FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2024
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2024
Inflection Point Acquisition Corp. II, a special purpose acquisition company, filed its Form 10-Q for the quarter ended September 30, 2024. The company reported a net loss of $1.4 million for the three months ended September 30, 2024, compared to a net loss of $0.3 million for the same period in 2023. As of September 30, 2024, the company had cash and cash equivalents of $25.4 million and a working capital deficit of $1.4 million. The company’s condensed balance sheet as of September 30, 2024, showed total assets of $26.1 million and total liabilities of $27.5 million. The company’s management’s discussion and analysis of financial condition and results of operations highlights the company’s focus on identifying and acquiring a target business, and notes that the company has not yet generated any revenue.
Overview
USA Rare Earth Acquisition Corp. is a special purpose acquisition company (SPAC) formed in March 2023 for the purpose of merging with or acquiring a business. The company has not yet engaged in any operations or generated any revenue, but has been focused on preparing for its initial public offering (IPO) and identifying a target company for a business combination.
Results of Operations
Since its inception in March 2023 through September 2024, the company has generated net income from interest and dividend income earned on the funds held in its trust account, which were raised through the IPO and private placement of warrants. The company has incurred operating expenses related to being a public company, as well as expenses for due diligence and identifying a potential acquisition target.
For the three and nine months ended September 30, 2024, the company reported net income of $1.5 million and $7.5 million, respectively. This was primarily driven by interest and dividend income earned on the trust account funds, partially offset by operating costs.
For the three months and period from inception through September 30, 2023, the company reported net income of $2.9 million and $3.7 million, respectively, also driven by interest income on the trust account.
Business Combination with USARE
On August 21, 2024, the company entered into a business combination agreement to merge with USARE, a rare earth company. Key terms of the transaction include:
Table 1: Key Terms of USARE Business Combination
| Term | Description |
|---|---|
| Domestication | The company will change its jurisdiction of incorporation from the Cayman Islands to Delaware prior to the closing. |
| Consideration | The aggregate consideration will be (A) the Aggregate Base Consideration, which is $800 million minus USARE’s indebtedness, divided by the redemption price per share, plus (B) up to 10 million shares of the combined company as Aggregate Earn-out Consideration. |
| Exchange Ratio | The Exchange Ratio will be the Aggregate Base Consideration divided by the USARE Fully Diluted Capital. |
| Earn-out Consideration | 50% of the Earn-out Consideration will vest if the combined company’s stock price is ≥$15 for 20 out of 30 trading days, and the remaining 50% will vest if the stock price is ≥$20 for 20 out of 30 trading days during the 5-year earnout period. |
| Series A Preferred Stock | The company will issue $9.1 million of Series A Preferred Stock to an affiliate investor, and $1.25 million to the CEO in exchange for forgiveness of a promissory note. |
Liquidity and Capital Resources
As of September 30, 2024, the company had $269 million held in its trust account from the IPO proceeds, and $141,201 in cash outside the trust account. The company intends to use the trust account funds, along with the proceeds from the Series A Preferred Stock investment, to complete the business combination with USARE.
The company may need to raise additional capital through loans or investments to finance its operations prior to the business combination, as the funds outside the trust account may not be sufficient. This raises substantial doubt about the company’s ability to continue as a going concern.
Contractual Obligations
The company’s main contractual obligations are the monthly fee of $14,746 paid to an affiliate for CFO and other services, and the deferred underwriting commission of up to $13.1 million owed to the IPO underwriters, which will be reduced to $4 million in cash or $2 million cash plus 400,000 shares under the Fee Reduction Agreement.
Critical Accounting Policies
The company’s critical accounting policies include net income per share calculation and recently issued accounting standards. Management does not believe any new accounting standards will have a material impact on the financial statements.
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