Montana Technologies Corp
For the period ended Jun 30, 2024. Filed Aug 23, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 23, 2024
AIRJ$2.39+13.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-20.
0001213900-24-045260
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-23.
0001213900-24-072000
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 114 previous paragraphs and 129 current paragraphs.
74 unchanged; 24 reworded; 28 added; 16 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 7 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
On June 5, 2024, the Company entered into subscription agreements (the “ Additional Subscription Agreements”) with certain continuing and new investors (the “PIPE Investors”), pursuant to which, among other things, the PIPE Investors agreed to subscribe for and purchase from Montana, and Montana agreed to issue and sell to the PIPE Investors, an aggregate of approximately 1,238,500 shares of Class A common stock, par value $0.0001 for an aggregate purchase price of $12,385,000. The purchase of shares under this agreement was completed in June 2024.
Current report
Investment in AirJoule, LLC
Current report
We own 50% interest in AirJoule, LLC. A variable interest entity (“VIE”), AirJoule, LLC is to be consolidated by its primary beneficiary if the Company has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The Company determined that it does not meet the control criterion for consolidating AirJoule and, accordingly, accounts for its variable interest in AirJoule, LLC under the equity method.
Current report
In addition to $10.0 million in cash, we contributed a perpetual license in our intellectual property with a carrying value of zero in exchange for the investment in AirJoule. In applying the equity method, our investment was initially recorded at fair value on the consolidated balance sheet. As such the Company recognized a gain of $333.5 million (and treated as a temporary item for tax purposes resulting in a deferred tax liability of approximately $87.8 million) as presented on the accompanying condensed consolidated statements of operations.
Current report
Our share of the losses reported by AirJoule, LLC are classified as equity loss from investment in AirJoule, LLC. The investment is evaluated for impairment annually and if facts and circumstances indicate that the carrying value may not be recoverable, an impairment charge would be recorded.
Current report
Equity Method Investment
Current report
In accordance with ASC 323, Investments - Equity Method and Joint Ventures, investments in entities over which the Company does not have a controlling financial interest but has significant influence are accounted for using the equity method, with the Company’s share of earnings or losses reported in earnings or losses from equity method investments on the statements of operations. Under the equity method, the Company’s investments are initially measured and recognized using the cost accumulation model following the guidance in ASC 805-50-30. After initial recognition, the consolidated financial statements include the Company’s share of undistributed earnings or losses, and impairment, if any, until the date on which significant influence ceases.
Current report
The Company’s equity method investments are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value may have occurred. When a loss is deemed to have occurred and is other than temporary, the carrying value of the equity method investment is written down to fair value. In evaluating whether a loss is other than temporary, the Company considers the length of time for which the conditions have existed and its intent and ability to hold the investment.
Current report
Income Taxes
Current report
Prior to the Business Combination on March 14, 2024, the Company was a limited liability company (“LLC”) and treated as a partnership for income tax purpose. As a Partnership, the Company was not directly liable for federal income taxes. As of the date of the Business Combination, the operations of the Company ceased to be taxed as a partnership resulting in a change in tax status for federal and state income tax purposes.
Current report
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that is included in the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Current report
ASC 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 recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. Management has evaluated the Company’s tax positions, including its previous status as a pass-through entity for federal and state tax purposes, and has determined that the Company has taken no uncertain tax positions that require adjustment to the condensed consolidated financial statements. The Company’s reserve related to uncertain tax positions was zero as of June 30, 2024 and December 31, 2023. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
Current report
Research and Development expenses for the three months ended June 30, 2024 was $1,050,804 as compared to $1,099,143 for the three months ended June 30, 2023. The $48,339 decrease in research and development is a result of timing of services and purchases. The Company expects that its research and development expenses will increase in future periods commensurate with the expected growth of its business.
Current report
Sales and marketing for the six months ended June 30, 2024 was $112,566 as compared to $138,576 for the six months ended June 30, 2023. In 2023, Montana incurred non-recurring expenses related to business development that ended in July 2023. Montana expects that its sales and marketing expenses will increase in future periods commensurate with the expected growth of its business.
Current report
Transaction costs incurred in connection with business combination
Current report
Transaction costs incurred in connection with the business combination include the non-cash recognition of earnout liabilities of approximately $53.7 million and transaction costs incurred by Legacy Montana of approximately $1.0 million, which were paid in 2024.
Current report
Gain on contribution to AirJoule, LLC
Current report
An equity method investment received in exchange for noncash consideration is measured at fair value. As a result, for the six months ended June 30, 2024, we recognized a gain of $333,500,000 on the contribution to AirJoule, LLC for the difference between our zero carrying value and the fair value of the perpetual license to intellectual property that we transferred to AirJoule, LLC.
Current report
The Company determined the fair value of the intellectual property by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to forecasted revenue growth rate and customer attrition rate, Level 3 measurements. Valuation specialists were used to develop and evaluate the appropriateness of the multi-period excess earnings method, the Company's discount rates, attrition rate and fair value estimates using its cash flow projections.
Current report
Equity loss on earnings from investment AirJoule, LLC
Current report
As previously noted, on January 25, 2024, we entered into a joint venture with GE Ventures LLC, the AirJoule JV which closed on March 4, 2024. For the three months ended June 30, 2024 and for the period from March 4, 2024 to June 30, 2024, we recognized a loss of $580,788 and $607,170, respectively from our 50% equity investment in the AirJoule JV.
Current report
Income Taxes
Current report
For the three and six months ended June 30, 2024, income tax benefit/(expense) was $1,237,824 and $(84,487,339), respectively. During the three and six months ended June 30, 2024, the Company’s contribution of a perpetual license to AirJoule, LLC’s intellectual property was measured at fair value and resulted in a book gain and a temporary difference between book and taxable income. The temporary difference resulted in the recognition of a deferred tax expenses and deferred tax liabilities of approximately $87.8 million. This expense was partially offset by the recognition of deferred tax assets in connection with the Company now being a corporation through the Business Combination.
Current report
Upon consummation of the Business Combination, the Company expensed approximately $53.7 million in Earnout Shares liability. The change in fair value of $13.1 million and $5.4 million for the three and six months ended June 30, 2024, is due to a decrease in the estimated fair value of the liability and is recognized as a gain in other income (expenses) in the statements of operations. The fair value of the liability decreased primarily due changes in the valuation inputs, mainly a change in the timing of future cash flows, a decrease in the stock price and an increase in the volatility.
Current report
Upon consummation of the Business Combination, the Company assumed approximately $11.8 million for the subject vesting shares liability. The change in fair value of income of $1.8 million and a loss of $0.7 million during the three and six months ended June 30, 2024, respectively, is due to a decrease and increase, respectively, in the estimated fair value of the liability recognized as a gain and (loss), respectively, in the condensed consolidated statements of operations. The stock price at June 30, 2024 decreased compared to the stock price as of March 31, 2024, which was the primary reason for the decrease in the liability in the three months ended June 30, 2024. However, compared to the date of closing, the stock price was higher as of June 30, 2024, substantially contributing to an increase in the estimated liability in the six months ended June 30, 2024.
Current report
Upon consummation of the Business Combination, the Company assumed approximately $555,000 in earnout true up shares liability. The change in fair value of the liability of $(0.1) million and $0.1 million during the three and six months ended June 30, 2024, respectively, is due to an increase and decrease, respectively as a result of changes in the Company’s stock price, in the estimated fair value of the liability recognized as a (loss) and gain, respectively, in the condensed consolidated statements of operations.
Current report
Gain on settlement of legal fees
Current report
During the three and six months ended June 30, 2024, the Company recognized a gain on the settlement of legal fees related to the transaction costs of the Business Combination. There were no such gains in the three and six months ended June 30, 2023.
Removed paragraphs (16)
Previous report
Variable Interest Entity
Previous report
AirJoule, LLC is a variable interest entity which the Company consolidates. Accordingly, the assets and liabilities contributed by the Company, as the primary beneficiary, were initially recorded at their previous carrying amounts in a manner consistent with the accounting under ASC 805-50-30 for transactions between legal entities under common control. The assets and liabilities contributed by GE Vernova met the definition of a business under ASC 805-10-55-3A. Consequently, the assets, including the assembled workforce and processes contributed by GE Vernova, which was determined to be a business and is not under common control was measured by the Company in accordance with ASC 805-20 and ASC 805-30. Accordingly, the assets, liabilities, and non-controlling interests of the VIE were measured at fair value as of the date the Company was determined to be the primary beneficiary (the “acquisition date”), which includes the recognition of goodwill and other intangible assets, if any.
Previous report
Subsequently, the assets, liabilities, and non-controlling interests of the VIE will be consolidated in the Company’s financial statements and profits and losses of the VIE will be allocated to the non-controlling interest held by GE Vernova. Intercompany transactions will be eliminated upon consolidation.
Previous report
The Company recognizes non-controlling interests related to its consolidated VIEs in the condensed consolidated balance sheets as a component of equity, separate from the Company’s stockholders’ equity. Changes in the Company’s ownership interest in a consolidated VIE that do not result in a loss of control are accounted for as equity transactions. The non-controlling interests related to its consolidated VIEs are initially recorded at fair value. The Company records adjustments to non-controlling interests for the allocable portion of income or loss to which the non-controlling interest holders are entitled. Distributions to holders of non-controlling interests are adjusted to the respective non-controlling interest holders’ balance.
Previous report
The amount of net loss attributable to non-controlling interests is included in consolidated net loss on the face of the condensed consolidated statements of operations.
Previous report
Goodwill
Previous report
Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. The impairment assessment includes an evaluation of various reporting units, which is an operating segment or one reporting level below the operating segment. First, the Company assesses qualitative factors to determine whether or not it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company recognizes an impairment loss in the consolidated statement of operations for the amount by which the carrying amount exceeds the fair value of the reporting unit. The Company performs its annual goodwill impairment test at October 1. No impairment loss was recognized as of March 31, 2024.
Previous report
In-Process Research & Development
Previous report
In accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC Topic 350”), goodwill and acquired IPR&D are determined to have indefinite lives and, therefore, are not amortized. Instead, they are tested for impairment annually, in our fourth quarter, and between annual tests if we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired.
Previous report
In-Process Research and Development (“IPR&D”) acquired in a business combination is capitalized as indefinite-lived assets on our consolidated balance sheets at the recognition date fair value. IPR&D relates to amounts that arose in connection with the consolidation of AirJoule, LLC. Once the project is completed, the carrying value of the IPR&D is reclassified to other intangible assets, net and is amortized over the estimated useful life of the asset. Post-acquisition research and development expenses related to the IPR&D projects are expensed as incurred. The projected discounted cash flow models used to estimate the fair values of our IPR&D assets, acquired in connection with AirJoule, LLC, reflect significant assumptions regarding the estimates a market participant would make in order to evaluate the development asset, including: (i) probability of successfully completing and obtaining regulatory approval; (ii) market size, market growth projections, and market share; (iii) estimates regarding the timing of and the expected costs to commercialization; (iv) estimates of future cash flows from potential product sales; and (v) a discount rate. These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The use of different inputs and assumptions could increase or decrease our estimated discounted future cash flows, the resulting estimated fair values and the amounts of related impairments, if any.
Previous report
The annual, or interim (if events or changes in circumstances indicate that it is more likely than not that the asset is impaired), IPR&D impairment test is performed by comparing the fair value of the asset to the asset’s carrying amount. When testing indefinite-lived intangibles for impairment, we may assess qualitative factors for its indefinite-lived intangibles to determine whether it is more likely than not that the asset is impaired. Alternatively, we may bypass this qualitative assessment for our indefinite-lived intangible asset and perform the quantitative impairment test that compares the fair value of the indefinite-lived intangible asset with the asset’s carrying amount. If IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is written down to the revised fair value with the related impairment charge recognized in the period in which the impairment occurs. If the carrying value of the asset becomes impaired as the result of unfavorable data from any ongoing or future processes, changes in assumptions that negatively impact projected cash flows, or because of any other information regarding the prospects of successfully developing or commercializing our programs, we could incur significant charges in the period in which the impairment occurs. No impairment loss was recognized as of March 31, 2024.
Previous report
Upon consummation of the Business Combination, the Company assumed approximately $53.7 million in earnout shares liability. The change in fair value of $7.7 million during the three months ended March 31, 2024 is recognized as other expenses for the period.
Previous report
Upon consummation of the Business Combination, the Company assumed approximately $11.8 million in earnout shares liability. The change in fair value of $2.4 million during the three months ended March 31, 2024 is recognized as other expenses for the period.
Previous report
Upon consummation of the Business Combination, the Company assumed approximately $555,000 in earnout shares liability. The change in fair value of $269,000 during the three months ended March 31, 2024 is recognized as other income for the period.
Previous report
Cash flows from operating activities
Previous report
Cash flows from financing activities
Reworded paragraphs (24)
Previous wording
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023, and our audited financial statements as of the year ended December 31, 2023, included in Form 8-K filed with the SEC on March 20, 2024
Current wording
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” should be read in conjunction with our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023, and our audited financial statements as of the year ended December 31, 2023, included in Form 8-K filed with the SEC on March 20, 2024
Previous wording
This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included herein. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Current wording
This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included herein. Factors that might cause or contribute to such a discrepancy include, but are not limited to: our status as an early stage company with limited operating history, which may make it difficult to evaluate the prospects for our future viability; our initial dependence on revenue generated from a single product; significant barriers we face to deploy our technology; the dependence of our commercialization strategy on our relationship with third parties; our history of losses; and other risks and uncertainties described in our other Securities and Exchange Commission (“SEC”) filings.
Previous wording
Prior to the Closing, Montana entered into common unit subscription agreements (the “Subscription Agreements”) with certain investors party thereto (the “Investors”), resulting in Aggregate Transaction Proceeds in the Business Combination of approximately $43,365,000 million. Pursuant to the Subscription Agreements, and subject to the conditions set forth therein, the Investors agreed to purchase from Montana and Legacy Montana agreed to issue and sell to the Investors, an aggregate number of Legacy Montana Class B Common Units as converted into an aggregate of 5,807,647 shares of Class A common stock (such shares, the “Conversion Shares”) upon the Closing as part of the consideration relating thereto. As of March 31, 2024, there was a $6,000,000 receivable under this agreement and is reported as subscription receivable on the condensed consolidated statement of equity.
Current wording
Prior to the Closing, Montana entered into common unit subscription agreements (the “Subscription Agreements”) with certain investors party thereto (the “Investors”), resulting in Aggregate Transaction Proceeds in the Business Combination of approximately $43,365,000 million. Pursuant to the Subscription Agreements, and subject to the conditions set forth therein, the Investors agreed to purchase from Montana and Legacy Montana agreed to issue and sell to the Investors, an aggregate number of Legacy Montana Class B Common Units as converted into an aggregate of 5,807,647 shares of Class A common stock (such shares, the “Conversion Shares”) upon the Closing as part of the consideration relating thereto. On May 9, 2024 and May 10, 2024, the Company received $6.0 million owed under the Subscription Agreements as reported as subscription proceeds received on the condensed consolidated statements of equity (deficit).
Previous wording
Pursuant to the A&R Joint Venture Agreement, the Company contributed $10 million to the AirJoule JV at the JV Closing (the “Closing Contribution”). The Company has also agreed to contribute up to an additional $90 million in capital contributions to the AirJoule JV following the JV Closing based on a business plan and annual operating budgets to be agreed between the Company and GE Vernova. In general, for the first six years, GE Vernova has the right, but not the obligation, to make capital contributions to the AirJoule JV. Until GE Vernova elects to participate and contributes its pro-rata share of all past capital contributions and commits to contribute its pro-rata share for all future capital contributions (the “GE Match Date”), the Company shall be solely responsible for funding the AirJoule JV, and the Company shall have a distribution preference under the A&R Joint Venture Agreement for the amount of its post-closing capital contributions plus a 9.50% preferred return on such amounts.
Current wording
Pursuant to the A&R Joint Venture Agreement, the Company contributed $10 million in cash to the AirJoule JV at the JV Closing (the “Closing Contribution”) and in June 2024, GE Vernova contributed $100 to the AirJoule JV. The Company has also agreed to contribute up to an additional $90 million in capital contributions to the AirJoule JV following the JV Closing based on a business plan and annual operating budgets to be agreed between the Company and GE Vernova. In general, for the first six years, GE Vernova has the right, but not the obligation, to make capital contributions to the AirJoule JV. Until GE Vernova elects to participate and contributes its pro-rata share of all past capital contributions and commits to contribute its pro-rata share for all future capital contributions (the “GE Match Date”), the Company shall be solely responsible for funding the AirJoule JV, and the Company shall have a distribution preference under the A&R Joint Venture Agreement for the amount of its post-closing capital contributions plus a 9.50% preferred return on such amounts.
Previous wording
We estimate the fair value of Earnout Shares awards underlying stock options, which is considered a compensatory award and accounted for under ASC 718,Share-Based Compensation, using the Monte-Carlo simulation model*.*The Monte-Carlo simulation model was selected as the valuation methodology for the Earnout Shares due to the path-dependent nature of triggering events. Under ASC 718, the award is measured at fair value at the grant date and expense is recognized over the time-based vesting period (the triggering event is a market condition and does not impact expense recognition). The Monte-Carlo model requires the use of highly subjective and complex assumptions, estimates and judgements, including the current stock price, volatility of the underlying stock, expected term the risk-free interest rate, the selection of comparable companies, and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of Common Stock. An increase of 100-basis points in interest rates would not have a material impact on the Company’s stock-based compensation.
Current wording
The Company estimates the fair value of Earnout Shares awards to employees, which are considered compensatory awards and accounted for under ASC 718 using the Monte-Carlo simulation model*.*The Monte-Carlo simulation model was selected as the valuation methodology for the Earnout Shares due to the path-dependent nature of triggering events. Under ASC 718, such Earnout shares are measured at fair value as of the grant date and expense is recognized over the applicable time-based vesting period (the triggering event is a market condition and does not impact expense recognition). The Monte-Carlo model requires the use of highly subjective and complex assumptions, estimates and judgements, including the current stock price, volatility of the underlying stock, expected term the risk-free interest rate, the selection of comparable companies, and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of Common Stock. An increase of 100-basis points in interest rates would not have a material impact on the Company’s stock-based compensation. During the period from the date of the Business Combination through June 30, 2024 the Company did not record stock-based compensation expense associated with these Earnout Shares as the performance conditions associated with these Earnout Shares were not deemed probable of achievement. Unrecognized stock-based compensation expense for these Earnout Shares with a performance-based vesting condition that was not deemed probable of occurring as of June 30, 2024 was $13.0 million which is expected to vest subject to the performance-based vesting condition being satisfied or deemed probable.
Previous wording
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including the True Up Shares issued in connection with the Subscription Agreement and the Subject Vesting Shares issued in connection with the Business Combination, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Current wording
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including the True Up Shares issued in connection with the Subscription Agreement and the Subject Vesting Shares issued in connection with the Business Combination, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
Previous wording
The True Up Shares issued under the Subscription Agreement do not qualify as equity under ASC 815-40; therefore, the Class A common stock (the “True Up Shares”) is required to be classified as a liability and measured at fair value with subsequent changes in fair value recorded in earnings. Changes in the estimated fair value of the derivative liability is recognized as a non-cash gain or loss on the condensed consolidated statements of operations. The fair value of the derivative liability is discussed in Note 11.
Current wording
The True Up Shares issued under the Subscription Agreement do not qualify as equity under ASC 815-40; therefore, the Class A common stock (the “True Up Shares”) is required to be classified as a liability and measured at fair value with subsequent changes in fair value recorded in earnings. Changes in the estimated fair value of the derivative liability is recognized as a non-cash gain or loss on the condensed consolidated statements of operations. The fair value of the derivative liability is discussed in Note 11Fair Value Measurements.
Previous wording
The three months ended March 31, 2024 compared to the three months ended March 31, 2023
Current wording
The three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023
Previous wording
The following table sets forth the Company’s condensed consolidated statements of operations data for the three months ended March 31, 2024 and 2023.
Current wording
The following table sets forth the Company’s condensed consolidated statements of operations data for the three and six months ended June 30, 2024 and 2023:
Previous wording
General and administrative expenses for the three months ended March 31, 2024 was $827,576 as compared to $218,175 for the three months ended March 31, 2023. The $609,401 increase in general and administrative reflects increases in professional services such as legal and audit and accounting. Montana expects that its general and administrative expense will increase in future periods commensurate with the expected growth of its business and increased expenditures associated with its status as an exchange listed public company.
Current wording
General and administrative expenses for the three months ended June 30, 2024 was $3,211,205 as compared to $1,813,014 for the three months ended June 30, 2023. The $1,398,191 increase in general and administrative reflects increases in professional services such as legal, audit and accounting services. Montana expects that its general and administrative expenses will increase in future periods commensurate with the expected growth of its business and increased expenditures associated with its status as an exchange-listed public company.
Previous wording
Research and Development expenses for the three months ended March 31, 2024 was $896,613 as compared to $604,944 for the three months ended March 31 2023. The $291,669 increase in research and development reflects increases in personnel and prototype related costs as the Company continues to develop its products and technology. The Company expects that its research and development expense will increase in future periods commensurate with the expected growth of its business.
Current wording
Research and Development expenses for the six months ended June 30, 2024 was $1,896,961 as compared to $1,704,087 for the six months ended June 30, 2023. The $192,874 increase in research and development reflects increases in personnel and prototype related costs as the Company continues to develop its products and technology. The Company expects that its research and development expenses will increase in future periods commensurate with the expected growth of its business.
Previous wording
Sales and marketing for the three months ended March 31, 2024 was $37,725 as compared to $10,423 for the three months ended March 31, 2023. Montana expects that its sales and marketing expense will increase in future periods commensurate with the expected growth of its business.
Current wording
Sales and marketing for the three months ended June 30, 2024 was $74,841 as compared to $128,153 for the three months ended June 30, 2023. In 2023, Montana incurred non-recurring expenses related to business development that ended in July 2023. Montana expects that its sales and marketing expenses will increase in future periods commensurate with the expected growth of its business.
Previous wording
Depreciation expense for the three months ended March 31, 2024 and 2023 were $1,145 and $1,085, respectively.
Current wording
Depreciation expense for the three months ended June 30, 2024 and 2023 was $1,216 and $1,085, respectively. Depreciation expense for the six months ended June 30, 2024 and 2023 was $2,301 and $2,168, respectively.
Previous wording
Interest income of $38,236 for the three months ended March 31, 2024 is a result of an increase in cash balance after the close of the Business Combination.
Current wording
Interest income was $216,480 and $242,626, respectively for the three and six months ended June 30, 2024 compared to $3,551 for the three and six months ended June 30, 2023. This is a result of the increase in our cash balance after the closing of the Business Combination.
Previous wording
The Company’s primary sources of liquidity have been cash from contributions from founders or other investors. The Company had an accumulated deficit of $43.7 million as of March 31, 2024. As of March 31, 2024, the Company had $26.2 million of working capital including $37.4 million in cash.
Current wording
The Company’s primary sources of liquidity have been cash from contributions from founders or other investors through subscriptions agreements. The Company had retained earnings of approximately $177.8.0 million as of June 30, 2024. As of June 30, 2024, the Company had $32.4 million of working capital including $34.6 million in cash.
Previous wording
With the consummation of the Business Combination and Subscription Agreements (as described above), the Company received proceeds of approximately $40 million in March 2024, after giving effect to XPDB’s stockholder redemptions and payment of transaction expenses, which will be utilized to fund our product development, operations and growth plans. We believe that as a result of the Business Combination our existing cash and cash equivalents, as well as proceeds received from the Business Combination and cash received from Subscription Agreements, will be sufficient to fund operations for the next year from the date the financial statements were issued.
Current wording
With the consummation of the Business Combination and Subscription Agreements (as described above and in Note 4 –Recapitalization), the Company received proceeds of approximately $40 million in March 2024, and $6 million in May 2024, after giving effect to XPDB’s stockholder redemptions and payment of transaction expenses, which will be utilized to fund our product development, operations and growth plans. Additionally, in June 2024, the Company received gross proceeds of $12.4 million from existing and new investors for 1,238,500 million shares of Class A common stock pursuant to an Additional Subscription Agreement entered into on June 5, 2024.
Previous wording
Our future capital requirements will depend on many factors, including, the timing and extent of spending by the Company to support the launch of its product and research and development efforts, the degree to which it is successful in launching new business initiatives and the cost associated with these initiatives, and the growth of our business generally. Pursuant to the A&R Joint Venture Agreement, the Company contributed $10 million to the AirJoule JV at the JV Closing (the “Closing Contribution”). The Company has also agreed to contribute up to an additional $90 million in capital contributions to the AirJoule JV following the JV Closing based on a business plan and annual operating budgets to be agreed between the Company and GE Vernova. In general, for the first six years, GE Vernova has the right, but not the obligation, to make capital contributions to the AirJoule JV. In order to finance these opportunities and associated costs, it is possible that the Company would need to raise additional financing if the proceeds realized from the Business Combination and cash received from Subscription Agreements are insufficient to support its business needs. While management believes that the proceeds realized through the Business Combination and cash received from Subscription Agreements will be sufficient to meet its currently contemplated business needs, management cannot assure that this will be the case. If additional financing is required by us from outside sources, the Company may not be able to raise it on terms acceptable to it or at all. If the Company is unable to raise additional capital on acceptable terms when needed, its product development business, results of operations and financial condition would be materially and adversely affected.
Current wording
Our future capital requirements will depend on many factors, including, the timing and extent of spending by the Company to support the launch of its product and research and development efforts, the degree to which it is successful in launching new business initiatives and the cost associated with these initiatives, and the growth of our business generally. Pursuant to the A&R Joint Venture Agreement, the Company contributed $10 million in cash to the AirJoule JV at the JV Closing (the “Closing Contribution”) and in June 2024, GE Vernova contributed $100 to the AirJoule JV. The Company has also agreed to contribute up to an additional $90 million in capital contributions to the AirJoule JV following the JV Closing based on a business plan and annual operating budgets to be agreed between the Company and GE Vernova. In general, for the first six years, GE Vernova has the right, but not the obligation, to make capital contributions to the AirJoule JV. In order to finance these opportunities and associated costs, it is possible that the Company would need to raise additional financing if the proceeds realized from the Business Combination and cash received from Subscription Agreements are insufficient to support its business needs. While management believes that the proceeds realized through the Business Combination and cash received from Subscription Agreements will be sufficient to meet its currently contemplated business needs, management cannot assure that this will be the case. If additional financing is required by us from outside sources, the Company may not be able to raise it on terms acceptable to it or at all. If the Company is unable to raise additional capital on acceptable terms when needed, its product development business, results of operations and financial condition would be materially and adversely affected.
Previous wording
In October 2021, the Company entered into a patent license agreement with a third party whereby the third party granted the Company rights to use certain of their patents in exchange for an upfront payment and royalties based on a percentage of net sales until such patents expire. In connection with this, the Company agreed to a minimum royalty amount of which $62,500 and $37,500 was expensed for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024 and December 31, 2023, $62,500 and $150,000, respectively, was accrued by the Company in the accompanying condensed consolidated balance sheet.
Current wording
In October 2021, the Company entered into a patent license agreement with a third party whereby the third party granted the Company rights to use certain of their patents in exchange for an upfront payment and royalties based on a percentage of net sales until such patents expire. In connection with this, the Company agreed to a minimum royalty amount of which $62,500 and $37,500 was expensed for the three months ended June 30, 2024 and 2023, respectively and $125,000 and $62,500 was expensed for the six months ended June 30, 2024 and 2023, respectively. At June 30, 2024 and December 31, 2023, $125,000 and $150,000, respectively, was accrued by the Company in the accompanying condensed consolidated balance sheet.
Previous wording
Future minimum royalties are as follows as of March 31,2024:
Current wording
Future minimum royalties are as follows as of June 30 ,2024:
Previous wording
Cash flows for the three months ended March 31, 2024 and 2023
Current wording
Cash flows for the six months ended June 30, 2024 and 2023
Previous wording
Net cash used in operating activities was $5,439,983 during the three months ended March 31, 2024 compared to net cash used in operating activities of $803,634 during the three months ended March 31, 2023. The period-to-period change was a result of Montana’s net loss for the period and a decrease in accounts payable and accrued expenses and other liabilities due to payments made partially offset by the change in fair value of earnout shares liability, change in fair value of True Up Shares and the change in fair value of Subject Vesting Shares.
Current wording
Net cash used in operating activities was $17,576,561 during the six months ended June 30, 2024 compared to net cash used in operating activities of $1,856,812 during the six months ended June 30, 2023. The period-to-period change was a result of Montana’s net loss from operations, a decrease in accounts payable, accrued expenses and other liabilities reflecting payments made in the six months ended June 30, 2024 and the change in fair value of earnout shares liability and True Up Shares.
Previous wording
Cash flows Used in Investing Activities
Current wording
Net Cash Used in Investing Activities
Previous wording
Net cash used in investing activities was $1,450 during the three months ended March 31, 2024 as a result of the purchase of fixed assets.
Current wording
Net cash used in investing activities was $10,006,554 during the six months ended June 30, 2024 compared to net cash used in investing activities of $96,025 for the six months ended June 30, 2023 as a result of the Company’s contribution made to AirJoule, LLC.
Previous wording
For the three months ended March 31, 2024, net cash provided by financing activities was $42,494,907 compared to net cash flow from financing activities of $255,861 during the three months ended March 31, 2023. The period-to-period change was primarily due to higher proceeds from the issuance of Legacy Montana common stock related to private placements prior to the Merger, and the exercise of stock options and warrants, partially offset by transaction costs incurred by Legacy Montana.
Current wording
For the six months ended June 30, 2024, net cash provided by financing activities was $61,855,930 compared to net cash flow from financing activities of $264,441 during the six months ended June 30, 2023. The period-to-period change was primarily due to higher proceeds from the issuance of Legacy Montana common stock related to private placements prior to the Merger and the exercise of stock options and warrants and the issuance of common stock to PIPE investors.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
General and administrative expenses for the six months ended June 30, 2024 was $4,024,444 as compared to $2,031,189 for the six months ended June 30, 2023. The $1,993,255 increase in general and administrative reflects increases in professional services such as legal and audit and accounting. Montana expects that its general and administrative expenses will increase in future periods commensurate with the expected growth of its business and increased expenditures associated with its status as an exchange listed public company.
Current report — wording carried from elsewhere
Net Cash Used in Operating Activities
Current report — wording carried from elsewhere
Net Cash flows Provided by Financing Activities