Business context and reporting period
This is the fiscal 2023 Form 10-K of Power & Digital Infrastructure Acquisition II Corp. (Nasdaq: XPDB), a special purpose acquisition company (SPAC), for the year ended December 31, 2023; it was filed March 11, 2024. The request metadata names Airjoule Technologies Corp., but that is not the issuer named in this filing. XPDB had no operating business or operating revenue and was searching for a business combination.
XPDB had a merger agreement with Montana Technologies LLC, which would become Montana Technologies Corporation if the transaction closes. A January 2025? No—the filing reports subsequent events only through March 8, 2024; at that point the transaction remained proposed and subject to closing conditions, including stockholder approval. Montana’s AirJoule water-capture technology is mentioned in a proposed joint venture with GE Vernova.
Financial results and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Operating revenue | None | None |
| Net income | $1.243 million | $2.042 million |
| Income from trust investments | $9.126 million | $4.188 million |
| Operating expenses | $6.330 million | $1.343 million |
| Net cash used in operating activities | $1.977 million | $1.724 million |
- 2023 operating expenses included $5.890 million of general and administrative expense, $240,000 of related-party administrative fees, and $200,000 of franchise taxes. Income tax expense was $1.759 million.
- At December 31, 2023, cash outside the trust was $59,167; trust assets were $114.642 million; total assets were $114.701 million; and total liabilities were $15.548 million. The balance sheet reported a working capital deficit of approximately $9.5 million.
- Current liabilities included $5.738 million accrued expenses, $695,515 accounts payable, a $900,000 related-party advance, and $1.881 million excise tax payable. Deferred underwriting commissions were $6.038 million. No working-capital loans were outstanding; the filing reports no other debt outstanding.
- Trust assets fell from $294.396 million at year-end 2022, largely reflecting 18,141,822 share redemptions in June 2023 for $188.132 million. After those redemptions, 10,608,178 Class A and 7,187,500 Class B shares remained outstanding.
- Net cash from investing activities was $188.880 million, mainly reflecting trust withdrawals for redemptions, partly offset by extension deposits and tax withdrawals; financing cash outflow was $188.132 million. Cash declined by $1.229 million during the year.
Material changes and unusual items
- Net income declined year over year despite higher trust investment income, as operating expenses rose substantially, principally from business-combination activity and related costs. Trust investment income is non-operating and does not represent revenue from an operating business.
- BofA waived $4.025 million of deferred underwriting fees in 2023. The remaining deferred fee payable upon a business-combination closing was approximately $6.038 million.
- The company recorded a $1.881 million excise-tax liability, calculated at 1% of the June 2023 share redemptions; the filing notes the tax’s application and mechanics may depend on transaction details and further guidance.
- On December 14, 2023, XPDB moved trust funds from government securities or money-market funds to an interest-bearing demand-deposit account to mitigate investment-company-status risk. The filing estimated a variable yield of approximately 4.5% and warned that lower interest income could reduce redemption or liquidation proceeds.
Outlook, risks and contingencies
- The auditor included a going-concern explanatory paragraph, and management stated that substantial doubt exists about the company’s ability to continue as a going concern. XPDB depended on completing the merger, obtaining any needed financing, or extending its deadline; it had only about $59,000 outside the trust at year-end.
- The board extended the combination deadline in monthly steps through March 14, 2024. A proxy seeking stockholder approval for an extension to April 14, 2024, with possible monthly extensions through July 14, was filed in February 2024; the supplied filing does not establish that this extension was approved.
- The February 5, 2024 merger amendment reduced the minimum Aggregate Transaction Proceeds condition from $85 million to $50 million. The filing does not establish that the amended condition was met or that the transaction closed.
- Under the merger terms, Montana equity holders were to receive approximately $421.9 million of consideration, subject to adjustment, and could qualify for earnout shares capped at $200 million based on new production capacity, customer commitments, and EBITDA-related milestones. Montana holders were expected to retain at least 80% of combined-company voting power immediately after closing.
- Post-year-end financing and strategic developments included a proposed Carrier subscription convertible into 1,176,471 shares at closing, a March 8, 2024 agreement for a $5.0 million share subscription by Rice (with possible additional shares under specified price conditions), and a proposed 50/50 Montana–GE Vernova joint venture to commercialize AirJoule-related systems. These were contingent or proposed arrangements, not completed operating results.
- Material weakness in internal control over financial reporting remained as of December 31, 2023, relating to accrued general and administrative expenses and the tax provision. Management found disclosure controls ineffective; the auditor did not provide an internal-control attestation.
- Other significant risks include merger failure or further redemptions, limited cash and uncertain financing, potential creditor claims against trust assets, sponsor and management conflicts (including investments in Montana), dilution from founder shares and warrants, and the possibility that public warrants expire worthless if no business combination is completed. Shareholder demand letters alleged deficiencies or omissions in the merger registration statement; management said no legal proceeding was expected to have a material adverse effect.
Important facts for investors to verify
- Whether the Montana merger and proposed extension were approved and closed, and whether the amended $50 million proceeds condition and all other closing conditions were satisfied.
- Post-redemption trust cash, further redemptions, financing sources, transaction costs, and the amount of cash actually available to the combined company at closing.
- The final merger consideration, ownership and voting structure, earnout terms, potential dilution, and the treatment of public and private warrants.
- Whether the Carrier and Rice subscriptions and GE Vernova joint venture were completed, and the associated funding, governance, production, customer, and commercialization milestones.
- Remediation of the financial-reporting material weakness; the excise-tax exposure; and any claims that could reduce trust proceeds or liquidation distributions.