of $451,852, comprised of $858,477 of dividend income earned on the Trust Account offset by unrealized foreign exchange loss of $19,834, formation and operating costs of $356,791, and administrative success fees - related party of $30,000.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, public health considerations, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. We cannot at this time predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.
Liquidity, Capital Reserves and Going Concern
Initial Public Offering
On May 2, 2022, we consummated our initial public offering of 7,875,000 units, including 375,000 units that were issued pursuant to the underwriters’ partial exercise of their over-allotment option. Simultaneously, the Company sold 3,762,500 private placement warrants, including 112,500 private placement warrants that were issued pursuant to the underwriters’ partial exercise of the over-allotment option. From the proceeds of the initial public offering and private placement warrants, the Company retained approximately $1,100,000 for working capital needs after transfer of proceeds to the Trust Account and payment of expenses related to the initial public offering and directors and officers insurance.
Related-Party Loans
In order to finance transaction costs in connection with an initial Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us working capital loans.
On September 21, 2022, the Company entered into a loan agreement with Eternal B.V., an affiliate of the Company through common ownership, (the “Lender”) in the principal amount of up to $180,000, on an unsecured basis and bearing no interest (the “Second Eternal Loan”). The Second Eternal Loan was available to be drawn down from September 21, 2022 to March 31, 2023 and its maturity date is the date of the consummation of the initial Business Combination of the Company, as amended by the Eternal Loan Amendment. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Second Eternal Loan was $170,603 and no interest was accrued.
Additionally, on November 12, 2022, the Company entered into a loan agreement with the Lender in the principal amount of up to $300,000, on an unsecured basis and bearing no interest (the “Third Eternal Loan”). The Third Eternal Loan was available to be drawn down from November 12, 2022 to March 31, 2023 and its maturity date is the date of the consummation of the initial Business Combination of the Company, as amended by the Eternal Loan Amendment. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Third Eternal Loan was $300,000 and no interest was accrued.
On January 29, 2023, the Company entered into a loan agreement with the Lender in the principal amount of up to $50,000, on an unsecured basis and bearing no interest (the “Fourth Eternal Loan”). The Fourth Eternal Loan was available to be drawn down from January 29, 2023 to March 31, 2023 and its maturity date is the earlier of March 31, 2025 or the date of the consummation of the initial Business Combination of the Company, as amended by the Eternal Loan Amendment. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Fourth Eternal Loan was $50,000 and no interest was accrued.
24
On April 12, 2023, the Company entered into a loan agreement with the Lender for a loan facility in the principal amount of up to $500,000, on an unsecured basis and bearing no interest (the “Fifth Eternal Loan”). The Fifth Eternal Loan was available to be drawn down in four installments: $150,000 on April 12, 2023, $125,000 on May 3, 2023, $125,000 on June 3, 2023, and $100,000 on July 3, 2023. The maturity date of the loan is the date of the consummation of the initial Business Combination of the Company. As of March 31, 2024 and December 31, 2023, the Company borrowed an additional $153,619 beyond the initial terms of the loan and the outstanding balance of the Fifth Eternal Loan was $653,619 and no interest was accrued.
On November 1, 2023, the Company entered into a loan agreement with the Lender in the principal amount of up to $335,000 on an unsecured basis and bearing no interest (the “Sixth Eternal Loan”). The Sixth Eternal Loan was available to be drawn down from November 1, 2023 and its maturity date is the earlier of August 1, 2024 or the date of the initial Business Combination of the Company. In the event the Company does not repay the Sixth Eternal Loan within 10 days of the consummation of the initial Business Combination of the Company, the Company will pay an interest of five percent (5%) per month to the Lender until the date of repayment of the loan. As of March 31, 2024, the Company borrowed an additional $788,434 beyond the initial terms of the loan and the outstanding balance of the Sixth Eternal Loan was $1,123,434 and no interest was accrued. As of December 31, 2023, the Company borrowed an additional $22,302 beyond the initial terms of the loan and the outstanding balance of the Sixth Eternal Loan was $357,302 and no interest was accrued.
On November 1, 2023, the Company and the Lender agreed to the Eternal Loan Amendment requiring that in the event that Company does not repay each of the Second Eternal Loan, Third Eternal Loan, Fourth Eternal Loan, and Fifth Eternal Loan within 10 days of the consummation of the initial Business Combination of the Company, the Company will pay an interest of five percent (5%) per month to the Lender until the date of repayment of each loan.
Convertible Promissory Note
On May 2, 2023, the Company issued the 2023 Extension Note in the aggregate principal amount of $900,000 to the Sponsor, which will be deposited into the Trust Account in monthly installments in lieu of Paid Extensions for the benefit of each Public Share that was not redeemed in connection with the Extension Amendment. The Sponsor agreed to pay $75,000 per month until the completion of an initial Business Combination, commencing on May 2, 2023 and continuing through May 2, 2024 (or such earlier date as determined by the Company’s board of directors in its sole discretion). The 2023 Extension Note bears no interest during the drawdown period of the note and is repayable in full upon the earlier of (a) the date of the consummation of the initial Business Combination, and (b) the date of the Company’s liquidation. Per the 2023 Extension Note Amendment, if the Company does not repay the 2023 Extension Note within five days of the maturity date, five percent (5%) interest per month will accrue on the unpaid principal balance until the 2023 Extension Note is fully repaid. At any time prior to the payment in full of the principal balance of the convertible promissory note, the sponsor may elect to convert all or any portion of the unpaid principal balance into that number of warrants (the “Conversion Warrants”) at a conversion price of $1.00 per warrant. The Conversion Warrants shall be identical to the private placement warrants issued by the Company at the initial public offering. The Company has determined that the fair value of the 2023 Extension Note is par value. As of March 31, 2024, the outstanding balance of the 2023 Extension Note was $900,000 and no interest was accrued.
On April 30, 2024, the Company issued the 2024 Extension Note in the aggregate principal amount of $600,000 to the Sponsor, which will be deposited into the Trust Account in monthly installments for the benefit of each Public Share that was not redeemed in connection with the 2024 EGM. The Sponsor agreed to pay $50,000 per month that the board of directors decides to take to complete an initial Business Combination, commencing on May 2, 2024 and continuing through May 2, 2025 (or such earlier date as determined by the Company’s board of directors in its sole discretion). The 2024 Extension Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the initial Business Combination, and (b) the date of the Company’s liquidation.
Going Concern
As of March 31, 2024, the Company has a cash balance of $316,030 and a working capital deficit of $4,143,621. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the issuance date of the consolidated financial statements. Prior to consummation of a Business Combination, the Company has the ability to secure additional funding from the Sponsor or other related parties. There is no assurance that the Company’s plans to consummate a Business Combination will be successful by May 2, 2025. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2024.
25
Contractual Obligations
Registration Rights
Pursuant to a registration rights agreement entered into on April 27, 2022, the holders of the founder shares and the private placement warrants (and their underlying securities) are entitled to registration rights. The Company will bear the expenses incurred in connection with the filing of any registration statements pursuant to such registration rights.
Underwriting Agreement
Pursuant to the underwriting agreement, the underwriters received a cash underwriting discount of $1,181,250 following the consummation of the initial public offering. The underwriters are also entitled to a deferred commission of $2,362,500, which will be payable solely in the event that the Company completes an initial Business Combination. In addition, the underwriters also received 118,125 units in the initial public offering, with such units restricted from sale until the closing of the initial Business Combination and with no redemption rights from the Trust Account.
Additionally, the Company granted the underwriters for a period beginning on the closing of the initial public offering and ending on the earlier of the 12 month anniversary of the closing of an initial business combination or April 27, 2025, a right of first refusal to act as (i) exclusive financial advisor in connection with all of the Company’s proposed Business Combinations for a fee of up to 6.0% of the proceeds of the initial public offering (subject to the Company’s right to allocate up to 50% of such fee to another financial institution or extinguish such amount in Company’s sole discretion), and (ii) sole investment banker, sole book-runner and/or sole placement agent, at underwriters’ sole discretion, for each and every future public and private equity and debt initial public offering, including all equity linked financings, during such period for the Company or any successor to it or any of its subsidiaries, on terms agreed to by both the Company and underwriters in good faith.
Transaction Expenses
On May 31, 2022, the Company entered into an agreement (the “EGS Agreement”) with Ellenoff, Grossman & Schole LLP to act as U.S. securities council to the Company in connection with pending acquisition targets for the Company to acquire consistent with its Initial Public Offering and assist in U.S. securities work related to the initial Business Combination. The fee structure for this agreement is as follows: (i) an upfront retainer of $37,500 (ii) billing on an hourly basis for time (iii) each month fifty percent (50%) of the amount billed shall be due and owing (iv) the remaining fifty percent (50%) not paid on a monthly basis will be deferred until the closing of the initial Business Combination and will be paid with a twenty percent (20%) premium. As of March 31, 2024, and December 31, 2023, the total outstanding billed amount for services provided by EGS is $895,679 and $892,784 of which $447,840 and $446,392 (50% of the outstanding balance), respectively, is considered outstanding per the terms of the EGS Agreement and is included in accrued liabilities on the consolidated balance sheet. As the initial Business Combination cannot be deemed probable as of March 31, 2024 and December 31, 2023, respectively, and payment of the deferred portion of the outstanding balance is contingent upon a successful initial Business Combination, no amount was accrued for the deferred portion of the outstanding amount or the premium.
On August 17, 2022, we entered into an agreement (the “Maxim Letter Agreement”) with Maxim to pay a fee (the “Maxim Success Fee”) upon completion of one or more successful transactions. On October 3, 2022, the Company amended its agreement with Maxim (the “Maxim Amendment”). The Maxim Amendment states that we will pay to Maxim, upon closing of such successful transaction(s), a fee based upon the amount of cash the Company has in the Trust Account immediately prior to consummation of the transaction and/or contributed to the transaction. If the amount of such cash is less than $50,000,000, Maxim’s fee will be equal to $200,000 in cash and an additional $150,000 of common stock of the post-transaction Company (the “New Common Stock”). If the amount of such cash is equal to or greater than $40 million, the Maxim Success Fee will be $500,000 cash. If the amount of such cash is equal to or greater than $75 million, the Maxim Success Fee will be $500,000 cash and an additional $500,000 payable in either cash or New Common Stock, at the option of the Company. The New Common Stock will be issued to Maxim Partners LLC, will be valued at the same price per share/exchange ratio as in the definitive transaction documentation, and it will have unlimited piggyback registration rights. The Maxim Success Fee will be paid upon the consummation of the transaction.
26
On July 11, 2022, we entered into a letter agreement with ALANTRA Corporate Finance, S.A.U. (“ALANTRA”) and U.N. SDG Support Holdings LLC (“Sponsor Entity”), under which we engaged ALANTRA to act as our financial advisor for the design, negotiation, and execution of potential Business Combinations between the Company and one or more energy transition companies. On October 3, 2022, we amended such letter agreement (the “ALANTRA Letter Agreement”).
Under the ALANTRA Letter Agreement, we agreed to pay ALANTRA a retainer of $15,000 at the signing of the ALANTRA Letter Agreement plus a retainer fee of $20,000 per month that is due and payable on the last day of each month for a maximum period of five months. Should the aggregated value of the transaction be above $400,000,000, the retainer fee will increase up to $40,000 per month with the same maximum five-month period for the payment of any retainer fee.
If a transaction that is introduced by ALANTRA or by another institution to which no fees are due by the Company (e.g. an institution acting on behalf of a target) is completed the following remuneration will be due to ALANTRA as a remuneration for its services (“ALANTRA Success Fee”).
| ● | $1,600,000 payable by the Company; and |
| ● | $1,600,000 payable by or on behalf of the Sponsor Entity |
If a transaction is completed in North America, Asia, or Africa that is not introduced by ALANTRA and such transaction requires an introductory, advisory, or similar fee due by us, we shall pay ALANTRA an ALANTRA Success Fee in the form of:
| ● | For the first $300,000,000 of aggregated value of the transaction, 0.85% of each transaction purchase price; and |
| ● | For the aggregated value of the transaction above the first $300,000,000, 0.4% of each transaction purchase price |
Notwithstanding the above, it is agreed that the ALANTRA Success Fee will be subject to a minimum of EUR 1,000,000.
Each ALANTRA Success Fee shall be payable upon consummation of the applicable transaction (i.e. when the transaction is closed, following fulfillment, if applicable, of conditions precedent) regardless of (i) the calendar for the payment of the price, (ii) how the purchase price is funded, (iii) and any deferred payment subsequent to consummation of the transaction, or (iv) any adjustment to the price of the transaction subsequent to consummation.
On January 4, 2024, the Company entered into the MZHCI Agreement with MZHCI wherein MZHCI would act as consultant and advise, counsel, and inform designated officers and employees of the Company as it relates to pre & post IPO, De-SPAC readiness assessment, post transaction close preparation advisory, overall capital markets climate related to global macroeconomic conditions, world-leading exchanges, Company’s competitors, related business acquisitions in the relevant market segments, and other aspects of/or concerning the Company’s business about which MZHCI has knowledge or expertise. The MZHCI Agreement became effective upon execution and will remain active for a period of six months with automatic renewal every six months thereafter. Prior to the De-SPAC of the Company, the Company shall pay MZHCI $12,000 per month and subsequent to De-SPAC, the Company shall pay MZHCI $15,000 per month. At the successful close of the initial Business Combination, the Company will issue MZHCI $120,000 worth of ClimateRock restricted common stock, valued at the closing price on the first day of trading after the successful close of the initial Business Combination.
Related Party Transactions
Founder Shares
During the period ended December 31, 2021, we issued an aggregate of 2,156,250 Founder Shares to our Sponsor for an aggregate purchase price of $25,000 in cash. The Founder Shares included an aggregate of up to 281,250 shares subject to forfeiture by our Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Initial Shareholders would collectively own 20% of our issued and outstanding shares after the Initial Public Offering (assuming the Initial Shareholders did not purchase any Public Shares in the Initial Public Offering and excluding the securities underlying the Private Placement Warrants).
On May 2, 2022, the underwriters partially exercised the over-allotment option in respect of 375,000 Units and, as agreed with the Company, the underwriters waived their right to further exercise the option on May 5, 2022. Accordingly, a total of 93,750 of the Founder Shares are no longer subject to forfeiture on May 2, 2022, and 187,500 of the Founder Shares were forfeited, resulting in an aggregate of 1,968,750 Founder Shares issued and outstanding.
27
On March 31,2023, the Sponsor elected to convert 1,968,749 Class B ordinary shares to class A ordinary shares of the Company, on a one-for-one basis. These conversion shares are subject to the same restrictions as applied to the Class B ordinary shares before the conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial Business Combination as described in the prospectus for the Company’s Initial Public Offering. Following the conversion, the Sponsor owns 1,968,749 Class A ordinary shares and one Class B ordinary share.
Loans with Related Party
On September 21, 2022, the Company entered into a loan agreement with the Lender in the principal amount of up to $180,000, on an unsecured basis and bearing no interest (the “Second Eternal Loan”). The Second Eternal Loan was available to be drawn down from September 21, 2022 to March 31, 2023 and its maturity date is the date of the consummation of the initial Business Combination of the Company, as amended by the Eternal Loan Amendment. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Second Eternal Loan was $170,603 and no interest was accrued.
Additionally, on November 12, 2022, the Company entered into a loan agreement with the Lender in the principal amount of up to $300,000, on an unsecured basis and bearing no interest (the “Third Eternal Loan”). The Third Eternal Loan was available to be drawn down from November 12, 2022 to March 31, 2023 and its maturity date is the date of the consummation of the initial Business Combination of the Company, as amended by the Eternal Loan Amendment. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Third Eternal Loan was $300,000 and no interest was accrued.
On January 29, 2023, the Company entered into a loan agreement with the Lender in the principal amount of up to $50,000, on an unsecured basis and bearing no interest (the “Fourth Eternal Loan”). The Fourth Eternal Loan was available to be drawn down from January 29, 2023 to March 31, 2023 and its maturity date is the earlier of March 31, 2025 or the date of the consummation of the initial Business Combination of the Company, as amended by the Eternal Loan Amendment. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Fourth Eternal Loan was $50,000 and no interest was accrued.
On April 12, 2023, the Company entered into a loan agreement with the Lender for a loan facility in the principal amount of up to $500,000, on an unsecured basis and bearing no interest (the “Fifth Eternal Loan”). The Fifth Eternal Loan was available to be drawn down in four installments: $150,000 on April 12, 2023, $125,000 on May 3, 2023, $125,000 on June 3, 2023, and $100,000 on July 3, 2023. The maturity date of the loan is the date of the consummation of the initial Business Combination of the Company. As of March 31, 2024 and December 31, 2023, the Company borrowed an additional $153,619 beyond the initial terms of the loan and the outstanding balance of the Fifth Eternal Loan was $653,619 and no interest was accrued.
On November 1, 2023, the Company entered into a loan agreement with the Lender in the principal amount of up to $335,000 on an unsecured basis and bearing no interest (the “Sixth Eternal Loan”). The Sixth Eternal Loan was available to be drawn down from November 1, 2023 and its maturity date is the earlier of August 1, 2024 or the date of the initial Business Combination of the Company. In the event the Company does not repay the Sixth Eternal Loan within 10 days of the consummation of the initial Business Combination of the Company, the Company will pay an interest of five percent (5%) per month to the Lender until the date of repayment of the loan. As of March 31, 2024, the Company borrowed an additional $788,434 beyond the initial terms of the loan and the outstanding balance of the Sixth Eternal Loan was $1,123,434 and no interest was accrued. As of December 31, 2023, the Company borrowed an additional $22,302 beyond the initial terms of the loan and the outstanding balance of the Sixth Eternal Loan was $357,302 and no interest was accrued.
On November 1, 2023, the Company and the Lender agreed to the Eternal Loan Amendment requiring that in the event that Company does not repay each of the Second Eternal Loan, Third Eternal Loan, Fourth Eternal Loan, and Fifth Eternal Loan within 10 days of the consummation of the initial Business Combination of the Company, the Company will pay an interest of five percent (5%) per month to Eternal until the date of repayment of each loan.
Eternal is controlled by Charles Ratelband V, our Executive Chairman of the Board of Directors. Each member of our board of directors has been informed of Mr. Ratelband’s material interest in the loan agreements, and upon the approval and recommendation of our audit committee, our board of directors has determined that the loans are fair and in the best interests of us and has voted to approve the loans.
28
Convertible Promissory Note
On May 2, 2023, the Company issued the 2023 Extension Note in the aggregate principal amount of $900,000 to the Sponsor, which will be deposited into the Trust Account in monthly installments in lieu of the Paid Extensions for the benefit of each Public Share that was not redeemed in connection with the Extension Amendment. The Sponsor agreed to pay $75,000 per month until the completion of an initial Business Combination, commencing on May 2, 2023 and continuing through May 2, 2024 (or such earlier date as determined by the Company’s board of directors in its sole discretion). The 2023 Extension Note bears no interest during the drawdown period of the note and is repayable in full upon the earlier of (a) the date of the consummation of the initial Business Combination, and (b) the date of the Company’s liquidation. Per the 2023 Extension Note Amendment, if the Company does not repay the 2023 Extension Note within five days of the maturity date, five percent (5%) interest per month will accrue on the unpaid principal balance until the 2023 Extension Note is fully repaid. At any time prior to the payment in full of the principal balance of the convertible promissory note, the Sponsor may elect to convert all or any portion of the unpaid principal balance into that number of warrants (the “Conversion Warrants”) at a conversion price of $1.00 per warrant. The Conversion Warrants shall be identical to the Private Placement Warrants issued by the Company at the Initial Public Offering. The Company has determined that the fair value of the 2023 Extension Note is par value. As of March 31, 2024, $900,000 has been drawn down under the 2023 Extension Note.
On April 30, 2024, the Company issued the 2024 Extension Note in the aggregate principal amount of $600,000 to the Sponsor, which will be deposited into the Trust Account in monthly installments for the benefit of each Public Share that was not redeemed in connection with the 2024 EGM. The Sponsor agreed to pay $50,000 per month that the board of directors decides to take to complete an initial Business Combination, commencing on May 2, 2024 and continuing through May 2, 2025 (or such earlier date as determined by the Company’s board of directors in its sole discretion). The 2024 Extension Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the initial Business Combination, and (b) the date of the Company’s liquidation.
Administrative Service Fee
The Company entered into an administrative services agreement (the “Administrative Services Agreement”) with the Sponsor on April 27, 2022 whereby the Sponsor will perform certain services for the Company for a monthly fee of $10,000. On May 2, 2022, the Sponsor entered into an assignment agreement with Gluon Group, an affiliate of the Company, to provide the services detailed in the Administrative Service Agreement. An officer of the Company owns 505 shares of Gluon Group and serves as managing partner. As of March 31, 2024, $39,187 has been paid to Gluon Group for such services and an additional $214,941 and $184,941, respectively, has been accrued.
Advisory Services
On September 21, 2022, the Company entered into an agreement (the “Letter Agreement”) with Gluon Partners LLP (“Gluon”) to pay a fee (the “Transaction Success Fee”) upon completion of one or more successful transactions. The Company will pay Gluon $500,000 upon completion of one or more transactions with an aggregate purchase price of less than $400,000,000; and, an additional $500,000 upon completion of one or more transactions with an aggregate purchase price of more than $400,000,000. This means the total remuneration for transactions with a purchase price more than $400,000,001 would be $1,000,000. The transactions purchase price will correspond to the price paid to the sellers of the applicable target, including cash, debt, and equity funded payments. Each Transaction Success Fee will be payable upon consummation of the applicable transaction, regardless of (i) the calendar for the payment of the purchase price, (ii) how the purchase price is funded, (iii) any deferred payment subsequent to consummation of the transaction, or (iv) any adjustments to the price of the transaction subsequent to consummation. Following payment of Transaction Success Fee, any accrued fees payable to the Gluon Group by the Company will be waived.
29
On October 5, 2022, the Company and Gluon agreed to lower the Transaction Success Fee to a total payment of $250,000 upon successful completion of one of more transactions with an aggregate purchase price equal or more than $400,000,000.
In addition, the Letter Agreement was amended to entitle Gluon, with respect to any financing undertaken by the Company introduced by Gluon during the term of the Letter Agreement, to the following fees: (i) for a financing involving an issuance of the Company’s senior, subordinated and/or mezzanine debt securities, a cash fee payable at any closing equal to two percent (2.0%) of the gross proceeds received by the Company at such closing; (ii) for a financing involving equity, equity-linked or convertible securities, a cash fee payable at each closing equal to five percent (5.0%) of the gross proceeds received by the Company at such closing.
In addition to the Transaction Success Fee, the Company agreed to pay Gluon Group for any reasonable and documented out-of-pocket expenses incurred in connection with providing the services for the transactions. In the event of a successful initial Business Combination, Gluon also agreed to waive any accrued fees owed by the Company.
In addition to the Gluon Success Fee, the Company agreed to pay Gluon Group for any reasonable and documented out-of-pocket expenses incurred in connection with providing the services for the transactions.
Per Regnarsson, the Chief Executive Officer and a director of the Company, is the Managing Partner of Gluon Partners. Each member of the Company’s board of directors has been informed of Mr. Regnarsson’s material interest in the Gluon Letter Agreement, and upon the approval and recommendation of the Company’s audit committee, the Company’s board of directors has determined that the Gluon Letter Agreement is fair and in the best interests of the Company and has voted to approve the Gluon Letter Agreement.
Critical Accounting Estimates
The preparation of the consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. Our significant accounting policies are discussed in Note 2, “Summary of Significant Accounting Policies”, of the unaudited Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Certifying Officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2024. Based upon their evaluation, our Certifying Officers concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective as of the quarterly period ended March 31, 2024.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
Other than as discussed above, there have been no changes to our internal control over financial reporting during the quarterly ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
ITEM 1A. RISK FACTORS
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Quarterly Report. For additional risks relating to our operations, see the section titled “Risk Factors” contained in our (i) IPO Registration Statement, (ii) Annual Reports on Form 10-K for the year ended December 31, 2023 and December 31, 2022, as filed with the SEC on March 18, 2024 and February 17, 2023, respectively, and (iii) Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2023, June 30, 2023, March 31, 2023, September 30, 2022, and June 30, 2022, as filed with the SEC on November 14, 2023 and amended on March 14, 2024, August 14, 2023 and amended on March 14, 2024, May 8, 2023 and amended on March 14, 2024, November 9, 2022 and amended on December 21, 2022 and March 14, 2024, and August 11, 2022 and amended on March 14, 2024, respectively, and (iv) definitive proxy statements on Schedule 14A, as filed with the SEC on April 11, 2023 and April 12, 2024, respectively. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
For risks related to GreenRock and the GreenRock Business Combination, please see the Registration Statement on Form F-4 filed by Pubco in connection with the GreenRock Business Combination on January 26, 2024, as amended on March 29, 2024 and as may be further amended from time to time.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None.
Use of Proceeds
For a description of the use of proceeds generated in our Initial Public Offering and Private Placement, see Part II, Item 2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, as filed with the on SEC on June 10, 2022. There has been no material change in the planned use of proceeds from the Company’s Initial Public Offering and Private Placement as described in the registration statement for the Initial Public Offering.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no such repurchases of our equity securities by us or an affiliate during the quarterly period covered by this Quarterly Report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the quarterly period
ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act)
Additional Information
None.
32
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| * | Filed herewith. |
| ** | Furnished herewith. |
33
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 15, 2024 | CLIMATEROCK | |
| By: | /s/ Per Regnarsson | |
| Per Regnarsson | ||
| Chief Executive Officer | ||
| By: | /s/ Abhishek Bawa | |
| Abhishek Bawa | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
34