10-Q 1 d549545d10q.htm 10-Q 10-Q
Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
to
    
    
    
    
Commission File
No. 001-41048
 
 
INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
86-2581754
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
400 W. Morse Boulevard, Suite 220
Winter Park, FL
 
32789
(Address of principal executive offices)
 
(Zip Code)
(
321
972-1583
(Registrant’s telephone number, including area code)
N/A
(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
Units, each consisting of one share of Class A common stock, par value $0.0001 per share, and
one-half
of one redeemable warrant
 
IRRXU
 
The New York Stock Exchange
Class A common stock, par value $0.0001 per share
 
IRRX
 
The New York Stock Exchange
Redeemable warrants
 
IRRXW
 
The New York Stock Exchange
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.    Yes  ☒    No  ☐
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).    Yes  ☒    No  ☐
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  
       
Non-accelerated
filer
     Smaller reporting company  
       
         Emerging growth company  
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      No  ☐
As of November
20
, 2023, there were 6,489,246 shares of Class A common stock, par value $0.0001, and 5,750,000 shares of Class B common stock, par value $0.0001 per share, issued and outstanding.
 
 
 


Table of Contents

INTEGRATED RAIL AND RESOURCE ACQUISITION CORP.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

 

         Page  

PART I—FINANCIAL INFORMATION

  
Item 1.  

Financial Statements (unaudited)

     1  
 

Condensed Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022

     1  
 

Unaudited Condensed Statements of Operations for the three and nine months ended September 30, 2023 and 2022

     2  
 

Unaudited Condensed Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2023 and 2022

     3  
 

Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

     4  
 

Notes to Condensed Financial Statements (Unaudited)

     5  
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     40  
Item 3.  

Quantitative and Qualitative Disclosures about Market Risk

     45  
Item 4.  

Control and Procedures

     45  

PART II—OTHER INFORMATION

     46  
Item 1.  

Legal Proceedings

     46  
Item 1A.  

Risk Factors

     46  
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     48  
Item 3.  

Defaults Upon Senior Securities

     48  
Item 4.  

Mine Safety Disclosures

     48  
Item 5.  

Other Information

     48  
Item 6.  

Exhibits

     48  

SIGNATURES

     50  

 

i


Table of Contents
http://fasb.org/us-gaap/2023#FairValueAdjustmentOfWarrantshttp://fasb.org/us-gaap/2023#FairValueAdjustmentOfWarrantshttp://fasb.org/us-gaap/2023#FairValueAdjustmentOfWarrants
INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
 
 
  
September 30,
2023
 
 
December 31,

2022
 
 
  
(Unaudited)
 
 
 
 
Assets
  
 
Current Assets:
  
 
Cash
   $ 8,076     $ 54,173  
Prepaid Expenses and Other Assets
     87,385       433,578  
    
 
 
   
 
 
 
Total Current Assets
    
95,461
     
487,751
 
Investments Held in Trust Account
     71,419,197       237,537,270  
    
 
 
   
 
 
 
Total Assets
  
$
71,514,658
 
 
$
238,025,021
 
    
 
 
   
 
 
 
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit
                
Current Liabilities
                
Accounts Payable
   $         $ 84,488  
Accrued Expenses
     565,782       597,250  
Accrued Franchise Tax
     30,000       70,685  
Accrued Excise Tax
     1,741,420           
Income taxes payable
     990,302       341,854  
Note Payable—Sponsor
     4,433,225           
Note Payable—Related Party
     600,000           
Working Capital Loan—Related Party
     17,935           
    
 
 
   
 
 
 
Total Current Liabilities
    
8,378,664
     
1,094,277
 
Deferred Income Taxes
     23,976       260,225  
Warrant Liabilities
     5,225,000       2,926,000  
Deferred Underwriting Fee Payable
     8,050,000       8,050,000  
    
 
 
   
 
 
 
Total Liabilities
  
 
21,677,640
 
 
 
12,330,502
 
    
 
 
   
 
 
 
Commitments and Contingencies
            
Class A Common Stock Subject to Possible Redemption. 6,489,246 and 23,000,000 Shares are at Redemption Value of $10.84 and $10.31 per share at September 30, 2023 and December 31, 2022, respectively.
     70,374,919       237,124,704  
Stockholders’ Deficit:
                
Class A Common Stock, $0.0001 Par Value; 100,000,000 Shares Authorized, No Shares Issued and Outstanding (Excluding 6,489,246 and 23,000,000 shares subject to possible redemption at September 30, 2023 and December 31, 2022, respectively).
                  
Class B Common Stock, $0.0001 Par Value; 10,000,000 Shares Authorized; 5,750,000 Shares Issued and Outstanding
     575       575  
Preference Shares, $0.0001 Par value; 1,000,000 Shares Authorized, No Shares Issued or Outstanding
                  
Accumulated Deficit
     (20,538,476     (11,430,760
    
 
 
   
 
 
 
Total Stockholders’ Deficit
  
 
(20,537,901
)
 
 
 
(11,430,185
    
 
 
   
 
 
 
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit
  
$
71,514,658
 
 
$
238,025,021
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
1

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
 
    
For the Three Months Ended
September 30,
   
For the Nine Months Ended
September 30,
 
    
2023
   
2022
   
2023
   
2022
 
EXPENSES
                                
Operating and Formation Expenses
   $ 273,767     $ 366,194     $ 1,044,323     $ 1,003,127  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from Operations
  
 
(273,767
)
 
 
 
(366,194
 
 
(1,044,323
)
 
 
 
(1,003,127
Other Income (Expense)
                                
Interest and income earned on Cash and Trust Investments
     1,298,862       682,849       4,110,737       1,158,812  
Unrealized gain on investments held in Trust
     (234,153 )              114,175           
Change in fair value of warrant liabilities
     2,926,000       4,368,000       (2,299,000     9,853,400  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total Other Income (Expense)
  
 
3,990,709
 
 
 
5,050,849
 
 
 
1,925,912
 
 
 
11,012,212
 
Income before provision for income taxes
     3,716,942       4,684,655       881,589       10,009,085  
Provision for income taxes
     (213,088     (136,293     (855,721     (178,445
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss)
  
$
3,503,854
 
 
$
4,548,362
 
 
$
25,868
 
 
$
9,830,640
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted Average Ordinary Shares Outstanding subject to possible redemption
     9,607,057       23,000,000       13,724,208       23,000,000  
    
 
 
   
 
 
   
 
 
   
 
 
 
Basic and diluted net income (loss) per share, Ordinary Shares Outstanding
subject to possible redemption
  
$
0.23
 
 
$
0.16
 
 
$
(0.00
)
 
 
$
0.34
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted Average Ordinary Shares Outstanding not subject to possible redemption
     5,750,000       5,750,000       5,750,000       5,750,000  
    
 
 
   
 
 
   
 
 
   
 
 
 
Basic and diluted net income (loss) per share, Ordinary Shares Outstanding not
subject to possible redemption
  
$
0.23
 
 
$
0.16
 
 
$
(0.00
)
 
 
$
0.34
 
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
2

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFECIT
 
    
For the Three and Nine Months Ended September 30, 2023
 
    
Common Stock
    
Additional
          
Total
 
    
Class A
    
Class B
    
Paid-In
    
Accumulated
   
Stockholders’
 
    
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
   
Deficit
 
Balance—January 1, 2023
  
 
  
 
  
$
  
    
 
5,750,000
 
  
$
575
 
  
$
  
    
$
(11,430,760
 
$
(11,430,185
Net Loss
     —          —          —          —          —          (2,413,318     (2,413,318
Remeasurement of Common Stock Subject to Redemption
     —          —          —          —          —          (1,409,451     (1,409,451
Accrued Excise Tax on Common Stock Redemptions
     —          —          —          —          —          (944,891     (944,891
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance—March 31, 2023
  
 
  
 
  
 
  
 
  
 
5,750,000
 
  
 
575
 
  
 
  
 
  
 
(16,198,420
 
 
(16,197,845
Net Loss
     —          —          —          —          —          (1,064,668     (1,064,668
Remeasurement of Common Stock Subject to Redemption
     —          —          —          —          —          (4,208,890     (4,208,890
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance—June 30, 2023
  
 
  
 
  
 
  
 
  
 
5,750,000
 
  
 
575
 
  
 
  
 
  
 
(21,471,978
 
 
(21,471,403
Remeasurement of Common Stock Subject to Redemption
     —          —          —          —          —          (1,773,823     (1,773,823
Net Income
     —          —          —          —          —          3,503,854       3,503,854  
Accrued Excise Tax on Common Stock Subject to
Redemption
     —          —          —          —          —          (796,529     (796,529
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance—September 30, 2023
  
 
  
 
  
$
  
    
 
5,750,000
 
  
$
575
 
  
$
  
    
$
(20,538,476
)
 
 
$
(20,537,901
)
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
   
    
For the Three Months and Nine Months Ended September 30, 2022
 
    
Common Stock
    
Additional
          
Total
 
    
Class A
    
Class B
    
Paid-In
    
Accumulated
   
Shareholders’
 
    
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
   
Deficit
 
Balance—January 1, 2022
  
 
  
 
  
$
  
    
 
5,750,000
 
  
$
575
 
  
$
  
    
$
(18,490,084
 
$
(18,489,509
Net Income
     —          —          —          —          —          4,515,091       4,515,091  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance—March 31, 2022
  
 
  
 
  
 
  
 
  
 
5,750,000
 
  
 
575
 
  
 
  
 
  
 
(13,974,993
 
 
(13,974,418
Remeasurement of Common Stock Subject to Redemption
     —          —          —          —          —          (74,424     (74,424
Net Income
     —          —          —          —          —          767,187       767,187  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance—June 30, 2022
  
 
  
 
  
 
  
 
  
 
5,750,000
 
  
 
575
 
  
 
  
 
  
 
(13,282,230
 
 
(13,281,655
Remeasurement of Common Stock Subject to Redemption
     —          —          —          —          —          (689,005     (689,005
Net Income
     —          —          —          —          —          4,548,362       4,548,362  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance—September 30, 2022
  
 
  
 
  
$
  
    
 
5,750,000
 
  
$
575
 
  
$
  
    
$
(9,422,873
 
$
(9,422,298
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
3
INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2023 and 2022
 
 
  
For the Nine Months Ended
September 30,
 
 
  
2023
 
 
2022
 
Cash Flows from Operating Activities:
  
 
Net (loss) income
   $ 25,868     $ 9,830,640  
Adjustments to reconcile net (loss) income to cash used in operating activities:
                
Reinvested dividends on Funds held in Trust Account
     (560,256 )     (1,158,349
Unrealized Gain on Investments Held in Trust
     (114,175     —    
Realized Gain on Investments Held in Trust
     (3,550,481     —    
Deferred Income Tax
B
enefit
     (236,249 )     —    
Change in fair value of warrant liabilities
     2,299,000       (9,853,400
Changes in Operating Assets and Liabilities:
                
Prepaid Expenses
     346,193       185,808  
Accounts Payable
     (84,484     (4,228
Accrued Offering Costs
     —         (36,352
Accrued Franchise Tax
     (40,685     (108,680
Income Tax Payable
     648,448       178,445  
Accrued Expenses
     (31,468 )     7,178  
Due to Related Party
     —         (12,494
    
 
 
   
 
 
 
Net Cash Used in Operating Activities
  
 
(1,298,289
)
 
 
 
(971,432
    
 
 
   
 
 
 
Cash Flows from Investing Activities:
                
Cash withdrawn from Trust Account to pay franchise and income taxes
     634,257       258,680  
Cash Deposited into Trust Account
     (4,433,225     —    
Cash withdrawn from Trust Account in connection with redemption
     174,141,949        
    
 
 
   
 
 
 
Net Cash Provided by Investing Activities
  
 
170,342,981
 
 
 
258,680
 
    
 
 
   
 
 
 
Cash Flows from Financing Activities:
                
Proceeds from Note Payable—Sponsor
     4,433,225       —    
Proceeds from Promissory Note—Related Party
     600,000       —    
Proceeds from Working Capital Loan—Related Party
     17,935       —    
Payment to redeeming stockholders
     (174,141,949     —    
    
 
 
   
 
 
 
Net Cash Used in Financing Activities
  
 
(169,090,789
 
 
—  
 
    
 
 
   
 
 
 
Net Change in Cash
  
 
(46,097
 
 
(712,752
Cash – Beginning of Period
     54,173       1,004,278  
    
 
 
   
 
 
 
Cash – End of Period
  
$
8,076
 
 
$
291,526
 
    
 
 
   
 
 
 
Supplemental Disclosure of Noncash Investing and Financing Activities:
                
Remeasurement of Common Stock Subject to Redemption
   $ 7,392,164     $ 763,429  
    
 
 
   
 
 
 
Excise tax liability arising from redemption of Class A shares
   $ 1,741,420     $ —    
    
 
 
   
 
 
 
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
4

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN
 
Integrated Rail and Resources Acquisition Corp. (the “Company”) is a blank check company incorporated as a Delaware corporation on March 12, 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 (“Business Combination”).
As of September 30, 2023, the Company had not yet commenced operations. All activity for the period from March 12, 2021 (inception) through September 30, 2023 related to the Company’s formation, its initial public offering (“IPO” or “Initial Public Offering”), which is described below, and, subsequent to the IPO, identifying a target company for an initial Business Combination.
The registration statement for the Company’s IPO was declared effective on November 11, 2021. On November 16, 2021, the Company consummated its IPO of 23,000,000 units (the “Units”), including the full exercise of the underwriters’ over-allotment option to purchase 3,000,000 Units. Each Unit consisted of one share of Class A common stock, par value $0.0001 per share, of the Company (the “Public Shares”) and
one-half
of one redeemable warrant, at $10.00 per Unit. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $230,000,000, which is described in Note 3. Each Unit consists of one share of Class A common stock and
one-half
of one redeemable warrant of the Company. Each whole warrant entitles the holder thereof to purchase one share of Class A common stock for $11.50 per share, subject to adjustment.
Simultaneously with the closing of the IPO, the Company consummated the sale of 9,400,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to DHIP Natural Resources Investments, LLC (“Sponsor”), generating gross proceeds of $9,400,000, which is described in Note 4.
Transaction costs amounted to $24,917,410 consisting of $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees, $11,675,823 for the excess fair value of Founder Shares (as defined in Note 5 below) attributable to the anchor investors (as described in Note 3), and $591,587 of other offering costs.
 
5

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
Initially, the Company had 12 months from the closing of the IPO on November 16, 2021 to consummate an initial Business Combination (until November 16, 2022). However, if the Company anticipated it was not able to consummate an initial Business Combination within such 12 month period, the insiders or their affiliates were entitled to, but were not obligated to, extend the period of time to consummate a Business Combination up to two times by an additional three months each time (for a total of up to 18 months to complete a Business Combination) by depositing into the trust account maintained by American Stock Transfer & Trust Company, acting as trustee, an amount of $0.10 per unit sold to the public in the IPO, $2,300,000, for each such three-month extension (resulting in a total deposit of $10.30 per public share sold in the event all two extensions were elected or an aggregate of $4,600,000, if the time to consummate a Business Combination was extended to a full 18 months). Public stockholders were not entitled to vote on or redeem their shares in connection with any such extension. In November 2022, the Sponsor deposited $2,300,000 into the trust account, as a capital contribution, to extend the deadline for an initial business combination three months to February 2023. In lieu of a second $2,300,000 extension payment for a three month extension to May 2023, a Special meeting of Stockholders was held in February 2023 that resulted in extension of the deadline to complete an initial business combination to March 15, 2023 and allowed the Company to further extend the date to consummate a business combination on a monthly basis up to five (5) times by an additional one month through September 15, 2023. In connection with the vote on the Extension Amendment at the Special Meeting, stockholders holding a total of 9,155,918 shares of the Company’s common stock exercised their right to redeem such shares for a pro rata of the funds in the Company’s trust account. As a result, $94,489,075 (approximately $10.32 per share) was withdrawn from the trust account to pay such holders.
 
Our Sponsor deposited $692,204 each month from February 2023 through July 2023 as a sponsor loan into the Trust Account, extending the deadline for an initial business combination by one month each time to August 15, 2023.

On August 8, 2023, the Company held the Annual Meeting. Stockholders voted on the Extension Amendment proposal and other proposals. The Extension Amendment Proposal permits an extension of the date by which the Company has to consummate a business combination until February 15, 2024. If the Company is unable to complete a Business Combination by the applicable deadline or by February 15, 2024, (the “Combination Period”), (1) the Company effectuate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (an “initial business combination”), (2) cease its operations except for the purpose of winding up if it fails to complete such initial business combination, and (3) redeem 100% of the Company’s Class A common stock (“Class A common stock”) included as part of the units sold in the Company’s initial public offering that was consummated on November 16, 2021 (the “IPO”), from August 15, 2023 to September 15, 2023, and to allow the Company, without another stockholder vote, to further extend such date to consummate a business combination on a monthly basis up to five (5) times by an additional one (1) month each time after September 15, 2023 or later extended deadline date, by resolution of the Company’s board of directors (the “Board”), if requested by the Sponsor, upon five days’ advance notice prior to the applicable deadline date, until February 15, 2024, or a total of up to six (6) months after August 15, 2023 (such date as previously extended), unless the closing of a business combination shall have occurred prior thereto.
In connection with the vote on the Extension Amendment at the Annual Meeting, stockholders holding a total of 7,354,836 shares of the Company’s common stock 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 $79,652,874 (approximately $10.83
per share) was removed from the Company’s trust account to pay such holders. Following redemptions, and as the filing of this report, the Company has
6,489,246
shares outstanding. The Sponsor deposited $
140,000
, monthly, from August 2023 to November 2023, as a sponsor loan into the Trust Account, further extending the deadline for an initial business combination from August 15, 2023, to December 15, 2023. During the period nine months ended September 30, 2023, the Company has deposited a total of $4,433,225 for extension purposes.
 
6

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
If the Company is unable to complete a Business Combination, the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Company’s management had broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds were applied generally toward consummating a Business Combination. The Company’s initial business combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account) at the time the Company signs a definitive agreement in connection with an initial business combination. However, the Company will only complete a Business Combination if the post-transaction 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 1940, as amended, or the Investment Company Act.
 
7

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
Following the closing of the IPO on November 16, 2021, management agreed that an amount equal to at least $10.10 per Unit sold (or $232,300,000) in the Initial Public Offering and the proceeds of the Private Placement Warrants, would be held in a trust account (“Trust Account”) with American Stock Transfer & Trust Company, LLC acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
The Company will provide its holders of the Public Shares (the “Public Stockholders”) 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 stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The
per-share
amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). The Public Shares are recorded at a redemption value and classified as temporary equity, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.
 
8

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001
upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to the amended and restated certificate of incorporation which was adopted by the Company upon the consummation of the Initial Public Offering, and was amended by certificates of amendment on February 9, 2023 and August 8, 2023 (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. 
Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Founder Shares prior to this Initial Public Offering (the “Initial Stockholders”) will agree to vote their Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of a business combination. In addition, the Initial Stockholders will agree to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a business combination. In addition, the Company has agreed not to enter into a definitive agreement regarding an initial business combination without the prior consent of the Sponsor.
 
9

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
Notwithstanding the foregoing, the Company’s Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than aggregate of 15% or more of the Class A common stock sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor, executive officers, directors and director nominees agreed not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to provide for the redemption of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their Class A common stock in conjunction with any such amendment.
In connection with the redemption of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes payable (less up to $100,000 of interest to pay dissolution expenses).
 
10

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
The Initial Stockholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the combination period. However, if the Initial Stockholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the combination period. The underwriters will agree to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the combination period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.10 per share initially held in the Trust Account.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
 
11

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
Liquidity and Going Concern
At September 30, 2023, the Company had $8,076 in cash and $8,283,203 in working capital deficit.
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans and while the Company believes it has sufficient access to additional sources of capital, if necessary, there are no assurances that such additional capital will ultimately be available. In addition, the Company currently has less than 12 months from the date these unaudited condensed financial statements were issued to complete a Business Combination and if the Company is unsuccessful in consummating an Initial Business Combination, it is required to liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Codification (“ASC”)
205-40,
“Presentation of Financial Statements – Going Concern”, management has determined that these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. As is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the combination period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business Combination during the combination period.

 
12

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 1 – DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND GOING CONCERN – CONTINUED
 
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 and Article 10 of Regulation
S-X
of the SEC. Certain information or footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulation of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the period presented.
The accompanying unaudited statements should be read in conjunction with the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022 as filed with the SEC on March 31, 2023, which contains the audited financial statements and notes thereto.
The interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future interim periods.
 
13

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of 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 of 2002, 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 stockholder approval of any golden parachute payments not previously approved.
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 Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth 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.
 
14

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Emerging Growth Company - continued
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 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 financial statements in conformity with GAAP requires the Company’s 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 financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liabilities. Accordingly, the actual results could differ significantly from those estimates.
 
15

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. The Company applies the
two-class
method in calculating net income (loss) per common share. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 20,900,000 shares in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented. As of September 30, 2023 and 2022 the Company did not have any dilutive securities or other contracts that could potentially be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods presented.
 
16

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Net Income (Loss) Per Common Share - continued
The following table reflects the calculation of basic and diluted net income (loss) per common stock (in dollars, except per share amounts):
 
    
For the Three Months Ended September 30,
 
    
2023
    
2022
 
    
Shares Subject

to
    
Shares Not

Subject to
    
Shares Subject

to
    
Shares Not

Subject to
 
    
Possible

Redemption
    
Possible
Redemption
    
Possible

Redemption
    
Possible
Redemption
 
Basic and diluted net income per common stock
           
Numerator:
           
Allocation of net income
   $ 2,191,939      $ 1,311,915      $ 3,638,690      $ 909,672  
Denominator:
           
Basic and diluted weighted average common shares outstanding
     9,607,057        5,750,000        23,000,000        5,750,000  
Basic and diluted net income per common stock
   $ 0.23      $ 0.23      $ 0.16      $ 0.16  
 
    
For the Nine Months Ended September 30,
 
    
2023
    
2022
 
    
Shares Subject

to
    
Shares Not

Subject to
    
Shares Subject

to
    
Shares Not

Subject to
 
    
Possible

Redemption
    
Possible
Redemption
    
Possible

Redemption
    
Possible
Redemption
 
Basic and diluted net (loss) income per common stock
           
Numerator:
           
Allocation of net (loss) income
   $ 7,638      $ 18,230      $ 7,864,512      $ 1,966,128  
Denominator:
           
Basic and diluted weighted average common shares outstanding
     13,724,208        5,750,000        23,000,000        5,750,000  
Basic and diluted net (loss) income per common stock
   $ (0.00    $ (0.00    $ 0.34      $ 0.34  
 
17

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Class A Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguished Liabilities from Equity. Shares of common stock subject to redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including shares of common stock 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, shares of common stock are classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. The valuation of common stock subject to redemption includes the Company’s estimate of interest held in the Trust Account that is available for payment of taxes, and excludes dissolution expense of up to $100,000 since it is only taken into account in the event of the Company’s liquidation. As of September 30, 2023 and December 31, 2022, 6,489,246 and 23,000,000 shares of Class A common stock subject to possible redemption, respectively, are presented at redemption value as temporary equity, outside of stockholders’ deficit section of the Company’s balance sheet. At September 30, 2023 and December 31, 2022, the Common Stock reflected in the condensed balance sheets are reconciled in the following table:
 
Gross Proceeds
   $ 232,300,000  
Less:
  
Proceeds allocated to Public Warrants
     (6,440,000
Common Stock issuance costs
     (23,874,892
Plus:
  
Accretion of carrying value to redemption value
     30,314,892  
  
 
 
 
Class A Common stock subject to possible redemption, December 31, 2021
  
$
232,300,000
 
  
 
 
 
Remeasurement of Class A common stock subject to possible redemption
     4,824,704  
  
 
 
 
Class A Common stock subject to possible redemption, December 31, 2022
  
$
237,124,704
 
  
 
 
 
Less:
  
Redemption of Class A common stock
     (94,489,075
Plus:
  
Remeasurement of Class A common stock subject to possible redemption
     1,409,451  
  
 
 
 
Class A Common stock subject to possible redemption, March 31, 2023
  
$
144,045,080
 
  
 
 
 
Plus:
  
Remeasurement of Class A common stock subject to possible redemption
     4,208,890  
  
 
 
 
Class A Common stock subject to possible redemption, June 30, 2023
  
$
148,253,970
 
  
 
 
 
Less:
  
Redemption of Class A common stock
     (79,652,874
Plus:
  
Remeasurement of Class A common stock subject to possible redemption
     1,773,823  
  
 
 
 
Class A Common stock subject to possible redemption, September 30, 2023
  
$
70,374,919
 
  
 
 
 
 
18

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguished Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in
capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a
non-cash
gain or loss on the unaudited condensed statements of operations. The fair value of the Public Warrants (as defined in Note 3) and Private Placement Warrants was estimated using an independent third-party valuation.
 
19

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of
ASC340-10-S99-1
and SEC Staff Accounting bulletin Topic 5A – Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction of equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, Derivatives and Hedging. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then
re-valued
at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or
non-current
based on whether or not
net-cash
settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, Fair Value Measurement (“ASC 820”), approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature. The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within the framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
 
20

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Fair Value of Financial Instruments - continued
The carrying amounts reflected in the balance sheets for cash, accounts payable, accrued expenses, accrued offering costs, investments held in trust account, and due to related party approximate fair value due to short-term nature.
Level 1—Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3—Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
See Note 9 for additional information on assets and liabilities measured at fair value.
Stock-based Compensation
The transfer of the Founder Shares to independent directors is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. As of the date the unaudited condensed financial statements were issued, the Company determined that a Business Combination is not considered probable, and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date a Business Combination is considered probable (i.e., upon completion of a Business Combination) in an amount equal to the number of Founders Shares that ultimately vest multiplied times the grant date fair value per share (uncles subsequently modified) less the amount initially received for the purchase of the Founders Shares.
 
21

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
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.
ASC740-270-30-5
requires that an annual effective tax rate be determined, and such annual effective rate applied to year to date income in interim periods under
ASC740-270-30-5.
The Company’s effective tax rate for the three and nine months ended September 30, 2023, was 5.73% and (97.07%), respectively, and for the three and nine months ended September 30, 2022, was 2.91% and 1.78%. The Company’s effective tax rate differs from the statutory income tax rate of 21% primarily due to the recognition of gains or losses from the change in the fair value of warrant liabilities, which are not recognized for tax purposes, and recording a full valuation allowance on deferred tax assets. The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss for the reporting period. The Company has used a discrete effective tax rate method to calculate taxes for the three and nine months ended September 30, 2023. The Company believes that, at this time, the use of the discrete method for the three and nine months ended September 30, 2023 is more appropriate than the estimated annual effective tax rate method as the estimated annual effective tax rate method is not reliable due to a high degree of uncertainty in estimating annual pretax earnings.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of September 30, 2023 and December 31, 2022.
 
22

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
 
Investments Held in Trust Account
As of September 30, 2023, the Company had $71,419,197 of treasury bills and cash funds held in the Trust Account. During the three and nine months ended September 30, 2023, the Company used $40,000 and $634,257, respectively, of interest earned in the Trust Account to pay taxes. During the nine months ended September 30, 2023, the Company paid $174,141,949 from the funds held in Trust related to redemption of Class A Common Stock as a result of the Special Meeting that occurred in February 2023 to extend the business combination date.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined.
Management has established a liability in the amount of $1,741,420 related to the excise tax included in current liabilities on the Company’s balance sheets as of September 30, 2023.
The Company confirms that when the extension is implemented, it will not withdraw any funds from the trust account, including interest earned on the funds held in the trust account, to pay for the 1% excise tax that may become due under the IR Act.
 
23

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 3 – INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 23,000,000 Units, including the full exercise of the underwriters’ over-allotment option to purchase 3,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one Class A common stock and
one-half
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment.
Twelve anchor investors, none of whom is affiliated with any member of our management team, purchased an aggregate of 20,000,000 of the units sold in the Initial Public Offering. Further, each such anchor investor purchased a
pro-rata
portion of 1,515,160 Founder Shares offered to the anchor investors at $0.004 per share.
The Company considers the excess fair value of the Founder Shares issued to the anchor investors above the purchase price as offering costs and have reduced the gross proceeds by this amount. The Company has valued the excess fair value over consideration of the Founder Shares offered to the anchor investors at $11,675,823. The excess of the fair value over consideration of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A and were allocated to stockholders’ deficit and expenses upon the completion of the Initial Public Offering. The fair value of the shares was estimated to be $7.71 based on numerous assumptions including the probability of an acquisition, an estimated date of acquisition, the risk free rate on the acquisition date, a discount for a lack of marketability and other variables.
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
 
24

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 4 – PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 9,400,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant ($9.4 million in the aggregate).
Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor were added to the proceeds from the Initial Public Offering to be held in the Trust Account such that at the time of closing $232,300,000 was held in the Trust Account. If the Company does not complete a Business Combination within the combination period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be
non-redeemable
for cash and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
 
25

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 5 – RELATED PARTY TRANSACTIONS
Founder Shares
On March 12, 2021, the Sponsor paid an aggregate of $25,000 in exchange for issuance of 5,750,000 shares of Class B common stock (the “Founder Shares”). On April 5, 2021, the Sponsor transferred interests in the Sponsor that corresponded with 25,000 Founder Shares to each of Nathan Asplund, Rollin Bredenberg, Brian Feldott, and Edmund Underwood, Jr., our independent director nominees. In relation to the Initial Public Offering, an aggregate of 1,515,160 Founder Shares were cancelled by
the
Sponsor and transferred by us to our anchor investors in the IPO. Amounts previously reported as Class B common stock were retrospectively restated to account for this transaction. On March 7, 2022, Nathan Asplund tendered the return of his interest in the Sponsor (that corresponded with 25,000 Founder Shares) in relation to his resignation from the Board of Directors and the Sponsor transferred an interest in the Sponsor that corresponded with 25,000 Founder Shares to Troy Welch, who was elected to the Board of Directors on March 4, 2022 to fill the vacancy. Notwithstanding the foregoing, the Sponsor retains all voting and disposition rights in the founders shares held by the Sponsor.
The Company determined the fair value of the share-based compensation related to the transfer of interests in the Sponsor (that corresponded to Founder Shares), to the independent director nominees, based on numerous assumptions including the probability of an acquisition, an estimated date of acquisition, the risk free rate on the acquisition date, a discount for a lack of marketability and other variables. The value of the share based compensation was $667,250 based on grant date fair value estimates of $6.63 and $6.80 at April 5, 2021 and March 7, 2022, respectively.
On November 15, 2022, the Company’s CEO Richard Bertel, CFO Christopher Bertel, Vice President Edmund Underwood, director Rollin Bredenberg, and director Troy Welch tendered their resignation from the Company. In relation to such resignations, Mr. Bredenberg, Mr. Welch, and Mr. Underwood each tendered the return of their interest in the Sponsor (that corresponded with 25,000 Founder Shares) on November 21, 2022. The Company replaced the departed directors with Ronald Curt Copley, and Jason Reeves.
On December 22, 2022, and December 24, 2022, the Sponsor transferred an interest in the Sponsor that corresponded with 25,000 Founder Shares to Ronald Curt Copley and Jason Reeves, respectively, as independent director nominees. The Company determined the fair value of the share-based compensation related to the transfer of the Sponsor interest (corresponding with Founder Shares), to the independent director nominees, based on numerous assumptions including the probability of an acquisition, an estimated date of acquisition, the risk-free rate on the acquisition date, a discount for a lack of marketability and other variables. The value of the share-based compensation was $74,637 based on grant date fair value estimates of $1.49 at both December 22, 2022, and December 24, 2022.
 
26

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 5 – RELATED PARTY TRANSACTIONS – CONTINUED
 
Founder Shares - continued
The Initial Stockholders have agreed not to transfer, assign, or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of an initial Business Combination and (B) subsequent to an initial Business Combination, (x) if the closing price of Class A common stock equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after an initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their common stock for cash, securities or other property.
Related Party Loans
The Sponsor agreed to loan the Company up to $1,500,000 to be used for working capital purposes through the earlier of December 31, 2021 or the closing of the Initial Public Offering. At March 25, 2022 the Sponsor agreed to loan the Company up to $1,500,000 to be used for working capital purposes through April 1, 2023, as funds are necessary. Such loans would be
non-interest
bearing, unsecured, and will be repaid upon the consummation of a Business Combination. In the event that the Company does not consummate a Business Combination, all amounts loaned to the Company will be forgiven except to the extent that the Company has funds available to it, outside of its trust account established in connection with the IPO.
As reflected in a Form
8-K
filing on January 20, 2023, the Company issued an unsecured promissory note to Trident Point 2, LLC, a related party through common ownership, pursuant to which the Company was entitled to borrow up to an aggregate principal amount of $600,000 in order to fund working capital deficiencies or finance transaction costs in connection with an intended Business Combination. All unpaid principal under the Note was due and payable in full on the earlier of September 15, 2023 and the date on which the Company consummated an initial business combination. Pursuant to the terms of such note, Trident Point 2 has the option at any time prior to September 15, 2023 to convert amounts outstanding, up to $600,000, into warrants to purchase the Company’s shares of Class A common stock at a conversion price of $1.00 per warrant, with each warrant entitling the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to the same adjustments applicable to the private placement warrants sold concurrently with the Company’s IPO. As of the date of this report, the Company has borrowed $600,000 on the promissory note.
In May 2023, the Company issued an amended and restated unsecured promissory note, dated as of January 20, 2023, to Trident Point 2, LLC removing the warrant conversion feature from the promissory note and revising the maturity date so that all unpaid principal under the Note will be due and payable in full on December 15, 2023 (or such later extension date permitted by the Amended and Restated Certificate of Incorporation) in the event the stockholders of the Company approve a further amendment to the Amended and Restated Certificate of Incorporation to extend the period to consummate a Business Combination and the date on which the Company consummates an initial business combination.
 
27

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 5 – RELATED PARTY TRANSACTIONS – CONTINUED
 
Related Party Loans - continued
On April 14, 2023, The Company issued an unsecure promissory note to the Sponsor, pursuant to which the Company is entitled to borrow up to an aggregate principal amount of $
4,153,244
.
All unpaid principal under the Promissory Note will be due and payable in full on December 15, 2023 (or such later extension date permitted by the Amended and Restated Certificate of Incorporation in the event the stockholders of the Company approve a further amendment to the Amended and Restated Certificate of Incorporation to extend the period to consummate the Business Combination) and the date on which the Company consummated the Business Combination. 
On August 14, 2023, the Company amended the original promissory note and increased the borrowing limit up to $8,400,000
from the Sponsor to fund costs related to the extension of the date by which the Company must consummate an initial business combination pursuant to the Amended and Restated Certificate of Incorporation. 
In connection with the loans mentioned above, the sponsor made six monthly deposits to the Trust Account of $
692,204
 from February 2023 through July 2023. Additionally, they made two monthly deposits of $
140,000
 to the Trust Account during August 2023 and September 2023 into the Trust Account to extend the deadline for consummating a business combination to October 15, 2023. As September 30, 2023, the total outstanding amount drawn under the extension loan was approximately $
4,433,225
. Subsequent to these financial statements
,
the Sponsor made deposits to the Trust Account of $140,000 during October 2023 and November 2023, respectively, to further extend the period to consummate the Business Combination to December 15, 2023 (or such later extension date permitted
by the Amended and Restated Certificate of Incorporation in the event the stockholders of the Company approve a further amendment to the Amended and Restated Certificate of Incorporation to extend the period to consummate the Business Combination). 
On September 14, 2023, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company is entitled to
borrow
up to an aggregate principal amount of $17,935 from the Lender in order to fund costs reasonably related to an initial business combination for the Company. No interest shall accrue on the unpaid principal balance of the Promissory Note. All unpaid principal under the Promissory Note will be due and payable in full on the earlier of (i) February 15, 2024 (or such later extension date permitted by the Amended and Restated Certificate of Incorporation) in the event the stockholders of the Company approve a further amendment to the Amended and Restated Certificate of Incorporation to extend the period to consummate the Business Combination) and (ii) the date on which the Company consummates the Business Combination.
Administrative Services Agreement
The Company entered into an agreement commencing on the date that the Company’s securities were first listed on the New York Stock Exchange through the earlier of consummation of an initial Business Combination and the liquidation, which provides that the Company will pay the Sponsor $10,000
per month for office space, secretarial and administrative services provided to the Company. In addition, the Sponsor, officers and directors, or their respective affiliates will be reimbursed for any
out-pocket
expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on possible Business Combination targets. The Company’s audit committee will review on a quarterly basis all payments that were made by the Company to the Sponsor, executive officers or directors, or their affiliates. Any such payments prior to an initial Business Combination will be made using funds held outside the Trust Account. For the three and nine months ended September 30, 2023, the Company recorded
$30,000 and $90,000, respectively, related to the administrative services agreement included in Operating Expenses on the unaudited Condensed Statement of Operations. For the three and nine months ended September 30, 2022, the Company recorded $30,000 and $90,000, respectively, related to the administrative services agreement included in Operating Expenses on the unaudited Condensed Statement of Operations.
 
28

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 6 – COMMITMENTS & CONTINGENCIES
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) will be entitled to registration rights pursuant to a registration and stockholder rights agreement signed in relation to the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of an initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company paid an underwriting discount of $0.20 per unit, or $4.6 million in the aggregate in relation to the Initial Public Officer, with an additional fee of $0.35 per unit, or approximately $8.05 million in the aggregate, payable to the underwriters for deferred underwriting commissions in relation to the Initial Public Offering. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
The Company accounted for the 20,900,000 warrants issued in connection with the Initial Public Offering (the 11,500,000 Public Warrants and the 9,400,000 Private Placement Warrants) in accordance with the guidance contained in
ASC815-40.
Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company classified each warrant as a liability at its fair value. This liability is subject to
re-measurement
at each balance sheet date. With each such
re-measurement,
the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s unaudited condensed statements of operations.
 
29

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 6 – COMMITMENTS & CONTINGENCIES – CONTINUED
 
Underwriting Agreement - Continued
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants trade. The Public Warrants will become exercisable 30 days after the completion of a Business Combination; provided that the Company has an effective registration statement under the Securities Act covering the Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permit holders to exercise their warrants on a cashless basis under certain circumstances). The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of an initial Business Combination, the Company will use commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement.
If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th day after the closing of an 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. Notwithstanding the above, if the Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
 
30

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 6 – COMMITMENTS & CONTINGENCIES – CONTINUED
 
Investment Banking Advisory Agreement
The Company has entered into an investment banking advisory services agreement pursuant to which fees will be paid upon the closing of an acquisition during the term of the agreement through 24 months after the termination of the agreement. Fees will be charged at the greater of $4,250,000 or up to .65% of the acquisition value if the acquisition value exceeds $900 Million. The investment banking advisory fees are contingent on both the consummation and the specific terms of an initial Business Combination, neither of which can be reasonably predicted at this time. Accordingly, no accrual has been made for these arrangements in the financial statements.
NOTE 7 – WARRANT LIABILITIES
The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity- linked securities for capital raising purposes in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
 
31

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 7 – WARRANT LIABILITIES – CONTINUED
 
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be
non-redeemable
so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the Initial Stockholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00: Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
 
   
in whole and not in part;
 
   
at a price of $0.01 per warrant;
 
   
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
 
   
the last sales price of the common stock reported has been at least $18.00 per share on each of twenty trading days within the thirty
trading-day
period ending on the third trading day prior to the date on which notice of the redemption for the Public Warrants is given.
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the
30-day
redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification. The Company will use its commercially reasonable best efforts to register or qualify such shares of common stock under the blue sky laws to the extent an exemption is not available.
 
32

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 7 – WARRANT LIABILITIES – CONTINUED
 
If the Company calls the warrants for redemption as described above, management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” management will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
None of the Private Placement Warrants will be redeemable by the Company so long as they are held by the Sponsor, the affiliates of the Sponsor, or its permitted transferees.
 
33

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 8 – STOCKHOLDERS’ DEFICIT
Class
 A common stock
— The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. At September 30, 2023, there were 13,844,082 shares of Class A common stock issued and outstanding, including 6,489,246 subject to possible redemption. At December 31, 2022, there were 23,000,000 shares of Class A common stock issued or outstanding, including 23,000,000 shares of Class A common stock subject to possible redemption.
Class
 B common stock
— The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. On September 30, 2023 and December 31, 2022, there were 5,750,000 shares of Class B common stock issued and outstanding, respectively, so that the Initial Stockholders and anchor investors collectively own 100% of the Company’s issued and outstanding shares of Class B common stock and 20% of all of the Company’s issued and outstanding common stock.
Stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Except as described below, holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders except as required by law.
 
34

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 8 – STOCKHOLDERS’ DEFICIT – CONTINUED
 
The Class B common stock will automatically convert into Class A common stock, which such shares of Class A common stock delivered upon conversion will not have any redemption rights or be entitled to liquidating distributions if the Company does not consummate an initial Business Combination, at the time of the initial Business Combination or earlier at the option of the holders thereof at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the sum of (i) the total number of common stock issued and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of an initial Business Combination, excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, deemed issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, its affiliates or any member of the management team upon conversion of Working Capital Loans. In no event will the shares of Class B common stock convert into Class A common stock at a rate of less than
one-to-one.
Preferred Shares
— The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share. At September 30, 2023, there were no preferred shares issued or outstanding.
 
35

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 9 – FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
Description
  
Amount at Fair
Value
    
Level 1
    
Level 2
    
Level 3
 
September 30, 2023
        
 
                
 
  
Assets
           
Investments held in Trust—US Treasury Bill
   $ 71,419,197      $ 71,419,197      $       $   
Liabilities
           
Warrant Liability—Public Warrants
   $ 2,875,000      $ 2,875,000      $       $   
Warrant Liability—Private Placement Warrants
     2,350,000                            2,350,000  
Warrant Liabilities
   $ 5,225,000      $ 2,875,000      $       $ 2,350,000  
Description
  
Amount at Fair
Value
    
Level 1
    
Level 2
    
Level 3
 
December 31, 2022
           
Assets
           
Investments held in Trust—US Treasury Fund
   $ 237,537,270      $ 237,537,270      $       $   
Liabilities
           
Warrant Liability—Public Warrants
   $ 1,610,000      $ 1,610,000      $       $   
Warrant Liability—Private Placement Warrants
     1,316,000                            1,316,000  
Warrant Liabilities
   $ 2,926,000      $ 1,610,000      $       $ 1,316,000  
 
36
INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 9 – FAIR VALUE MEASUREMENTS – CONTINUED
 
As of September 30, 2023 and December 31, 2022, the Company utilized quoted active market exchange trade pricing to value the Public Warrants (Level 1 inputs), and an independent third party to value the private warrants with a binomial options pricing model (Level 3 inputs). The changes in fair value are recognized in the unaudited condensed statements of operations. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the private warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting periods. The Company transferred public warrants from Level 3 to Level 1 during the year ended December 31, 2022, as they began actively trading on January 3, 2022.
Investments Held in Trust
At December 31, 2022, the Company held $237,537,270 of Investments in the Trust Account at fair value in United States Treasury Bills. At September 30, 2023, the Company held $71,419,197 of United States Treasury Funds. The assets held in the Trust Account at September 30, 2023 and December 31, 2022 within the condensed balance sheets represent a Level 1 fair value measurement based upon the observable valuation nature of the respective investments. As of September 30, 2023, the Company recognized $642,716 of unrealized gains on the Trust Account investments within the Statement of Operations.
 
37

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 9 – FAIR VALUE MEASUREMENTS – CONTINUED
 
Warrant Liabilities
The following table provides the significant inputs to the independent third party’s pricing model for the fair value of the Private Placement Warrants:
 
    
At September 30,

2023
   
At December 31,
2022
 
Share Price
   $ 10.88     $ 10.30  
Exercise Price
   $ 11.50     $ 11.50  
Years to Expiration
     5.38       5.13  
Volatility
     2.90     3.40
Risk-Free Rate
     4.50     3.91
Dividend Yield
     0.00     0.00
Fair Value of warrants
   $ 0.25     $ 0.140  
The following table provides a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:
 
    
Warrant
Liabilities
 
Fair Value at January 1, 2023
   $ 1,316,000  
Change in Fair Value
     1,504,000  
Fair Value at March 31, 2023
     2,820,000  
Change in Fair Value
     846,000  
Fair Value at June 30, 2023
   $ 3,666,000  
Change in Fair Value
     (1,316,000
Fair Value at September 30, 2023
   $ 2,350,000  
 
38

INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2023 (Unaudited)
 
NOTE 10 – SUBSEQUENT EVENTS
 
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited financial statements.
On October 13, 2023 and November 15, 2023
,
the Sponsor made deposits to the Trust Account of $140,000, respectively, to further extend the period to consummate the Business Combination to December 15, 2023
(or such later extension date permitted by the Amended and Restated Certificate of Incorporation in the event the stockholders of the Company approve a further amendment to the Amended and Restated Certificate of Incorporation to extend the period to consummate the Business Combination)(see Note 5). 
 
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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 Integrated Rail and Resources Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to DHIP Natural Resources Investments, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed 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.

Overview

We are a blank check company incorporated as a Delaware Corporation on March 12, 2021 (inception) formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). We intend to effectuate our Business Combination using cash derived from the proceeds of our initial public offering in March 12, 2021 (the “Initial Public Offering” or “IPO”) and the sale of the 9,400,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, our shares, debt or a combination of cash, shares and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2023 were organizational activities and those necessary to prepare for the Initial Public Offering and an initial Business Combination, described below. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the initial Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and other expenses in connection with searching for, and completing, a Business Combination.

For the three months ended September 30, 2023, we had a net income of $3,503,854, which consisted of operating costs of $273,767 and a provision for income taxes of $213,088, offset by interest and income earned on cash and the trust account established during our Initial Public Offering (“Trust Account”) of $1,298,862, unrealized gain on investments held in the Trust Account of $234,153, and a non-cash change in fair value of warrant liabilities of $2,926,000.

For the three months ended September 30, 2022, we had a net income of $4,548,362, which consisted of operating costs of $366,194 a provision for income taxes of $136,293, offset by and interest and income earned on cash and investment in the Trust Account of $682,849 a non-cash changes in fair value of warrant liabilities of $4,368,000.

For the nine months ended September 30, 2023, we had a net income of $25,868, which consisted of operating costs of $1,044,323, a non-cash change in fair value of warrant liabilities of $2,299,000, and a provision for income taxes of $855,721, offset by the interest and income earned on cash and investment in the Trust Account of $4,110,737 and unrealized gain on investments held in Trust of $114,175.

For the nine months ended September 30, 2022, we had a net income of $9,830,640, which consisted of operating costs of $1,003,127 and a provision for income taxes of $178,445, offset by a non-cash change in fair value of warrant liabilities of $9,853,400, off set by interest and income earned on cash and investments in the Trust Account of $1,158,8129.

Liquidity and Capital Resources

On November 16, 2021, we completed the Initial Public Offering of 23,000,000 units of our class A common stock, par value $0.0001 per share, (the “Public Shares”) and one-half of one redeemable warrant (the “Units”), which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, we completed the sale of 9,400,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $9,400,000.

 

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Following the Initial Public Offering and the sale of the Private Placement Warrants, a total of $232,300,000 was placed in the Trust Account, and we had $1,712,612 of cash held outside of the Trust Account after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $24,917,410 in transaction costs, including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees, $11,675,823 for the excess fair value of Founder Shares attributable to the anchor investors, and $591,587 of other offering costs.

In connection with the vote on an amendment to the Company’s Amended and Restated Certificate of Incorporation to extend the date by which the company must effect the Business Combination (an “Extension Amendment”) at the Special Meeting of Stockholders of our Company on February 8, 2023, stockholders holding a total of 9,155,918 shares of the Company’s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, $94,489,075 (approximately $10.32 per share) was withdrawn from the Trust Account to pay such holders.

For the nine months ended September 30, 2023, cash used in operating activities was $1,298,289. Net income of $25,868 was affected by a non-cash charge for the change in fair value of warrant liabilities of $2,299,000, deferred income taxes of $236,249, unrealized gain on marketable securities held in Trust Account of $114,175 and interest and realized gains on marketable securities held in the Trust Account of $4,110,737. Changes in operating assets and liabilities provided $838,004 of cash for operating activities.

For the nine months ended September 30, 2023, cash provided by investing activities was $170,342,981 and affected by cash deposited in Trust Account of $4,433,225, transfer of funds from Trust Account to redeeming shareholders for $174,141,949 and transfer of funds from Trust Account for payment of franchise and income taxes of $634,257.

For the nine months ended September 30, 2023, cash used in financing activities was $169,090,789 and affected by proceeds from a note payable from Sponsor, and a related party of the Company and other loans outstanding for $4,433,225 and $617,935, respectively and a payment to redeeming shareholders for $174,141,949.

For the nine months ended September 30, 2022, cash used in operating activities was $971,432. Net income of $9,830,640 was affected by a non-cash charge for the change in fair value of warrant liabilities of $9,853,400, interest and income earned on investments in the Trust Account of $1,158,349, and net cash provided by changes in other operating assets and liabilities of $209,677.

At December 31, 2022, the Company held $237,537,270 of investments in the Trust Account at fair value in a fund invested in United States Treasury instruments. As of September 30, 2023, the Company withdrew funds for payment to redeeming shareholders totaling $174,141,949. At September 30, 2023, the fair value of the investments held in the Trust Account was $71,419,197 as recognized on the unaudited condensed balance sheet. As of September 30, 2023, the Company recognized $642,716 of unrealized gains on the investments held in the Trust Account on the unaudited condensed statement of operations.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete a Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. During the nine months ended September 30, 2023, the Company used $634,257 of interest earned in the Trust Account to pay income taxes.

At September 30, 2023, we had cash of $8,076 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.

The Company will need to raise additional funds to meet the expenditures required for operating its business as it currently has insufficient funds available to operate the business prior to the initial Business Combination. If the Company is unable to complete an initial Business Combination due to insufficient available funds, it will be forced to cease operations and liquidate the Trust Account.

 

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At September 30, 2023, the Company had approximately $8,076 in cash and $8,283,203 in working capital deficiency.

The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans and while the Company believes it has sufficient access to additional sources of capital, there are no assurances that such additional capital will ultimately be available. In addition, the Company currently has less than 12 months from the date these unaudited condensed financial statements were issued to complete a Business Combination and if the Company is unsuccessful in consummating an initial Business Combination, it is required to liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, “Presentation of Financial Statements – Going Concern”, management has determined that these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. As is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the combination period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business Combination during the combination period.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

During the nine months ended September 30, 2023, we entered into a promissory note with a related party for up to $600,000 to fund working capital. Additionally, during the nine months ended September 30, 2023, the Sponsor loaned us $4,433,225 to fund costs related to the extension of the date by which the Company must consummate an initial Business Combination pursuant to the Company’s Amended and Restated Certificate of Incorporation (as amended on February 9, 2023 and August 8, 2023). We also have an agreement to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, secretarial, and administrative services provided to the Company. We will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company’s liquidation.

The underwriters are entitled to a deferred fee of $0.35 per Unit, or approximately $8.1 million. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.

 

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Class A Ordinary Shares Subject to Possible Redemption

We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguished Liabilities from Equity. Common stock subject to redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock 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, common stock are classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. As of September 30, 2023, 13,844,082 Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of stockholders’ equity section of the Company’s balance sheet.

Net Income (Loss) per Ordinary Share

We comply with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the period, excluding Class A common stock subject to forfeiture.

Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguished Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Public Warrants (as defined in Note 7) and Private Placement Warrants was estimated using an independent third-party valuation.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, Fair Value Measurement (“ASC 820”), approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature. The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within the framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

 

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Recent Accounting Standards

The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the accompanying financial statements.

 

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2023, we were not subject to any market or interest rate risk. The net proceeds held in the Trust Account have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less, or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (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, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

None.

 

ITEM 1A.

RISK FACTORS

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 31, 2023, except as set forth below. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement if we do not complete our initial Business Combination by December 15, 2023, or up to February 15, 2024, if all possible remaining monthly extensions are implemented. As such, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial Business Combination within the prescribed time frame. If we are unable to effect an initial Business Combination by the applicable date, we will be forced to liquidate.

We are a blank check company and have no operating history. Because we are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial Business Combination within the prescribed time frame, subject to extensions, as further described in our Annual Report on Form 10-K filed with the SEC on March 31, 2023, our proxy statement on Schedule 14A, as amended, filed with the SEC on July 17, 2023 and July 24, 2023, and in Item 5 of this Quarterly Report. We have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. Our plans to raise capital and to consummate our initial Business Combination may not be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained in our Annual Report on Form 10-K filed with the SEC on March 31, 2023 and in this Quarterly Report on Form 10-Q do not include any adjustments that might result from our inability to continue as a going concern.

In addition, prior to the completion of its IPO, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. The Company has since completed its IPO at which time capital in excess of the funds deposited in the Trust Account and/or used to fund offering expenses was released to the Company for general working capital purposes. The Company used these funds primarily to identify and evaluate target businesses to complete an initial Business Combination.

Because the Company’s initial estimates of the costs of completing an initial Business Combination were less than the actual amount necessary to do so, it had insufficient funds available to operate the business prior to the initial Business Combination. Furthermore, because the term for entering into a Business Combination has been extended as further described in our Annual Report on Form 10-K, filed with the SEC on March 31, 2023, and in Item 5 of this Quarterly Report, the Company has needed to raise additional funds to meet the expenditures required for operating its business through such extension dates. If the Company is unable to complete an initial Business Combination due to insufficient available funds, it will be forced to cease operations and liquidate the Trust Account.

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Sponsor or any affiliates of the Sponsor, may continue to, but are not obligated to, loan funds to the Company on a non-interest basis as may be required. In the event that an initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, identical to the Private Placement Warrants, at a price of $1.00 per warrant at the option of the lender. The Company does not expect to seek loans from parties other than the Sponsor or any affiliates of the Sponsor. Additionally, the Company could suspend payments on a certain administrative service agreement (as discussed in Note 5 to the financial statements of our Annual Report on Form 10-K filed with the SEC on March 31, 2023 and in this Quarterly Report) to conserve working capital.

At September 30, 2023, the Company had $8,076 in cash and $8,283,203 in working capital deficiency.

The Company currently has less than 12 months to complete a Business Combination, and if the Company is unsuccessful in consummating an initial Business Combination, it is required to liquidate and dissolve. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that these factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

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In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC 205-40, “Presentation of Financial Statements – Going Concern”, management has determined that these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. If the Company is not able to consummate a Business Combination during the combination period, it will cease all operations and redeem the public shares.

To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we are currently assessing the relevant risk and it is possible that to mitigate the risk of the Company being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act), the Company may instruct the trustee with respect to the Trust Account to liquidate the U.S. government treasury obligations and money market funds held in the Trust Account and to hold all funds in the Trust Account in cash until the earlier of consummation of the Company’s initial Business Combination or liquidation. Following any such liquidation of investments in the Trust Account, we would likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.

The funds in the Trust Account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”). However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we are currently assessing the relevant risks and it is possible that to mitigate the risk of the Company being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act), the Company may instruct the trustee with respect to the Trust Account to liquidate the U.S. government treasury obligations and money market funds held in the Trust Account and to hold all funds in the Trust Account in cash until the earlier of consummation of the Company’s initial Business Combination or liquidation. Following such a liquidation, we would likely receive minimal interest, if any, on the funds held in the Trust Account. However, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any. As a result, any decision to liquidate the investments held in the Trust Account and thereafter to hold all funds in the Trust Account in cash items would reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company.

The Company did not liquidate the U.S. government treasury obligations and money market funds held in the Trust Account on or before November 10, 2023, the expiry of the 24-month anniversary of the effective date of the Company’s initial public offering prospectus. We may be deemed to be an investment company. The longer that the funds in the Trust Account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the securities held in the Trust Account at any time and instead hold all funds in the Trust Account in as cash items which would further reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company. Were we to liquidate, our warrants would expire worthless, and our securityholders would lose the investment opportunity associated with an investment in the combined company, including any potential price appreciation of our securities.

 

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ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The securities in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-256381). The registration statement for the Initial Public Offering was declared effective on November 10, 2021. On November 16, 2021, the Company consummated the Initial Public Offering of 23,000,000 Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant, at $10.00 per unit, generating gross proceeds of $230,000,000.

Simultaneously with the closing of the IPO, the Company consummated the sale of the 9,400,000 Private Placement Warrant at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor.

For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Quarterly Report.

In connection with the vote on the extension amendment at the special meeting held on February 8, 2023, stockholders holding a total of 9,155,918 shares of the Company’s common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, $94,489,075 was withdrawn from the Company’s Trust Account to pay such holders.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5.

OTHER INFORMATION

None.

 

ITEM 6.

EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

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No.    Description of Exhibit
    3.1+    Amended and Restated Certificate of Incorporation, as amended by the First Amendment to the Amended and Restated Certificate of Incorporation and the Second Amendment to the Amended and Restated Certificate of Incorporation.
    3.2    By-Laws (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1 filed with the SEC on May 21, 2021).
  10.1    Promissory Note, dated as of August 14, 2023 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on August 16, 2023).
  10.2    Promissory Note, dated as of September 14, 2023 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 14, 2023).
  31.1    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1*    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2*    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH    Inline XBRL Taxonomy Extension Schema Document
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104    Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

*

These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

+

Filed herewith.

 

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    INTEGRATED RAIL AND RESOURCES ACQUISITION CORP.
Date: November 20, 2023     By:   /s/ Mark A. Michel
    Name:   Mark A. Michel
    Title:  

Chief Executive Officer and Chairman

(Principal Executive Officer)

Date: November 20, 2023     By:   /s/ Timothy J. Fisher
    Name:   Timothy J. Fisher
    Title:  

Chief Financial Officer, President and Vice Chairman

(Principal Financial and Accounting Officer)

 

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