SECURITIES AND EXCHANGE COMMISSION
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the
fiscal yearannual period ended December 31,
20202021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from
to
Commission File Number
001-39632
Decarbonization Plus Acquisition Corporation
(Exact
Namename of
Registrantregistrant as
Specifiedspecified in its
Charter)charter) | | |
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(State or Other Jurisdictionother jurisdiction of Incorporation
incorporation or Organization)organization
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2744 Sand Hill Road
Menlo Park, California
| | 94025 |
(Address of Principal Executive Offices) | | (Zip Code)Number) |
Registrant’s475 Quaker Meeting House Road
(Address, including zip code, and telephone number, including area
code: (212) 993-0076code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
| | | | Name of each exchange on which registered |
Units, each consisting of one share of ClassClass A common stock and one-half of one warrant | | DCRBU | | Nasdaq Capital Market |
Class A common stock,Common Stock, par value $0.0001 per share | | DCRB | | Nasdaq |
Warrants, each whole warrant exercisable for one share of Class A common stock, $0.0001 par value, at an exercise price of $11.50 per share | | DCRBW | | Nasdaq |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
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,”company” and “emerging growth company” in
Rule 12b-2
of the Exchange Act.
| | | | | | |
| Large accelerated filer | | ☐ | | Accelerated filer | | ☐ |
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| | ☒ | | Smaller reporting company | | ☒ |
| | | |
| | | | Emerging growth company | ☒ |
Non-accelerated filer | ☒ | Smaller reporting 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)7(a)(2)(B) of the ExchangeSecurities Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).: Yes ☐ No
☒
No ☐The registrant’s units, each consisting
As of
one share of Class A common stock and one-half of one warrant, began trading on the Nasdaq Capital Market on October 20, 2020. Prior to that date, the Registrant’s units were not traded on any national securities exchange or in the over-the-counter market. Commencing December 14, 2020, holders of the units were permitted to elect to separately trade the shares of Class A common stock and public warrants included in the units. On December 31, 2020,June 30, 2021, the last business day of the registrant’s most recently completed
fourthsecond fiscal quarter, the aggregate market value of the
registrant’s Class A common stock
outstanding, other than shares held by
non-affiliatespersons who may be deemed affiliates of the registrant,
was approximately $239.3 million based oncomputed by reference to the closing sales price
offor the
registrant’s Class A common stock on
such dateJune 30, 2021, as reported on the
NasdaqNASDAQ Capital
Market. For purposes of this computation, all officers, directors and 10% beneficial owners of the registrant of which the registrant is aware are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.Market, was approximately $232.7 million.
As of March 1, 2021, 22,572,502 11, 2022, there were approximately
shares of
Class Athe registrant’s common stock
outstanding, par value $0.0001 per share,
and 5,643,125 shares of Class B common stock, par value $0.0001 per share, were issued and outstanding.
Documents Incorporated by Reference: None.
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| | | | Auditor Location: Rochester, New York |
Table of ContentsCERTAIN TERMS
References to the “Company,” “our,” “us” or “we” refer to Decarbonization Plus Acquisition Corporation, a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this
CAUTIONARY NOTE REGARDING FORWARD- LOOKING STATEMENTS
This Annual Report on Form 10-K
as our “initial business combination.” References to our “Sponsor” refer to Decarbonization Plus Acquisition Sponsor, LLC, a Delaware limited liability company. References to “Riverstone” are to Riverstone Investment Group LLC, a Delaware limited liability company, and its affiliates. References to “Riverstone Funds” are to a family of private equity funds in(this “Report”) contains forward-looking statements within the
energy and power industry that are managed by Riverstone. References to “equity-linked securities” are to any securitiesmeaning of the
Company or any of our subsidiaries which are convertible into, or exchangeable or exercisable for, equity securitiesSection 27A of the
Company or such subsidiary, including any securities issued by the Company or anySecurities Act of
our subsidiaries which are pledged to secure any obligation of any holder to purchase equity securities1933, as amended, and Section 21E of the
Company or anySecurities Exchange Act of
our subsidiaries. References to the “SEC” are to the U.S. Securities and Exchange Commission. References to our “Public Offering” refer to our initial public offering, which closed on October 22, 20201934, as amended (the
“Closing Date”“Exchange Act”).
References to “public shares” are to shares of our Class A common stock sold as part of the units in our Public Offering. References to “public stockholders” are to the holders of our public shares.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-lookingThese statements include, but are not limited to,without limitation, statements regarding our or ourthe financial position, business strategy and the plans and objectives of management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition,for future operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions,assumptions. These statements constitute projections, forecasts and forward-looking statements, and are forward-looking statements. Thenot guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this report, the words “could,” “should”, “will,” “may,” “anticipate,” “believe,” “continue,” “could,“expect,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would”the negative of such terms and other similar expressions mayare intended to identify forward looking statements, although not all forward- looking statements contain such identifying words. Such forward-looking statements butare based on management’s current expectations and assumptions about future events and are based on currently available information as to the absenceoutcome and timing of these words does not mean that a statement is not forward-looking. future events.
Forward-looking statements
are subject to a number of risks and uncertainties including, but not limited to, those described below and under the section entitled “” in this
Annual Report
onand in subsequent reports that we file with the SEC, including this Form 10-K
may include, for
example,the year ended December 31, 2021.our ability to commercialize our products and strategic plans, including our ability to establish facilities to produce our vehicles or secure hydrogen supply in appropriate volumes, at competitive costs or with competitive emissions profiles;
our ability to effectively compete in the heavy-duty transportation sector, and withstand intense competition and competitive pressures from other companies worldwide in the industries in which we operate;
our ability to convert non-binding memoranda of understanding into binding orders or sales (including because of the current or prospective resources of our counterparties) and the ability of our counterparties to make payments on orders;
our ability to invest in hydrogen production, distribution and refueling operations to supply our customers with hydrogen at competitive costs to operate their fuel cell electric vehicles;
disruptions to the global supply chain, including as a result of the COVID-19 pandemic and geopolitical events, and shortages of raw materials, and the related impacts on our third party suppliers and assemblers
our ability to maintain the listing of our common stock on NASDAQ;
our ability to raise financing in the future;
our ability to retain or recruit, or changes required in, our officers, key employees or directors;
our ability to protect, defend or enforce intellectual property on which we depend; and
the impacts of legal proceedings, regulatory disputes and governmental inquiries.
Should one or more of the risks or uncertainties described above, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements
about: | ● | our ability to select an appropriate target business or businesses; |
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| ● | our ability to complete our initial business combination, particularly in light of disruption that may result from limitations imposed by the COVID-19 outbreak; |
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| ● | our expectations around the performance of the prospective target business or businesses; |
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| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
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| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements; |
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| ● | our potential ability to obtain additional financing to complete our initial business combination; |
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| ● | our pool of prospective target businesses; |
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| ● | the ability of our officers and directors to generate a number of potential acquisition opportunities; |
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| ● | our public securities’ potential liquidity and trading; |
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| ● | the lack of a market for our securities; |
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| ● | the use of proceeds not held in the trust account described below or available to us from interest income on the trust account balance; |
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| ● | the trust account not being subject to claims of third parties; or |
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| ● | our financial performance. |
The forward-looking statements contained in this
Annual Report on Form 10-Kreport are based on our current expectations and beliefs concerning future developments and their potential effects on
us. There can be no assurance that future developments affecting us
will be those thatand speak only as of the date of this report. Except as otherwise required by applicable law, we
have anticipated. Thesedisclaim any duty to update any forward-looking statements,
involve a number of risks, uncertainties (someall of which are
beyond our control) or other assumptions that may cause actual results or performanceexpressly qualified by the statements in this section, to
be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under “Part I, Item 1A. Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, futurereflect events or
otherwise, except as may be required under applicable securities laws.ii
circumstances after the date of this report. You should, however, review additional disclosures we make in subsequent filings with the SEC.
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Item 1.
Business.Introduction
Business
Hyzon Motors Inc. (“Hyzon”, the “Company”, ‘we, “our” or “us”) was established with a singular goal: to lead the decarbonization of commercial transportation by deployingzero-emission,
hydrogen fuel cell electric vehicles (“FCEVs”) in a full ecosystem approach, coupling vehicles with access tolow-cost,
carbon intensity hydrogen and a complete service, parts and maintenance approach. We
areplan to accomplish this through industry-leading vehicle electrification platforms centered around Hyzon’s fuel cell technology, the production and supply of cost-effective clean hydrogen through diversified partnerships andco-investments,
leading partners in service, parts and maintenance, and access to global markets. Transportation is a
blank check company incorporatedvital cog in the global economy and constitutes one of the largest contributors to greenhouse gas (“GHG”) emissions: as a
Delaware corporationsector, transportation was responsible for approximately 23% of worldwide CO2 emissions in 2019 according to the International Energy Agency. In the U.S., according to the Environmental Protection Agency (“EPA”), transportation contributed up to 29% of GHG emissions in 2019, and
formedof that, light, medium and heavy-duty trucks contributed up to 36% of GHG emissions. The urgent need for
zero-emission
solutions in transportation is clear. Hyzon intends to meet its customers’zero-emission
vehicle needs by electrifying proven vehicle platforms utilizing our industry leading fuel cell and electric propulsion technologies. We expect to deploy these technologies in various vehicle classes, including heavy-duty (“HD”) and medium-duty (“MD”) trucks and buses with the
purposepotential for future expansion into light duty commercial vehicles, additional mobility use cases (e.g., aviation, marine, rail) and stationary power applications. Hyzon plans to drive acceleratedzero-emission
vehicle adoption by focusing on the largest and highest impact value pools of
effectingazero-emission
vehicle’s Total Cost of Ownership (“TCO”). As illustrated in the diagram, we estimate that typical TCO for a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar businessheavy-duty truck consists of upfront vehicle costs (40%), fuel costs (50%) and maintenance costs (10%). Hyzon expects to bring leadingzero-emission
commercial vehicles to market with increasing vertical integration and innovation across the electric propulsion systems of the vehicle including the fuel cell system. We believe that these specialty vehicle technologies hold the greatest potential for performance and cost improvements given our expectations that they may constitute approximately 70% of the upfront cost of the vehicle. By directly investing inlow-cost,
carbon intensity hydrogen fuel production, and collaborating with partners in feedstock, production, distribution and dispensing, we expect to bring hydrogen fuel to market to match the demand created by our customers’ fleet deployments. This collaboration will include direct investments by Hyzon via its subsidiary, Hyzon Zero Carbon, Inc., in hydrogen production projects built and operated by Hyzon’s partners, bringing fuel online close to Hyzon vehicle deployments in the near term. Once proven, we expect that these hydrogen supply models will be funded through third party financing via Hyzon Zero Carbon, Inc.
Through these hydrogen fuel production investments and partnerships, combined with highly competitive fuel cell and vehicle electrification technologies, Hyzon seeks to drive decarbonization while reducing vehicle TCO, providing advantaged cost structures and accelerating our customers’ ability to meet diesel parity as theHyzon-owned
content in those value pools increases. Key Benefits of Hydrogen and FCEV HD / MD applications
FCEVs are known to offer significant improvement in fuel efficiency compared to vehicles powered by internal combustion engines (“ICEs”). Thermal energy efficiency of a hydrogen fuel cell is typically higher than that of an ICE. As an additional benefit, hydrogen fuel cells emit only water while operating. Potentially lower cost of fuel
combination
of factors, including the relative abundance of hydrogen and its ability to be produced from multiple renewable sources (such as waste, wind and solar power, and biomass), we expect that the price of hydrogen will decrease relative tonon-renewable
hydrocarbon resources, including diesel fuel. Because the cost to transport hydrogen can be significant,production of hydrogen is expected to result in minimal transportation costs (which are built into the price of hydrogen) as compared to gasoline and diesel fuel which generally must be shipped extended distances. Further, as decarbonization efforts continue globally, including those mandated by many governments, we expect that investments in the hydrocarbon economy will shift towards renewable energy and that investment in hydrogen production will increase worldwide, resulting in advanced hydrogen production technology and lower hydrogen fuel costs. Finally, we expect the price of hydrocarbon fuels to rise due to global conflicts involving various oil producing countries, and as governments around the world increase taxation on high-emissions fuels while incentivizing clean energy sources such as low carbon intensity hydrogen. When coupled with
one ortechnological innovations that are expected to decrease the cost of producing hydrogen fuel cell systems, we expect these factors to allow hydrogen-powered vehicles to be competitive with diesel and other ICEs, enabling wide adoption by the transportation sector.:FCEVs use high torque electric propulsion providing optimal performance in commercial mobility. As compared to ICEs, FCEVs provide smoother acceleration, even with vehicle mass exceeding Class 8 vehicle weight limits in the U.S. : Hydrogen-powered heavy vehicles are generally quieter than comparable ICE vehicles, thus reducing the resulting noise pollution that can affect those operating the vehicles as well as those in the vehicle’s immediate surroundings. In addition, the time restrictions that are placed on truck operations in residential areas are often intended to reduce noise pollution, meaning that quieter hydrogen vehicles may enjoy more
businesses.In September 2017, our Sponsor purchased an aggregatefreedom to operate in some cases.
:Hydrogen fuel cell technology is anear-zero-emission
powertrain, as there is no combustion occurring in hydrogen fuel cellsThe California Air Resources Board (“CARB”) classifies fuel cell vehicles as “Zero-Emission Vehicles”. Based on CO2 emissions data from the Environmental Protection Agency (22.2 pounds of CO2 emissions per gallon of diesel), Hyzon estimates that 100,000 of our
hydrogen-powered Class
B common stock, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000, or approximately $0.002 per share. In September and October 2020, our Sponsor returned to us at no cost an aggregate of 5,750,000 Founder Shares, which we cancelled. Our Sponsor and WRG DCRB Investors, LLC, an affiliate of our chief executive officer (“WRG”), agreed to forfeit8 commercial vehicles could eliminate up to
161 million tons of CO2 emissions over 10 years assuming low carbon intensity hydrogen from 100% zero carbon feedstock, 100,000 operating miles annually per vehicle and a comparative consumption rate of 6.25 miles per diesel gallon. We model the total expected CO2 emissions reductions for one hydrogen-powered truck on an
aggregateannual basis as follows: expected annual miles driven x 1 / (6.25 miles per diesel gallon) x 10 kilograms of
750,000 Founder SharesCO2 / diesel gallon. Significant local area health benefits:
: We believe that FCEVs will eventually offer an attractive alternative to commercial operators because of a lower TCO as compared to ICE alternatives. We expect the higher initial purchase prices of FCEVs to be offset by lower overall cost of operations over time. We anticipate that, as global investment in hydrogen technologies and production facilities continues to grow, more favorable hydrogen cost structures will allow hydrogen fuel cell-powered commercial vehicles to deliver lower per mile (or kilometer) operating costs than their ICE equivalents based on publicly available data, including data from the National Renewable Energy Laboratory. Seamless transition from ICE is possible
In a decarbonized future, we believe that commercial vehicle use cases will be shared betweenzero-emission
electrified commercial vehicle platforms, with FCEVs deployed most densely in applications requiring longer periods of operation between refueling, heavy loads, and/or significant auxiliary power requirements, and battery electric vehicles (“BEVs”) used for other use cases. Examples of use cases that favor FCEVs include heavy duty trucks, medium and light duty trucks with refrigeration, auxiliary power and/or long-range requirements, refuse trucks, and higher mileage energy usage buses and coaches. Based on internal and third-party testing and customer-reported experiences, we also believe that FCEVs offer the following advantages as compared to BEVs: BEV propulsion systems for large, heavy commercial vehicles with high utilization currently require large, heavy battery packs, which tend to limit driving range and payloads. Our heavy-duty FCEV trucks are expected to include hydrogen storage capacity of 50 kilograms, resulting in a greater than300-mile
range depending on duty cycle. This range is greater than the distance advertised by many manufacturers for their heavy-duty BEVs.
In the U.S., the U.S. Department of Transportation Federal Highway Administration sets the Gross Vehicle Weight Rating (“GVWR”) weight allowance for a Class 8 truck at approximately 36 tons (80,000 lbs.). As depicted in the diagram, a typical heavy commercial tractor is likely to suffer payload limitations when operating as a BEV truck, but these limitations are largely overcome by Hyzon FCEV tractors powered by hydrogen as fuel. This is due to higher energy density of fuel cell and hydrogen systems compared with today’s state-of-the-art batteries. In addition to increased range and reduced refill times offered by hydrogen, this increased payload can generate better economics for our customers. Furthermore, additional weight allowances for zero-emission trucks benefit fuel cell electric trucks to the
same extent
as BEVs. Hydrogen-powered commercial vehicles are refueled in a process similar to natural gas vehicles by pumping compressed hydrogen gas into the vehicle tank using a dispenser and nozzle. Hydrogen benefits from a relatively short refueling time for FCEV trucks, while BEV trucks are expected to take substantially longer to charge, depending on the capacity of the charger. Lower infrastructure hurdles:
build-out
is a challenge for both FCEV and BEV HD and MD commercial vehicles, but we believe hydrogen has the infrastructure advantage when considering the required cost and time tobuild-out
the production, distribution and refueling infrastructure capacities to support each. Hydrogen fuel can be produced locally from a wide variety of resources and, when produced with low carbon intensity production methods and used to power fuel cells, results in zero direct GHG emissions. Clean hydrogen infrastructure can likely be built efficiently by building hydrogen production and dispensing in a modular fashion paired with and close to fleet deployments as the market develops from a breadth of locally available feedstocks, in most cases fully independent from major infrastructure constraints like the electricity grid. Comparatively, our analysis shows that any sizable HD and MD commercial truck BEV fleet deployment in many regions of the world will likely require significant electric charging infrastructure and electricity grid investment to bring substantial rapid charging to bear. For instance, charging just 100 Class 8 BEV trucks, each with battery capacity of 500kWh with megawatt chargers, would likely require at least 50 MW of power to support adelivery operation with the shortest possiblere-charging
time. In addition to investing in last-mile charging infrastructure, significant investment would likely also need to be made in transmission and distribution infrastructure to deliver the power needed to charge high-capacity batteries in HD and MD commercial BEV fleets. In summary, we believe that the
over-allotment optioncombination of availability, energy density, and local production will allow low carbon hydrogen to acquire substantial market share for
powering HD and many MD commercial vehicles.Our Strategy and Strengths
We believe that each FCEV sale will lead to multiple sources of revenue over the
Public Offering was not exercisedcourse of an average vehicle’s10-year
lifecycle: theone-time
investment in
fullthe vehicle itself, ongoing fuel needs, and regular maintenance, all important elements of a commercial vehicle TCO (as modeled above). Hyzon plans to prioritize those sources with an outsized impact on overall value capture and emissions, maximizing GHG reductions as well as margin potential where possible. Hyzon has established a strategy focusing on generating higher margins by
transitioning from purchasing externally-sourced, high value vehicle electrification components (which, together with the
underwriters. In October 2020,fuel cell system, may constitute 70% of the cost of a FCEV Class 8 truck) to internal development and manufacturing, assembly or partnered development and production of such components to complement our
Sponsor transferred an aggregate of 1,042,198 Founder Sharesindustry-leading fuel cell system technology. Hyzon’s strategy is to pursue opportunities to capture value from focused innovation relating to our
independent directorsbroadening electric propulsion technologies.
Vehicles and WRGVehicle Platforms
Hyzon focuses on the development of FCEVs in classes and use cases that benefit most from the advantages of hydrogen and FCEV technology. We work with our customers to identify the optimal vehicle use cases, including vehicles with high energy usage via long range, heavy loads, parasitic energy load losses (e.g., refrigeration, auxiliary power), and/or operational constraints that advantage hydrogen as a fuel. These customers – often early in the adoption phase of FCEVs – will mostly employ amodel where their vehicles return to a central “base” between operations, thereby allowing them to refuel onsite and/or nearby, as hydrogen can be produced locally at
or proximate to the central base. Back to base or regional customer applications include refuse collection, food and beverage distribution, gas and power utilities, port drayage, industrial operations, regionalfreight, coach and transit buses, and many others. As access to hydrogen improves and Hyzon offerings mature, we expect to expand our target customer focus to include longer-haul truck and bus segments, additional vehicle classes, stationary power, incremental mobility applications (e.g., rail, marine, aviation) and additional fuel cell applications. Aligned with our global footprint, Hyzon plans to assemble a variety of vehicle offerings to conform to regional regulations and customer preferences (e.g., cabover vs. traditional, right-hand drive vs. left-hand drive, etc.). Vehicle assembly operations have been globally established to support and match the regional market demands with consideration to planned ramp schedules. Utilizing standard powertrain and electrification module designs, we expect to realize significant manufacturing efficiency and high quality for final assembly. As the developer ofzero-emission
propulsion technologies, Hyzon will also consider working with fleet operators tore-power
vehicles in their
original purchase price. In November 2020,fleets to support their clean energy initiatives and carbon footprint minimization. For U.S. production, we plan to utilize a third party vehicle upfitter to support the expected high demand forzero-emission
vehicles to allow Hyzon to focus on continued innovation in electric propulsion technologies. Within the vehicle platforms we bring to market, we are focused on developing proprietary vehicle designs, vertical integration or partnered sourcing, and innovation within the critical components responsible forzero-emission
vehicle performance via electrification, including fuel cell systems, onboard hydrogen systems, battery technologies, E-axles, electric motors, integrated power electronics, and related equipment. We estimate that these critical components may comprise approximately 70% of the cost base for azero-emission
vehicle. By vertically integrating or partnering our
Sponsor transferred an additional 22,130 Founder Shares to onesourcing of
our independent directors. In December 2020, our Sponsorthe specialty components that drive cost and
WRG forfeited an aggregate of 106,875 Founder Shares in connection with the underwriters’ partial exercise of their over-allotment option resultingperformance in our
Sponsor, our independent directorselectrified vehicle platforms, we believe that we will offer advantaged vehicle cost structures, decarbonized vehicle performance and
WRG holding an aggregate of 5,643,125 Founder Shares. The holders of our Founder Shares (including our Sponsor, our independent directors and WRG) are referred to herein as our “initial stockholders.”Onvital supply chain flexibility.
Our estimates show that fuel represents the
Closing Date, we consummated our Public Offering of 20,000,000 units. The units were sold at a price of $10.00 per unit, generating gross proceeds to us of $200,000,000. Each unit (“Unit”) consists of one share of our Class A common stock, par value $0.0001 per share, and one-half of one warrant (“Warrant”). Each whole Warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment. Simultaneously with the consummation of the Public Offering, we completed the private sale of 6,000,000 private placement warrants (the “Private Placement Warrants”) at a purchase price of $1.00 per warrant to our Sponsor, our independent directors and WRG, generating gross proceeds to us of approximately $6,000,000. Each Private Placement Warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment.In connection with the Public Offering, the underwriters of the Public Offering were granted an option to purchase up to an additional 3,000,000 units (the “Over-allotment Units”). On November 9, 2020, the underwriters partially exercised their over-allotment option and, on November 12, 2020, the underwriters purchased 2,572,502 Over-allotment Units at an offering price of $10.00 per unit, generating gross proceeds of approximately $25.7 million. Simultaneously with the closing of the sale of these Over-allotment Units, we completed a private sale with our Sponsor and WRG for an additional 514,500 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds of approximately $514,500.
We received gross proceeds from the Public Offering (including the Over-allotment Units) and the sale of the Private Placement Warrants of approximately $225.7 million and $6.5 million, respectively, for an aggregate of approximately $232.2 million. Approximately $225.7 million of the gross proceeds were deposited into a U.S. based trust account (the “Trust Account”), with Continental Stock Transfer & Trust Company acting as trustee (“Trustee”). The approximately $225.7 million of net proceeds held in the Trust Account includes approximately $7.9 million of deferred underwriting discounts and commissions that will be released to the underwriters of the Public Offering upon completion of our initial business combination. Of the gross proceeds from the Public Offering and the sale of the Private Placement Warrants that were not deposited in the Trust Account, approximately $4.5 million was used to pay underwriting discounts and commissions in the Public Offering, $300,000 was used to repay loans and advances from our Sponsor and the balance was reserved to pay accrued offering and formation costs, business, legal and accounting due diligence expenses on prospective acquisitions and continuing general and administrative expenses.
The shares of our Class B common stock will automatically convert into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in our Public Offering and related to the closing of the initial business combination, the ratio at which the shares of our Class B common stock will convert into shares of our Class A common stock will be adjusted (unless the holders of a majority of the outstanding sharesTCO equation for vehicle operators, contributing up to 50% of our Class B common stock agreea typical
10-year
TCO for a heavy-duty truck (excluding driver wages). Hyzon’s strategy to
waive such adjustmentoptimize this critical component of TCO andzero-emission
vehicle adoption in general is to form strategic partnerships across the hydrogen fuel value chain, from feedstock to hydrogen production and dispensing. We have primarily focused on modular, scalable hydrogen production technology partnerships. These partnerships give Hyzon the right to directly invest in projects with
respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of our Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the business combination (excluding any shares or equity-linked securities issued, orleading technology partners. Through these partnerships, Hyzon expects to be
issued,able to
any sellerleverage a full range ofcarbon intensity feedstocks including solid waste, biomass, renewable natural gas (“RNG”) and renewable power (e.g., wind, solar, hydro). Waste, biomass and renewable gases in
the business combination). Holders of our Founder Shares may also elect to convertparticular are an advantaged feedstock for clean hydrogen production given their
shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above,widespread availability and attractive production costs at
any time.On December 11, 2020, we announced that commencing on December 14, 2020 holders of the Units sold in our Public Offering may elect to separately trade the shares of Class A common stock and Warrants included in the Units. The shares of Class A common stock and Warrants that are separated trade on the Nasdaq Capital Market (“NASDAQ”) under the symbols “DCRB” and “DCRBW,” respectively. Those units not separated continue to trade on NASDAQ under the symbol “DCRBU.”
Our Company
Our Sponsor is an affiliate of Riverstone, a Delaware limited liability that manages a family of private equity funds in the energy and power industry. Although we may pursue an acquisition opportunity in any business or industry, we intend to capitalize on the Riverstone platform to identify, acquire and operate a business in industries that may provide opportunities for attractive risk-adjusted returns in one of the multiple sectors that may advance the objectives of global decarbonization. This includes the energy and agriculture, industrials, transportation and commercial and residential sectors.relatively small scale. We believe there is ample ability to pair these areas of focus represent a favorablesmaller scale production plants with initial fleet operations, and highly fragmented market opportunity to consummate a business combination.
we expect that modular production will increase as demand grows. We intend to identify and acquire a business that could benefit from a hands-on owner with extensive transactional, financial, managerial and investment experience that presents potential for an attractive risk-adjusted return profile under our stewardship. Even fundamentally sound companies can often underperform their potential due to underinvestment, a temporary period of dislocation in the markets in which they operate, over-levered capital structures, excessive cost structures, incomplete management teams and/or inappropriate business strategies. Riverstone, an affiliate of our Sponsor, has extensive experience in identifying and executing acquisitions across the renewable, infrastructure, upstream and industrial services sectors, and has a two decade history of managinghave built a portfolio of industrial assetshydrogen production technology partners across a range of these
carbon intensity feedstocks to provide us with the ability to bring production online in the footprint of thefleets that
it believes mustare or plan to be
deploying Hyzon FCEV trucks, at the
corecost and carbon intensity they require. With modular production available close to demand, we can help to reduce the cost of
hydrogen to our customers by minimizing distribution costs.
Hyzon invests in hydrogen fuel production projects and related infrastructure with attractive economics through our subsidiary, Hyzon Zero Carbon, Inc. These projects are primarily managed by our hydrogen production and delivery partners, and they are intended to provide Hyzon with the ability to bring hydrogen production online with our partners at a
solutions roadmapsuitable scale close to
addressfleet demand, with the ability toscale-up
production as fleet demand and vehicle deployments grow. Additionally, our direct investment in these projects provides the ability to lock in the cost structure for hydrogen fuel at an equity cost basis. Our direct investments are also intended to minimize distribution costs, given that the production plants will be targeted to be located close to demand and provide the best opportunity to deliverlow-cost
hydrogen to fleets, thereby driving accelerated parity with diesel. Our focus oncarbon intensity hydrogen feedstocks also maximizes the low carbon fuel subsidy, such as California’s Low Carbon Fuel Standard program, that may be available to pass on to our customers via our dispensing partners. We have advanced our partnerships across the hydrogen fuel value chain over the past 12 months, particularly in hydrogen production, through Hyzon Zero Carbon, Inc.’sco-investments
in certain projects. For example, we have announced partnerships across the hydrogen production feedstock landscape, including those with Raven SR, Transform Materials, TC Energy, ReCarbon, and Woodside. Raven SR’s technology can take many forms of solid waste, biomass or renewable natural gas and produce clean hydrogen through a relatively compact, modular hydrogen production plant or “hydrogen hub” design. These hydrogen hubs can be located at landfills or near natural gas supply locations. Our first hydrogen hub in partnership with Raven SR has been sited at a Republic Services’ landfill in Richmond, California, USA, and is expected to produce 5 tons per day of clean hydrogen from 50 tons per day of solid waste and biomass – enough to fuel100-120
Class 8 trucks per day. This hub is expected to be online in the second half of 2022. Each of our hydrogen production partnerships has significant potential to produce clean hydrogen across the full set of clean hydrogen feedstocks, with a deep backlog of potential hydrogen production locations across the US, Canada, Europe, and Australia. This approach is projected to provide Hyzon’s customers withlow-cost
fuel that can be brought to market relatively quickly given the smaller scale of these projects and their proximity to demand. It also presents a significant business opportunity for Hyzon given the ability to invest in or fund these projects with attractive potential returns. Our key strengths include the following:
Proven hydrogen fuel cell technology and vehicle electrification experience
Highly experienced and proven team.
Strong fit with the comme
climate change
through decarbonizations.around the world have imposed more stringent emission reduction requirements, and heavy-duty commercial vehicles are becoming a target for emission reduction.
Vertical integration in key FCEV components and targeted assembly capabilities.
We
are installing manufacturing and assembly lines for membrane electrode assembly (“MEA”), fuel cell stack, fuel cell system, hydrogen storage system, battery pack, power electronics, for distribution to vehicle assembly locations in the U.S. and elsewhere.Asset-light, first mover approach to vehicle assembly
Partnered approach to bringing competitive hydrogen fuel to market located close to fleet deployments
believe that we are
positioned to bring competitive,carbon intensity hydrogen to our fleet customers close to their base of operations. We project these models will accelerate the realization of competitive total cost of ownership for Hyzon FCEVs as compared to diesel trucks.The last ten years have seen the rapid development of clean transport solutions. We believe this growth will continue to accelerate as increased product offerings, technological developments, reduced costs, additional supporting infrastructure, and increased global focus on climate goals drive broader adoption. The demand for hydrogen FCEVs will, in our view, be driven by these factors, together with customers’ needs and desires to decarbonize and meet their environmental, social and governance goals and policies supported by regulations and the decreasing total cost of ownership of FCEVs stemming in part from the improving economics of hydrogen. We believe Hyzon is well positioned to
identify attractive risk-adjusted returnscapitalize on this growth across a broad range of mobility applications, includingon-road,
off-road,
rail, maritime and aviation. Focusing on the commercial truck market, the below diagram shows that the market is divided by product segment and use case, depending on the distances travelled (long-haul vs. local or regional), the activities performed (vocational vs. haulage), and the weight classification (heavy / medium / light). Based on the combination of these factors, adjustments can be made to the electric powertrain to optimize vehicle performance. Hyzon focuses initially on those combinations for which our fuel cell technology provides clear benefits – high energy use cases where hydrogen propulsion delivers the best value to our customers. Use cases exist across heavy, medium, and light-duty vehicles, buses and many vocational applications, particularly inoperations as mentioned previously.
Source : Hyzon-funded third party analysis
Note 1: Total U.S. vehicles in operation (“VIO”) for fleets registered to entities with >30Class 3-8
vehicles; use cases capture top 80+% of VIO within the given product segment; excludes buses,pick-ups,
and non-commercial vehicles (e.g., motorhomes). Note 2: Hydrogen advantage is based on management’s expectations and determined by a qualitative scoring against load weight, range, auxiliary power draw, utilization, and industry access to hydrogen.
We see potential for our hydrogen vehicle electrification technologies in many other mobility use cases beyond commercial trucks and buses, which we will explore as those markets and opportunities present themselves with a strong fit to our technologies, innovation pipeline, and partnerships.
In the aviation sector, hydrogen fuel cells can contribute to the decarbonization of both ground facilities and services, and are currently being evaluated for powering small aircraft.
In the rail sector, hydrogen fuel cells are currently capable of powering electric trains and there are trials ongoing in various parts of the world for this application. Hydrogen fuel cells also show promise in decarbonizing the maritime industry which would help to protect the world’s oceans and marine life. Third party studies involving the use of hydrogen and fuel cells as alternative propulsion system for commercial maritime vessels have shown the feasibility ofnear-zero-emission
technologies such as hydrogen fuel cells forre-powering
today’s diesel-electric vessels. Fuel cells can also be utilized in situations requiringzero-emission
stationary power solutions. Because fuel cells operate independently of the electrical grid, they can be deployed in areas without access to the grid or in emergency settings where the grid has failed. In addition, peak loads exceeding local grid capabilities can be remediated through fuel cell systems, including charging of BEVs in some scenarios. Government entities, states, and municipalities are members of another segment of the market that we believe will actively participate in the
marketplacetransition from ICEs to sustainably powered vehicles and
equipment and represent significant potential demand. In the U.S., the CARB adopted the Advanced Clean Truck Regulation in June 2020 mandating truck manufacturers that certifyClass 2b-8
chassis or complete vehicles with combustion engines to sellzero-emission
trucks as an increasing percentage of their annual California sales from 2024 to 2035. Many U.S. states have expressed their intent to follow similar decarbonization paths. We are in advanced discussions with municipalities and ports in the United Kingdom and European Union. In Australia, grants and incentives are available to support and encourage the adoption and deployment ofzero-emission
vehicles.
Our target markets include hydrogen-powered commercial vehicle use cases stemming not only from the need to decarbonize activities, but also from the potential for lower TCO in comparison to the TCO associated with traditional gasoline and diesel ICE vehicles.
Given the outlook on the opportunities and market demand for decarbonized hydrogen-powered commercial mobility, we believe that the rapid technological advances in hydrogen-powered fuel cells, coupled with the growing abundance oflow-cost
renewable fuels that can be converted to hydrogen and the increasing investments in hydrogen refueling stations, FCEVs could dominate many commercial vehicle use cases. Hyzon’s objective is to be a leading player in the emerging hydrogen economy. We will seek to exploit our expanding vehicle electrification technologies as customers take incremental steps towards decarbonizing their operations, including transport and other energy needs. We believe that achieving a decarbonized future requires a vast increase in the production of and access to clean hydrogen - at a cost basis that is at or below diesel fuel costs per mile. The goals forzero-emission
vehicle deployments cannot be met without expansion of the fueling infrastructure which includes feedstock sources that can be converted into hydrogen, technologies to produce hydrogen, and distribution and dispensing solutions to bring hydrogen toend-users.
By participating in the development of clean hydrogen production and refueling infrastructure, we believe we can accelerate the near-term deployment of FCEVs while positioning ourselves favorably for the long run transition to renewable fuels. Given our strategy of investing in projects with leading hydrogen production partners, utilizing a broad set of clean hydrogen feedstocks, and positioning Hyzon truck fleet deployments close to demand, we expect to have a cost advantage in the hydrogen fuel we expect to produce and provide to fleets. We expect to compete with diesel in many customer use cases from the serviceable area of our first hydrogen hub – expected to be online in Richmond, CA and targeted for the second half of 2022, and at a cost that is expected to be at or below most currently operating forms of clean hydrogen production, given the base technologies’ expected production costs and low transportation costs. This hydrogen strategy provides Hyzon with a substantial market opportunity as our FCEV truck deployments scale in each region of the world where we operate, given the general lack of clean hydrogen infrastructure available today in most regions. TCO as Key Concern for Fleet Operators
In highly competitive commercial trucking, fleet operators are focused on their TCO over the lifetime of a vehicle. To control TCO, operators purchase vehicles that offer cost competitiveness and reliability, spend minimal time out of service, can be readily serviced when necessary, and have access to fuel with minimal price volatility.
To help our customers achieve these goals, Hyzon offers product, operational, and financing options to facilitate a transition to our vehicles:
Upfit of commonly used vehicles – electrifying existing OEM vehicle platforms that our contactscustomers operate in their fleets today instead of introducing new cab and transaction sources, rangingchassis designs increases the likelihood that drivers will be comfortable behind the wheel from day one. It further provides entry into international markets, as regional differences in vehicle designs are common, making upfit of existing platforms a faster pathway to putting familiar vehicles into customers’ hands.
Trial programs – before purchase, customers may participate in a paid trial to test our vehicles in daily operations.
Fuel access – during trial and after purchase, Hyzon aims to provide access to fueling infrastructure through a mobile refueler or local hydrogen production plant.
Existing carrier and service partners – thanks to a modular vehicle assembly approach, Hyzon can quickly train technical service providers to perform maintenance on the vehicle.
Leasing service – customers can participate in Hyzon’s leasing service, paying a stable and predictable monthly bundled rate for vehicle, fuel, and service.
Through these and other core business activities, Hyzon believes that it has developed a pathway to TCO parity with diesel vehicles in multiple geographies.
Vehicles and Vehicle Platforms
The competitive landscape for our vehicles ranges from vehicles relying on legacy ICEs, to extended range BEVs, to other hydrogen fuel cell and alternativecarbon emission propulsion vehicles. Competitors include well established vehicle companies already deploying vehicles using fuel cell technology, such as Hyundai and Toyota, and other heavy vehicle companies that have announced their plans to offer fuel cell trucks in the future, such as Daimler and Volvo, along with new entrants in heavy vehicles such as Nikola Corporation and Xos. Additionally, many fuel cell manufacturers, including Ballard, Cummins, PowerCell, ElringKlinger and Plug Power, are considering offering or already offer fuel cell systems for the vehicle markets we are focused on. We also face competition from traditional ICE vehicle manufacturers such as Kenworth, Freightliner, Peterbilt, Isuzu, Navistar, and Volvo. Given stated ambitions of various states and countries to move tozero-emission
freight under specified timelines, these competitors pose a threat primarily through their ability to produce at scale, brand recognition, and existing commercial relationships and reputation, should they decide to pursuezero-emission
vehicles. Additionally, our FCEVs will compete with BEVs and other low andzero-emission
vehicle types in the shift to lower emission freight haulage. As previously discussed, we believe our Hyzon FCEV trucks are well positioned to compete against BEVs and other powertrain types in the vehicle platforms and customer segments in which we choose to compete. The high energy usage, longer range, heavy load use cases we will focus on in heavy, medium, and selective light duty commercial vehicles position FCEVs to out compete BEVs in these areas. Our leading fuel cell technology and go to market approach, inclusive of the hydrogen fuel strategy stated above, provides the basis for which we expect to distinguish our products against our competitors and competing technologies. In our fuel business, we face or may face competition from a range of traditional energy production, industrial gas and distribution players such as Air Liquide, Air Products, BP, ExxonMobil, renewable power companies such as NextEra, new entrants such as BayoTech, and fuel cell vehicle competitors who are also entering hydrogen production such as Nikola and Plug Power. There are a vast number of hydrogen production projects that have been announced in geographies around the world that will be competing based on their ability to bring hydrogen production online at the lowest delivered cost and lowest carbon intensity possible, and to deliver to hydrogen consumption markets including transportation. Our competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, and marketing of their hydrogen production and dispensing services. Additionally, our competitors may also have greater name recognition, longer operating histories, larger sales forces, broader customer and industry executives, private owners, private equity fundsrelationships, and investment bankers,other tangible and intangible resources than us in energy and fuel production and delivery. They may already have access to those customers that we hope to target to sell hydrogen as fuel to their vehicles. We have mitigated some of these risks via partnerships with many of the companies in this space, but they may or may not be exclusive in nature, and those partners may still be able to compete directly against us in securing customers for hydrogen fuel.
These fuel competitors also compete with us in recruiting and retaining qualified research and development (“R&D”), sales, marketing, and management personnel, as well as in acquiring technologies complementary to, or necessary for, our products. Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.
Our core technology is centered on hydrogen fuel cell stacks and systems that we integrate into commercial vehicles. In addition to our fuel cell technology, we are developing other key vehicle electrification elements that are incorporated in our FCEVs. For example, we are developing fast charge/discharge LFP battery packs and control capabilities that we plan to incorporate into our FCEVs to improve performance, reduce fuel consumption, and mitigate supply chain risks. Further, we plan to manufacture or assemble other key components including E-axles and power electronics. Consistent with our strategy to focus on vehicle platforms and the industry reachspecialty components, we believe these actions will help us improve the quality of our vehicles, reduce product costs, and increase our gross margins over time.
The hydrogen fuel cell system is a central feature of the Riverstone platform,powertrain in a FCEV. The fuel cell stack is the heart of a fuel cell system. It generates electricity in the form of direct current from electrochemical reactions that take place in the fuel cell. Each single cell produces a small amount of power, and these cells are combined in series within a fuel cell stack. A typical fuel cell stack may consist of hundreds of individual cells. The level of power produced by a fuel cell stack depends upon several factors, such as fuel cell design and operating conditions, including the temperature at which it operates, stoichiometric ratio and pressure of the gases supplied to the cell.
An advantage of our technology is the high power density, and the current fuel cell stacks can provide up to 150kW of power from a single fuel cell stack.
We are also developing our next generation fuel cell stacks, and we intend to deploy our “Made in USA” 200 kW single-stack fuel cell systems in heavy-duty trucks by the end of 2022. We continue to explore opportunities for 300 kW models.
Hydrogen fuel cell stacks including those used in our products are made up of two key components: the membrane electrode assembly (the “MEA”) and the bipolar plate.
The Membrane Electrode Assembly
The main function of the MEA is to generate electric power in a fuel cell. The MEA, however, is also a major cost contributor to the fuel cell, as it contains precious materials functioning as an electrocatalyst, and requires a highly specialized assembly process. The main components of the MEA are the electrolyte membrane and the electrodes that consist of electrocatalyst layers and gas diffusion layers. There are a limited number of large-scale producers of MEA around the world.
The most critical part of the MEA is the cathode electrode. We are developing advanced cathode catalysts with nano-engineered high surface carbon support and use of innovative functionalized ionomers that can improve performance and durability. We expect that ourin-house
MEA manufacturing capabilities will enable us to
pursueintroduce innovative material solutions in our MEA products and to remain highly competitive as the global market for high powered fuel cells evolves. Our in-house MEA and bipolar plate technologies have applications in a
broadvariety of electrochemical devices from fuel cells to electrolyzers, and even solid-state batteries. Our MEA is expected to provide significant future cost advantage to Hyzon, and serve as a meaningful barrier to entry for those wishing to enter markets requiring high powered fuel cells.
The main functions of the bipolar plate are to supply the reactant gases to the respective electrodes in the MEA, remove waterby-product
from the fuel cell stack, and conduct electrons generated by the fuel cell reaction. Also, the bipolar plate distributes coolant in the fuel cell stack to reject the heat generated by the reaction in the MEA. Our Innovations in Bipolar Plates
We currently deploy unique, patented hybrid plates in our fuel cell stacks. The hybrid plate consists of a carbon cathode plate and a metallic anode plate. The carbon plate provides the cathode with fine flow-field channels and improves water management in the cathode; it also enables high current density and long lifetime operations. The hybrid approach improves power performance, compactness, and expected lifetime simultaneously, all of which are critical for commercial vehicles.
Hyzon continues to advance bipolar plate technology as part of our on-going innovation efforts. Thinner and lighter titanium bipolar plates with proprietary flow-field design and production techniques improve stack power densities significantly and may enable Hyzon to supply fuel cells for specific, demanding use cases where power density is critical.
Our materials and engineering advancements enable our fuel cells to achieve high overall power output and high power density, both attributes being especially important for heavy duty vehicles. In addition, we utilize advanced fuel cell system controls to mitigate stress factors for the fuel cell stack, resulting in significant improvement of the fuel cell lifetime in real-world settings. Fuel cell lifetime improvements are critically important in achieving TCO parity.
High Performance Fuel Cell System
The fuel cell stack requires a system around it to support its functions, which is made up of air delivery, fuel delivery, cooling, and electrical elements. These systems perform the care and feeding of the fuel cell. The sum of these support systems is commonly referred to as the balance of plant (“BOP”) which, together with the fuel stack, make up the fuel cell system. The fuel cell system takes hydrogen from the hydrogen storage system and performs all the functions necessary to supply conditioned electricity to the high voltage electrical system of the vehicle.
FCEVs use batteries for vehicle start up, peak shaving, and braking energy recovery. Each FCEV is based on an electric vehicle platform and batteries have an impact on FCEV cost and performance, although the batteries in FCEVs are much smaller than those in BEVs. Hyzon is developing high safety and fast charge/discharge battery packs for optimized FCEV performance, within-house
battery management system and battery pack technologies. Such battery technology may find applications in hybrid electric vehicles and high performance commercial BEVs. We have solid state battery development at an early stage, in which we are leveraging 20 years of our senior team’s knowhow in electrochemistry. Hyzon is developingE-axles
to replace centrally mounted single electric motor with multispeed transmission, to optimize vehicle fuel efficiency. We are developing our next generation power electronics modules which integrate multiple inverters and converters in one package. This design can reduce the use of wiring and save space and reduce vehicle cost while improving reliability.
Our Solutions, Timelines and Existing Customers
Hyzon-Branded
Commercial VehiclesHyzon vehicles are assembled in various locations to serve the unique markets in which we operate. We maintain a production facility through our joint venture in Winschoten, Netherlands. We also contract or plan to contract vehicle assembly with third party partners and suppliers in the U.S. and the People’s Republic of China. The vehicles that we assemble and sell currently are heavy-duty and medium-duty trucks and buses. We are also exploring the production of light duty vehicles and, should we proceed, we will seek to source those chassis from OEMs.
We are taking a vehicle system-level approach to assembling these vehicles by focusing on our proprietary fuel cell and electric propulsion systems, optimizing the vehicle controls and interfaces while utilizing existing third-party components such as the chassis, cab, and hydrogen cylinders.
Our FCEVs contain a fuel cell system based on our proprietary technology. Management’s models suggest that our heavy duty FCEVs can typically achieve a driving range of250-500
miles(400-800
km) per fill based on installed hydrogen storage capacity.
Hyzon System-Level Approach
We currently source traction motors, electric accessories, telematics solutions, and other commercially available elements to build our integrated FCEVs. We leverage existing component and assembly supply chain partners such as chassis, cab and hydrogen cylinders, an approach that is expected to minimize tooling and capital expenditures. We are developing our own solid-state batteries by leveraging our deep electrochemistry knowhow.
We integrate these systems with proprietary vehicle control software. Further, with the intelligence that is built into today’s telematics components that we integrate into our FCEVs, we can overlayover-the-air
communications, a feature that is not possible with traditional diesel/mechanical systems. This allows us to implement remote monitoring, health prognostics, and preventative maintenance to deliver increased uptime to our customers. We are currently accepting orders for heavy-duty and medium-duty trucks, as well as city and coach buses. Our commercial vehicles can be tailored to customer specifications and are expected to include onboard hydrogen storage systems with volumes that provide increased driving range as compared to comparable BEVs, and which are capable of being rapidly refueled.
Our FCEVs use compressed hydrogen storage tanks. The pressure of the compressed tank is typically350-bar,
as compared to most light duty vehicles that use a700-bar
system. The advantage of a350-bar
system over a700-bar
system is not only a lower cost of the tank system but also reduced hydrogen fuel cost. Hyzon believes that the350-bar
system can offer better TCO for commercial customers in many heavy-duty vehicle applications. Electrified trucks are expected to require traction motors up to 500kW peak power for heavy-duty and up to 200kW for medium-duty trucks. They also require air compressors for braking and suspension, and electric steering pumps. We expect the electric motors to be able to connect to gearboxes, making it possible for vehicle operators to use power take off (“PTO”) for any super structures such as refuse collection, sewer cleaning, utility service trucks, and many additional applications. The high voltage batteries in these vehicles can be used as a backup power source when the vehicles are stationary to power all accessories for extended periods of time. The specifications that follow are provided for illustrative purposes. We expect to produce other configurations to meet customer requirements.
Based on our targeted specifications, we expect that our standard heavy-duty trucks will have a Gross Vehicle Mass (“GVM”) of up to 50 metric tonnes and will include an onboard hydrogen mass of 50 kilograms gaseous hydrogen at 350 bar pressure and the option to upgrade to a hydrogen mass of 70 kilograms. The cabin of our heavy-duty trucks is expected to be air suspended and to open using electric tilt. Our heavy-duty trucks are expected to have a Hyzon fuel cell system with power up to 200 kW which combines with an onboard battery for optimal performance. The fuel economy is expected to be up to eleven kilometers per kilogram of hydrogen while loaded. Conventional vehicle chassis are planned to feature as our main offering North America and one of our offerings in Australia, while we expect cabover chassis models to be dominant in European and Asian markets.
We have also announced development efforts with Chart Industries to bring to market a liquid-onboard hydrogen or “LH2 truck”, with the goal of achieving a range of
opportunities.We continueup to seek1,000 miles or 1,600 kilometers. This vehicle program is expected to capitalizebe based upon the same cab and chassis being deployed in the heavy-duty category, except with liquid hydrogen tanks on board instead of gaseous hydrogen cylinders. As liquid hydrogen is much more dense than gaseous, the expertise and industry relationships of Riverstone, our chief executive officer and board of directors to source and complete a business combination. Since 2000, Riverstone has raised over $40 billion across capital structure in all major componentsadditional fuel capacity significantly increases the range of the renewable and conventional energy, power and infrastructure markets, with exposurevehicle, which is expected to over 195 portfolio companies in 15 countries. The firm maintains offices in New York, London, Houston, Menlo Park, Mexico City and Amsterdam. Together, our board of directors and management team has a demonstrable track record of identifying high-quality assets, businesses and management teams with significant resources, capital and optimization potential.
Erik Anderson and Jim McDermott serve as our chief executive officer and lead independent director, respectively. Messrs. Anderson and McDermott have significant backgrounds and experience as entrepreneurs andbe used in the decarbonization investment space. Mr. Andersonmost challenging
on-road
andoff-road
energy usage and range applications, and we expect it will unlock long-haul freight use cases along with ultra-heavy load environments assuming the joint development is
successfully brought to market. Additionally in the founderheavy-duty category, we are actively developing FCEV refuse trucks for deployment globally, with initial efforts underway in Australia and Europe, and plans to offer the FCEV refuse truck platform in North America. Refuse trucks are a highly attractive use case for hydrogen FCEV operations as they have the high energy usage duty cycle as well as the opportunity to place a hydrogen production plant at landfill or depot locations.
Based on target specifications, we expect our medium-duty trucks to be appealing to multiple vocations. Additionally for the U.S. market, we plan to introduce vehicles which are optimized for various vocations utilizing FCEV applications, including field service / utility trucks, extended range box freight delivery trucks and refrigerated trucks, all of which require significant energy in range, payload and / or parasitic or auxiliary power.
As of March 23, 2022, we had received firm orders in an aggregate value of approximately $63.0 million forHyzon-branded
trucks and buses to be supplied to Australia, China, New Zealand, and the Netherlands. Our existing customers which have placed orders include leaders in the transportation and logistics and mining sectors, as well as companies committed to reducing the overall environmental impact and fuel costs of their owned and operated trucking fleets. We have also signednon-binding
memoranda of understanding and letters of intent with various companies and government agencies – predominantly in Europe, Asia and Australia, that have indicated significant interest inHyzon-branded
commercial vehicles. We have also deployed demonstration or evaluation vehicles to customers. Suchnon-binding
memoranda of understanding and letters of intent signal significant potential fleet demand, but we have not yet converted thesenon-binding
memoranda of understanding or letters of intent into orders or sales. We have no assurances that such potential customers will convert into orders or sales, including because of the current or future financial position and the level of demand for the products and services of such potential customers. We may also be unable to identify or secure additional customers. For more information about these risks, please see the section entitled “”. Additional Hydrogen Fuel Cell Mobility Products and Markets
In addition to developing our heavy and medium dutyHyzon-branded
commercial vehicles, we are also actively assessing and selectively expanding our ability to integrate and configure hydrogen fuel cell systems into additional commercial vehicle categories as well as rail, maritime and aircraft applications for customers based on their individual requirements. Examples of the additional mobility categories in various stages of Hyzon product assessment and deployment follow: We are developing coach and city buses with safety features including forward collision warning, advanced emergency braking systems and lane departure warnings. We also expect that our city bus will include remote vehicle monitoring. As with our other commercial vehicle offerings, detailed specifications can be tailored to a customer’s individual requirements.
In the regional coach market, many coach bus operators seek at least a200-mile
(320-km)
driving range, and, currently,
serves as chief executive officerwe believe that only hydrogen fuel cells can achieve that range withnear-zero-emissions.
In both applications, we believe that our buses will offer superior performance and
equity company with $2 billionoperating characteristics compared to diesel buses and provide improved passenger amenity throughnear-zero-emissions,
elimination of
assets under management focused on advancing investmentsdiesel odors and quieter operations. We expect to perform coach assembly in the
innovation economy, with a focus on energy, life sciencesU.S. and
technology. Mr. Anderson also serves as the executive chairman of Topgolf Entertainment Group which, under his leadership, has become one of the fastest-growing sportsEurope to complement existing assembly efforts in Asia (through multiple third-party OEMs) and
entertainment brands in the world. Mr. McDermott has over two decades of investment and entrepreneurship experience almost exclusively dedicated to the decarbonization and clean tech space. He is the founder of Stamps.com, and has co-founded and invested in over 35 other companies over 25 years including NanoH20, Molear, Carbon Engineering and US Renewables Group. He presently serves as the chief executive officer of Rusheen Capital Management, a Santa Monica-based private equity firm dedicated to investments in growth-stage companies in carbon capture and utilization, low-carbon energy and water sustainability sectors. He also serves as the chief executive officer of 1PointFive, which develops, builds, owns and operates Direct Air Capture and Sequestration (DAC+S) plants in the United States, which holds the U.S. exclusive license from Carbon Engineering for the buildout of DAC+S plants across the country, utilizing Carbon Engineering’s proprietary and patented technology. Mr. McDermott founded and isare currently
a board member of Fulcrum BioEnergy, whose purpose is to advance the decarbonization of transportation through the conversion of municipal solid waste to low-carbon transportation fuels.Riverstone is one of the most experienced private equity investors globally within renewable energy, with over 15 years of dedicated investment experience to renewables. Since inception, Riverstone has committed over $5.2 billion of capital to 14 renewable power platform investments across subsectors including power generation, transmission & distribution, services and supply chain. Riverstone has owned or developed nearly 14 gigawatts of generation capacity and has developed over 110 projects in 15 countries. Further, Riverstone has raised significant funds for decarbonization and renewables platforms following the emergence of the coronavirus and its impact on the global economy and financial markets. In 2020, Riverstone raised $1 billion of equity for the recapitalization of Enviva Holdings, the world’s largest producer of sustainable wood pellets, and completed a $6.1 billion take-private of Pattern Energy Group, one of the world’s largest companies dedicated to carbon-free electricity through the development of utility scale wind and solar power facilities.
With respect to the foregoing examples, past performance of Riverstone or our management team is not a guarantee either (i) of successevaluating possible timelines with respect to any business combinationbeginning assembly activities in those regions.
Based on typical specifications, we may consummateexpect that our coach buses will seat up to 57 passengers and have a Curb Weight of 18 metric tonnes. Our coach buses are expected to feature a 120 kW fuel cell coupled with a Dana TM4 power electric motor (115 kW continuous and 230 kW peak power) that provides smooth acceleration and superior control, as well as a 100 kWh battery that provides power when the vehicle is idle, or (ii)the fuel supply is exhausted. Designed for long-range passenger transport with comfort in mind, passengers and drivers can enjoy a smooth drive without the disturbance of engine vibration. Fuel cell coaches are typically at least 60% quieter than comparable diesel vehicles, especially at idle. Our coach buses are expected to have a normal driving range of up to 300 kilometers from the onboard hydrogen supply of 26 kilograms.
Our fuel cell systems are well suited for both city bus and regional coach applications. For city buses, our fuel cells are designed to be compatible with the40-
and60-foot
(12 and18-meter)
low-floor
city bus models that
are used in urban areas around the globe. Due to the fast refueling offered by hydrogen-powered buses, we
willexpect cities and municipalities to be able to
identifyreplace diesel bus fleets with a
suitable candidate for our initial business combination. You should not relynear-zero-emissions
equivalent with minimal impact on
the historical record of Riverstone’s or our management’s performance as indicative of our future performance.Business Strategy
Our acquisitionoperating routes and value creation strategy is to identify, acquire and, after our initial business combination, build a company whose principal effort is developing and advancing a platform that decarbonizes the most carbon-intensive sectors, including the energy and agriculture, industrials, transportation and commercial and residential sectors. To date, decarbonization investment dollarsdepot facilities.
We have
taken place mostly on the grid, with investments in electricity conversions or substitutions from coal, oil and natural gas to renewables, principally wind and solar, while decarbonization initiatives around transportation have accelerated but are still in their infancy. Riverstone believes that the addressable universe to achieve substantial reductionsalso identified several potential use cases in the
global carbon footprint must extend beyond electricity and transportation. The electric grid accounts for less than 25% of primary energy consumption, whilelight duty commercial truck range, from Class 3 up to Class 5 in
the transportation market, the global adoption of electric vehicles has been slow to accelerate (in 2019, the electric vehicle share of global light vehicle purchases was 2.5% versus 1.2% in 2017). Meanwhile, the legacy global industrial, urban and agriculture complex remains largely under-resourced in terms of investments dollars expressly seeking measurable improvements in carbon intensity, and the application of digitization to industrial processes or supply chains provides enormous improvement potential in the carbon emissions profile of the global economy. Our acquisition strategy will leverage Riverstone’s network of potential proprietary and public transaction sources where we believeNorth America. These use cases under evaluation include field service / utility trucks with a combination of
our relationships, knowledgelonger range and
experienceparasitic and auxiliary load, refrigerated delivery vans and longer-range box trucks. Many of these trucks expend30-40%
of their total energy while sitting still due to idling and auxiliary power requirements, which challenge BEVs’ abilities to deliver the energy required over a full workday due to battery capacities, weight of batteries, and extended recharging times. We have interest from several customers in the
renewableU.S., including gas and
energy industries could effect a positive transformation or augmentation of existing businesses or properties. Our goal is to build a focused businesspower utilities with
multiple competitive advantages that have the potential to improve the target business’s overall value proposition. We plan to utilize the network and industry experience of our management team and Riverstone in seeking an initial business combination and employing our acquisition strategy. Over the course of their careers, the members of our management team and their affiliates have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of acquisition opportunities. In addition to industry and lending community relationships, we plan to leverage relationships with management teams of public and private companies, investment bankers, restructuring advisers, attorneys and accountants, which we
are evaluating potential light duty utility truck programs.
Fuel Cell Systems for Rail, Maritime and Aviation Applications
We also believe should provide us with a number of business combination opportunities. Members ofthat our management teamfuel cell systems could meet customer requirements for rail, maritime, and aviation applications. Indeed, we are communicating with their networks of relationships to articulate the parameters for our search for a target business and a potential business combination and beginalready in the process of pursuingdesigning high power density fuel cell systems for small electric aircraft usage. In the first quarter of 2022, we shipped a fuel cell stack to a private aircraft manufacturer of hydrogen electric powered aircraft for evaluation.
We have also had discussions with manufacturers of intercity, standard, and
reviewing potentially interesting leads.high-speed passenger trains to design and integrate our hydrogen fuel cells into passenger trains. In addition, some ocean-going vessel manufacturers have expressed interest in validating our technology for their vessels. To date these applications have not resulted in orders. Hydrogen Fuel Cell System Production and Supply
Acquisition Criteria
Consistent
Fuel cell stack production requires a highly specialized process and is well served to beco-located
with
MEA production to “feed” the fuel cell stack production stage. Production of our
business strategy, we have identifiedfuel cell stacks will initially be centralized in our Bolingbrook, Illinois facility. Fuel cell system assembly is a simpler, low CAPEX process; therefore, the
following general criteria and guidelines that we believe are importantfuel cell system assembly line can be readily placed at vehicle assembly facilities in
evaluating prospective targetsdifferent parts of the world if the local supply chains for peripherals meet our needs. For the US, the fuel cell system assembly will be placed next to the fuel cell stack production in our Bolingbrook facility, then the assembled fuel cell system will be shipped to vehicle assembly locations. We aim for our
initial business combination. We will use these criteriafirst fuel cell stack production and
guidelines in evaluating acquisition opportunities, but we may decidefuel cell system assembly to
enter into our initial business combination with a target that does not meet these criteria and guidelines. We intend to acquire target businesses that we believe: | ● | are fundamentally sound but that we believe can improve results by leveraging the transactional, financial, managerial and investment experience of our management team and Riverstone; |
| | |
| ● | can utilize the extensive networks and insights that our management team and Riverstone have built in the renewable infrastructure and energy industry; |
| | |
| ● | are at an inflection point, such as requiring additional management expertise, are able to innovate through new operational techniques, or where we believe we can drive improved financial performance; |
| | |
| ● | exhibit unrecognized value or other characteristics, desirable returns on capital, and a need for capital to achieve the company’s growth strategy, that we believe have been misevaluated by the marketplace based on our analysis and due diligence review; and |
| | |
| ● | will offer an attractive risk-adjusted return for our stockholders. |
Potential upside from growthoccur in the target business and an improved capital structure will be weighed against any identified downside risks.
These criteria are not intendedsecond half of 2022. MEA production is expected to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteriabegin in our stockholder communications related to our initial business combination, which would beBolingbrook facility in the formfirst half of proxy solicitation or tender offer materials that we would file with the SEC.
Initial Business Combination
Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions2022.
We temporarily source hydrogen fuel cells and
taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial business combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinionfuel cell stacks and systems from an
independent investment banking firm that isaffiliate of Horizon Fuel Cell Technologies PTE Ltd, a
member of the Financial Industry Regulatory Authority (“FINRA”) or an independent accounting firm with respect to the satisfaction of such criteria. Our stockholders may not be provided with a copy of such opinion, nor will they be able to rely on such opinion.
We may pursue an acquisition opportunity jointly with our Sponsor, or one or more of its affiliates,Singapore company which we refer to as an “Affiliated Joint Acquisition.” Any such parties may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by issuing to such parties a class of equity or equity-linked securities. Any such issuance of equity or equity-linked securities would, on a fully diluted basis, reduce the percentage ownership of our then-existing stockholders. Notwithstanding the foregoing, pursuant to the anti-dilution provisions of our Class B common stock, issuances or deemed issuances of Class A common stock or equity-linked securities would result in an adjustment to the ratio at which shares of Class B common stock shall convert into shares of Class A common stock such that our initial stockholders and their permitted transferees, if any, would retain their aggregate percentage ownership at 20% of the sum of the total number of all shares of common stock outstanding upon completion of our Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business combination), unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to such issuance or deemed issuance at the time thereof. Our Sponsor and its affiliates have no obligation to make any such investment, and may compete with us for potential business combinations.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction companybeneficially owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons, including an Affiliated Joint Acquisition as described above. However, we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise not required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequentcommon stock (“Horizon”), and anticipate continuing to rely on Horizon as a fuel cell supplier until our manufacturing operations are fully operational. We may continue to source hydrogen fuel cells and fuel cell stacks from Horizon for the Chinese market or elsewhere, even after we commence manufacturing our fuel cells, as it may be more economical to source from Horizon’s factory in China than to ship our U.S.-made fuel cells to China or elsewhere pending supply chain constraints. Additionally, we may source hydrogen fuel cells and fuel cell stacks from other suppliers where their access to local markets and subsidies enables us to grow our FCEV market share in that local market by leveraging their sourced technology in Hyzon FCEVs. We also plan to engage in the production of other electrification components for fuel cell vehicles by 2025 at locations to be decided through careful evaluation closer to the commencement of such operations.
Complete Hydrogen Solutions
Although a significant portion of our current customers are fleet operators that use amodel withpre-existing
access to hydrogen, we are developing a complete hydrogen solution that is intended to serve customers who do not currently have access to hydrogen. This solution is expected to include hydrogen production, compression, and storage. To develop this complete hydrogen solution, we intend to collaborate with chosen technology and project development partners - such as our existing hydrogen production partners mentioned previously - to ensure that affordable hydrogen is available to our
initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.Our Acquisition Process
In evaluating a prospective target business, we expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial and other information that will be made available to us. We will also utilize our transactional, financial, managerial and investment experience.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our Sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that our initial business combination is fair to the Company from a financial point of view.
Riverstone, members of our management team and our independent directors own (directly or indirectly) Founder Shares and/or Private Placement Warrants and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such other entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination.fleet customers. In addition, we may pursue an Affiliated Joint Acquisition opportunity with an entityare entering into new partnerships and collaborations across the hydrogen value chain, from feedstock to which an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with usdispensing, to enable competitive,
carbon intensity hydrogen supply as close to fleet demand as possible in
the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by issuing to such entity a class of equity or equity-linked securities. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.In addition, Riverstone or its affiliates, including our officers and directors who are affiliated with Riverstone, may sponsor or form other blank check companies similar to ours during the period in which we are seeking an initial business combination, and members of our management team may participate in such blank check companies. Any such companies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among the management teams. However, we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.
Our Management Team
Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that any member of our management team will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.
We believe our management team’s operating and transaction experience and relationships with companies provides us with a substantial number of potential business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships around the world. This network has grown through the activities of our management team sourcing, acquiring and financing businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions. See “Part III, Item 10. Directors, Executive Officers and Corporate Governance” for a more complete description of our management team’s experience.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Once public, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Effecting our Initial Business Combination
We intend to effectuate our initial business combination using cash from the proceeds of our Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the Trust Account are used for payment of the consideration in connection with our business combination or used for redemptions of purchases of our Class A common stock, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination (which may include a specified future issuance), and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the Trust Account. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our business combination. There are no prohibitions on our ability to raise funds privately, including pursuant to any specified future issuance, or through loans in connection with our initial business combination.
Sources of Target Businesses
We are not prohibited from pursuing an initial business combination with a business combination target that is affiliated with our Sponsor, officers or directors or making the acquisition through a joint venture or other form of shared ownership with our Sponsor, officers or directors. In the event we seek to complete our initial business combination with a business combination target that is affiliated with our Sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm that such an initial business combination is fair to the Company from a financial point of view. We are not required to obtain such an opinion in any other context.
If any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us. We may, at our option, pursue an Affiliated Joint Acquisition opportunity with an entity to which an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by making a specified future issuance to any such entity.
Selection of a Target Business and Structuring of our Initial Business Combination
Our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of our assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm with respect to the satisfaction of such criteria. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise is not required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be valued for purposes of the 80% of net assets test.
To the extent we effect our business combination with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review, which may encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as applicable, as well as a review of financial, operational, legal and other information which will be made available to us. If we determine to move forward with a particular target, we will proceed to structure and negotiate the terms of the business combination transaction.
Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business with which our business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. The Company will not pay any consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or in connection with our initial business combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we intend to focus our search for an initial business combination in a single industry. By completing our business combination with only a single entity, our lack of diversification may:
| ● | subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and |
| | |
| ● | cause us to depend on the marketing and sale of a single product or limited number of products or services. |
Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC, subject to the provisions of our amended and restated certificate of incorporation. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
Type of Transaction | | Whether
Stockholder
Approval is
Required |
Purchase of assets | | No |
Purchase of stock of target not involving a merger with the company | | No |
Merger of target into a subsidiary of the company | | No |
Merger of the company with a target | | Yes |
Under NASDAQ’s listing rules, stockholder approval would be required for our initial business combination if, for example:
| ● | we issue shares of Class A common stock that will be equal to or in excess of 20% of the number of shares of our Class A common stock then outstanding; |
| | |
| ● | any of our directors, officers or substantial stockholders (as defined by NASDAQ rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding common shares or voting power of 5% or more; or |
| | |
| ● | the issuance or potential issuance of common stock will result in our undergoing a change of control. |
Permitted Purchases of our Securities
In the event we seek stockholder approval of our business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or their affiliates may purchase shares or Warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase shares or Warrants in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights.
In the event that our Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
The purpose of any such purchases of shares could be to (i) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of Warrants could be to reduce the number of Warrants outstanding or to vote such Warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our common stock or Warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our Sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our Sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders (in the case of shares of Class A common stock) following our mailing of proxy materials in connection with our initial business combination. To the extent that our Sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the Trust Account or vote against the initial business combination. Our Sponsor, officers, directors, advisors or any of their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our Sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) of and Rule 10b-5 under the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our Sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) of or Rule 10b-5 under the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The per-share amount that we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting discounts and commissions we will pay to the underwriters of the Public Offering. Our Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any Founder Shares held by them and any public shares held by them in connection with the completion of our business combination.
Limitations on Redemptions
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed business combination may require (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial 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 we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval, while direct mergers with the Companygeography where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by applicable law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
| ● | conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and |
| | |
| ● | file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulations the solicitation of proxies. |
Upon public announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or our Sponsor will terminate any plan established in accordance with Rule 10b5-1 under the Exchange Act to purchase shares of our Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or we decide to obtain stockholder approval for business or other legal reasons, we will:
| ● | Conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and |
| | |
| ● | File proxy materials with the SEC. |
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the Company representing a majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote at such meeting. Our initial stockholders will count toward this quorum and have agreed to vote their Founder Shares and any public shares purchased during or after the Public Offering in favor of our initial business combination.operate. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholders’ Founder Shares, we would need 37.5% of the then outstanding public shares to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised). We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our 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(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 20% of the shares sold in our Public Offering, which we refer to as the “Excess Shares.” We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 20% of the shares sold in our Public Offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us, our Sponsor or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 20% of the shares sold in our Public Offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, our amended and restated certificate of incorporation will not restrict our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have 24 months from the closing of the Public Offering to complete our initial business combination. If we are unable to complete our business combination within such 24-month period, we 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 us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our business combination within the 24-month time period.
Our Sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them if we fail to complete our initial business combination within 24 months from the closing of the Public Offering. However, if our Sponsor, officers or directors acquire public shares in or after the Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if we fail to complete our initial business combination within the allotted 24-month time period.
Our Sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) that would modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated our initial business combination within 24 months from the closing of our Public Offering or (ii) with respect to any other provision relating to the rights of holders of our Class A common stock or pre-initial combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment 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 us to pay our franchise and income taxes, divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules).
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts held outside the Trust Account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the Trust Account not required to pay franchise and income taxes on interest income earned on the Trust Account balance, we may request the Trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
The proceeds deposited in the Trust Account could become subject to the claims of our creditors, which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per share redemption amount received by stockholders will not be substantially less than $10.00. Under Section 281(b) of the Delaware General Corporation Law (the “DGCL”), our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors (except for our independent registered public accounting firm), service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to seek access to the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with whichexample, we have entered into a letterstrategic alliance with Viva Energy Group Limited to provide
near-zero-emission
vehicles coupled with hydrogen refueling stations to customers in Australia, and have executed a memorandum of
intent, confidentiality or other similar agreement or business combination agreement, reduceunderstanding (“MoU”) with TotalEnergies in Europe to collaborate on refueling infrastructure. We believe that we have the
amountpotential to realize recurring revenue from certain hydrogen supply partnership agreements as hydrogen production hubs are commissioned.
These partnerships across the hydrogen fuel production and dispensing value chain paired with Hyzon’s vehicle fleet deployments creates a significant opportunity for Hyzon to invest in fuel production with its partners and benefit from the expected leading cost structures described previously. Those investments are to be made by Hyzon’s subsidiary, Hyzon Zero Carbon, Inc., which will house Hyzon’s interests in the
Trust Accounthydrogen fuel side of the business. Bringing fuel to
below (i) $10.00 permarket at an equity investment cost basis, with leading partners developing the fuel value chain with Hyzon, enables us to provide full-service vehicle leases including fuel and vehicles with fuel at a combined TCO that fleet operators can tangibly see in one offering. This provides a simple solution to fleet operators who want a‘one-stop’
partner in providing the vehicle, fuel and service in their fleet decarbonization journey. In addition, Hyzon has developed an alliance – the Hyzon Zero Carbon Alliance – that aims to facilitate the establishment of hydrogen hubs around the world starting fromorlogistics hubs. Hydrogen can be produced from local renewable sources such as municipal waste, renewable natural gas,bio-methanol,
solar or wind, not only to refuel the vehicles but also to provide peak load power to the electricity grid, thereby increasing grid resilience. The Hyzon Zero Carbon Alliance aims to facilitate ecosystems for commercializing FCEVs, and collaborators may include energy companies, green hydrogen production companies, hydrogen equipment companies, financing companies, insurance companies, corporate customers and after-sales service companies. The alliance will also promote public share or (ii) such lesser amount per public share heldawareness and education of the environmental benefits hydrogen mobility and how hydrogen can play an important role in helping to reduce global carbon emissions. We and our alliance partners plan to progress tangible hydrogen ecosystem projects in the Trust AccountU.S., Australia, New Zealand and Europe during the course of 2022 and beyond.
We provide various vehicle leasing solutions. We are working to establish a financing program in various markets with financing partners, which is expected to enable fleet operators to pay one monthly fee and receive:
scheduled preventative maintenance; and
hydrogen supply.
The application of new technology and the development and delivery of competitive hydrogen vehicles has the potential to enable rapid growth for Hyzon around the world and to contribute to the acceptance of commercial hydrogen fuel cell vehicles and the affordable transition of the transportation sector to hydrogen energy.
On January 12, 2021, JS Horizon (as defined below under the heading,), an affiliate of Horizon, and Hyzon entered into the Horizon IP Agreement (as defined below), pursuant to which JS Horizon assigned to Hyzon a joint ownership interest in Background IP (as defined below under the heading,), and each of Hyzon and JS Horizon granted to the other, within such other party’s field of use, exclusive licenses under their respective joint ownership rights in the Background IP, as well as their rights in improvements made in the future with respect to such Background IP. The Horizon IP Agreement was amended effective September 27, 2021. Under the Horizon IP Agreement, Hyzon also grants JS Horizon anon-exclusive
license under certain identified provisional patent applications owned by Hyzon and identified in the agreement, as well as improvements thereto, for use only within JS Horizon’s field of use. Please see the section below entitled “” for additional information concerning the Horizon IP Agreement.
On January 7, 2021, Hyzon and Jiangsu Qingneng New Energy Technologies Co. Ltd., part of the Horizon group of companies, entered into that certain Commercial Terms for the Supply of Goods Agreement, wherein, Horizon agreed to supply and treat Hyzon as a preferred export customer, each party agreed to exchange information on lead times for materials, parts and components, and each party agreed to seek out opportunities to optimize the supply of equipment and materials from Horizon to Hyzon.
On August 4, 2020, Hyzon entered into an agreement with Fontaine Modification Company (“Fontaine”) in the U.S. for the purposes of collaboration relating to the assembly of Hyzon brandednear-zero-emission
trucks to be supplied into the U.S. market. The agreement is initiallynon-binding
in nature but provides a framework for a close future collaboration with the goal of deploying approximately 5,000 Hyzon trucks per year from Fontaine facilities by 2025. On October 30, 2020, Hyzon entered into a Share Subscription Agreement with Global NRG H2 Limited, a New Zealand corporation (“NRG”), whereby Hyzon would acquire 17,000 shares of NRG in two tranches totaling $2,448,000, and an Options Agreement of the same date granting Hyzon the right to acquire up to 233,000 shares in three tranches at specified exercise prices. These arrangements were and are intended to afford Hyzon access NRG hydrogen production technology.
On October 30, 2020, Hyzon formed Hyzon Motors Europe B.V., a Dutch-based, private limited company joint venture (“Hyzon Europe”) with Holthausen Clean Technology Investments B.V. (“Holthausen”), for the primary purpose of supplying hydrogen-powered trucks to the European Union and nearby markets such as the United Kingdom, the Nordic countries and Switzerland. Hyzon owns 50.5% and Holthausen owns 49.5% of the equity interests of Hyzon Europe, respectively. Pursuant to the 2020 Joint Venture Agreement, by and among Hyzon, Holthausen and Hyzon Europe, neither Hyzon nor Holthausen may have an interest in, be engaged in, or be concerned with, or approach any person with a view to obtaining an interest or being engaged in or concerned with, any business involving the development or production of, or the trading in, any products developed, produced or traded by, or the provision of services developed or provided by Hyzon Europe or any of its subsidiaries, subject to certain exceptions forpassive investments. On December 31, 2021, Hyzon signed aNon-Binding
Letter of Intent with our joint venture partners in Hyzon Europe to purchase from such partners additional shares in Hyzon Europe that, if a transaction effecting this Non-Binding Letter of Intent is completed, will increase Hyzon’s equity stake in Hyzon Europe to 75%. Concurrent with the signing of this LOI, a €1 million refundable deposit was paid to Holthausen, approximately $1.1 million in USD. On April 23, 2021, Hyzon announced its joint venture with Raven SR, a renewable fuels company, to work towards building up to 100 hydrogen hubs across the U.S. and globally, with the first two hubs to be built in California. In connection with this partnership, Hyzon agreed to acquire and subsequently did acquire a minority interest, and options to purchase additional common shares in Raven SR, investing $2.5 million in July 2021.
On April 29, 2021, Hyzon, together with Modern Industrial Investment Holding Group (“Modern Group”), announced the signing of a MoU with NEOM Company for the development of a vehicle assembly facility in NEOM, the $500 billion giga-project in northwest Saudi Arabia. Under the MoU, Hyzon, Modern Group and NEOM Company plan to work closely over the next 18 months to finalize plans and specifications for a new NEOM regional assembly facility with an anticipated annual capacity to assemble up to 10,000 vehicles. To facilitate construction of the new facility, Hyzon and Modern Group plan to incorporate a joint venture company, Hyzon Motors Middle East, which would focus on supplying locally-built,Hyzon-branded
zero-emission
commercial vehicles throughout Saudi Arabia and the Gulf Cooperation Council. On May 24, 2021, Hyzon announced that it had signed a strategic collaboration agreement with Sojitz Machinery Corporation of America (“SMA”) with the goal of partnering in penetrating new markets and exploring the development of new fuel cell-powered commercial mobility applications. The strategic relationship between Hyzon and SMA is designed to connect Hyzon’s hydrogen fuel cell-powered heavy vehicles and fuel cell technologies with SMA customers and suppliers.
On July 6, 2021, Hyzon and Chart Industries Inc. announced their agreement to develop and produce a liquid hydrogen-powered heavy-duty commercial vehicle with a range of up to 1,000 miles.
On July 12, 2021, Hyzon announced that it signed an MoU with TotalEnergies SE to expand the companies’ relationship. Under the terms of the MOU, the parties will seek to collaborate on developing hydrogen ecosystems, as well as production and sale of 80 hydrogen fuel cell-powered trucks for TotalEnergies’ French customers.
On November 9, 2021, Hyzon announced its MoU with ITOCHU, the leading Japanese business group. Under thenon-binding
MoU, the companies are expected to jointly develop hydrogen supply chain strategies as well as model customer projects for the deployment of Hyzon FCEVs and fuel cell technology in the mining sector. On November 10, 2021, Hyzon announced an agreement with TC Energy to collaborate on development, construction, operation, and ownership of hydrogen production facilities or ‘hubs’ across North America. The hydrogen production facilities will be used to meet hydrogen FCEV demand by focusing oncarbon intensity hydrogen from renewable natural gas, biogas, and other sustainable sources. The facilities will be located close to demand, supporting Hyzonvehicle deployments. On December 7, 2021, Hyzon announced an agreement with Woodside Energy to collaborate on developing supply of zero carbon intensity hydrogen and building demand from heavy-duty and medium-duty commercial vehicle customers in the U.S. and Australia. Under the agreement, the companies will evaluate opportunities to develop green hydrogen hubs. Initially, the project will focus on liquid hydrogen supply projects to support Hyzon’s future liquid hydrogen onboard mobility use cases – including ultra-long range trucks already under development, and aviation, marine and rail applications.
On January 19, 2022, Hyzon announced anon-binding
MoU with Transform Materials, a provider of renewable hydrogen through its innovative proprietary microwave reactor technology. Together, Hyzon and Transform Materials will evaluate proposals to develop facilities to producecarbon intensity hydrogen from various forms of methane, prioritizing biogas and renewable natural gas. Through Transform Material’s proprietary technology, these facilities (acting as hubs) can be built to produce hydrogen efficiently—even at small scales of1-5
tons/day—offering modular construction that allows capacity to grow as customer demand increases. Transform’s technology to be employed in these projects produces hydrogen as aco-product
with acetylene, providing significantly advantaged hydrogen cost structures. We have a global sales and marketing strategy that is centrally coordinated and delivered at the regional level, with business development teams in the U.S., Australia, Singapore, China, and Europe. We expect to work with local partners in certain countries to develop agency and/or reseller arrangements. We plan to focus most of our efforts on direct sales to private sector and government heavy-vehicle fleet owners and operators but may also pursue indirect sales through commercial vehicle dealerships and other channels. Our primary methods for growing brand awareness are digital media, traditional media, and industry events.
Our R&D will continue to be principally focused on the areas to support ourin-house
development and manufacturing, including advanced fuel cell technologies and elements of vehicle electrification. R&D resources will leverage our deep electrochemistry knowhow, for example, solid state batteries for electric propulsion and electrolyzers to produce hydrogen fuel. In summary, our R&D efforts will include:
advanced materials for fuel cell stack, MEA and bipolar plate;
novel solid-state battery for optimizing FCEV performance;
high efficiency multi-motor drive systems with torque vectoring;
advanced driver assistance systems and autonomous driving technology;
purpose-built vehicle platforms with light-weight materials;
advanced production technologies in vehicle electrification components;
green hydrogen hubs with hydrogen and electricity produced from renewable resources; and
on-site energy storage with hydrogen and batteries.
Intellectual property is important to our business, and we seek to protect our strategic intellectual property through a combination of patents, copyrights, trade secrets and trademarks, along with employee and third-partynon-disclosure
agreements and other contractual restrictions. Pursuant to the Intellectual Property Agreement dated January 12, 2021, as amended on September 27, 2021 (the “Horizon IP Agreement”), between and among Jiangsu Qingneng New Energy Technologies Co., Ltd. Shanghai Qingneng Horizon New Energy Ltd., Jiangsu Horizon Powertrain Technologies Co. Ltd. (”JS Powertrain”) (collectively, “JS Horizon”) and Hyzon, JS Horizon assigned to Hyzon a joint ownership interest in certain intellectual property rights previously developed by JS Horizon (“Background IP”), and each of Hyzon and JS Horizon granted to the other, within such other party’s field of use, exclusive licenses under their respective joint ownership rights in the Background IP, as well as their rights in improvements made in the future with respect to such Background IP.
Hyzon’s field of use under the Horizon IP Agreement includes the manufacture, commercialization and other exploitation of mobility products throughout the world, as well as fuel cells designed for use in mobility products commercialized outside of identified countries in Asia, Africa, and South America. JS Horizon’s field of use under the Horizon IP Agreement includes the manufacture, commercialization, and other exploitation throughout the world of fuel cells not designed for use in mobility products, as well as fuel cells designed for use in mobility products commercialized within identified countries in Asia, Africa, and South America. Under the Horizon IP Agreement, the parties also acknowledge and confirm Hyzon’s sole ownership of the 20 pending U.S. provisional patent applications owned by Hyzon as of the date of the
liquidationHorizon IP Agreement, and Hyzon grants JS Horizon anon-exclusive
license under those patent applications (and any patents issuing therefrom), as well as improvements thereto, for use only within JS Horizon’s field of use. Under the terms of the
Trust Account, dueHorizon IP Agreement, the Company was to
reductions in valuepay JS Horizon a fee of $10 million as consideration for the rights it receives under the Background IP and improvements. As of December 31, 2021, $6.9 million of the
trust assets,fee was paid and the remaining $3.1 million was paid in
each case net ofFebruary 2022. Prior to entering into the
amount of interest which may be withdrawnHorizon IP Agreement, Hyzon was a party to
pay taxes, except as 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) and except as to any claims under our indemnity of the underwriters of our Public Offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations, and we believe that our Sponsor’s only assets are securities of the Company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust AccountLicense Agreement, effective as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our Sponsor to reserve for such indemnification obligations and we cannot assure you that our Sponsor would be able to satisfy those obligations.
We will seek to reduce the possibility that our Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for our independent registered public accounting firm), prospective target businesses or other entitiesJanuary 20, 2020 (substantially concurrent with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Our Sponsor will also not be liable as to any claims under our indemnity of the underwriters of our Public Offering against certain liabilities, including liabilities under the Securities Act.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of our Public Offering may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of the Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our business combination within 24 months from the closing of our Public Offering is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our business combination within 24 months from the closing of our Public Offering, we 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 us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 24th month and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers (except for our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and the Company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the Trust Account only (i) in the event of the redemption of our public shares if we are unable to complete our business combination within 24 months from the closing of our Public Offering, subject to applicable law, (ii) in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 24 months from the closing of our Public Offering or (B) with respect to any other provision relating to the rights of holders of our Class A common stock or pre-initial business combination activity or (iii) if they redeem their respective shares for cash upon the completion of the initial business combination. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the Trust Account. Such stockholder must have also exercised its redemption rights as described above.
Limited Payments to Insiders
There will be no finder’s fees, reimbursements or cash payments made by the Company to our Sponsor, officers or directors, or our or their affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination, other than the following payments, none of which will be made from the proceeds of our Public Offering and the sale of the Private Placement Warrants held in the Trust Account prior to the completion of our initial business combination:
| ● | repayment of up to an aggregate of $300,000 in loans made to us by our Sponsor to cover offering-related and organizational expenses; |
| | |
| ● | reimbursement for office space, utilities, secretarial support and administrative services provided to us by our Sponsor, in an amount equal to $10,000 per month; |
| ● | reimbursement for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial business combination; and |
| | |
| ● | repayment of loans made by our Sponsor or an affiliate of our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. |
Competition
In identifying, evaluating and selecting a target business for our business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Facilities
Our executive offices are located at 2744 Sand Hill Road, Menlo Park, CA 94025, and our telephone number is (212) 993-0076. Our executive offices are provided to us by an affiliate of our Sponsor. Commencing on the date of the Public Offering, we have agreed to pay our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. We consider our current office space adequate for our current operations.
Proposed Business Combination
Business Combination Agreement
On February 8, 2021, we entered into a business combination agreement and plan of reorganization (the “Business Combination Agreement”) with DCRB Merger Sub Inc., a Delaware corporation and our wholly owned subsidiary (“Merger Sub”), and Hyzon Motors, Inc., a Delaware corporation (“Hyzon”)Legacy Hyzon’s formation), pursuant to which Merger Sub will be merged with and intoLegacy Hyzon (the “Merger,” together with the other transactions related thereto, the “Proposed Transactions”), with Hyzon surviving the Merger as our wholly owned subsidiary. The parties expect the Proposed Transactions to be completed in the second quarter of 2021, subject to, among other things, the approvalreceived an exclusive license under certain of the Proposed Transactions by our stockholders, satisfactionBackground IP. That agreement was replaced with a Partial Assignment Agreement of the conditions stated in the Business Combination Agreement and other customary closing conditions.
Lock-Up Agreement
In connection with the execution of the Business Combination Agreement, on February 8, 2021, certain stockholders of Hyzon, whoseFuel Cell Technology, dated November 19, 2020, which contemplated a joint ownership interests collectively represent approximately 90% of the outstanding common stock, par value $0.001 per share, of Hyzon (“Hyzon Common Stock”) on a fully diluted basis, entered into a Lock-Up Agreement (the “Lock-Up Agreement”) with us and Hyzon pursuant to which they agreed, subject to certain customary exceptions, not to effect any direct or indirect sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer, or entry into any agreementstructure with respect to any sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer, with respect to any shares of our Class A common stock held by them immediately after the effective timecertain of the Merger, including any sharesBackground IP similar to the structure set forth under the Horizon IP Agreement. Both the January 20, 2020 and November 19, 2020 agreements have been superseded by the Horizon IP Agreement.
As of the
Merger (the “Closing”), for six months after the Closing.Founder Warrant Agreement
In connection with the execution of the Business Combination Agreement, on February 8, 2021, our Sponsordate hereof, we exclusively owned 15 pending U.S. provisional patent applications, and certain other holders of our warrants (together with our Sponsor, the “Founder Warrant Holders”) entered into a Founder Warrant Agreement (the “Founder Warrant Agreement”) with us pursuant to which each of the Founder Warrant Holders agreed that, following the Closing, such Founder Warrant Holder will not transfer 75% of its Private Placement Warrants until the earlier of (a) one year after the Closing and (b) subsequent to the Closing, (x) the date on which the last sale price of our Class A common stock quoted on NASDAQ (or the exchange on which the shares of our Class A common stock are then listed) equals or exceeds $11.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of our Class A common stock for cash, securities or other property.
Upon and subject to the Closing, 12.5% of each Founder Warrant Holder’s Private Placement Warrants (the “$12.00 Warrants”) will become subject to potential forfeiture, and each Founder Warrant Holder agrees not to exercise such $12.00 Warrants unless and until the occurrence of a date on which the last reported sales price of one share of our Class A common stock quoted on NASDAQ (or the exchange on which the shares of our Class A common stock are then listed) is greater to or equal to $12.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period within the five year period commencing on the one year anniversary of the Closing.
Upon and subject to the Closing, 12.5% of each Founder Warrant Holder’s Private Placement Warrants (the “$14.00 Warrants”) will become subject to potential forfeiture, and each Founder Warrant Holder agrees not to exercise such $14.00 Warrants unless and until the occurrence of a date on which the last reported sales price of one share of our Class A common stock quoted on NASDAQ (or the exchange on which the shares of our Class A common stock are then listed) is greater to or equal to $14.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period within the five year period commencing on the one year anniversary of the Closing.
Subscription Agreements
In connection with the execution of the Business Combination Agreement, on February 8, 2021, the Company and Hyzon entered into separate subscription agreements (collectively, the “Subscription Agreements”) with a number of investors (collectively, the “Subscribers”), pursuant to which the Subscribers agreed to purchase, and we agreed to sell to the Subscribers, an aggregate of 40,500,000 shares of our Class A common stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $400,000,000, in a private placement (the “PIPE”).
The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the concurrent consummation of the Proposed Transactions. The purpose of the PIPE is to raise additional capital for use by the combined company following the Closing.
Pursuant to the Subscription Agreements, we agreed that, within 15 calendar days after the consummation of the Proposed Transactions, we will file with the SEC (at our sole cost and expense) a registration statement registering the resale of the PIPE Shares (the “PIPE Resale Registration Statement”), and we will use our reasonable best efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Ardour Subscription Agreement
In connection with the execution of the Business Combination Agreement, on February 8, 2021, the Company, Ardour Capital Investments LLC (“Ardour Capital”), ACP Mgmt Corp. and Hyzon entered into a subscription agreement (the “Ardour Subscription Agreement”), pursuant to which ACP Mgmt Corp. agreed, in full satisfaction of Ardour Capital’s right to receive a warrant to purchase shares of Hyzon Common Stock for its services as a financial advisor to Hyzon, to purchase, and we agreed to sell to ACP Mgmt Corp., warrants exercisable for one share of our Class A common stock at an exercise price of $2.20,jointly owned, subject to the terms of a Warrantthe Horizon IP Agreement, 9 issued U.S. patents and 14 pending U.S.
non-provisional
patent application. We pursue the registration of domain names, trademarks and service marks in the U.S, and as of the date hereof, owned 7 trademark applications pending and 1 issued trademark before the U.S. Patent and Trademark Office.
We regularly review our development efforts to assess the existence and patentability of new intellectual property. To that end, we are prepared to file additional patent applications as we consider appropriate under the circumstances relating to the new technologies that we develop.
We cannot be
entered into bysure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications we may own or license in the future, nor can we be sure that any of our existing IP portfolio will be useful in protecting our technology. Please see the section entitled “” for additional information on the risks associated with our IP strategy and
betweenportfolio. As of December 31, 2021, the Company employed approximately 200 people (full-time equivalents). We anticipate significant employee growth in the near term as we prepare for series production of our hydrogen fuel cells and Continental Stock Transfer & TrustFCEVs. We have also contracted with various independent contractors and other service providers both in the U.S. and other countries where we operate to perform certain functions or services we require to operate. The ability to recruit, retain, develop, protect, and fairly compensate our global workforce are enablers of our success. This includes four general categories of focus: Health and Safety; Development and Retention; Diversity, Equity and Inclusion; and Compensation and Benefits.
Hyzon is committed to the safety, health, and well-being of its employees. The Company continuously evaluates opportunities to raise safety and health standards, visiting sites to identify and manage environmental health and safety risks; evaluating compliance with regulatory requirements and our policy, and maintaining a global security operation for the protection of facilities and people on our facility. Hyzon also promotes a culture of health and well-being and provides comprehensive health care benefits.
Development and Retention
Developing employees contributes to growing our business. In today’s world, we compete for talent against other companies in connectionthe automotive and renewable energy industries. To recruit and retain top talent, we provide an environment that values an individual’s contributions and assists our employees to achieve their long-term professional goals. We invest significant resources to retain and develop our workforce. We also partner with Closing (the “Ardour Warrant Agreement”)outside vendors to provide development programs and learning opportunities for all employees, in addition to regular coaching and support from their managers.
Diversity, Equity and Inclusion
A diverse, global workforce and inclusive culture that provides fair and equitable opportunities helps Hyzon remain competitive, advance its innovation culture, and serve customers. While focusing on attracting and advancing top talent, Hyzon is committed to advance global diversity in our workforce, continue advancing pay equity and increase Hyzon’s diversity with underrepresented groups. This commitment is embraced at all levels of the Company, including our diverse Board of Directors, which is currently made up of 2 women out of 9 members and is more than 60% racially or ethnically diverse (6 out of 9 members). Such warrants will be governed byIn addition, we organize regular cultural events, teambuilding activities and exercisablepublic recognition forums to celebrate our diversity and invest in strong relationships.
Compensation and Benefits
We provide a flexible working environment, which allows our employees to work where and when they can best achieve their goals. Flexibility supports attraction and retention of talent around the globe. Our total compensation for employees includes a variety of components that support sustainable employment and the ability to build a strong financial future, including competitive market-based pay and comprehensive benefits. In addition to earning a base salary, eligible employees are compensated for their contributions to the Company’s goals with both short-term cash incentives and long-term equity-based incentives. Eligible full-time employees in the U.S. are offered benefits such as vacation days, 401(k), performance bonuses, and a premier health plan for employees and their dependents. Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices, and negotiations with works councils, trade unions, and other employee representative bodies.
The industry in which we operate is subject to
extensive environmental regulations in numerous countries, and to regulations which have become increasingly more complex and restrictive over time. These laws and regulations generally govern water use, air emissions, use of recycled materials, energy sources, the storage, handling, treatment, transportation and disposal of hazardous materials, protection of the environment, occupational safety, natural resources and endangered species, and the remediation of environmental contamination. We may be required to obtain and comply with the terms and conditions of
the Ardour Warrant Agreement.
The foregoing descriptions of the Business Combination Agreement, the Lock-Up Agreement, the Founder Warrant Agreement, the Subscription Agreements and the Ardour Subscription Agreement are qualified in their entirety by reference to the full text of the Business Combination Agreement, the Lock-Up Agreement, the Founder Warrant Agreement, the form of the Subscription Agreement and the Ardour Subscription Agreement, copiesmultiple environmental permits, many of which are includeddifficult and costly to obtain and could be subject to legal challenges.
Compliance with such laws and regulations at an international, regional, national, provincial, and local level is an important aspect of our ability to continue our operations. Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, standards adopted by regulatory agencies and the permits and licenses that we hold. Each of these sources is subject to periodic modifications and increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, orders to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses. Please see the section entitled “Risk Factors – Risks Related to Litigation and Regulation
In connection with the delivery and placement into service of Hyzon’snear-zero-emission
vehicles under the GHG Emissions Standards for Heavy and Medium-Duty Engines and Vehicles (the “EPA Clean Trucks Plan”),we are expected to earn tradable credits that under current laws and regulations can be sold. Under the EPA Clean Trucks Plan, (the EPA is scheduled to make its first rule making in 2022), each hydrogen FCEV earns a credit multiplier of 5.5 for use in the calculation of emission credits. This multiplier is currently set to expire in 2027 but may be extended in future rulemaking. A second set of EPA rules will, if it takes effect, sets more stringent GHG emission standards for new heavy-duty vehicles sold as
exhibitssoon as model year 2030 and beyond. Commercial vehicle manufacturers are required to ensure they meet the carbon-dioxide and nitrogen oxide emission standard for each type of vehicle produced. This emission standard continues to tighten the emission requirements over time, increasing the challenge for conventional diesel vehicles to meet the standard. At present, manufacturers of diesel trucks may need to purchase GHG credits to cover their emission deficit. The EPA Clean Trucks Plan provides the opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these regulatory requirements. Current regulations do not limit the number of battery-electric and hydrogen fuel cell credits sold within the same commercial vehicle categories. California also has a GHG emissions transportation standard which closely follows the EPA Clean Trucks Plan. However, the California timeline for reaching very low GHG emissions is more aggressive than that of the EPA.
The CARB Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”) and regulations, including the requirements and benefits of such program, may provide for potential voucher incentives for Hyzon’s Class 8 trucks and their powertrain design and technology, along with additional classes of Hyzon vehicles over time. The HVIP requires eligible vehicles to be “CARB-certified”. CARB’s recently adopted certification standards and test procedures for heavy-duty zero-emission vehicles (the “ZEPCert Procedures,” incorporated in 13 CCR 1956.8(a)(8)) are optional beginning with model year (“MY”) MY2021 and mandatory beginning with MY2024. Thus, prior to MY2024, if Hyzon elects to certify its vehicles following the traditional certification framework (primarily involving GHG certification using the EPA/CARB simulation model), customers that purchase our vehicles in California may be eligible for voucher incentives under the HVIP program (currently set at $120,000 for each Class 8 truck sold and registered in CA). However, the HVIP program provides a credit multiplier that makes Class 8 FCEVs eligible for $240,000 voucher for customers, but this multiplier may be determined in part by how our vehicles are designed and whether they containon-board,
plug-in
battery capabilities. Other Financial Incentives
Examples of other potential incentive and grant programs that either Hyzon or its customers may apply for include:
. The Low Carbon Fuel Standard was initially developed in California and is gaining traction in other U.S. states and other jurisdictions around the world. Its goal is to reduce thecarbon intensity of fuels by providing both mandated reduction targets as well as tradeable/sellable credits. In California, this includes a credit for hydrogen refueling infrastructure as well as credits for the dispensing of hydrogen as transportation fuel. Grant and Subsidy Programs
zero-emission
vehicles and infrastructure technologies. Federal and state grant and subsidy programs are under evaluation for introduction and/or expansion, such as LCFS structures in Oregon and Washington, and the Federal IIJA which includes significant funding opportunities for hydrogen ecosystem enablement, including $8 billion for the establishment of at least four hydrogen hubs across the U.S.. The EPA Smartway program provides grants and funding for the retrofit of heavy-duty vehicles with components and technologies that reduce emissions. Drivers and fleet owners who repower vehicles with advanced technology powertrains or CNG engines may be able to access funding to offset a portion of the cost. The European Union currently maintains a key funding programme for research and innovation with a total budget of €95.5Bn, including €15.1Bn allocated for Climate, Energy and Mobility, including clean hydrogen andzero-emission
road transport. The EU also has an Innovation Fund which provides €10Bn of support through 2030 for the commercial demonstration of innovativelow-carbon
technologies. The UK has introduced a Net Zero Hydrogen Fund (“NZHF”) of £240MM to support the commercial deployment of new low carbon hydrogen production projects. The UK additionally created the Department for Transport Zero Emission Road Freight Trials (“ZERFT”) £20MM to demonstratezero-emission
freight and stimulate transition through road freight trials. Germany introduced various subsidies totaling approximately €3Bn up to 10 years to support the penetration of zero emission vehicles and green hydrogen production. These subsidies will contribute to the EU environmental objectives, in line with the European Green Deal.
China’s central government is initiating a four-year pilot program, and select cities will be elected to carry out research and development and application demonstrations of FCEVs. This pilot program seeks to encourage innovation and to stimulate the development of hydrogen and the FCEV industry in China. The Chinese central government will reward successful pilot cities and details of those benefits and programs are to be published by the government in a separate policy document.
Vehicle Safety and Testing Regulation
Our vehicles and those of our customers whose vehicles we configure or power with our hydrogen fuel cells are subject to, and comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”), including applicable U.S. Federal Motor Vehicle Safety Standards (“FMVSS”). As a vehicle manufacturer and integrator of hydrogen fuel cells, we must self-certify that the vehicles meet or are exempt from all applicable FMVSS before a vehicle can be imported into or sold in the U.S. There are numerous FMVSS that apply to our Current Reportvehicles. Examples of these requirements include:
Electronic Stability Control.
on
Form 8-K filed withheavy-duty vehicles to reduce crashes caused by rollover or by directionalPerformance and equipment requirements of air brake systems on heavy-duty vehicles to ensure safe braking performance under normal and emergency conditions. Limitations on electrolyte spillage, battery retention, and avoidance of electric shock following specified crash tests. Flammability of Interior Materials.
the
SEC on February 9, 2021,occupant compartment.Seat Belt Assemblies and incorporated hereinAnchorages.
by
reference.Human Capital Resources
We currently have two officers. Membersrestraint and reducing the probability of our management team arefailure.
The following FMVSS do not obligated to devote any specific number of hoursapply to our mattersvehicles, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that they will devote in any time period will vary based on whether a target business has been selected for our initial business combination andcurrently incorporate the current stageapplicable components of the business combination processstandards for additional safety performance:
Tire Pressure Monitoring System.
Strength requirements for the occupant roof to prevent crushing of the roof into the occupant compartment in rollover crashes. Minimum Sound Requirements for Hybrid and Electric Vehicles.
Crash Tests for High-Voltage and Hydrogen Fuel System Integrity.
In addition to the applicable FMVSS requirements, we
are in.Periodic Reporting and Financial Information
We have registeredalso design our Units, Class A common stock and Warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance withvehicles to meet the requirements of the Exchange Act,Federal Motor Carrier Safety Administration (“FMCSA”), which has requirements for the truck and fleet owners. We also design our annual reports will contain financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statementsvehicles to meet the requirements set forth in the Federal Motor Carrier Safety Regulations (“FMCSR”) pertaining to the safety of the prospective target businessdriver during operation of the vehicle. There are numerous FMCSR that apply to our vehicles. Examples of these requirements include, but are not limited to:
Step, Handhold and Deck Requirements.
Performance and placement requirements for lamps in addition to lamps that meet the requirements of FMVSS 108 Lamps, Reflective Devices and Associated Equipment. Performance and accuracy requirement for equipment indicating the vehicle speed. This includes both digital and analog displays.
We are also required to comply with other NHTSA requirements and federal laws administered by NHTSA, including early warning reporting requirements regarding warranty claims, field reports, death and injury reports, foreign recalls, and owner’s manual requirements.
The vehicles we expect to offer for sale in Europe are subject to United Nations Economic Commission Europe (“UNECE”) safety testing regulations. Many of those regulations, referred to as European Union Whole Vehicle Type Approval or “WVTA”, are different from the federal motor vehicle safety standards applicable in the U.S. and may require redesign and/or retesting. Our vehicles currently meet specific NHTSA-type approvals, and we plan to commence testing our vehicles for the WVTA to ensure compliance with the UNECE requirements. There are UNECE compliance requirements and UN Global Technical Regulations (“GTR”) applicable to heavy-duty vehicles in Europe, which have not been developed for heavy-duty vehicles by NHTSA or FMCSA. We have implemented the UNECE standards for additional safety during driving operation. The following are some UNECE standards and GTRs applied to our vehicles:
Electromagnetic Compatibility and Interference.
Lane Departure Warning System.
Performance and testing requirements for BEVs and FCEVs duringin-use
and post-crash. Hydrogen Fuel Cell Vehicle Safety.
in-use
and post-crash.Our vehicles and systems consist of many electronic and automated components and systems. Our vehicles are designed to comply with the International Standards Organization’s (“ISO”) Functional Safety Standard. This standard addresses the integration of electrical systems and software and identifies the possible hazards caused by malfunctioning behavior of the safety-related electrical or electronic systems, including the interaction of these systems.
Environmental Regulations
We currently are subject to extensive environmental national, state and local laws and regulations, including, among others, water use, and discharge, air emissions, use of chemicals and recycled materials, energy sources, storage, handling, treatment, transportation and disposal of hazardous materials and wastes, the protection of health, safety and the environment, natural resources, and the remediation of environmental contamination. Furthermore, joint ventures and other businesses we may invest in that focus on hydrogen production and distribution hubs and refueling centers are subject to similar environmental and public safety-related laws and regulations. We are required to obtain and comply with the terms and conditions of environmental permits, many of which may be difficult and expensive to obtain and must be renewed on a periodic basis. A failure to comply with these laws, regulations or permits could result in substantial civil and criminal fines, penalties, the suspension or loss of such permits, and orders to cease or limitnon-compliant
operations. Our operations and products are required to comply with regulations under the U.S. Federal Clean Air Act and analogous laws in other jurisdictions. For example, our vehicles are required to obtain a Certificate of Conformity (“COC”) issued by the EPA, or an order issued by the CARB for vehicles sold in jurisdictions that impose California’s emission standards, prior to being sold. There are currently four states which have adopted the CARB standard for heavy-duty vehicles. These COCs must be obtained for each model year of production, and failure to obtain them prior to entering our vehicles into commerce may result in substantial fines or penalties.
Hazardous Substances and Waste
We are subject to laws and regulations regarding the generation, use, treatment, handling, storage, and disposal of hazardous substances and solid wastes. Hydrogen is highly flammable. Furthermore, the assembly and transportation of our fuel cells are subject to certain design, manufacturing, packaging, and similar regulations from the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration. Similarly, hydrogen is a “chemical of interest” (“COI”) under the U.S. Cybersecurity & Infrastructure Agency’s Chemical Facility Anti-Terrorism Standards (“CFATS”). Facilities that store COIs above certain specified thresholds may be required to comply with various reporting, security, and other regulations as part of the proxy solicitationCFATS.
Additionally, laws may impose strict, joint and several liability for the investigation and remediation of sites where hazardous substances have been released or tender offer materials (as applicable) sentdisposed. For instance, in the U.S., the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as ‘Superfund’, as well as similar state laws can impose joint and several liability without regard to stockholders.fault or the legality of the original conduct, on entities that contributed to the release of a hazardous substance into the environment. These financial statementsinclude current and prior owners or operators of the site where the release occurred as well as companies that disposed or arranged for the disposal of hazardous substances at the site. Under CERCLA, these persons may be subject to strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources, and for the costs of addressing health impacts. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environmental and to recover from the responsible entities the costs they incur. We may handle hazardous substances within the meaning of CERCLA, or similar state statutes, in the course of ordinary operations and, as a result, may be jointly and severally liable under CERCLA for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment.
We may also generate or dispose of solid wastes, which may include hazardous wastes that are subject to the requirements of the Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes. While RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. Certain components of our manufacturing waste may be excluded from RCRA’s hazardous waste regulations, provided certain requirements are met. However, if these components do not meet all established requirements for the exclusion, or if the requirements for the exclusion change, we may be required to treat such products as hazardous waste, which are subject to more rigorous and costly handling and disposal requirements. Any such changes in the laws and regulations, or our ability to qualify the materials we use for exclusions under such laws and regulations, could adversely affect our operating expenses.
Increasingly, jurisdictions require companies to monitor for and address certain practices from their supply chains. For example, several jurisdictions have adopted or are considering adopting supply chain diligence laws such as including, but not limited to, Modern Slavery, Conflict Minerals, and Managing Risks to Women in Supply Chains. Compliance with such laws entails substantial costs, and may require modifying our supply chains if any issues are discovered or could result in substantial fines. Additionally, should we fail to sufficiently monitor our supply chains, we may be
preparedsubject to fines or penalties fornon-compliance,
which may have an adverse effect on our operations. Similar or more stringent laws also exist in accordance with U.S. generally accepted accounting principles (“GAAP”), or reconciled to, GAAP, or International Financial Reporting Standards (“IFRS”), depending onother jurisdictions where we operate, including the circumstances,European Union and Australia.
Our Internet address is www.hyzonmotors.com. Our website and the
historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”). These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with the requirements outlined above,information contained therein or
that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that any applicable requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.Website
Our website address is www.dcrbplus.com. Information contained on our website islinked thereto are not part of this Annual Report on Form 10-K.
Our Annual ReportReport. We make available free of charge through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as well as anyproxy statements, registration statements and amendments and exhibits to thesethose reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act are available on our website, free of charge, as soon as reasonably practicable after we electronically file such reports are filedmaterial with, or furnishedfurnish them to the SEC. Alternatively, youThe SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may access these reports atbe obtained electronically by accessing the SEC’s website at www.sec.gov.
Item 1A. Risk Factors.
An investment in our securities involves
The following is a high degreesummary of risk. You should consider carefully allsome of the risks described below,and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed risk factors contained below.
Our business model has yet to be tested and we may fail to commercialize our strategic plans.
We recently completed the Business Combination with Decarbonization Plus Acquisition Corporation (“DCRB”) in which we raised gross proceeds net of redemption and transaction costs totaling approximately $512.9 million. Nevertheless, we may need to raise additional funds, and these funds may not be available on terms favorable to us or our stockholders or at all when needed.
Increases in costs, disruption of supply or shortage of raw materials, could harm our business.
We qualify as an “emerging growth company’ as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act, and we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information containedthey deem important.
We have identified a material weakness in this Annual Report on Form 10-K, including our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences.
Our Class A Common Stock commenced trading on the NASDAQ Global Select Market on July 19, 2021, and we have limited experience operating as a publicly traded company. We need to implement various policies, procedures and controls pertaining to our operations and governance as required by SEC and NASDAQ rules and regulations.
We have a limited number of current customers, and there is no assurance as to whether our sales pipeline will result in sales and revenues, or that we will be able to convertnon-binding
letters of intent or memoranda of understanding into orders or sales (including because of the current or prospective financial resources of the counterparties to ournon-binding
memoranda of understanding and letters of intent, the liability accounting for our warrants or customer contractual demands), or that we will be able to identify additional potential customers and convert them to paying customers. We also face and will continue to face significant competition in all aspects of our business and operations, and many of our current and future competitors have or will have significantly more resources than us, and may outcompete us for customers, employees, and suppliers.
We may not succeed in investing in hydrogen production, distribution and refueling operations critical to supplying our customers with hydrogen to operate our FCEVs either at all or in part, and/or at the cost required to achieve TCO for potential Hyzon FCEV customers to drive their purchases of our trucks.
There is no assurance that there will be, or that we will be able to supply, hydrogen at prices or with an emissions profile that allow our FCEVs to be competitive with commercial vehicles powered by other energy sources.
We may face legal challenges and other resistance attempting to sell our vehicles which could materially adversely affect our sales and costs. Additionally, unfavorable publicity, or a failure to respond effectively to adverse publicity, could harm our reputation and adversely affect our business.
If we engage in mergers or acquisitions, we may assume liabilities – both disclosed and undisclosed – by contract or under operation of law of the target or acquired company which could materially adversely affect our business and financial results.
To date, we have produced only technology validation or evaluation FCEVs and there is no assurance that we will be able to establish and operate facilities capable of producing our FCEVs in appropriate volumes and at competitive costs or at all.
We have limited experience servicing our FCEVs. If we are unable address the service requirements of our customers, our business will be materially and adversely affected. Additionally, insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition, and operating results.
Threats to information technology, including unauthorized control of our vehicles or interruption of our systems, could adversely affect our business.
We may be unsuccessful in meeting various local, national and international safety and emissions rules and regulations for our products.
We depend on third parties, including Horizon, for supply of key inputs and components for our products.
We will depend on Horizon as a sole source supplier for our fuel cell systems, until such time we are able to commence manufacturing fuel cell systems inhouse.
Risk Factors Relating to Our Business and Industry
Our business model has yet to be tested and any failure to execute our strategic plans would have a material adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
The estimated costs and timelines that we have developed in planning for full scale commercial production of our vehicles are subject to the risks and uncertainties inherent in transitioning from astart-up
company focused onactivities to the design andlarge-scale
integration, assembly, and manufacture of hydrogen-powered commercial vehicles, andlarge-scale
integration and manufacture of hydrogen fuel cell systems and hydrogen production, distribution and refueling. We have not secured contractual relationships with all component suppliers to produce our products. We may not be able to accurately estimate the demand for our hydrogen-powered commercial vehicles or hydrogen fuel cell systems, or, should we decide to produce them, electric batteries or battery electric vehicles which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. Additionally, we may not be able to accurately estimate the demand for the hydrogen fuel produced by our hydrogen production plant investments or the ability of our partners to build and operate those facilities at the cost, schedule and operating performance anticipated. These risks could result in a loss of revenue and/or an inability to provide fuel to our fleet customers leading to a delay in customer vehicle deployments or order cancellations, and/or increased costs and reduced margins. If we fail to accurately predict supply and demand for our products and other integration, assembly and manufacturing requirements, or if we fail to timely invest in people, processes and capital equipment to meet demand, we could incur additional costs or experience delays. In addition, there can be no assurance that our estimates related
notes, before makingto the costs and timing necessary to complete design and engineering of our facilities will prove accurate. The likelihood of our success must be considered in light of these risks, expenses, complications, delays and the competitive environment in which we operate. Therefore, there can be no assurances that our business plan will prove successful.
We will continue to encounter risks and difficulties frequently experienced by many early-stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with pursuing our growth plans. In addition, as a decisionresult of the capital-intensive nature of our business, we can be expected to continue sustaining substantial operating expenses without generating sufficient revenues to cover expenditures. Any investment in us is therefore highly speculative and could result in the loss of your entire investment.
We may need to raise additional funds, and these funds may not be available on terms favorable to us or our stockholders or at all when needed.
The manufacture, integration, assembly and sale of hydrogen-powered commercial vehicles, hydrogen fuel cell systems, and investments in hydrogen production, distribution and refueling are highly capital-intensive businesses. Our business plan to manufacture, integrate, assemble, sell, and service hydrogen-powered commercial vehicles and hydrogen fuel cell systems is expected to require continued capital investment to fund operations, continue research and development, and build or improve facilities. While we completed the Business Combination with DCRB and raised gross proceeds, net of redemption and transaction costs, of approximately $512.9 million, there can be no assurance that we will have access to additional capital we may need on favorable terms when required or at all. As a result of the proceeds from the Business Combination and other financings, we expect that we will have sufficient capital to fund our planned operations for the next 12 months; however, we expect that we will need to raise additional capital in the near future. We may raise additional funds through the issuance of equity, equity related or debt securities, strategic partnerships, licensing arrangements, and/or through obtaining credit from government or financial institutions. This capital will be necessary to fund our ongoing operations, continue research, development and design efforts, improve infrastructure, and introduce new vehicles. We are currently exploring raising additional capital through our subsidiary, Hyzon Zero Carbon, Inc., to invest in hydrogen production, distribution and fueling capabilities.
If we cannot raise additional funds when we need them, our securities. If anyfinancial condition, business, prospects, and results of operations could be materially adversely affected. We may raise funds through the following events occur,issuance of debt securities or through loan arrangements, the terms of which could require significant interest payments, contain covenants that restrict our business, or other unfavorable terms. We may also raise funds through the sale of additional equity securities which could dilute our stockholders.
We have a limited operating history as a stand-alone company thereby making it difficult to evaluate our future business prospects and which may increase the risk of your investment.
We face significant risks and difficulties as an early-stage company. We have a limited operating history, which increases the risk to your investment. As we scale from limited production of units deployed for technology validation to production for operational fleet validation to volume production and sales to support full fleet conversions, it is difficult, if not impossible, to forecast our future results. We have limited insight into trends that may emerge and affect our business. Moreover, we intend to derive a majority of our revenues initially from the sale or lease of our hydrogen fuel cell heavy commercial vehicles, deliveries of which first occurred in the second half of 2021 in Europe and China. In addition, we have engaged in limited marketing activities to date, so there can be no assurance that customers will embrace our commercial vehicles in significant numbers. The majority of our commercial vehicle deliveries in 2021 were made to customers in China where our average selling prices are substantially lower than in Europe and where we expect to recognize initial revenues upon collections, due in part to our lack of experience selling to our customers in China and contract payment terms which may extend over several years.
It is difficult to predict our future revenues or budget for our expenses. In the event that actual results differ from our estimates, or we adjust our estimates in future periods, our operating results and financial position could be materially affected. The projected results depend on the successful implementation of our management’s growth strategies and are based on assumptions and events over which we have only partial or no control. The assumptions underlying such projected information require the exercise of judgment, and the projections are subject to uncertainty because of economic, business, competitive, regulatory, legislative, political and other changes.
Increases in costs, disruption of supply or shortage of raw materials, could harm our business.
Disruptions in the supply chain, including those caused by theCOVID-19
pandemic, may impact our ability to adequately source raw materials or components, including battery packs, semiconductors, and integrated circuits, as well as cabs and chassis from heavy vehicle OEMs. Certain production ready components such as displays may not arrive at our facilities in time to meet production planning, which could cause delays in validation and testing for these components, as well as the final assembly of certain of our vehicle orders. Our business also depends on sourcing hydrogen fuel cells and stacks from Horizon, which also could be impacted by supply chain challenges in procuring raw materials and components to manufacture fuel cells for us. Any such supply interruption could materially negatively impact our business, prospects, financial condition, and operating results. Additionally, we source many critical components referenced above from countries around the world, which may become subject to geopolitical impacts, trade and tariff policy changes, and other supply disruptions outside of our direct control. We are also exposed to commodity price volatility as we use various raw materials including aluminum, steel, carbon fiber,non-ferrous
metals (such as copper), and cobalt. The prices and availability for these raw materials may fluctuate depending on market conditions and global demand, including as a result of geopolitical events and other events beyond our control, and could adversely affect our business and operating results. As a result, substantial increases in the prices for our raw materials or components would increase our operating costs and could reduce our margins if the increased costs cannot be recouped through increased FCEV prices. There can be no assurance that we will be able to recoup increasing costs of raw materials by increasing vehicle prices.
Complex software and technology systems will need to be developed, bothin-house
and in coordination with vendors and suppliers, for us to successfully produce our hydrogen-powered commercial vehicles and hydrogen fuel cell systems, and there can be no assurance that such systems will be successfully developed. Our products will require a substantial amount of third-party andin-house
software and complex hardware to operate. The development of such advanced technologies is inherently complex and costly, and we will need to coordinate with our vendors and suppliers to produce our hydrogen-powered commercial vehicles and hydrogen fuel cell systems. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. We may be unable to develop the necessary software and technology systems or meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance, useful life and warranty requirements we anticipate in our business plan and which our customers will demand. As a result, our business plan could be significantly impacted, and we may incur significant liabilities under warranty claims which could adversely affect our business, prospects, and results of operations. We are implementing engineering processes in our product development to help systematically ensure our product quality, designsign-off,
and traceability of our product design information; however, there can be no guarantees about the success, timing or cost of these processes. We are developing new technologies and know how related to key components in our vehicles. We may be unsuccessful in these efforts or in competing with new and existing component manufacturers.
We have begun investing in electrification technologies related to components in our vehicles and we plan to produce or assemble various key components of our vehicles that we presently source from third parties to help achieve increased quality assurance, reduced component costs, and reduced supply chain risks. We have limited experience in designing and producing these key components, and we may not be successful in developing or commercializing the technologies we develop. We may not be able to compete effectively with suppliers of these components that are better financed, have existing manufacturing operations, and have established products in the marketplace.
We have a limited number of current customers and pending orders, and there is no assurance thatnon-binding
memoranda of understanding and letters of intent will be converted into orders or sales. To date, we have engaged in limited marketing activities and currently have limited customer contracts. Ournon-binding
memoranda of understanding and letters of intent with potential customers do not represent assured sales and may not be converted into orders or sales. We cannot be assured that the counterparties to such memoranda of understanding and letters of intent have or will have the financial capacity to make such orders or that such counterparties’ demand for our products will remain. We have not received any deposits from the counterparties on certain of our orders,non-binding
memoranda of understanding and letters of intent, and these counterparties have no obligation to make purchases. Further, these counterparties may not perform as expected and may therefore not have the means or market demand to convert thenon-binding
memoranda of understanding or letters of intent into orders. If these arrangements are terminated or we are unable to secure binding orders or long-term contracts for volume sales supporting full fleet conversions, our business, prospects, financial condition and operating results may be
materially adversely affected.
Even if we were able to obtain orders, customers may limit their volume of purchases initially as they assess our commercial vehicles and hydrogen fuel cell systems and whether to make a broader transition to hydrogen-powered electric vehicle solutions. This may be a long process, which will depend on the safety, reliability, efficiency and quality of our products, as well as the support and service that we offer. It will also depend on factors outside of our control, such as general market conditions, government incentives and mandates forzero-emission
vehicles, and broader trends in transportation, including fleet management, and availability and pricing of hydrogen, that could impact customer buying decisions. As a result, there is significant uncertainty regarding demand for our products and the pace and levels of growth that we will be able to achieve. Regarding our focus on hydrogen production, distribution and refueling, while we have entered into various memoranda of understanding and letters of intent with partners to develop, build and operate hydrogen hubs and refueling centers, contract negotiations for these opportunities that could lead to revenue will, in our view, be very complex and require significant time and effort, and may ultimately not be successful.
Our sales efforts involve considerable time and expense, and our sales cycle is often long and unpredictable.
Our results of operations may fluctuate, in part, because of the intensive nature of our sales efforts and the length and unpredictability of our sales cycle. As part of our sales efforts, we invest considerable time and expense evaluating potential customers’ specific needs and necessary resources, such as access to hydrogen supply, and educating potential customers about the technical capabilities of our hydrogen-powered commercial vehicles and hydrogen fuel cell systems. In addition, we have limited direct sales and business development personnel, and our sales efforts have historically depended on the significant involvement of our senior management team. Our sales cycle has been long and varies substantially from customer to customer. Our sales cycle often lasts nine months but can extend to a year or more for some customers. Some of our sales efforts have not resulted in orders and may in the future not result in orders. There can be no assurances that event,we will be successful in making a sale to a potential customer. If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, our business, financial condition, and results of operations could be adversely affected.
Regarding our focus on hydrogen production, distribution and refueling business, the sales cycle for these opportunities is unproven and, in our view, will be very long.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition, and operating results.
We and our current and prospective customers may benefit from certain government subsidies and economic incentives that support the development and adoption of our vehicles. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies, or the incentives due to the perceived success ofzero-emissions
vehicles or other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our FCEV vehicles specifically. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition, and operating results. These incentives, which are available to us or our customers, include tax credits, rebates, and other incentives for alternative energy production, alternative fuel and electric vehicles, including GHG emissions credits under the EPA’s GHG Rule, CARB, and HVIP. While these benefits have been available in the past, there is no guarantee these programs will be available in the future. If these incentives and other benefits are not available, reduced or otherwise limited in the future, our financial position could be harmed.
We may expend substantial cost and managerial time in preparing bids and proposals for potential customers that use competitive bidding processes, and there is no assurance that we will win awards.
We expect to derive a substantial portion of our business through competitive bidding processes, both directly and through partnerships or other arrangements with the bidding party. Competitive bidding processes entail substantial costs and managerial time to prepare bids and proposals for contracts that may not be awarded to us or our bidding partners, or they may be split among competitors. Even if we or our partners are successful in obtaining an award, we or our partners may encounter bid protests from unsuccessful bidders on any specific award. Bid protests could result, among other things, in significant expenses, contract modifications, or even loss of the contract award. Even where a bid protest does not result in the loss of a contract award, the process for resolving the bid protest can extend the time until contract activity can begin and, as a result, delay the recognition of revenue. We or our bidding partners also may not be successful in efforts to protest or challenge any bids for contracts that were not awarded to us, and we would be required to incur significant time and expense in such efforts. All of the above could have a material adverse effect on our business, prospects, financial condition or operating results.
We operate our commercial mobility products business in the European market solely through our joint venture with Holthausen Clean Technology Investments B.V.
On October 30, 2020, we formed Hyzon Motors Europe B.V. (“Hyzon Europe”), a joint venture with Holthausen Clean Technology Investments B.V. (“Holthausen”), for the primary purpose of supplying hydrogen-powered trucks to the European Union and nearby markets such as the United Kingdom, Nordic countries, and Switzerland. We currently own 50.5% of the equity interests of Hyzon Europe. On December 31, 2021, we signed anon-binding
Letter of Intent with Holthausen to purchase an increased equity interest in Hyzon Europe; the Letter of Intent provides that we intend to increase our total equity interest to 75% from 50.5%. Concurrent with the signing of this Letter of Intent, we provided a €1 million refundable deposit to Holthausen, approximately $1.1 million in USD. Pursuant to the Joint Venture Agreement, by and among Hyzon, Holthausen and Hyzon Europe, neither Hyzon nor Holthausen may have an interest in, be engaged in, or be concerned with, or approach any person with a view to obtaining an interest or being engaged in or concerned with, any business involving the development or production of, or the trading
pricein, any products developed, produced or traded by, or the provision of
our securities could decline,services developed or provided by Hyzon Europe or any of its subsidiaries, other than passive investments representing no more than 1% ownership in such business. As a result, we must develop, produce and
you could lose all or part of your investment.
Risk Factor Summary
Risks Relating to a Special Purpose Acquisition Companysell hydrogen-powered trucks in Europe through the Hyzon Europe joint venture and our Securities
| ● | We are a recently formed company with no operating history and no revenues (other than interest earned on the funds heldare thereby limited in the Trust Account), and you have no basis on which to evaluate our ability to achieve our business objective. |
| ● | Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of the business combination. |
| ● | The requirement that we complete our initial business combination within 24 months after the closing of our Public Offering may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have to conduct due diligence on potential business combination targets as we approach our dissolution deadline. |
| ● | We may not be able to complete our initial business combination within 24 months after the closing of our Public Offering, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholder may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless. |
| ● | You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares or Warrants, potentially at a loss |
Risks Relating to our Securities
| ● | You will not be entitled to protections normally afforded to investors of many other blank check companies. |
| ● | If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 20% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 20% of our Class A common stock. |
| ● | Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. |
| ● | If the net proceeds of our Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for at least 24 months after the Closing Date, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our Warrants will expire worthless. |
| ● | Our search for a business combination, and any target businesses with which we ultimately consummate a business combination, may be materially adversely affected by the coronavirus (“COVID-19”) pandemic and the status of the debt and equity markets. |
| ● | We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors. |
| ● | We have not registered the shares of Class A common stock issuable upon exercise of the Warrants under the Securities Act or any state securities laws, and such registration may not be in place when an investor desires to exercise Warrants, thus precluding such investor from being able to exercise its Warrants except on a cashless basis and potentially causing such Warrants to expire worthless. |
| ● | The grant of registration rights to our initial stockholders may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock. |
| ● | Because we are not limited to a particular industry, sector or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations. |
Risks Relating to Riverstone, our Sponsor and Our Management Team
| ● | Past performance by Riverstone, including our management team, may not be indicative of future performance of an investment in us. |
| ● | We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel. |
| ● | Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business. |
| ● | Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests. |
| ● | We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us. |
| ● | We may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all. |
| ● | Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business. |
| ● | We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a business combination with which a substantial majority of our stockholders do not agree. |
| ● | We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination. |
| ● | Our initial stockholders will control the election of our board of directors until consummation of our initial business combination and will hold a substantial interest in us. |
| ● | Our warrants and Founder Shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our business combination. |
I. Risks Relating to a Special Purpose Acquisition Company and our Securities
We are a recently formed company with no operating history and no revenues (other than interest earned on the funds held in the Trust Account), and you have no basis on which to evaluate our ability to achieveconduct certain operations in Europe outside of Hyzon Europe. If our business objective.
Wearrangements with Hyzon Europe are a recently formed company with no operating results. Becauseconsidered unenforceable or otherwise impermissible by courts or other government bodies, we lack an operating history, you have no basis upon whichmay also be subject to evaluate our ability to achieve our business objectivefines, liability or other sanctions by courts or other government bodies.
We may be unable to completesuccessfully produce our hydrogen-powered commercial vehicles or our hydrogen fuel cell systems in appropriate volumes, at competitive costs, or at all, which may adversely affect our business, combination. Ifprospects, financial condition and operating results.
We have not yet completed our MEA and PEM production facilities in Bolingbrook, Illinois. We are also in the process of establishing various component production and assembly operations in our Rochester facility. We are currently at small volume vehicle assembly in Groningen, Netherlands and have yet to commence series production. There is no assurance that we
failwill be able to complete
our business combination,these facilities, or that we will
never generate any operating revenues.Our public stockholdersbe able to either manufacture our hydrogen fuel cell systems, components, or assemble our hydrogen-powered commercial vehicles at costs, volumes, and specifications acceptable to us. These facilities may not be afforded an opportunity to vote on our proposed business combination, which meansalso require permits for construction or operation, and we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.
We may choose not to hold a stockholder vote to approve our initial business combination unless the business combination would require stockholder approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other legal reasons. Except as required by applicable law or stock exchange requirement, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may complete our initial business combination even if holders of a majority of our public shares do not approve of the business combination we complete. Please refer to “Part I, Item 1. Business — Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.
If we seek stockholder approval of our initial business combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.
Unlike many other blank check companies in which the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, our initial stockholders have agreed to vote their Founder Shares, as well as any public shares purchased during or after the Public Offering, in favor of our initial business combination. As a result, in addition to our initial stockholders’ Founder Shares, we would need 37.5% of the then outstanding public shares to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial business combination approved. Our initial stockholders own 20% of our outstanding shares of common stock. Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder approval will be received than would be the case if our initial stockholders agreed to vote their Founder Shares in accordance with the majority of votes cast by our public stockholders.
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of the business combination.
Since our board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination, unless we seek such stockholder approval. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to obtain these permits on conditions acceptable to us. We currently rely on the supply of hydrogen fuel cell systems solely from Horizon, and plan to do so until our manufacturing facilities are operational; however, we will continue to rely on Horizon thereafter for supply of hydrogen fuel cell systems for deliveries in China or to meet demand that we cannot fulfil or to react to supply chain challenges that we may face in the U.S. We also rely on third parties to produce glider kits, chassis, and other commercial vehicle components, and, in the U.S., for the assembly of our hydrogen-powered commercial vehicles. To date, we have not secured supply agreements with all suppliers from which we must procure chassis, subassemblies and components to assemble our vehicles. For those suppliers from which we do purchase chassis, subassemblies and components, the worldwide supply chain crisis has had a material negative impact on our ability to procure these necessary in time—particularly in Europe, Australia, and the U.S.—to meet our product forecasts and product delivery obligations. In 2021, we experienced supply chain disruptions in Europe that prevented us from completing and shipping vehicles as planned, causing a material impact on our revenues and gross margins.
Our facilities and those of our suppliers, assemblers and other partners may be harmed or rendered inoperable by natural orman-made
disasters, including earthquakes, flooding, fire, power outages, and geopolitical conflicts, or by health epidemics, such
closingas the recentCOVID-19
pandemic, and related governmental mandates and responses, which may render it difficult or impossible for us to produce our products for an undefined period of time. Any alternative suppliers and partners may either not exist or if they do exist may be unwilling or unable to supply us. The inability to produce our products or the backlog that may develop if our facilities or the facilities of our suppliers are rendered inoperable for even a short period of time may result in the loss of customers or harm to our reputation. Although we maintain insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all. We, our partners and our suppliers may rely on complex machinery and equipment to produce our hydrogen-powered commercial vehicles and fuel cell systems, which involve a significant degree of risk and uncertainty in terms of operational performance and costs.
We, our partners and suppliers may rely on complex machinery and equipment for the manufacture, integration and assembly of our hydrogen-powered commercial vehicles and fuel cell systems. Such complex machinery and equipment may involve a significant degree of uncertainty and risk in terms of operational performance and costs. Our facilities and those of our partners and suppliers will consist oflarge-scale
facilities and machinery combining many components. These machines and their components may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict, especially for astart-up
like us, as well as for hydrogen production site operators with which we have or intend to have a relationship that may themselves have limited operating experience, and could be influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity, and natural disasters. Should any operational risk materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs, and potential legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition or operating results.
Our future growth is dependent upon the willingness of customers in the commercial vehicle market, including but not limited to operators of commercial vehicle fleets and heavy-duty transport, to adopt hydrogen-powered and otherzero-emission
commercial vehicles, and our ability to produce, sell and service products that meet customers’ needs. If the market for hydrogen-powered solutions does not develop or develops slower than we expect, our business, prospects, financial condition and
operating results will be adversely affected. The market for hydrogen-powered commercial vehicles is relatively new and untested and is expected to experience rapidly changing technologies, intense price competition among numerous competitors, evolving government regulation and industry standards, government subsidies, and uncertain customer demands and behaviors. Hydrogen-powered vehicles may also face competition from other alternatives to fossil fuels, including electric vehicles, renewable natural gas, biodiesel, and others. Factors that may influence the adoption of our hydrogen-powered commercial vehicles include:
the premium in the anticipated initial purchase prices of our commercial vehicles over those of comparable vehicles powered by ICE or other alternative energy sources, both including and excluding the effect of possible government and other subsidies and incentives designed to promote the purchase of vehicles powered by clean energy;
the total cost of ownership of the vehicle over its expected life, which includes the initial purchase price and ongoing operating costs, including hydrogen supply, price, and maintenance costs;
access to hydrogen supply and refueling stations locally and nationally, and related infrastructure costs;
the availability and terms of financing options for our customers to purchase or lease our vehicles;
the availability of tax and other governmental incentives to purchase and operatenon-carbon
emitting vehicles, and future regulations requiring increased use ofnon-carbon
emitting vehicles; government regulations and economic incentives promoting or mandating fuel efficiency and alternate forms of energy;
prices for hydrogen, diesel, natural gas, electricity and other sources of power for vehicles, and volatility in the cost of diesel or a prolonged period of low gasoline and natural gas costs that could decrease incentives to transition to vehicles powered by alternative energy sources;
the cost and availability of other alternatives to diesel or natural gas fueled vehicles, such as a result, would not be able to proceed with the business combination. Furthermore, in no event will we redeem our public shares in an amountelectric vehicles;
corporate sustainability initiatives and environmental, social and governance (“ESG”) policies;
perceptions about hydrogen, safety, design, performance, reliability and cost, especially if adverse events or accidents occur that would cause our net tangible assets to be less than $5,000,001 (so that we are not subjectlinked to the SEC’s “penny stock” rules)quality or any greater net tangible assetsafety of hydrogen-powered vehicles, or cash requirement which may be contained in the agreement relating tosafety of production, transportation or use of hydrogen generally;
the quality and availability of service for our
initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption andcommercial vehicles, including the
related business combination and may instead search for an alternate business combination. Prospective targets will be awareavailability of
these risks and, thus, may be reluctant to enter into a business combination transaction with us.Thereplacement parts;
the ability of our public stockholderscustomers to exercise redemption rights with respectpurchase adequate insurance for our vehicles; and
macroeconomic factors.
If, in weighing these factors, our potential customers, including operators of commercial vehicle fleets or heavy-duty transport, determine that there is not a compelling business justification for purchasing hydrogen-powered commercial vehicles, particularly those that we will produce and sell, then the market for such vehicles may not develop as we expect or may develop more slowly than we expect, which would adversely affect our business, prospects, financial condition and operating results.
Demand for our hydrogen-powered commercial vehicles and hydrogen fuel cell systems will ultimately depend on demand from target customers, some of which operate in cyclical or regulated industries or industries impacted by supply chain challenges, which may in turn subject us to that cyclicality or regulatory uncertainty and result in volatility and uncertainty and in the demand for our products, which could have a large numbermaterial adverse effect on our business, prospects, financial condition and operating results.
Decisions to purchase our hydrogen-powered electric commercial vehicles and hydrogen fuel cell systems will likely depend on the performance of the industries in which our target customers operate, and a decrease in demand for production or services from those industries will impact demand for our products. Demand in these industries is impacted by numerous factors, including global supply chain challenges, commodity prices, infrastructure spending, interest rates, consumer spending, fuel costs, energy demands, municipal spending, government subsidies and incentives, and commercial construction, among others. Increases or decreases in these variables may significantly impact the demand for our products. Additionally, some of our
shares may not allow ustarget customers have felt the impact of theCOVID-19
pandemic, which has resulted in reduced demand for commercial vehicles and global supply chain disruptions. If we are unable to
complete the most desirable business combination or optimize our capital structure.At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the Trust Account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting discounts and commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with a business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting discounts and commissions and after such redemptions, the amount held in trust will continue to reflect our obligation to pay the entire deferred underwriting discounts and commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
The requirement that we complete our initial business combination within 24 months after the closing of our Public Offering may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination within 24 months from the closing of our Public Offering. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target business,accurately predict demand, we may be unable to completemeet our initialcustomers’ needs, resulting in the loss of potential sales, or we may produce excess products, resulting in increased inventories and overcapacity in our contracted production facilities, increasing our unit production cost and decreasing our working capital and operating margins.
If there is inadequate availability of hydrogen or we fail to secure hydrogen supply at competitive prices or with a competitive emissions profile, our business combinationwill be materially and adversely affected. Additionally, we are reliant upon our hydrogen production and dispensing partners to build and operate production facilities, including potentially through Hyzon Zero Carbon, Inc.’s direct investments in those production plants. If our partners cannot deliver at the cost, schedule and operating performance anticipated, our business will be materially and adversely impacted.
Demand for our hydrogen-powered electric commercial vehicles and hydrogen fuel cell systems will depend in part on the availability of hydrogen infrastructure and the cost of hydrogen fuel. There is no assurance that hydrogen production will scale at the rate we anticipate or that the cost of hydrogen will become competitive with
any target business. This risk will increasethe cost of hydrocarbons or other hydrocarbon-alternatives as we
get closerproject. Our commercial vehicles and vehicles powered by our hydrogen fuel cell systems require an adequate supply of hydrogen for refueling. Currently, hydrogen supply and refueling stations are not generally available. We expect to
partner with third parties with the
timeframe described above. In addition, weaim of providing hydrogen infrastructure and refueling stations to potential Hyzon customers. Some potential customers may
choose not to purchase Hyzon products because of the risk of unavailability or cost of hydrogen supply. Additionally, while certain customers may consider hydrogen vehicles because of their sustainability profile, the sustainability profile of hydrogen depends on the hydrogen production process. “Gray” hydrogen, often produced by steam methane reformation, is currently the most common andcost-effective
form of hydrogen production; however, this process results in significant GHG emissions. Other types of hydrogen, such as “green” hydrogen produced by cleanenergy-powered
electrolysis, have
limited time to conduct due diligencea smaller emissions footprint but are less common and
may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
cost-effective.
We may not be able to complete our initial business combination within 24 months after the closing of our Public Offering, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholder may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
We may not be able to find suitable investments in hydrogen production, distribution, and refueling assets or secure a suitable targetcontinuous supply of hydrogen at a satisfactory quantity and price that also meets customers’ emissions-reduction goals, which may cause some potential customers not to purchase Hyzon products. Additionally, Hyzon’s direct investments in hydrogen production plants and the related supply and sale of that hydrogen to customers is directly impacted by our partners’ ability to design, build, operate and maintain those
co-invested
production plants and refueling assets. Our partners may or may not deliver at the cost, schedule and operating performance anticipated, if at all. If we are unable to satisfactorily provide adequate access to hydrogen supply at cost structures that customers require, or which may require significant capital expenditures, our ability to generate customer loyalty, grow our business, and
completesell our
initialproducts could be impaired.
Increased focus on sustainability or other ESG matters could impact our operations.
Our business
combination within 24 months after the closing ofrequires customers and financial institutions to view our
Public Offering. Our abilitybusiness and operations as having a positive ESG profile. Increasing attention to
complete our initial business combinationsocietal expectations regarding climate change, human rights, and other ESG topics may
be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. If we have not completed our initial business combination within such time period, we 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 torequire us to
pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each casemake certain changes to our
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.If we seek stockholder approval of our initial business combination, our Sponsor, directors, officers, advisors and their affiliates may elect to purchase shares or Warrants from public stockholders or public warrantholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or their affiliates may purchase shares or Warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. There is no limit on the number of shares our Sponsor, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and NASDAQ rules. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase shares or Warrants in such transactions.
In the event that our Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of any such purchases of shares could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination oroperations to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amountthe expectations of cash at the closing of our business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of Warrants could be to reduce the number of Warrants outstanding or to vote such Warrants on any matters submitted to the warrantholders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our business combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13customers and Section 16 of the Exchange Act to the extent the purchasers are subject to such reporting requirements. See “Part I, Item 1. Business — Permitted Purchases of our Securities” for a description of how our Sponsor, directors, officers, advisors or any of their affiliates will select which stockholders to purchase securities from in any private transaction.
In addition, if such purchases are made, the public “float” of our Class A common stock or Warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the proxy rules or tender offer rules, as applicable, when conducting redemptions in connection with our business combination. Despite our compliance with these rules, if a stockholder fails to receive our proxy solicitation or tender offer materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy solicitation or tender offer materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly redeem or tender public shares.financial institutions. For example, we may require our public stockholders seekingbe required to exercise their redemption rights, whether they are record holdersprocure from or hold their sharesinvest in “street name,” to either tender their certificates to our transfer agent prior to the date set forthcompanies in the proxy solicitationbusiness of producing and selling “green” hydrogen on terms that are not economical to meet customer expectations, which could adversely impact our financial results of operations. Similarly, we rely on a global supply chain. Managing that supply chain for ESG risks could require us to incur substantial costs and, if any risks are identified, incur further costs to remedy issues or tender offer materials mailedlocate alternative suppliers, which either may not exist or may be unwilling or unable to such holders,supply us. Additionally, our customers may be driven to purchase our vehicles due to their own sustainability or upESG commitments, which may entail holding their suppliers – including us – to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials,ESG standards that go beyond compliance with laws and regulations or to deliver their shares to the transfer agent electronically. In the event that a stockholder failsour ability or willingness to comply with thesesuch standards. Failure to maintain operations that align with such “beyond compliance” standards may cause potential customers to not do business with us or anyotherwise hurt demand for our products. These and other procedures, its shares may not be redeemed.
You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. Therefore, to liquidate your investment, youESG concerns could adversely affect our business, prospects, financial condition and operating results.
Our business may be forcedsubject to sell your public sharesrisks associated with construction, cost overruns and delays, and other contingencies that may arise while constructing or Warrants, potentiallyservicing hydrogen infrastructure or refueling stations for certain customers, and such risks may increase in the future as we expand the scope of such services.
We expect to construct and service, or invest in the construction and servicing, of hydrogen infrastructure and refueling stations at
a loss.Our public stockholders willcertain customer sites and elsewhere. We expect such construction and servicing at customer sites and elsewhere to be entitledsubject to receive funds from the Trust Account only upon the earliest to occur of: (i) our completion of an initial business combination, (ii) the redemption of any public shares properly submittedoversight and regulation in connectionaccordance with a stockholder vote to approve an amendment to our amendedstate and restated certificate of incorporation that would (A) modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated our initial business combination within 24 months from the closing of our Public Offering or (B) with respect to any other provisionlocal laws and ordinances relating to building codes, accessibility requirements, safety, environmental protection and related matters, and to require various local and other governmental approvals and permits that may vary by jurisdiction. All of the rightsabove may cause delays or cost-overruns or prevent construction or servicing of holders ofhydrogen infrastructure and refueling stations. Meaningful delays or cost overruns, or the inability to construct or service hydrogen infrastructure or refueling stations at certain customer sites and elsewhere, could have a material adverse effect on our Class A common stockbusiness, prospects, financial condition and operating results. In addition, we may undertake such construction or pre-initial business combination activity,service through partners or contractors, which may require us, our partners, contractors, or customers to obtain licenses or permits, or require compliance with additional rules, working conditions and (iii) the redemption ofother union requirements, adding costs and complexity to a construction project. If we, our public shares if wepartners or contractors are unable to complete an initial business combination within 24 months fromprovide timely, thorough, and quality construction-related services, our customers could fall behind with their schedules leading to liability to us or cause customers to become dissatisfied with the closinghydrogen solutions we offer.
We depend upon key personnel and will need to hire and train additional personnel.
Our success depends on the continuing services of key employees. We believe the depth and quality of the experience of our
Public Offering, subjectmanagement team in the hydrogen fuel cell and commercial vehicle industries is a key to
applicable lawour ability to be successful. The loss of any of these individuals could have a material adverse effect on our business, prospects, financial condition and
as further described herein. In addition, if we are unable to complete an initial business combination within 24 months fromoperating results. Additionally, the
closingsuccess of our
Public Offering for any reason, compliance with Delaware law may require that we submit a plan of dissolutionoperations will largely depend upon our ability to
our then-existing stockholders for approval prior to the distribution of the proceeds heldsuccessfully attract and retain competent and qualified key management personnel in the
Trust Account. In that case, public stockholders maycountries where we operate. As with any company with limited resources, there can be
forced to wait beyond 24 months from the closing of our Public Offering before they receive funds from the Trust Account. In no
other circumstances will a public stockholder have any right or interest of any kind in the Trust Account. Holders of Warrants will not have any right to the proceeds held in the Trust Account with respect to the Warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or Warrants, potentially at a loss.II. Risks Relating to our Securities
NASDAQ may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
We cannot assure you that our securities will continue to be listed on NASDAQ in the future or prior to our initial business combination. In order to continue listing our securities on NASDAQ prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity ($2,500,000) and a minimum number of holders of our securities (300 public holders).
Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with NASDAQ’s initial listing requirements, which are more rigorous than NASDAQ’s continued listing requirements, in order to continue to maintain the listing of our securities on NASDAQ. For instance, our stock price would generally be required to be at least $4.00 per share and our stockholders’ equity would generally be required to be at least $5.0 million. We cannot assure youguarantee that we will be able to meetattract such individuals or that the presence of such individuals will necessarily translate into profitability for us. The challenge will be exacerbated for us as we attempt to transition from limited production of units deployed for technology validation to production for operational fleet validation to, ultimately, volume production and sales to support full fleet conversions under the unforeseeable business conditions which continue to evolve as a result of the impact of
COVID-19.
In the event that our employees seek to join a labor union, higher employee costs and increased risk of work stoppages or strikes could result. We may also directly or indirectly depend upon other companies with unionized workforces, including suppliers, and work stoppages or
strikes with respect to those
initial listing requirements at that time.
If NASDAQ delistscompanies could have a material adverse impact on our securities from tradingbusiness, financial condition, or results. Our inability to attract and retain key personnel in a timely and
cost-effective
manner could have a material adverse effect on
its exchangeour business, prospects, financial condition and operating results. We intend to hire additional personnel, including design and manufacturing personnel and service technicians, to support the manufacture, sale and service of our vehicles. Because our vehicles are based on a different technology platform than for traditional ICE vehicles, individuals with sufficient training in alternative fuel vehicles and FCEVs may not be available to hire, and we expect intense competition for employees with such skills and experience. Consequently, we may not be successful in attracting and retaining employees with such skills and experience, and as a result, our business, prospects, financial condition, and operating results could be materially adversely affected.
We currently face and will continue to face significant competition and many of our current and future competitors have or will have significantly more resources.
We face intense competition as we aim to replace existing commercial transportation solutions with our hydrogen-powered FCEVs and hydrogen fuel cell systems. We expect to face increasing competition both from current transportation options and improvements to current transport options as well as from new alternative energy solutions, including BEVs. Each of our target markets is currently serviced by existing manufacturers with existing customers and suppliers. These manufacturers generally use proven and widely accepted technologies such as ICE and batteries. Competitors are
notworking on developing technologies in each of our targeted markets. Many of our current and potential future competitors have or will have greater financial, technical, manufacturing, marketing and other resources than we do. They may be able to
listdeploy greater resources and more quickly to design, develop, manufacture, distribute, promote, sell, market and support their alternative transport programs. Additionally, our
securities on another national securities exchange,competitors may also have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other resources than we
expectdo. These competitors also compete with us in recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as in acquiring technologies complementary to, or necessary for, our
securities could be quoted on an over-the-counter market.products. If
this were to occur, we
could face significant material adverse consequences, including: | ● | a limited availability of market quotations for our securities; |
| | |
| ● | reduced liquidity for our securities; |
| | |
| ● | a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| | |
| ● | a limited amount of news and analyst coverage; and |
| | |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Units, Class A common stock and Warrants are listed on NASDAQ, our Units, Class A common stock and Warrants are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on NASDAQ, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
Prior to our initial business combination, only holders of our founder shares will have the right to vote on the election of directors. As a “controlled company” within the meaning of NASDAQ’s rules, we may qualify for and rely on exceptions from certain corporate governance requirements that would otherwise provide protection to shareholders of other companies.
Prior to our initial business combination, only holders of our founders shares will have the right to vote on the election of directors. As a “controlled company” within the meaning of NASDAQ’s rules, we may qualify for and rely on exceptions from certain corporate governance requirements. Under NASDAQ corporate governance standards, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements that:
| ● | we have a board that includes a majority of “independent directors,” as defined under NASDAQ rules; |
| | |
| ● | we have a compensation committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; |
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| ● | we have independent director oversight of our director nominations. |
We do not intendcompete effectively, our competitive positioning and operating results will be harmed. We expect competition in our industry to utilize these exemptionsintensify from our existing and intend to comply with the corporate governance requirements of NASDAQ, subject to applicable phase-in rules. However, if we determinefuture competitors in the future to utilize somein light of increased demand and regulatory push for vehicles powered by renewable energy sources.
Until we complete our hydrogen fuel cell production facilities, which may be delayed or
all of these exemptions, you will not
have the same protections afforded to shareholders of companies that are subject tooccur at all,
of NASDAQ’s corporate governance requirements.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Because we have net tangible assets in excess of $5,000,000 and timely filed a Current Report on Form 8-K after the Closing Date, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated bydependent and expect to remain dependent on Horizon as a single source supplier of our hydrogen fuel cell systems, and the SECinability of Horizon to protect investors in blank check companies,deliver such as Rule 419 under the Securities Act (“Rule 419”). Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means we willfuel cell systems at prices, volumes, and specifications acceptable to us could have a longer period of time to completematerial adverse effect on our business, combination than do companies subjectprospects, financial condition and operating results.
We currently rely and expect to
Rule 419. Moreover, if we were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the Trust Account to us unless andrely until
the funds in the Trust Account were released to us in connection with our completion of
an initial business combination.If we seek stockholder approvalour hydrogen fuel cell manufacturing facilities solely on Horizon as a single source supplier of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 20% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 20% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our 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(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 20% of the public shares without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shareshydrogen fuel cell systems. Even if we complete our business combination. As a result, you willmanufacturing facilities, we expect to continue to hold that numberrely on Horizon for supply of shares exceeding 20%hydrogen fuel cell systems for deliveries in China. Horizon may not be able to meet our product specifications and in orderperformance characteristics or our desired specifications, performance and pricing, which could impact our ability to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.
Because ofachieve our limited resourcesproduct specifications, performance characteristics and the significant competition for business combination opportunities, ittarget pricing as well. We may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per shareobtain hydrogen fuel cell systems from Horizon or alternative suppliers at prices, volumes, and specifications acceptable to us, which could have a material adverse effect on our redemption ofbusiness, prospects, financial condition and operating results. In addition, our public shares, or less than such amount in certain circumstances, and the Warrants will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (whichpricing arrangements with Horizon may be individualssubject to challenge by tax authorities in the U.S., Singapore, China, the Netherlands or investment partnerships),elsewhere, and if our transfer pricing is challenged, we may be subject to fines, liability, potential double taxation or other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we dosanctions by government bodies and our financial resources willbusiness could be relatively limited when contrasted with those of many of these competitors.adversely affected. While we believe there are numerous target businessesthat we could potentially acquire with the net proceeds of our Public Offeringmay be able to establish alternate supply relationships and the sale of the Private Placement Warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, because we are obligated to pay cashcan obtain or engineer replacement components for the shares of Class A common stock which our public stockholders redeem in connection with our initial business combination, in conjunction with a stockholder vote or via a tender offer, target businesses will be aware that this may reduce the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account and the Warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share upon our liquidation.
If the net proceeds of our Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for at least 24 months after the Closing Date,such single source inputs, we may be unable to complete our initial business combination,do so in which case our public stockholders may only receive $10.00 per share,the short term (or at all) at prices or less than such amount in certain circumstances, and our Warrants will expire worthless.
The funds availablequality levels that are favorable to us, outside of the Trust Account may not be sufficient to allow us to operate for at least 24 months after the Closing Date, assuming that our initial business combination is not completed during that time. We could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business.
Subsequent to our completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges thatwhich could have a significant negativematerial adverse effect on our business, prospects, financial condition resultsand operating results.
We depend on third parties for the supply of components and
our stock price, which could cause you to lose some or all of your investment.Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outsideassembly of our control will not later arise. As a result of these factors, we may be forcedhydrogen-powered commercial vehicles.
We depend on third party suppliers to
later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value.If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the Trust Account,provide components, including but not limited to fraudulent inducement, breachglider kits and chassis, for our FCEVs. We also depend on third party assemblers to assemble our vehicles. To the extent that there are limitations on the availability of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claimscomponents, either due to the monies held in the Trust Account, our management will perform an analysisunwillingness or inability of the alternatives availablesuppliers to itproduce and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Making such a request of potential target businesses may make our acquisition proposal less attractive tosupply them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that we might pursue.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our public shares, if we are unable to complete our business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.00 per public share initially held in the Trust Account, due to claims of such creditors. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us or our assembly partners, or a prospective target business with whichchange in governmental regulations or policies, we have entered into a written letter of intent, confidentialitywould need to develop capabilities in manufacturing such components or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 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 $10.00 per share due to reductions in the value of the trust assets, in each case net of the interestseek alternative suppliers, which may be withdrawn to pay taxes, provided that such liability willeither 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 our indemnity of the underwriters of our Public Offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and we believe that our Sponsor’s only assets are securities of the Company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 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 $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be exposed to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
| ● | restrictions on the nature of our investments; and |
| | |
| ● | restrictions on the issuance of securities, each of which may make it difficult for us to complete our business combination. |
In addition, we may have imposed upon us burdensome requirements, including:
| ● | registration as an investment company; |
| | |
| ● | adoption of a specific form of corporate structure; and |
| | |
| ● | reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations. |
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our anticipated principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the Trust Account may only be 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. Pursuant to the trust agreement governing the Trust Account, the Trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. The Trust Account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our initial business combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated our initial business combination within 24 months from the closing of our Public Offering or (B) with respect to any other provision relating to the rights of holders of our Class A common stock or pre-initial business combination activity; or (iii) absent a business combination, our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and our Warrants will expire worthless.
Our search for a business combination, and any target businesses with which we ultimately consummate a business combination, may be materially adversely affected by the coronavirus (“COVID-19”) pandemic and the status of the debt and equity markets.
In December 2019, a novel strain of coronavirus was reported to have surfaced, which has and is continuing to spread throughout the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic.” The outbreak of the COVID-19 pandemic continues to grow in both the U.S. and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 continue to restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and service providers, limit our ability to thoroughly conduct due diligence, or restrict our ability to negotiate and consummate a transaction in a timely manner. Additionally, the outbreak of COVID-19 may negatively impact businesses we may seek to acquire. The extent to which the COVID-19 pandemic impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain the COVID-19 pandemic or treat its impact, among others. If the disruptions posed by the COVID-19 pandemic or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected. In addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of our Public Offering may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 24th month from the closing of our Public Offering in the event we do not complete our business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of our Public Offering is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.
In accordance with NASDAQ corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on the NASDAQ. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We have not registered the shares of Class A common stock issuable upon exercise of the Warrants under the Securities Act or any state securities laws, and such registration may not be in place when an investor desires to exercise Warrants, thus precluding such investor from being able to exercise its Warrants except on a cashless basis and potentially causing such Warrants to expire worthless.
We have not registered the shares of Class A common stock issuable upon exercise of the Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file a registration statement under the Securities Act covering such shares. We will use our best efforts to cause the same to become effective, but in no event later than 60 business days after the closing of our initial business combination, and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the Warrants are not registered under the Securities Act, we will be required to permit holders to exercise their Warrants on a cashless basis. However, no Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any Warrant, or issue securities or other compensation in exchange for the Warrants in the event that we are unable to register or qualify the shares underlying the Warrants under the Securities Act or applicable state securities laws, and there is no exemption available. If the issuance of the shares upon exercise of the Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In such event, holders who acquired their Warrants as part of a purchase of Units will have paid the full Unit purchase price solely for the shares of Class A common stock included in the Units. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A common stock for sale under all applicable state securities laws.
The grant of registration rights to our initial stockholders may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement entered into in connection with our Public Offering, our initial stockholders and their permitted transferees can demand that we register the resale of their Founder Shares, after those shares convert to Class A common stock at the time of our initial business combination. In addition, holders of our Private Placement Warrants and their permitted transferees can demand that we register the resale of the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants and holders of warrants that may be issued upon conversion of working capital loans may demand that we register the resale of such Warrants or the Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock that is expected when the securities owned by our initial stockholders, holders of our Private Placement Warrants, holders of warrants that may be issued upon conversion of working capital loans or their respective permitted transferees are registered for resale.
Because we are not limited to a particular industry, sector or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
Although we expect to focus our search for a target business in industries that may provide opportunities for attractive risk-adjusted returns in one of the multiple sectors that may advance the objectives of global decarbonization, we may seek to complete a business combination with an operating company in any industry or sector. However, we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our business combination with another blank check company or similar company with nominal operations. There is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of revenues or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our securities will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value.
III. Risks Relating to Riverstone, our Sponsor and Our Management Team
Past performance by Riverstone, including our management team, may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, Riverstone and its affiliates and our management team is presented for informational purposes only. Past performance by Riverstone, including our management team, is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of Riverstone’s or our management team’s performance as indicative of our future performance or of an investment in us or the returns we will, or are likely to, generate going forward.
We may seek acquisition opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
We will consider a business combination outside of our management’s area of expertise if a business combination candidate is presented to us and we determine that such candidate offers an attractive acquisition opportunity for the Company. Although our management will endeavor to evaluate the risks inherent in any particular business combination candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our securities will not ultimately prove to be less favorable than a direct investment, if an opportunity were available, in a business combination candidate. In the event we elect to pursue an acquisition outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this Annual Report on Form 10-K regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any stockholders who choose to remain stockholders following our business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these criteria and guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our Trust Account and our Warrants will expire worthless.
We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of revenues, cash flows or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business without a proven business model and with limited historical financial data, volatile revenues, cash flows or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to the Company from a financial point of view.
Unless we complete our business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to the Company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy solicitation or tender offer materials, as applicable, related to our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm. However, our stockholders may not be provided with a copy of such opinion, nor will they be able to rely on such opinion.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination (including pursuant to a specified future issuance) or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle holders thereof to (i) receive funds from the Trust Account or (ii) vote on any initial business combination. The issuance of additional shares of common or preferred stock:
| ● | may significantly dilute the equity interests of our investors; |
| | |
| ● | may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| | |
| ● | could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
| | |
| ● | may adversely affect prevailing market prices for our Units, Class A common stock and/or Warrants. |
Resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our Trust Account and our Warrants will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our Trust Account and our Warrants will expire worthless.
We are dependent upon our officers and directors, and their loss could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our officers and directors. We believe that our success depends on the continued service of our officers and directors, at least until we have completed our initial business combination. In addition, our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating their time among various business activities, including identifying potential business combinations and monitoring the related due diligence. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.
Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
In addition, the officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our business combination and, as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the Company after the completion of our business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business.
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target business’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target business’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them,exist or if they are abledo exist may be unwilling or unable to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials (as applicable) relating to the business combination contained an actionable material misstatement or material omission.
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interestsupply us. Either case could have a negative impact on our ability to sell our hydrogen-powered commercial vehicles at the prices, or achieve the margins, or in the timeframes that we anticipate.
Additionally, we depend on other partners to assemble vehicle components and our hydrogen fuel cell systems into our commercial vehicles in North America and may do so elsewhere as appropriate. Using a third-party for the integration, installation, and assembly of our commercial vehicles is subject to risks with respect to operations that are outside our control. We could experience delays if our partners do not meet agreed upon timelines or experience capacity constraints that make it impossible for us to fulfill purchase orders on time or at all. Our ability to build a premium brand could also be adversely affected by perceptions about the quality of our partners’ products. In addition, although we will oversee each step of the supply chain, including production, installation, and assembly, because we have no management control over, and therefore rely on, our partners to meet our quality standards, there can be no assurance that the final product will meet expected quality standards.
We may be unable to enter into new agreements or extend existing agreements with third-party suppliers and assemblers on terms and conditions acceptable to us and therefore may need to contract with other third parties or significantly add to our own manufacturing or assembly capacity. There can be no assurance that in such event we would be able to engage other third parties or establish or expand our own capabilities to meet our needs on acceptable terms or at all. The expense and time required to complete
any transition, and to assure that our
initialcommercial vehicles assembled at facilities of new partners comply with our quality standards and regulatory requirements, may be greater than anticipated. Any of the foregoing could adversely affect our business,
combination.Our officersprospects, financial condition and directorsoperating results.
We may not succeed in investing in hydrogen production, distribution and refueling operations critical to supplying our customers with hydrogen to operate our FCEVs either, at all or in part, and/or at the cost required to achieve total cost of ownership for potential Hyzon FCEV customers to drive their purchases of Hyzon FCEV trucks.
As a key component of our business model, we intend to invest in hydrogen production, distribution, and refueling centers. We may include the cost of hydrogen in the purchase price of our trucks. The availability of clean hydrogen at a cost competitive with diesel fuel with supporting hydrogen distribution and refueling infrastructure available in proximity of Hyzon customer fleets is vital to adoption of Hyzon FCEV trucks and the success of our business. There are many risks to our and other market participants’ ability to bring this required infrastructure and hydrogen supply online at the cost, timing, and availability required to support Hyzon’s fleet deployments. These risks include, but are not limited to, the possibility that Hyzon’s hydrogen production partners are unable to produce hydrogen at the quantity, quality, carbon intensity, and/or cost required, or that those production plants are delayed or not built at all, which could be caused by a number of factors including partner liquidity, construction market and execution risk, and quality of construction / installation. The availability and cost of hydrogen production feedstock such as solid waste, biomass, and natural gas / renewable natural gas is also a risk to sustainable hydrogen production for Hyzon fleets. Additionally, Hyzon’s ability to fund projects to establish the cost structure required for fleet total cost of ownership to drive FCEV truck purchases presents a risk that would be increased if other capital demands or cost increases to Hyzon absorb the capital allocated for hydrogen production investments. Finally, if an applicable Low Carbon Fuel Standard or other subsidy upon which the hydrogen production economics are dependent in the near-term are reduced, modified or eliminated, or Hyzon and its partners are unable to secure such subsidies, the hydrogen cost to fleets may not support conversion at the total cost of ownership realized.
As an example, the first such Raven SR hydrogen production hub is being built in Richmond, California. There is no guarantee that Raven SR, in conjunction with the site operator of this first hub, will not, commit their full timebe able to meet the development timeline with regard to the production hub or successfully produce hydrogen at scale. To the extent we are unable to produce or obtain the hydrogen or to obtain hydrogen at favorable prices for this or any other hub in which we invest, we may be unable to establish these production and distribution centers and severely limit our ability to sell our FCEVs or, if we are still able to establish these centers, we may be forced to sell hydrogen at a loss to maintain our commitments. We believe that this hydrogen incentive will be a significant driver for purchases of our FCEVs and therefore, the failure to identify and invest in these hydrogen centers in accordance with our expectations would materially adversely affect our business.
Trade policies, treaties and tariffs, and the present conflict between Russia and Ukraine could have a material adverse effect on our business.
We operate a global supply chain and depend on the availability of raw materials and components for our vehicles, including electrical components common in the semiconductor and commercial truck industries. Current uncertainty about the future relationship between the U.S. and certain countries, most significantly Russia and China, with respect to human rights, international affairs, environmental and trade policies, treaties, tariffs and taxes, may pose significant risks to our affairs,business.
The current U.S. presidential administration and U.S. Congress have made various changes to policies from past U.S. presidential administrations, and future changes could occur. Any such changes could have a material effect on global economic conditions and the stability of global financial markets, and could significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. These uncertainties include: (i) economic sanctions and embargos that could lead to major disruptions in markets for energy, goods and services; (ii) an increase in the inflation rate, making the prices of components and materials we purchase more expensive; (iii) the possibility of altering the existing tariffs or penalties on products manufactured outside the U.S., including the U.S. government’s 25% tariff on a range of products from China; (iv) the effects stemming from the removal of such previously imposed tariffs; (v) subsequent tariffs imposed by the U.S. on any other U.S. trading partner such as China and Russia; and (vi) potential tariffs imposed by trading partners on U.S. goods. Any of the foregoing actions could increase our costs, which may result incould have a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers is engaged in several other business endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. In particular, certain of our officers and directors are employed by Riverstone, which is an investment manager to various private investment funds, which make investments in securities or other interests of or relating to companies in industries we may target for our initial business combination. Our independent directors also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have amaterial negative impact on our business.
We cannot predict whether, and to what extent, there may be changes to international trade agreements or whether quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed. Additionally, an open conflict or war across any region such as that presently being conducted by Russia against the people of Ukraine could affect our ability to
completeobtain raw materials. The current military conflict between Russia and Ukraine, and related sanctions, export controls or other actions that may be initiated by private companies, and institutions, as well as nations including the U.S., the European Union or Russia, could adversely affect our
initial business
combination.and/or our supply chain or our business partners or customers in other countries beyond Russia and Ukraine. Although we currently maintain alternative sources for raw materials, if we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could have a material adverse effect on our business, financial condition and results of operations. disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could have a material adverse effect on our business and our results of operations.
We depend upon our relationship with our shareholder Horizon and Horizon’s subsidiaries, including in respect of the Horizon Supply Agreement and the Horizon IP Agreement.
Hyzon is currently majority owned by Singapore incorporated Hymas Pte Ltd (“Hymas”), which is majority but indirectly controlled by Horizon. We depend on agreements entered into with Horizon’s subsidiaries, including those for supply of hydrogen fuel cell systems and for joint ownership and licenses of certain intellectual property. Such intellectual property may be difficult to enforce if Horizon’s subsidiaries refuse to join in our enforcement actions, and the nature of our rights in such intellectual property may restrict us from expanding our business with additional product lines and commercialization opportunities.
Additionally, although we have endeavored to enter into agreements with Horizon and its affiliates on market terms, including the Intellectual Property Agreement (the “Horizon IP Agreement”), dated January 12, 2021, between Jiangsu Qingneng New Energy Technologies Co., Ltd. and Shanghai Qingneng Horizon New Energy Ltd. (together, “JS Horizon”) and Hyzon, and the Framework Supply Contract Template (the “Horizon Supply Agreement”), dated January 7, 2021, between Jiangsu Qingneng New Energy Technologies Co. Ltd. and Hyzon, our agreements with Horizon and its affiliates may not reflect terms that would have resulted fromarm’s-length
negotiations with unaffiliated third parties. If such arrangements are considered unenforceable or otherwise impermissible, we may be subject to fines, liability, tax penalties or sanctions by courts or other government bodies. Please see the section entitled “Business – Key Agreements
Business – Intellectual Property
Additionally, our relationship with Horizon may be interrupted or deteriorate, and Horizon or its subsidiaries may delay performance of or breach obligations to us under such arrangements, which could materially adversely affect our business, prospects, financial condition and operating results. Under the Horizon IP Agreement, JS Horizon assigned to Hyzon a joint ownership interest in certain intellectual property rights owned by JS Horizon relating to fuel cell technologies and mobility products, and each of Hyzon and JS Horizon granted to the other exclusive rights to use such jointly owned intellectual property rights within such other party’s field of use, as well as certain rights in improvements made in the future with respect thereto. Our field of use under the Horizon IP Agreement includes the manufacture, commercialization and other exploitation of mobility products throughout the world, as well as fuel cells designed for use in mobility products commercialized outside of identified countries in Asia, Africa, and South America. JS Horizon’s field of use under the Horizon IP Agreement includes the manufacture, commercialization and other exploitation throughout the world of fuel cells not designed for use in mobility products, as well as fuel cells designed for use in mobility products commercialized within identified countries in Asia, Africa, and South America. Any of the above could materially adversely affect our business, prospects, financial condition and operating results.
We may be unable to expand on our intellectual property portfolio or otherwise develop the technology needed to operate our business.
A portion of the intellectual property that we own was assigned to us by JS Horizon pursuant to the Horizon IP Agreement. Some of the technology based on this intellectual property is in the early stages of development and it is possible that we will be unable to successfully build on the portfolio of intellectual property that was assigned to us by JS Horizon. Our ability to refine and grow our portfolio of intellectual property and technology depends on many factors, including our ability to attract and retain a skilled technical workforce and our ability to devote sufficient resources to research and development efforts. Our failure to continue development of our intellectual property and technology portfolio could materially adversely affect our business, prospects, financial condition and operating results.
Certain of our
directors, officers, and
directorsemployees are now
and all of them may in the future become, affiliated with
entitiesHorizon, which is engaged in business activities similar to
those intended to be conducted by usours, and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Until we consummate our initial business combination, we
We intend to engage in the business of identifyingproduce hydrogen-powered commercial vehicles and combining with one or more businesses. Certain of our officers and directors and our Sponsor are, and all of them may in the future become, affiliated with entities that are engagedhydrogen fuel cell systems. Horizon engages in a similar business including another blank check company thatand may have acquisition objectives that are similar to ours or that is focused on a particular industry. Moreover,compete for the sale of hydrogen fuel cell systems in certain territories with us.
Certain of our
directors, officers, employees, contractors and consultants are affiliated with Horizon. In particular, George Gu, the Executive Chairman of our Board, also serves as the Chairman of the Board of Horizon. Craig Knight and Viktor Meng also serve on both our Board and the Board of Horizon. In addition, certain directors, officers, employees, contractors, and consultants hold or will hold stock in both Hyzon and Horizon and its affiliates. Further, by virtue of its control of Hymas, Horizon currently has control over a majority of Hyzon’s voting stock. As a result, our directors, officers, and
directors have time and attention requirements for private investment funds of which affiliates of Riverstone are the investment managers.Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.
Accordingly, they mayemployees could have conflicts of interest, including in determiningrespect of our contractual relationships with Horizon, and decisions of whether to which entity a particularpresent business opportunity should be presented.opportunities to us or to Horizon. These conflicts may not be resolved in our favor, and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a business combination with a target business that is affiliated with our Sponsor, our directors or officers, although we do not intend to do so, or we may acquire a target business through an Affiliated Joint Acquisition with one or more affiliates of Riverstone and/or one or more investors in the Riverstone Funds. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
In particular, Riverstone and its affiliates also are focused on investments in the energy industry. As a result, there may be substantial overlap between companies that would be a suitable business combination for us and companies that would make an attractive target for such other affiliates.
We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our Sponsor, officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement or potential involvement of our Sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our Sponsor, officers, directors or existing holders. Our directors also serve as officers and board members for other entities. Such entities may compete with us for business combination opportunities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a business combination and such transaction was approved by a majority of our directors. Despite our obligation to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm regarding the fairness to the Company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our Sponsor, officers, directors or existing holders, potential conflicts of interest still may exist and, as a result in the terms of the business combination mayour contractual relationships with Horizon or its subsidiaries being not be as advantageous to our public stockholdersus as they would be absent any conflicts of interest.
Moreover, we may,interest, management spending less time on our business than they would absent any conflicts of interest, or potential business opportunities being presented to Horizon instead of us. We have adopted our Related Party Transactions and Code of Business Conduct Ethics Policies which apply to certain related person transactions and can be found on the investor relations page of our website at www.hyzonmotors.com. These policies are subject to the review by our option, pursueBoard and Audit Committee. We have included our reference to our website address only as an Affiliated Joint Acquisition opportunity withinactive textual reference and do not intend it to be an entity affiliated with Riverstone and/or one or more investorsactive link to our website.
We face risks related to health epidemics, including the ongoingCOVID-19
pandemic, which could have a material adverse effect on our business and results of operations. Our business and results of operations have been and are expected to continue to be adversely affected by theCOVID-19
pandemic and related governmental responses, which have caused a material adverse effect on the level of economic activity around the world, including in the
Riverstone Funds. Any such partiesmarkets we serve. The governmental responses being implemented to contain the outbreak ofCOVID-19
or its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which have changed frequently and have varied between across U.S. states and localities and many countries, have limited and may
co-invest with uslimit in the
target business atfuture our ability to meet with potential customers or affect the
timeability of our
initial business combination, or we could raise additional proceedspersonnel, suppliers, and partners to
completeoperate in the
acquisition by making a specified future issuance to any such parties.Since our Sponsor, officersordinary course. While national and directors will lose their entire investmentlocal governments in us if our business combination is not completed, a conflict of interest may ariselocations in determining whether a particular business combination target is appropriate for our initial business combination.
On September 12, 2017, our Sponsor acquired an aggregate of 11,500,000 Founder Shares in exchange for a capital contribution of $25,000, or approximately $0.002 per share. In September and October 2020, our Sponsor returned to us at no cost an aggregate of 5,750,000 Founder Shares, which we cancelled. The numberand our key suppliers operate have recently begun to relax restrictions on business operations, the global outlook continues to remain uncertain due to a variety of Founder Shares issued was determined based onfactors including the expectation that such Founder Shares would represent 20%Omicron variant and the potential emergence of additional variants, supply chain disruptions, labor shortages and inflation, and the outstanding sharesimpacts of the
COVID-19
pandemic may continue even after the
Public Offering. In Octoberoutbreak has subsided and
November 2020, our Sponsor transferred an aggregatecontainment measures are lifted. Additionally, the imposition of
1,064,329 Founder Shares to our independent directors and WRG at their original purchase price. In December 2020, our Sponsor and WRG returned to us at no cost an aggregate of 106,875 Founder Shares, which we cancelled, resulting in our initial stockholders holding 5,643,125 Founder Shares. The Founder Shares will be worthless if we do not complete an initial business combination. In addition, our Sponsor, independent directors and WRG purchased an aggregate of 6,514,500 Private Placement Warrants, each exercisable for one share of our Class A common stock at $11.50 per share, for a purchase price of approximately $6,514,500,workplace vaccine mandates or
$1.00 per whole warrant, that will also be worthless if we do not complete a business combination. Holders of Founder Shares have agreed (A) to vote any shares owned by them in favor of any proposed business combination and (B) not to redeem any Founder Shares in connection with a stockholder vote to approve a proposed initial business combination. In addition, we may obtain loans from our Sponsor, affiliates of our Sponsor or an officer or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, whichtesting requirements may adversely affect our leverageability to attract or retain talent. The extent to which theCOVID-19
pandemic impacts us will depend on future developments, including the emergence of new variants, the adoption and effectiveness of vaccines, the availability and effectiveness of treatments and the possible imposition of further containment measures, which are highly uncertain and cannot be predicted. If the financial markets or the overall economy are impacted for an extended period, our results of operations, financial position and cash flows may be materially adversely affected.
We have identified a material weakness in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences. Additionally, failure to timely implement and maintain adequate financial, information technology and management processes, controls and procedures could result in further material weaknesses which could lead to errors in our financial reporting and adversely affect our business.
We are subject to the SEC’s internal control over financial reporting requirements and may become subject to the auditor attestation requirements as of the end of the 2022 fiscal year. Prior to the Business Combination, we were a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating businesses. As a result, previously existing internal controls are no longer applicable or comprehensive enough as of December 31, 2021, as our operations prior to the Business Combination were insignificant compared to those of the consolidated entity post-Business Combination. The design of internal controls over financial reporting for our business post-Business Combination has required and will continue to require significant time and resources from management and other personnel.
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements would not be prevented or detected on a timely basis.
We identified and previously reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2021, a material weakness in our internal control over financial reporting. Specifically, due to our size and limited operating history, particularly prior to the Business Combination, we did not have sufficient financial reporting resources and personnel necessary to ensure the appropriate segregation of duties and effective review procedures with respect to the processing and recording of financial transactions, as well as an appropriate level of control oversight over the financial statement reporting process. We have concluded that the material weakness in internal control over financial reporting remained as of December 31, 2021, and we continue to work to remediate.
The measures we have taken and continue to take to remediate the identified material weakness, include: (i) the hiring of additional finance and accounting personnel over time to augment our accounting staff and to provide more resources for complex accounting matters and financial conditionreporting; (ii) further developing and thus negatively impactimplementing formal policies, processes and documentation procedures relating to our financial reporting and consulting with accounting experts; and (iii) the implementation of new technological solutions. We intend to continue to take steps to remediate the material weakness described above and further evolve our accounting processes.
The actions we are taking are subject to ongoing executive management review and are also subject to audit committee oversight. To date, we have hired additional financial and accounting personnel with technical accounting experience and are in the process of implementing new technology solutions to assist with our financial reporting process. We are still executing an assessment to identify process design gaps and implementing additional controls to mitigate segregation of duty risk. We will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a sufficient period of time. If we are unable to successfully remediate the material weakness, or if in the future, we identify further material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated, and we may be delayed in filing required periodic reports.
Our private placement warrants are accounted for as liabilities and the changes in value of our stockholders’ investmentwarrants could have a material effect on our financial results.
We classify our private placement warrants as derivative liabilities measured at fair value, with changes in
us.Wefair value reported in our Consolidated Statements of Operations and Comprehensive Loss for each reporting period. As a result of the recurring fair value measurement, our financial statements and results of operations may choosefluctuate quarterly, based on factors which are outside of our control. Due to incur substantial debt to complete our business combination. We have agreedthe recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our private placement warrants each reporting period and that the amount of such gains or losses could be material.
There are inherent limitations in all control systems, and misstatements due to error or fraud that could seriously harm our business may occur and not incurbe detected.
Our management does not expect that our internal and disclosure controls will prevent all possible errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, an evaluation of controls can only provide reasonable assurance that all material control issues and instances of fraud, if any,
indebtedness unlessin Hyzon have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by the individual acts of some persons or by collusion of two or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of inherent limitations in acost-effective
control system, misstatements due to error or fraud may occur and not be detected. A failure of our controls and procedures to detect error or fraud could seriously harm our business and results of operations. Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, or from individuals within our organization, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early-stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents or thefts of our trade secrets or other proprietary and confidential information consistent with applicable laws and regulations protecting individual privacy rights. Such privacy laws and regulations can and do impose potentially significant fines and penalties for not adequately protecting individuals’ personal information, as well as subject us to potential litigation. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and results of operations, lead to financial loss, and subject us to substantial and costly litigation.
We may face legal challenges and other resistance attempting to sell our vehicles which could materially adversely affect our sales and costs.
To date, our sales of our FCEVs have been made directly to our customers. In the U.S., we have
obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies heldnot yet sold FCEVs. Our FCEV sales plan in the
trust account. As such, no issuance of debt will affectU.S. includes both direct sales to end customers, as well as sales through dealers and distributors. In the
per-share amountU.S., most states require a license to sell motor vehicles (including commercial vehicles like ours) within the state. Some states prohibit manufacturers from selling motor vehicles directly to customers. In other states, manufacturers must operate a physical dealership within the state to deliver vehicles to customers. Individual state law may dictate our available
for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including: | ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
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| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
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| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
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| ��� | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
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| ● | our inability to pay dividends on our common stock; |
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| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, to pay expenses, make capital expenditures and acquisitions and fund other general corporate purposes; |
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| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
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| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
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| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
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| ● | other disadvantages compared to our competitors who have less debt. |
We may only be ablesales path to complete one business combination with the proceeds of our Public Offering and the sale of the Private Placement Warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
market. We may effectuate our business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuatesell directly to customers in each state. We may also be unsuccessful in attracting dealers and distributors to carry our brand, which could pose not only sales risk but also limit our ability to service and support our customers.
We are currently not registered as a dealer in any state. In states where we may seek to sell vehicles directly to customers, there is uncertainty as to whether, as a manufacturer, we will be able to sell and deliver vehicles directly to customers, as well as service those vehicles. For customers residing in states where we will not be allowed to sell or deliver vehicles, we may have to arrange alternate methods of delivery of vehicles. These methods may include delivering vehicles to adjacent or nearby states in which we are allowed to directly sell and ship vehicles and arranging for the customer to transport the vehicles to their home states. These workarounds could add significant complexity to our business
combinationmodel and could materially adversely affect our sales and profitability. For more information see the risk factors described in the section entitled “Risks Related to Litigation and Regulation
We do not currently have any leasing arrangements finalized to offer our customers financing, but we may offer a bundled lease option or other alternative structure to customers which would expose us to credit risk.
We currently do not have in place a relationship with a third party lessor to provide lease financing to our customers. While we currently intend to offer bundled leasing of our vehicles or other financing structures to potential customers through a third-party financing partner, we have no assurance that a third-party financing partner will be able or willing to provide the leasing services on terms acceptable to us and end customers, or to provide financing at all. Furthermore, offering leasing to customers may expose us to risks commonly associated with the extension of credit. Credit risk is the potential loss that may arise from any failure in the ability or willingness of the customer to fulfil its contractual obligations – including payment – when they fall due. The longer we may finance customers, the more than one targetworking capital we will consume. Competitive pressure and challenging markets may increase credit risk through leases to financially weak customers, extended payment terms and leases into new and immature markets. This could have a material adverse effect on our business, becauseprospects, financial results, cash flow and results of various factors, includingoperations.
If our vehicles fail to perform as expected, our ability to develop, market and sell or lease our alternative fuel and electric vehicles could be harmed.
Our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or may require repair. We currently have no frame of reference to evaluate the existenceperformance of our vehicles upon which our business prospects depend. For example, our vehicles will use a substantial amount of software to operate which will require modification and updates over the life of the vehicle. Software products are inherently complex accounting issues and the requirementoften contain defects and errors when first introduced. We have limited experience in writing such software.
There can be no assurance that we preparewill be able to detect and file pro formafix any defects in our vehicles’ hardware or software prior to commencing customer sales or post sale. We may experience recalls in the future, which could adversely affect our brand in our target markets and could adversely affect our business, prospects, and results of operations. Our vehicles may not perform consistent with our warranty, customers’ expectations or consistent with other vehicles which may become available. Any product defects or any other failure of our trucks to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims and significant warranty and other expenses, and could have a material adverse impact on our business, financial statements with the SEC that presentcondition, operating results, and prospects
We have limited experience servicing our vehicles. If we are unable to address the financial conditionservice requirements of several target businesses as if theyour customers, our business will be materially and adversely affected.
Because we have had
been operatedlimited production and sales of our vehicles, we haveexperience servicing or repairing our vehicles. Servicing alternative fuel and electric vehicles is different than servicing vehicles with ICE and requires specialized skills, including high voltage training and servicing techniques. We may decide to partner with a third party to perform some or all of the maintenance on
a combined basis. By completing our
initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitivetrucks, and
regulatory developments. Further,there can be no assurance that we
would notwill be able to
diversifyenter into an acceptable arrangement with any such third-party provider. Even if we do enter into contractual arrangements with third party service or repair providers, there is no assurance that such providers will have the skills, knowledge, and experience necessary to service our
operationsvehicles. If we cannot satisfactorily service or
benefitrepair our vehicles as determined by our customers (many of whom will rely on our vehicle for mission critical operations), our customers, our business and prospects will be materially and adversely affected. In addition, the motor vehicle industry laws in many states require that service facilities be available to service vehicles physically sold from locations in the possible spreadingstate. While we anticipate developing a service program that would satisfy regulators in these circumstances, the specifics of risks or offsetting of losses, unlike other entitiesour service program are still in development and may need to be restructured to comply with state law, which may have the resourcesimpact our business, financial condition, operating results, and prospects.
Insufficient warranty reserves to complete severalcover future warranty claims could materially adversely affect our business, combinations in different industries or different areas of a single industry. In addition, we intendprospects, financial condition, and operating results.
We will maintain warranty reserves to
focuscover warranty-related claims associated with our
searchvehicles. We will be liable for
an initial business combination in a single industry. Accordingly, the prospectswarranty claims for our
successvehicle because the work we perform on vehicles we purchase from OEMs to retrofit them with our fuel cell propulsion systems and other components generally will void OEM warranties. If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition, and operating results could be materially and adversely affected. We may
be:become subject to significant and unexpected warranty expenses. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims
| ● | solely dependent upon the performance of a single business, property or asset, or |
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| ● | dependent upon the development or market acceptance of a single or limited number of products, processes or services. |
This lack
Any unauthorized control or manipulation of diversification may subjectour vehicles’ systems could result in loss of confidence in us and our vehicles and harm our business.
Our vehicles contain or are planned to
numerous economic, competitivecontain complex information technology systems such as telematics and
regulatory risks, anybuilt-in
data connectivity to accept and install periodic remoteupdates to improve or
all of which mayupdate functionality. We or our technology vendors have
a substantial adverse impact upon the particular industry in which we may operate subsequentdesigned, implemented, and tested security measures intended to prevent unauthorized access to our
business combination.Weinformation technology networks, our trucks and related systems. However, hackers may attempt to simultaneously completegain unauthorized access to modify, alter, and use such networks, vehicles, and systems to gain control of or to change our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle. Future vulnerabilities could be identified and our efforts to remediate such vulnerabilities may not be successful. Any unauthorized access to or control of our vehicles or their systems, or any loss of customer data, could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our vehicles, systems, or data, as well as other factors that may result in the perception that our vehicles, systems, or data are capable of being “hacked,” could negatively affect our brand and harm our business, combinations with multiple prospective targets, which may hinderprospects, financial condition, and operating results.
Interruption or failure of our information technology and communications systems could impact our ability to completeeffectively provide our services.
We plan to outfit our trucks within-vehicle
services and functionality, or “telematics” that utilize data connectivity to monitor performance and timely capture opportunities for cost-saving preventative maintenance. The availability and effectiveness of our services depend on the continued operation of information technology and communications systems, which we have yet to develop. Our systems and those of any providers we may work with will be vulnerable to damage or interruption from, among others, fire, terrorist attacks, hackers, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. Data centers where we store our electronic data could also be subject tobreak-ins,
sabotage and intentional acts of vandalism causing potential disruptions. Some of our systems will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any problems at our data centers could result in lengthy interruptions in our service. In addition, our trucks are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in our business
combinationor the failure of our systems. Unfavorable publicity, including related to adverse financial reports, regulatory investigations or litigation, or a failure to respond effectively to adverse publicity, could harm our reputation and adversely affect our business.
As an early stage, publicly traded company, maintaining and enhancing our brand and reputation is critical to our ability to attract and retain employees, partners, customers, and investors, and to mitigate legislative or regulatory scrutiny, litigation, and government investigations.
Negative publicity has adversely affected our brand and reputation and our stock price. Negative publicity may result from allegations of fraud, improper business practices, employee misconduct, unfair employment practices, information technology breaches or failures or any other matters that could give rise to increased costslitigation and/or governmental investigations. Adverse publicity and risksits effect on overall public perceptions of our brand, or our failure to respond effectively to adverse publicity, could have a material adverse effect on our business.
On September 28, 2021, Blue Orca Capital issued a report indicating that
could negatively impact our operationsit had taken a short position in the Company’s stock and
profitability.If we determine to simultaneously acquire several businessesmaking various allegations about the Company’s business, including allegations about the nature and viability of the Company’s potential customers, the accuracy of the Company’s disclosures and the Company’s financial projections. Following that are owned by different sellers, we will need for each of such sellers to agree that our purchasereport, the Company and certain of its business is contingent onofficers and directors were named in various putative class action securities lawsuits, and the simultaneous closingsCompany’s directors and certain
former directors of DCRB also were named in separate shareholder derivative lawsuits. On January 12, 2022, the Company announced that it had received a subpoena from the SEC for production of documents and information, including documents and information related to the allegations made in the report issued by Blue Orca Capital, and that the Company was cooperating with the SEC. Because of these events, certain of the
other business combinations,Company’s potential suppliers and partners indicated that they were suspending negotiations with us concerning supplying us with key components necessary to produce our vehicles. The Company has strongly rejected Blue Orca’s claims, and will aggressively defend against the resulting litigation. The negative publicity stemming from this article has adversely affected our brand and reputation as well as our stock price which
may makemakes it more difficult for us
to attract and
delayretain employees, partners and customers, reduces confidence in our
ability, to complete our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdensproducts and
costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers)services, harms investor confidence and the
market price of our securities, invites legislative and regulatory scrutiny, and has resulted in litigation and governmental investigations As a result, customers, potential customers, partners and potential partners have failed to award us additional
risks associated withbusiness or cancelled or sought to cancel existing contracts or otherwise, directed or may direct future business to our competitors, and may in the
subsequent assimilationfuture take similar actions, and investors may invest in our competitors instead of
us. See Legal Proceedings in Note 14, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this Annual Report on Form10-K
and incorporated herein by reference. The successful rehabilitation of our brand will depend largely on regaining and maintaining a good reputation, meeting our vehicle commercialization schedules, satisfying the
operationsrequirements of customers, meeting our fueling commitments under our future bundled lease arrangements or other customer arrangements, maintaining a high quality of service under our future bundled lease arrangements, improving our compliance programs, and
services or products of the acquired companies in a single operating business. If we are unablecontinuing our marketing and public relations efforts. We’ve incurred expenses related to
adequately address these risks, it could negatively impact our
profitabilitybrand promotion, reputation building, and
results of operations.We may attempt to completemedia strategies and our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our business combination strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
Our managementefforts may not be ablesuccessful. We anticipate that other competitors and potential competitors will expand their offerings, which will make maintaining and enhancing our reputation and brand increasingly more difficult and expensive. If we fail to maintain control of a target business aftersuccessfully rehabilitate our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure a business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interestbrand in the target sufficientcurrent or future competitive environment or if events similar to the negative publicity occur in the future, our brand and reputation would be further damaged and our business may suffer.
Although we maintain insurance for the post-transaction companydisruption of our business and director and officer liability insurance, these insurance policies may not be sufficient to cover all our potential losses and may not continue to be requiredavailable to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Evenus on acceptable terms, if the post-transaction companyat all.
Concentration of ownership among our majority shareholder, executive officers and directors and their affiliates may prevent new investors from influencing significant corporate decisions.
As of December 31, 2021, Hymas PTE Ltd, a subsidiary of Horizon Fuel Cell Technology PTE Ltd. beneficially owns,
50%directly or
more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to such transaction could own less than a majorityindirectly, approximately 62.8% of our outstanding
shares of common stock,
subsequent to such transaction. In addition, other minorityand our directors and executive officers as a group beneficially own approximately 6.6% of our outstanding common stock. As a result, these stockholders
may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the Company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will
not be able to
maintainexercise a significant level of control
over all matters requiring stockholder approval, including the election of
the target business.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a business combination with which a substantial majoritydirectors, any amendment of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). As a result, we may be able to complete our business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our Sponsor, officers, directors, advisors or any of their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceeds the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
In order to effectuate our initial business combination, we may seek to amend oursecond amended and restated certificate of incorporation, or our Certificate of Incorporation, and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
Risks Related to Intellectual Property
We may need to defend ourselves against patent, copyright, trademark, trade secret or other governing instruments,intellectual property infringement or misappropriation claims, which may be time-consuming and cause us to incur substantial costs.
Companies, organizations or individuals, including our warrant agreement, in a mannercompetitors, may own or obtain patents, copyrights, trademarks, trade secrets or other intellectual property or proprietary rights (collectively, “IP”) that willwould prevent or limit our ability to manufacture or sell our hydrogen-powered commercial vehicles or hydrogen fuel cell systems, which could make it easiermore difficult for us to completeoperate our initial business combination butbusiness. We may receive inquiries from IP owners inquiring whether we infringed upon or misappropriated their proprietary rights. Companies owning IP, including those relating to hydrogen-powered mobility products or hydrogen fuel cell technologies, may allege infringement or misappropriation of such rights. In response to a determination that we have infringed upon or misappropriated a third party’s IP, we may be required to do one or more of the following:
cease development, sales or use of our stockholdersproducts that incorporate or warrantholdersare covered by the asserted IP;
pay substantial damages, including through indemnification obligations;
obtain a license from the owner of the asserted IP, which license may not
support.In orderbe available on reasonable terms or at all; or
redesign one or more aspects of our hydrogen-powered commercial vehicles or hydrogen fuel cell systems.
A successful claim of infringement or misappropriation against us could materially adversely affect our business, prospects, financial condition and operating results. Any legal proceedings or claims, whether valid or invalid, could result in substantial costs and diversion of resources.
Our business may be adversely affected if we are unable to effectuateprotect our intellectual property rights from unauthorized use by third parties.
Our success depends on our ability to protect our IP, and the failure to adequately protect or enforce our IP could result in our competitors offering products similar to ours, which would adversely affect our business, prospects, financial condition and operating results. We will rely on a
business combination
blank check companiesof patents, trade secrets (includingknow-how),
employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses, and other contractual rights to establish and protect our rights in our technology. The measures we take to protect our IP from infringement or misappropriation by others may not be effective for various reasons, including the following: any patent applications we submit or currently have pending may not result in the recent past, amended various provisionsissuance of patents;
the scope of our issued patents, including our patent claims, may not be broad enough to protect our proprietary rights;
our issued patents may be challenged or invalidated;
our employees, customers or business partners may breach their
chartersconfidentiality,non-disclosure
andnon-use
obligations to us; We fail or are determined by a court of competent jurisdiction to have failed to make reasonable efforts to protect our trade secrets;
third parties may independently develop technologies that are the same or similar to ours;
we may not be successful in enforcing our IP portfolio against third parties who are infringing or misappropriating such IP, for a number of reasons, including substantive and governing instruments, including their warrant agreement. For example, blank check companiesprocedural legal impediments;
our trademarks may not be valid or enforceable, and our efforts to police unauthorized use of our trademarks may be deemed insufficient to satisfy legal requirements throughout the world;
the costs associated with enforcing patents, confidentiality and invention agreements or other IP may make enforcement impracticable; and
current and future competitors may circumvent or design around our IP.
Additionally, IP laws vary throughout the world. Some foreign countries do not protect IP to the same extent as do the laws of the U.S. Further, policing the unauthorized use of our IP in foreign jurisdictions may be difficult. Therefore, our IP may not be as strong and expansive, or as easily enforced, outside of the U.S.
Our patent applications may not issue or if issued, may not provide sufficient protection, which may have amendeda material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that we are the
definitionfirst inventor of
business combination, increased redemption thresholds, changed industry focus and,the subject matter for which we have filed a particular patent application, or if we are the first party to file such a patent application. If another party has invented or filed a patent application with respect to
their warrants, amended their warrant agreementsthe same subject matter as we have, we may not be entitled to
require the
warrantsprotection sought by our applicable patent applications. We also cannot be certain that all the claims included in a patent application will ultimately be allowed in the applicable issued patent. Further, the scope of protection provided by issued patent claims is often difficult to
be exchanged for cash and/or other securities. We cannot assure you thatdetermine. Although we
will not seekhave filed and may continue to
amend our charter or other governing instruments or change our industry focus in order to effectuate our initial business combination.The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from the Trust Account) may be amendedfile provisional patent applications with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amendedU.S. Patent and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholdersTrademark Office, we may not support.
Some other blank check companies havefile a provision in their charter which prohibits
non-provisional
patent application within the
amendment of certain of its provisions, including those which relate torequiredone-year
time period, if at all, and that even if we do file a
company’s pre-business combination activity, without approval bynon-provisional
application, there is no guarantee that a
certain percentage of the company’s stockholders. In those companies, amendment of these provisions requires approval by between 90% and 100% of the company’s public stockholders. Our amended and restated certificate of incorporation provides that any of its provisions (other than amendments relating to the appointment of directors, which require the approval of a majority of at least 90% of our common stock voting at a stockholder meeting) related to pre-business combination activity (including the requirement to deposit proceeds of our Public Offering and the Private Placement of Warrants into the Trust Account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders) maynon-provisional
patent will be
amended if approved by holders of 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our Trust Account may be amended if approved by holders of 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who collectively beneficially own 20% of our common stock, will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose.issued. As a result, we
cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, even if all our patent claims are allowed and cover their intended scope, our competitors may
circumvent or design around our issued patents, which may adversely affect our business, prospects, financial condition and operating results. Risks Related to the Hydrogen Fuel Cell Industry
Our hydrogen vehicles compete for market share with vehicles powered by other technologies that may prove to be more attractive to customers. Decreases in the price of gasoline and natural gas and the availability of alternative powered vehicles could delay or prevent transition to hydrogen vehicles.
Our hydrogen vehicles compete for market share with vehicles fueled by alternative energy sources. If alternative energy powered vehicles are available and the prices of alternative sources are lower than energy sources used by our products, offer greater efficiencies, greater reliability or otherwise benefit from other factors resulting in overall lower total cost of ownership, this could decrease incentives to transition to hydrogen vehicles, adversely impact sales of our products and affect the commercial success of our vehicles or make our vehicles uncompetitive or obsolete. Fuel prices, including volatility in the cost of diesel or a prolonged period of low gasoline and natural gas costs, could decrease incentives to transition to hydrogen vehicles. Moreover, there is no guarantee that commercial customers will prefer hydrogen vehicles over otherzero-emissions
ornear-zero-emissions
vehicles, such as electric vehicles; to the extent that otherzero-emissions
ornear-zero-emissions
vehicles have lower total costs of ownership or better sustainability profiles, it may adversely impact sales of our products or the commercial success of our vehicles. Developments in alternative technology improvements in the ICE may adversely affect the demand for our trucks.
Developments in alternative technologies such as advanced diesel, ethanol, or compressed natural gas, or improvements in the fuel economy of the ICE, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Other fuels or sources of energy may emerge as customers’ preferred alternative to hydrogen-based solutions. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced FCEVs, which could result in the loss of competitiveness of our vehicles, decreased revenue, and a loss of market share to competitors. Our research and development efforts may not be sufficient to adapt to changes in alternative fuel and electric vehicle technology. As technologies change, we will be forced to upgrade or adapt our vehicles and increase investment in R&D.
Our products use flammable fuels, and some generate high voltages, which could subject our business to product safety, product liability, other claims, product recalls, or negative publicity.
High-voltage electricity poses potential shock hazards, and hydrogen is a flammable gas and therefore a potentially dangerous fuel. Any accidents involving or linked to, defects in design or manufacturing of, or any negative publicity surrounding hydrogen-powered vehicles, including those produced by us, or the production, transportation or use of hydrogen generally could materially impede our business. If any of our products are or are alleged to be defective in design or manufacturing or experience other failures, including with respect to the safety of hydrogen or the efficiency and performance of hydrogen fuel cells, we may be compelled to undertake product recalls or take other actions, which could adversely affect our business, prospects, operating results, reputation and financial condition. Insufficient warranty reserves to cover future warranty claims could adversely affect our business, prospects, financial condition and operating results. In addition, we may be held responsible for damages beyond the scope of our insurance coverage.
Risks Related to Litigation and Regulation
We operate in a highly regulated industry. The failure to comply with laws or regulations could subject us to significant regulatory risk, and changing laws and regulations and changing enforcement policies and priorities could adversely affect our business, prospects, financial condition and operating results.
The motor vehicle manufacturing and hydrogen industries in general are highly regulated in most countries, and if we fail to comply with national, federal, state and local laws, rules, regulations and guidance, including those related to hydrogen-powered vehicle safety and direct sales to customers as well as hydrogen production, storage and transportation, our business could be adversely affected. We will be subject to licensing and operational requirements that could result in substantial compliance costs, and our business would be adversely affected if our licenses are impaired. Litigation, regulatory actions and compliance issues, including in respect of antitrust and competition laws as applied to our relationships with Horizon and Hyzon Europe, could subject us to revocation of licenses, significant fines, penalties, judgments, remediation costs, negative publicity and reputational harm, and requirements resulting in increased expenses. Our operations and products are also subject to numerous stringent environmental laws and regulations, including those governing the generation, use, handling, storage, disposal, and transport of hazardous substances and wastes. These laws may require us or others in our value chain to obtain permits and comply with various restrictions and obligations that may have material effects on our operations. If key permits and approvals cannot be obtained on acceptable terms, or if other operational requirements cannot be met in a manner satisfactory for our operations or on a timeline that meets our commercial obligations, it may adversely impact our business. In addition, laws, regulations and rules relating to privacy, information security, and data protection could increase our costs, affect or limit how we collect and use personal information, and adversely affect our business opportunities. The ongoing costs of complying with such laws, regulations and rules could be significant.
Additionally, all of these laws and regulations may be subject to change or changes in enforcement policies or priorities, including from changes that may result from changes in the political landscape and changing technologies. Future legislation and regulations, changes to existing laws and regulations, or interpretations thereof, or changes in enforcement policies or priorities, could require significant management attention and cause additional expenditures, restrictions, and delays in connection with our operations as well as other future projects.
We depend on global customers and suppliers, and adverse changes in governmental policy or trade regimes could significantly impact the competitiveness of our products.
We source components from suppliers and sells our products around the world, including sourcing hydrogen fuel cell systems from Horizon in China. There is significant uncertainty about the future relationship between the U.S. and various other countries, particularly China, with respect to trade policies, treaties, government regulations, tariffs, customs regulations, price or exchange controls, or preferences in foreign nations of domestically manufactured products. Changes in such government policy, including any changes to existing trade agreements, international trade relations between countries in which we or our suppliers or partners have business operations or our target markets, regulatory requirements, or the availability of tax and other governmental incentives, including those promoting fuel efficiency and alternate forms of energy, may have an adverse effect on us. A trade war, other governmental action related to tariffs or international trade agreements, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development or investment in the territories and countries where we sell our products, source our supplies or currently operate or may in the future operate, and any resulting negative sentiments towards the U.S. as a result of such changes, may have an adverse effect on our business, financial condition or results of operations.
We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.
We are subject to, and may become a party to, a variety of litigation, other claims, suits, regulatory actions and government investigations and inquiries. For example, between September 30, 2021 and November 15, 2021, three related putative securities class action lawsuits were filed in the U.S. District Court for the Western District of New York against the Company, certain of the Company’s current officers and directors and certain officers and directors of DCRB: (Kauffmann v. Hyzon Motors Inc., et al. (No. 21-cv-06612-CJS), Brennan v. Hyzon Motors Inc., et al. (No. 21-cv-06636-CJS), and Miller v. Hyzon Motors Inc. et al. (No. 21-cv-06695-CJS)), asserting violations of federal securities laws. The complaints generally allege that the Company and individual defendants made materially false and misleading statements relating to the nature of the Company’s customer contracts, vehicle orders, and sales and earnings projections, based on allegations in a report released on September 28, 2021, by Blue Orca Capital, an investment firm that indicated that it held a short position in our stock and which has made numerous allegations about the Company. These lawsuits have been consolidated under the caption In re Hyzon Motors Inc. Securities Litigation (Case No. 6:21-cv-06612-CJS-MWP), and on March 21, 2022, the court-appointed lead plaintiff filed a consolidated amended complaint seeking monetary damages.
Between December 16, 2021 and January 14, 2022, three related shareholder derivative lawsuits were filed in the U.S. District Court for the Western District of New York: (Lee v. Anderson et al. (No. 21-cv-06744-CJS); Révész v. Anderson et al. (No. 22-cv-06012-CJS); and Shorab v. Anderson et al. (No. 22-cv-06023-CJS)). On February 2, 2022, a similar shareholder derivative lawsuit was filed in the U.S. District Court for the District of Delaware (Yellets v. Gu et al. (No. 22-cv-00156), and on February 3, 2022, another similar shareholder derivative lawsuit was filed in the Supreme Court of the State of New York, Kings County (Ruddiman v. Anderson et al. (No. 503402/2022)). These lawsuits name as defendants the Company’s current directors and certain former directors of DCRB, along with the Company as a nominal defendant, and generally allege that the individual defendants breached their fiduciary duties by making or failing to prevent the misrepresentations alleged in the consolidated securities class action, and assert claims for violations of federal securities laws, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. These lawsuits generally seek equitable relief and monetary damages.
On March 18, 2022, a putative class action complaint, Malork v. Anderson et al. (C.A. No. 2022-0260-KSJM), was filed in the Delaware Court of Chancery against certain officers and directors of DCRB, DCRB’s sponsor, and certain investors in DCRB’s sponsor, alleging that the director defendants and controlling shareholders of DCRB’s sponsor breached their fiduciary duties in connection with the merger between DCRB and Legacy Hyzon. The complaint seeks equitable relief and monetary damages.
Between January 26, 2022 and March 28, 2022, Hyzon received four demands for books and records pursuant to Section 220 of the Delaware General Corporation Law from stockholders who state they are investigating whether to file similar derivative or stockholder lawsuits, among other purposes. The proceedings are subject to uncertainties inherent in the litigation process. We cannot predict the outcome of these matters or estimate the possible loss or range of possible loss, if any.
On January 12, 2022, the Company announced that it had received a subpoena from the SEC for production of documents and information, including documents and information related to the allegations made in the September 28, 2021 report issued by Blue Orca Capital. The Company is cooperating with the SEC.
The outcome of litigation and other legal proceedings, including the other claims described under Legal Proceedings in Note 14, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K and incorporated herein by reference, are inherently uncertain, and adverse judgments or settlements in some or all of these legal disputes may result in materially adverse monetary damages or injunctive relief against us. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future.
We are subject to data privacy and security laws, regulations, standards, policies, and contractual obligations that may extend to our vehicles, and any actual or perceived failure to comply with such obligations could harm our reputation and brand, subject us to significant fines and liabilities, or otherwise affect our business.
In the course of our operations, we may collect, use, store, disclose, transfer and otherwise process personal information from our customers employees and third parties with whom we conduct business, including names, accounts, user IDs and passwords, and payment or transaction related information. Additionally, we intend to use our vehicles’ electronic systems to log information about each vehicle’s use to aid us in vehicle diagnostics, repair and maintenance. Our customers may object to our use of this data, which may increase our vehicle maintenance costs and harm our business prospects. Furthermore, possession and use of our customers’ information in conducting our business may subject us to legislative and regulatory burdens in the U.S., the European Union, Australia, China, and other countries that could require notification of data breaches, restrict our use of such information and hinder our ability to acquire new customers or market to existing customers.Non-compliance
or a major breach of our network security and systems could have serious negative consequences for our business and future prospects, including both civil and criminal liability, possible fines, penalties and damages, reduced customer demand for our vehicles, and harm to our reputation and brand. We are subject to or affected by a number of federal, state, local and international laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security and govern our collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal information including that of our employees, customers and other third parties with whom we conduct business. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material and adverse impact on our business, financial condition and results of operations. The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We may not be able to amendmonitor and react to all developments in a timely manner. The European Union adopted the provisionsGeneral Data Protection Regulation, or GDPR, which became effective in May 2018, and California adopted the California Consumer Privacy Act of 2018, or CCPA, which became effective in January 2020; both impose additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is collected. Compliance with existing, proposed and recently enacted laws and regulations (including implementation of the privacy and process enhancements called for under the GDPR and CCPA) can be costly, and any failure to comply with these regulatory standards could subject us to legal and reputational risks.
The CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California consumers. The CCPA includes a framework with potentially severe statutory damages for violations and a private right of action for certain data breaches. The CCPA requires covered businesses to provide California consumers with new privacy-related disclosures and new ways toopt-out
of certain uses and disclosures of personal information. As we expand our
amended and restated certificate of incorporation which govern our pre-business combination behavior more easily than some other blank check companies, and thisoperations, the CCPA may increase our
ability to complete a business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amendedcompliance costs and
restated certificate of incorporation.
Our Sponsor, officers and directors have agreed, pursuant to a written agreement with us, that theypotential liability. Effective January 1, 2023, the California Privacy Rights Act, or CPRA, will not propose any amendment to our amended and restated certificate of incorporation (i) that wouldsignificantly modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 24 months from the closing of our Public Offering or (ii)CCPA, including by expanding California consumers’ rights with respect to anycertain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.
Other states have begun to propose similar laws. Compliance with applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms to comply with such laws and regulations, which could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business. Certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation and application. Failure to comply with applicable laws or regulations or to secure personal information could result in investigations, enforcement actions and other provision relatingproceedings against us, which could result in substantial fines, damages, and other liability as well as damage to our reputation and credibility, which could have a negative impact on revenues and profits.
China enacted the rightsPersonal Information Protection Law (or “PIPL”) in August 2021 that went into effect November 2021. PIPL imposes strict restrictions on the data collection and transfer of holderspersonal information both within and without China. Similar in many respects to GDPR in the European Union, PIPL affords data subjects notice and the right to consent (or not) the collection and use of personal information. While Hyzon has operations and employees in China, PIPL restricts the sharing of Hyzon’s China employees with our U.S-based human resources organization unless the information is anonymized or we receive employee consent. Such restrictions may result in increased costs of operating our business.
We post public privacy policies and other documentation regarding our collection, processing, use and disclosure of personal information. Although we endeavor to comply with our published policies and other documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, contractors, service providers, vendors or other third parties fail to comply with our published policies and documentation. Such failures could carry similar consequences or subject us to potential local, state, and federal action if they are found to be deceptive, unfair or misrepresentative of our Class A common stock or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment 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 us to pay our franchise and income taxes, divided by the number of then outstanding public shares. These agreements are contained in a letter agreementactual practices. Claims that we have entered intoviolated individuals’ privacy rights or failed to comply with our Sponsor, officers and directors. Our stockholdersdata protection laws or applicable privacy notices could, even if we are not found liable, be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.
Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and other third parties
of security breaches involving certain types of data. Such laws may be inconsistent or may change or additional laws may be adopted. In addition, our agreements with certain customers may require us to
or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our Sponsor, officers or directors for any breach of these agreements. As a result,notify them in the event of a
breach,security breach. Such mandatory disclosures are costly, could lead to negative publicity, penalties or fines, litigation and our
stockholders would needcustomers losing confidence in the effectiveness of our security measures and require us to
pursue a stockholder derivative action, subjectexpend significant capital and other resources to
applicable law.We may be unablerespond to obtain additional financingor alleviate problems caused by the actual or perceived security breach. Any of the foregoing could materially adversely affect our business, prospects, operating results, and financial condition.
Risk Factors Relating to complete our initial business combination or to fund the operations and growthOur Securities
Sales of a targetsubstantial number of our securities in the public market, including those issued upon exercise of warrants, could cause the market price of our Class A Common Stock to drop significantly, even if our business whichis doing well.
Sales of a substantial number of shares of Class A Common Stock in the public market could compel usoccur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to restructure or abandon a particular business combination. If wesell shares, could reduce the market price of our Class A Common Stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to complete our initial business combination, our public stockholderspredict the effect that sales may receive only approximately $10.00 per sharehave on the liquidationprevailing market price of the Class A Common Stock and the warrants.
As of December 31, 2021, we had outstanding 247,758,412 shares of our
Trust AccountClass A Common Stock and
our Warrants will expire worthless.If the net proceedswarrants to purchase 19,300,742 shares of our Public OfferingClass A Common Stock. In addition, an aggregate of 44,056,301- shares of Class A Common Stock are subject to outstanding awards or available for future issuance under Hyzon’s 2021 Equity Incentive Plan.
On February 8, 2021, certain stockholders of Legacy Hyzon, collectively holding 92,775,000 shares of Legacy Hyzon Common Stock or securities convertible into shares of Legacy Hyzon Common Stock, entered into an agreement with DCRB and Legacy Hyzon (the“Lock-Up
Agreement”) pursuant to which they agreed, following the Closing Date, not to transfer any shares of Class A Common Stock issued or issuable upon the exercise of any warrant or other right to acquire shares of such Class A Common Stock beneficially owned or otherwise held by such stockholders for six months following the Closing Date. Thislock-up
period expired in January 2022, and the
saleshares held by the parties to theLock-Up
Agreement are no longer under these contractual restrictions. In connection with the Closing, that certain Registration Rights Agreement dated October 19, 2020 (the “IPO Registration Rights Agreement”) was amended and restated and the Company entered into the amended and restated IPO Registration Rights Agreement (the “A&R Registration Rights Agreement”) with certain persons and entities holding securities of
DCRB prior to the
Private Placement Warrants prove to be insufficient to complete our initial business combination, either because of the size of our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemptionClosing and certain persons and entities receiving Class A Common Stock in connection with
the Business Combination (the “Reg Rights Holders”). Pursuant to the A&R Registration Rights Agreement, we agreed that, within 15 business days after the Closing, we will file a registration statement with the SEC (the “Initial Registration Statement”) (at our
initial business combination orsole cost and expense), and we will use our reasonable best efforts to have the
terms of negotiated transactionsInitial Registration Statement become effective as soon as reasonably practicable after the filing thereof. A registration statement on FormS-1
(the “2021 Registration Statement”) satisfying these requirements was filed with the SEC on July 30, 2021 and became effective on August 10, 2021. In certain circumstances, the Reg Rights Holders can demand up to
purchase sharesthree underwritten offerings in
connection with our initial business combination,any12-month
period and will be entitled to customary piggyback registration rights. Further, under the Subscription Agreements (as defined below), we
may bewere required to
seek additional financing orfile a registration statement within 15 calendar days after the Closing to
abandonregister the
proposed business combination. We cannot assureresale of the PIPE Shares, which requirement was satisfied by the 2021 Registration Statement. For more information about the A&R Registration Rights Agreement, see the section entitled “Certain Relationship and Related Party Transactions –
Our stock price is volatile, and you that such financing willmay not be available on acceptable terms, if at all. To the extent that additional financing provesable to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share plus any pro rata interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes on the liquidationsell shares of our Trust AccountClass A Common Stock or warrants at or above the price you paid.
The trading prices of our Class A Common Stock and
public warrants are volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our
Warrants will expire worthless. In addition, even if we do not need additional financing to complete our business combination, we may require such financing to fund the operations or growthcontrol. Any of the
target business. The failure to secure additional financingfactors listed below could have a material adverse effect on
your investment in our securities and our securities may trade at prices significantly below the
continued development or growth ofprice you paid for them. In such circumstances, the
target business. Nonetrading price of our
officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination.Our initial stockholders will controlsecurities may not recover and may experience a further decline.
Factors affecting the electiontrading price of our boardsecurities may include, but are not limited to:
actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of directors until consummationcompanies perceived to be similar to us;
changes in the market’s expectations about our operating results;
success of competitors;
our initial business combination and will hold a substantial interest in us. As a result, they will elect alloperating results failing to meet the expectation of our directors prior to our initial business combination and may exert a substantial influence on actions requiring a stockholder vote, potentiallysecurities analysts or investors in a mannerparticular period;
changes in financial estimates and recommendations by securities analysts concerning us or the market in general;
operating and stock price performance of other companies that
you do not support.Our initial stockholders own shares representing 20.0%investors deem comparable to us;
our ability to market new and enhanced products and technologies on a timely basis;
changes in laws and regulations affecting our business;
our ability to meet compliance requirements;
commencement of, or involvement in, litigation;
changes in our issued and outstanding sharescapital structure, such as future issuances of common stock. In addition,securities or the Founder Shares, allincurrence of which are held by our initial stockholders, will entitle additional debt;
the
holders to elect all of our directors prior to our initial business combination. Holders of our public shares will have no right to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended by a majority of at least 90% of our common stock voting at a stockholder meeting. As a result, you will not have any influence over the election of directors prior to our initial business combination. Accordingly, our initial stockholders may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. In addition, our board of directors, whose members were elected by our initial stockholders, is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our business combination, in which case all of the current directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion of our business combination.
We may amend the terms of the Warrants in a manner that may be adverse to holders of Warrants with the approval by the holders of at least 50% of the then-outstanding Warrants (or, if applicable, 65% of the then-outstanding Warrants and 65% of the then-outstanding Private Placement Warrants, voting as separate classes). As a result, the exercise price of your Warrants could be increased, the Warrant could be converted into cash or stock (at a ratio different than initially provided), the exercise period could be shortened and the numbervolume of shares of our Class A common stock purchasable upon exercise of a Warrant could be decreased, all without your approval.
The Warrants were issuedCommon Stock available for public sale;
any major change in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguityour Board or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding Warrants to make any change that adversely affects the interests of the registered holders of the Warrants. If an amendment adversely affects the Private Placement Warrantsmanagement;
investors engaged in a different manner than the Warrants or vice versa, then approval of holders of at least 65% of the then-outstanding Warrants and 65% of the then-outstanding Private Placement Warrants, voting as separate classes, will be required. Accordingly, we may amend the terms of the Warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding Warrants (or, if applicable, 65% of the then-outstanding Warrants and 65% of the then-outstanding Private Placement Warrants, voting as separate classes) approve of such amendment. Although our ability to amend the terms of the Warrants with the consent of at least 50% of the then-outstanding Warrants (or, if applicable, 65% of the then-outstanding Warrants and 65% of the then-outstanding Private Placement Warrants, voting as separate classes) is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares ofshort selling our Class A common stock purchasable upon exerciseCommon Stock;
sales of
a warrant.We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force you (i) to exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants. None of the Private Placement Warrants will be redeemable by us for cash so long as they are held by our Sponsor or its permitted transferees.
In addition, we may redeem your Warrants after they become exercisable for a number of sharessubstantial amounts of Class A common stock determined based onCommon Stock by our directors, executive officers or significant stockholders or the redemption dateperception that such sales could occur; and the fair
general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market
value of our Class A common stock. Any such redemptionand industry factors may
have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the Warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had your Warrants remained outstanding.
Our ability to require holders of our Warrants to exercise such Warrants on a cashless basis after we call the Warrants for redemption or if there is no effective registration statement covering the Class A common stock issuable upon exercise of these Warrants will cause holders to receive fewer shares of Class A common stock upon their exercise of the Warrants than they would have received had they been able to pay the exercise price of their Warrants in cash.
If our shares of Class A common stock are at the time of any exercise of a Warrant not listed on a national securities exchange such that our shares of Class A common stock satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Warrants who exercise their Warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. “Cashless exercise” means the warrantholder pays the exercise price by giving up some of the shares for which the Warrant is being exercised, with those shares valued at the then-current market price. Accordingly, each holder would pay the exercise price by surrendering the exercised Warrants in exchange for the issuance of 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 exercised 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 the Warrants.
In addition, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants is not effective within a specified period following the consummation of our initial business combination, warrantholders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis. For purposes of calculating the number of shares issuable upon such cashless exercise, the “fair market value” shall mean the volume weighted average price of the Class A common stock for the 10 trading day period ending on the trading day prior to the date on which notice of exercise is received by the warrant agent.
If we choose to require holders to exercise their Warrants on a cashless basis, which we may do at our sole discretion, or if holders elect to do so when there is no effective registration statement, the number of shares of Class A common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised his or her warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s investment in the Company because the warrantholder will hold a smaller number of shares of Class A common stock upon a cashless exercise of the warrants they hold.
Our warrants and Founder Shares may have an adverse effect onmaterially harm the market price of our Classsecurities irrespective of our operating performance. The stock market in general and NASDAQ have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A commonloss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock and make it more difficult to effectuateprice regardless of our business, combination.
prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
We issued Warrantswill incur increased costs as a result of operating as a public company, and our management will devote substantial time to purchase 11,286,251 shares of Class A common stocknew compliance initiatives.
As a public company, we have significantly higher legal, accounting and other expenses than we did as
parta private company. Furthermore, as a public company, we are subject to the reporting requirements of the
Units. We also issued 6,514,500 Private Placement Warrants, each exercisableExchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to
purchase one share of Class A common stock at $11.50 per share. Our initial stockholders currently own an aggregate of 5,643,125 Founder Shares. The Founder Shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizationsbe adopted, by the SEC and the
like. In addition, if our Sponsor makes any working capital loans, it may convert those loans into upNASDAQ. Our management and other personnel will need to
an additional 1,500,000 Private Placement Warrants, at the price of $1.00 per warrant at the option of the lender. To the extent we issue shares of Class A common stock to effectuate a business combination, the potential for the issuance ofdevote a substantial
numberamount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We cannot predict or estimate the amount or timing of additional
shares of Class A common stock upon exercisecosts we may incur to respond to these requirements. The impact of these
warrants and conversion rightsrequirements could
make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of issued and outstanding shares of our Class A common stock and reduce the value of the shares of Class A common stock issued to complete the business combination. Therefore, our warrants and Founder Shares may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business.
Because each Unit contains one-half of one Warrant and only a whole Warrant may be exercised, the Units may be worth less than units of other blank check companies.
Each Unit contains one-half of one Warrant. Pursuant to the warrant agreement, no fractional Warrants will be issued upon separation of the Units, and only whole Warrants will trade. This is different from other blank check companies similar to ours whose units include one share of common stock and one warrant to purchase one whole share. We have established the components of the Units in this way in order to reduce the dilutive effect of the Warrants upon completion of a business combination since the Warrants will be exercisable in the aggregate for one-third of the number of shares compared to units that each contain a whole warrant to purchase one share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this Unit structure may cause our Units to be worth less than if they included a warrant to purchase one whole share.
A provision of our warrant agreement mayalso make it more difficult for us to consummateattract and retain qualified individuals to serve on our Board, our Board committees or as executive officers.
Because we have no current plans to pay cash dividends on our Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A Common Stock for a price greater than that which you paid for it.
We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we incur. As a result, you may not receive any return on an
initial business combination.Unlike most blank check companies, if we issue additional sharesinvestment in our Class A Common Stock unless you sell our Class A Common Stock for a price greater than that which you paid for it. See the section entitled “
Market Price, Ticker Symbol and Dividend Information
We are a “controlled company” under NASDAQ rules.
Because Hymas and its affiliates control a majority of
common stock or equity-linked securities for capital raising purposes in connection with the
closingvoting power of our
initial business combination atoutstanding capital stock, we are a
newly issued price“controlled company” under the NASDAQ rules. As a controlled company, we are exempt from certain NASDAQ corporate governance requirements, including those that would otherwise require the Board to have a majority of
less than $9.20 per shareindependent directors and require us to establish a compensation committee comprised entirely of
common stock, thenindependent directors, or otherwise ensure that the
exercise pricecompensation of its executive officers and nominees for directors are determined or recommended to the Board by the independent members of the
warrantsBoard. While we do not expect to rely on any of these exemptions, and while our compensation committee is currently comprised solely of independent directors, we are entitled to do so for as long as we are considered a “controlled company” and to the extent that we rely on one or more of these exemptions, holders of our Class A Common Stock will
be adjusted to equal 115% of the newly issued price. This may make it more difficult for us to consummate an initial business combination with a target business.Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include target historical and/or pro forma financial statement disclosure. We will includenot have the same financial statement disclosure in connection with our tender offer documents, whether or not theyprotections afforded to stockholders of companies that are required under the tender offer rules. These financial statements may be requiredsubject to be prepared in accordance with, or be reconciled to, GAAP or international financial reporting standards as issued by the International Accounting Standards Board (“IFRS”), depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standardsall of the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
We are an emerging growth company and a smaller reporting company within the meaning of the SecuritiesNASDAQ’s corporate governance requirements.
The JOBS Act
and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.We are anpermits “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we maycompanies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including
but not limited to, not being required to comply with(a) the exemption from the auditor attestation requirements
ofwith respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act,
(b) the exemptions fromandparachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.statements. As a result, our stockholders may not have access to certain information they
may deem important.
We
could bewill remain an emerging growth company until
the earliest of (a) the last day of the fiscal year
(i) following
October 22, 2025, the fifth anniversary of the
completioninitial public offering of
our Public Offering, although circumstances could cause usDCRB, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to
lose that status earlier, including ifSEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our Class A
common stockCommon Stock that is held by
non-affiliates
exceeds $700 million as of
any June 30 beforethe last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion innon-convertible
debt during the prior three-year period. We could be subject to the additional requirements associated with being deemed a large accelerated filer as early as of the end of the 2022 fiscal year.In addition, Section 107 of the JOBS Act provides that
time, in which case we would no longer be an emerging growth company
ascan take advantage of the
following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companiesexemption from being required to complycomplying with new or revised financialaccounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to 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.companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies, but any such
an election to opt out is irrevocable. We have 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, we, 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
a comparison of our
consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in
accountantaccounting standards used.
We are alsocannot predict if investors will find our Class A Common Stock less attractive because we will rely on these exemptions. If some investors find our Class A Common Stock less attractive as a “smaller reporting company” as defined in Regulation S-K under the Securities Act and may take advantage of certain of the scaled disclosures available to smaller reporting companies. Weresult, there may be a smallerless active trading market for our Class A Common Stock and our stock price may be more volatile.
Our management has limited experience in operating a public company.
Our executive officers have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting
company even after we are no longer an emerging growth company.Compliance obligations under federal securities laws. Their limited experience in dealing with the Sarbanes-Oxley Actincreasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may make itbe devoted to these activities which will result in less time being devoted to the management and growth of the post-combination company. We may not have adequate personnel with the appropriate level of knowledge, experience and training, as well as the technology, systems and tools available to them to perform their functions, in the accounting policies, practices or internal control over financial reporting required of public companies in the U.S. We are in the process of upgrading our finance and accounting systems to an enterprise system more difficultsuitable for a public company, and a delay could impact our ability or prevent us to effectuatefrom timely reporting our initial business combination, require substantial financialoperating results, timely filing required reports with the SEC and management resources, and increase the time and costs of completing our initial business combination.
complying with Section 404 of the Sarbanes-Oxley Act requiresAct. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2021. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to complyexpand our employee base and hire additional employees to support our operations as a public company which will increase our operating costs in future periods.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the independentapproval by the holders of at least 50% of the then-outstanding public warrants (or, if applicable, 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes). As a result, the exercise price of the warrants could be increased, the exercise period could be shortened and the number of shares of our Class A Common Stock purchasable upon exercise of a warrant could be decreased, all without a holder’s approval.
Our warrants were issued in registered form under a warrant agreement (the “Warrant Agreement”), dated October 19, 2020, by and between Continental Stock Transfer & Trust Company, as warrant agent, and DCRB. The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding public accounting firm attestation requirementwarrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants (or, if applicable, 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes) approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then-outstanding public warrants (or, if applicable, 65% of the then-outstanding public warrants and 65% of the then-outstanding private placement warrants, voting as separate classes) is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our Class A Common Stock purchasable upon exercise of a warrant.
We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30trading-day
period ending on
the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our
internal control over financial reporting. Further,redemption right even if we are unable to register or qualify the underlying securities for
assale under all applicable state securities laws. Redemption of the outstanding warrants could force holders (a) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for holders to do so, (b) to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (c) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. None of the private placement warrants will be redeemable by us so long as
we remainthey are held by the Sponsor, those persons who served as independent directors of DCRB, WRG DCRB Investors, LLC (“WRG”), an
emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirementaffiliate of Erik Anderson, who was DCRB’s Chief Executive Officer and serves as a director of Hyzon or any of their permitted transferees. NASDAQ may delist our securities from trading on
our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome for us as compared to other public companies because a target business with which we seek to complete our business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its
internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us,exchange, which could limit the price investors mightinvestors’ ability to make transactions in our securities and subject us to additional trading restrictions.
We cannot assure you that our securities will continue to be
willinglisted on NASDAQ. If NASDAQ delists our securities from trading on its exchange and we are not able to
pay in the futurelist our securities on another national securities exchange, we expect our securities could be quoted on anover-the-counter
market. If this were to occur, we could face significant material adverse consequences, including: a limited availability of market quotations for our securities;
reduced liquidity for our securities;
a determination that our Class A
common stockCommon Stock is a “penny stock” which will require brokers trading in our Class A Common Stock to adhere to more stringent rules and
could entrench management.Our amended and restated certificatepossibly result in a reduced level of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to betrading activity in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred stock, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailingsecondary trading market prices for our securities.
Wesecurities;
a limited amount of news and analyst coverage; and
a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are
also subjectreferred to
anti-takeover provisions under Delaware law, which could delayas “covered securities.” Because our Class A Common Stock and public warrants are listed on NASDAQ, our Class A Common Stock and public warrants qualify as covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or
preventbar the sale of covered securities in a
change of control. Together, these provisions may make the removal of management more difficultparticular case. Further, if we were no longer listed on NASDAQ, our securities would not be covered securities and
may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.If we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a varietyregulation in each state in which we offer our securities.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Class A Common Stock adversely, the price and trading volume of additional risksour Class A Common Stock could decline.
The trading market for our Class A Common Stock is influenced by the research and reports that
industry or securities analysts may
negatively impactpublish about us, our
operations.If we effectbusiness, our initial business combination with a company with operationsmarket or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, includingour competitors. If any of the following:
| ● | higher costs and difficulties inherent in executing cross-border transactions, managing cross-border business operations and complying with different commercial and legal requirements of overseas markets; |
| ● | rules and regulationsanalysts who cover us change their recommendation regarding currency redemption; |
| | |
| ● | complex corporate withholding taxes on individuals; |
| | |
| ● | laws governing the manner in which future business combinations may be effected; |
| | |
| ● | tariffs and trade barriers; |
| | |
| ● | regulations related to customs and import/export matters; |
| | |
| ● | longer payment cycles; |
| | |
| ● | tax issues, such as tax law changes and variations in tax laws as compared to the United States; |
| | |
| ● | currency fluctuations and exchange controls; |
| | |
| ● | rates of inflation; |
| | |
| ● | cultural and language differences; |
| | |
| ● | employment regulations; |
| | |
| ● | crime, strikes, riots, civil disturbances, terrorist attacks and wars; and |
| | |
| ● | deterioration of political relations with the United States. |
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which maystock adversely, impactor provide more favorable relative recommendations about our results of operations and financial condition.
Our initial business combination and our structure thereafter may not be tax-efficient to our stockholders and warrantholders. As a resultcompetitors, the price of our business combination, our tax obligations may be more complex, burdensome and uncertain.
Although we will attemptClass A Common Stock would likely decline. If any analyst who covers us were to structure our initial business combination in a tax-efficient manner, tax structuring considerations are complex, the relevant facts and law are uncertain and may change, and we may prioritize commercial and other considerations over tax considerations. For example, in connection with our initial business combination and subjectcease their coverage or fail to any requisite stockholder approval, we may structure our business combination in a manner that requires stockholders and/or warrantholders to recognize gain or income for tax purposes, effect a business combination with a target company in another jurisdiction, or reincorporate in a different jurisdiction (including, but not limited to, the jurisdiction in which the target company or business is located). We do not intend to make any cash distributions to stockholders or warrantholders to pay taxes in connection with our business combination or thereafter. Accordingly, a stockholder or a warrantholder may need to satisfy any liability resulting from our initial business combination with cash from its own funds or by selling all or a portion of the shares received. In addition, stockholders and warrantholders may also be subject to additional income, withholding or other taxes with respect to their ownership ofregularly publish reports on us, after our initial business combination.
In addition, we may effect a business combination with a target company that has business operations outside of the United States, and possibly, business operations in multiple jurisdictions. If we effect such a business combination, we could be subjectlose visibility in the financial markets, which could cause our stock price or trading volume to significant income, withholding and other tax obligations in a number of jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. Due to the complexity of tax obligations and filings in other jurisdictions, we may have a heightened risk related to audits or examinations by U.S. federal, state, local and non-U.S. taxing authorities. This additional complexity and risk could have an adverse effect on our after-tax profitability and financial condition.
decline.
IV. General Risk Factors
Changes in laws or regulations, or a failure to comply with any laws
andor regulations, may adversely affect our business,
including our ability to negotiate and complete our initial business combination,investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consumingtime-consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
Our tax obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect ourafter-tax
profitability and financial results. In the event that Hyzon’s operating business expands domestically or internationally, our effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under GAAP, changes in deferred tax assets and liabilities, or changes in tax laws. Factors that could materially affect our future effective tax rates include but are not limited to: (a) changes in tax laws or the regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and(d) pre-tax
operating results of our business.
Additionally, we may be subject to significant income, withholding, and other tax obligations in the U.S. and other countries, and may become subject to taxation in numerous additional U.S. state and local andnon-U.S.
jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. Our after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including
(a) the availability of tax deductions, credits, exemptions, refunds, income tax treaties and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and (i) the ability to structure business operations in an efficient and competitive manner. Outcomes from audits or examinations by taxing authorities could have an adverse effect on our after-tax profitability and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused their attention to intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If we do not prevail in any such disagreements, our profitability may be affected. Our after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect.
We may issue additional Class A Common Stock or preferred stock under an employee incentive plan. Any such issuance would dilute the interest of our stockholders and likely present other risks.
The Charter authorizes the issuance of 410,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a) 400,000,000 shares of Class A Common Stock and (b) 10,000,000 shares of preferred stock. In addition, an aggregate of approximately 44.6 million shares of Class A Common Stock have been reserved for issuance under the 2021 Plan, subject to increase as described under Note 15, Stock-based Compensation Plans, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K and incorporated herein by reference.
We may issue a substantial number of additional shares of Class A Common Stock or preferred stock under an employee incentive plan. The issuance of additional shares of Class A Common Stock or preferred stock:
may significantly dilute the equity interests of our investors;
may subordinate the rights of holders of Class A Common Stock if preferred stock is issued with rights senior to those afforded our common stock;
could cause a change in control if a substantial number of shares of our Class A Common Stock are issued, which may affect, among other things, our ability to
negotiateuse our net operating loss carry forwards, if any, and
completecould result in the resignation or removal of our
initial business combination,present officers and
results of operations.directors; and
may adversely affect prevailing market prices for our units, Class A Common Stock and/or warrants.
Provisions in our amendedCharter may prevent or delay an acquisition of us, which could decrease the trading price of our Class A Common Stock, or otherwise may make it more difficult for certain provisions of the charter to be amended.
The Charter contains provisions that are intended to deter coercive takeover practices and restated certificateinadequate takeover bids and to encourage prospective acquirers to negotiate with the Board rather than to attempt a hostile takeover. These provisions include:
our Board is divided into three classes with staggered terms;
the right of incorporationour Board to issue preferred stock without stockholder approval;
restrictions on the right of stockholders to remove directors without cause; and
restrictions on the right of stockholders to call special meetings of stockholders.
These provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Board determines is not in our and our stockholders’ best interests.
Our Charter designates state courts within the State of Delaware
lawas the exclusive forum for certain types of actions and proceedings that may
have the effect of discouraging lawsuits againstbe initiated by our stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
and officers.Our amended and restated certificateofficers, employees or agents.
The Charter provides that, unless we consent in writing to the selection of incorporation requires,an alternative forum, to the fullest extent permitted by law, thata state court located within the State of Delaware (or, if no court located within the State of Delaware has jurisdiction, the federal district court for the District including Delaware shall be the sole and exclusive forum for any internal or intra-corporate claim or any action asserting a claim governed by the internal affairs doctrine as defined by the laws of the State of Delaware, including, but not limited to (i) any derivative actionsaction or proceeding brought inon behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our name, actions against directors, officers andor other employees for breachor stockholders to us or our stockholders; or (iii) any action asserting a claim arising pursuant to any provision of fiduciary duty and other similar actions (other than actions arising under the Securities ActGeneral Corporation Law of the State of Delaware (the “DGCL”) or the Exchange Act)Charter or the Bylaws (in each case, as they may be brought only inamended from time to time), or as to which the DGCL confers jurisdiction on the Court of Chancery inof the State of Delaware.
In addition, the Charter provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district court for the District of Delaware (or, if such court does not have subject matter jurisdiction thereof,over such action, any other federal district court located inof the U.S.) shall be the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act or any rule or regulation promulgated thereunder (in each case, as amended), provided, however, that if the foregoing provisions are, or the application of such provisions to any person or entity or any circumstance is, illegal, invalid or unenforceable, the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act or any rule or regulation promulgated thereunder (in each case, as amended) shall be the Court of Chancery of the State of Delaware with subject matter jurisdiction) and, if brought outside of Delaware,Delaware.
The Charter provides that the stockholder bringing such suitexclusive forum provision will be deemedapplicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any rule or regulation promulgated thereunder (in each case, as amended), or any other claim over which the federal courts have consented to serviceexclusive jurisdiction. This choice of process on such stockholder’s counsel. Thisforum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us andor any of our directors, officers, or other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in the Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect our business and future profitability.
We are a U.S. corporation and thus subject to U.S. corporate income tax on our worldwide operations. New U.S. laws and policy relating to taxes may have
thean adverse effect
of discouraging lawsuits against our directors and officers.Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business, and leadfuture profitability.
For example, President Biden has set forth several tax proposals that would, if enacted, make significant changes to U.S. tax laws. Such proposals include an increase in the U.S. income tax rate applicable to corporations (such as Hyzon) from 21% to 28% under the American Jobs Plan, raising the tax on global intangible low taxed income (“GILTI”) from 10.5% to 21%, and imposing a 15% minimum tax on global pre-tax book net income for firms with over $2 billion in net income. Congress may consider, and could include, these and other proposals in connection with tax reform to be undertaken by the Biden administration. It is unclear whether these or other changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of this proposal and other similar changes in U.S. federal income tax laws could adversely affect our business, cash flows and future profitability.
Further, new income, sales, use or other tax laws, statutes, rules, regulations or ordinances, in the U.S. or in other jurisdictions, could be enacted at any time, which could adversely affect our business, prospects, financial loss.condition, future profitability and operating results. In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us and may have an adverse effect on our business, cash flows and future profitability.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our executive offices are located at 2744 Sand Hill Road, Menlo Park, CA 94025. The cost for our use of this space is included
Manufacturing and Assembly
Hyzon acquired a 78,000 sq. foot building near Rochester, New York in 2020 to house vehicle prototyping and assembly vehiclesub-systems.
Hyzon currently leases a manufacturing facility in Bolingbrook, Illinois where it intends to produce MEA, fuel cell stacks, fuel cell systems and other electrified powertrain components. Hyzon also has a 5,000 sq. meter facility in Winschoten, in the
$10,000 per month fee we paygreater Groningen area in the Netherlands, where it currently assemblesHyzon-branded
commercial vehicles. Hyzon is leasing a facility near theHyzon-owned
Rochester facility for fuel cell testing. This fuel cell test capability is presently being relocated to
an affiliatethe Hyzon owned facility for activities to be consolidated. Hyzon leased 2,480 sq. meter mixed-use space in Melbourne, Australia in January 2022, that includes a workshop for the assembly and storage of
our Sponsor for office space, utilities, secretarial supportFCEVs and
administrative services. We consider our current office space adequate for our current operations.equipment. Hyzon expects R&D activities to primarily take place in its Bolingbrook, Illinois facility. The Bolingbrook facility is expected to conduct fuel cell stack and system development, and to carry out advanced R&D on fuel cell material, solid-state batteries, advancede-drive
systems, autonomous driving technologies and green hydrogen production technologies. Activities at the Rochester facility are focused on vehicle engineering/prototyping and validation, along with subsystem assembly. Hyzon expects to focus on vehicle/powertrain and fuel cell system engineering at the Troy, Michigan facility. In addition, Hyzon may choose to establish various innovation centers around the world based on business needs and the availability of local expertise. Item 3. Legal
Proceedings.There Proceedings
The information set forth under Note 14, Commitments and Contingencies to our audited consolidated financial statements of this Annual Report onForm 10-K
is
no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management teamincorporated by reference in
their capacity as such.answer to this item. Such information is limited to certain recent developments. Item 4. Mine Safety Disclosures.
Not
applicable.Applicable.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.Securities
Our Units began tradingClass A common stock is currently listed on the NASDAQ Global Select Market under the ticker symbol “DCRBU” on October 20, 2020. Commencing on“HYZN.”
As of December
14, 2020, holders of the Units could elect to separately trade the31, 2021, 247,758,412 shares of Class A common stock
and Warrants included in the Units. The shares of Class A common stock and Warrants that are separated trade on NASDAQ under the symbols “DCRB” and “DCRBW,” respectively. Those Units not separated continue to trade on NASDAQ under the symbol “DCRBU.”Holders
At February 24, 2021, there was one holderoutstanding were held of record of our Units, one holder of record ofby approximately 40 holders, which number does not include beneficial owners holding our Class A common stock seven holders of record of ourthrough nominee names.
We have not paid any cash dividends on the Class
BA common stock
one holderto date. We may retain future earnings, if any, for future operations and expansion and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of
recordthe board of
directors and will depend on, among other things, our
Warrantsresults of operations, financial condition, cash requirements, contractual restrictions and
eight holdersother factors that the board of
recorddirectors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of
any future outstanding indebtedness we or our
Private Placement Warrants.subsidiaries incur or securities that we issue.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
An aggregate of approximately 44.6 million shares of Class A Common Stock have been reserved for issuance under the 2021 Plan.
Recent Sales of Unregistered
Securities; Use of Proceeds from Registered OfferingsUnregistered Sales
On September 12, 2017, the Sponsor purchased an aggregate of 11,500,000 Founder Shares for $25,000, or approximately $0.002 per share. In September and October 2020, our Sponsor returned to us at no cost an aggregate of 5,750,000 Founder Shares, which we cancelled. The Founder Shares will automatically convert into shares of our Class A common stock at the time of the initial business combination, or at any time prior thereto at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights. In October 2020, our Sponsor transferred an aggregate of 1,042,198 Founder Shares to our independent directors and WRG at their original purchase price. In November 2020, the Sponsor transferred an additional 22,130 Founder Shares to one of our independent directors. Securities
In December 2020,2021, we issued 31,000 warrants to Hydro Fortune Logistics (Hong Kong) Co., Limited, a subsidiary of Shanghai Qingli Hongyun Motors Co.
Issuer Purchases of Securities
The following table summarizes our
Sponsor and WRG forfeited an aggregatepurchases of
106,875 Founder Shares in connection with the underwriters’ partial exercise of their over-allotment option resulting in our initial stockholders holding an aggregate of 5,643,125 Founder Shares. The Founder Shares were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Simultaneously with the closing of our Public Offering, we consummated the sale of 6,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor, our independent directors and WRG, generating gross proceeds of $6.0 million. In addition, simultaneously with the closing of the sale of the Over-allotment Units, we consummated the sale of an additional 514,500 Private Placement Warrants in a private placement to our Sponsor and WRG, generating gross proceeds of approximately $514,500. Each Private Placement Warrant entitles the holder thereof to purchase one share of our Class A common stock at an exercise price of $11.50 per share. The sales of the Private Placement Warrants were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Use of Proceeds
On October 22, 2020, we consummated the Public Offering of 20,000,000 Units. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $200.0 million. The underwriters were granted a 45-day option from the date of the final prospectus relating to the Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at $10.00 per Unit, less underwriting discounts and commissions. On November 9, 2020, the underwriters partially exercised the over-allotment option and, on November 12, 2020, the underwriters purchased 2,572,502 of the Over-allotment Units, generating gross proceeds of $25,725,020. The over-allotment option subsequently expired.
On October 22, 2020, simultaneously with the closing of the Public Offering, we completed the private sale of 6,000,000 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant to our Sponsor, our independent directors and WRG, generating gross proceeds of $6.0 million. Simultaneously with the closing of the sale of the Over-allotment Units, we completed the private sale of an additional 514,500 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant to our Sponsor, generating gross proceeds of approximately $514,500.
Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC served as underwriters for the Public Offering. The securities soldpublic warrants in the Public Offering were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-248958) (the “Registration Statement”). The SEC declared the Registration Statement effective on October 19, 2020.
From September 7, 2017 (inception) throughthree months ended December 31, 2020, we incurred approximately $555,093 for costs and expenses related to the Public Offering. In connection with the closing2021:
| | | | | | | | | | | | | | | | |
| |
| | | | | | Total
Number of
Units
Purchased
Under
Announced
Programs
(2) | | | Approximate
Dollar Value
of Units That
May Yet be
Purchased
Under
Announced
Programs
| |
October 1, 2021 through October 31, 2021 | | | — | | | $ | — | | | | — | | | $ | — | |
November 1, 2021 through November 30, 2021 | | | 40,196 | | | $ | 2.35 | | | | 40,196 | | | $ | 4,906 | |
December 1, 2021 through December 31, 2021 | | | 216,781 | | | $ | 2.05 | | | | 216,781 | | | $ | 4,460 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (1) | Units purchased consist of public warrants repurchased in the open market. |
| (2) | On November 17, 2021, the Company’s Board of Directors authorized the purchase of up to $5.0 million of its outstanding common stock and/or public warrants. |
Item 6.
Selected Financial Data.We are a smaller reporting company as defined in Item 10(f) of Regulation S-K. As a result, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item.
[Reserved]Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.Operations
The following discussion and analysis
provide information that management believes is relevant to an assessment and understanding of
the Company’s financial condition andour consolidated results of operations
and financial condition. This discussion should be read in conjunction with the
auditedaccompanying consolidated financial statements and
notes thereto included as a part of the
notesForm10-K
to which this Management’s Discussion and Analysis of Financial Condition and Results of Operations is attached. Unless the context otherwise requires, all references in this section to “Hyzon,” “we,” “us,” and “our” are intended to mean the business and operations of Hyzon Motors Inc. and its consolidated subsidiaries following the consummation of the Business Combination and to Legacy Hyzon and its consolidated subsidiaries prior to the Business Combination.Headquartered in Rochester, New York, with operations in North America, Europe, China, and Australasia, Hyzon provides decarbonized solutions primarily for commercial vehicles market and hydrogen supply infrastructure.
Vehicles and Vehicle Platforms
Our commercial vehicle business is focused primarily on assembling and supplying hydrogen-powered FCEVs, including heavy-duty (Class 8) trucks, medium-duty (Class 6) trucks, light-duty (Class 3 and 4) trucks, and 40 and60-foot
(12 and18-meter) city and coach buses to commercial vehicle operators. On-road,
our potential customers include shipping and logistics companies and retail customers with large distribution networks, such as grocery retailers, food and beverage companies, waste management companies, and municipality and government agencies around the world.Off-road,
our potential customers include mining, material handling and port equipment manufacturers and operators. Initial strategic customer groups often employ amodel where their vehicles return to a central base or depot between operations, thereby allowing operators to have fueling independence as the necessary hydrogen can be produced locally at or proximate to the central base and dispensed at optimally-configured hydrogen refueling stations. Hyzon may expand its range of products and hydrogen solutions as the transportation sector increasingly adopts hydrogen propulsion and investments are made in hydrogen production and related
thereto which are includedinfrastructure in
“Part II, Item 8. Financial Statementsaccordance with our expectations.In addition, we perform integration for rail and Supplementary Data” of this Annual Report on Form 10-K. Certain information containedaviation customers and plan to expand our integration activities across maritime and other applications in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipatedfuture. We expect the opportunities in these forward-looking statements assectors to continue to expand with the rapid technological advances in hydrogen fuel cells and the increasing investments in hydrogen production, storage and refueling infrastructure around the world.
Our hydrogen supply infrastructure business is focused on building and fostering a
resultclean hydrogen supply ecosystem with leading partners from feedstock through hydrogen production, dispensing and financing. We collaborate with strategic partners on development, construction, operation, and ownership of
many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Part I, Item 1A. Risk Factors”hydrogen production facilities and
elsewhererefueling stations in
this Annual Report on Form 10-K.Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purposeeach major region of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Our Sponsor is Decarbonization Plus Acquisition Sponsor, LLC, a Delaware limited liability company and an affiliate of Riverstone. Although we may pursue an acquisition opportunity in any business or industry,our operations, which we intend to capitalizecomplement our
model and near-term fleet deployment opportunities. On July 12, 2021, Hyzon announced that it signed a memorandum of understanding (“MoU”) with TotalEnergies SE to expand the companies’ relationship. Under the terms of the MoU, the parties will seek to collaborate on developing hydrogen ecosystems, as well as the supply of 80 hydrogen fuel cell-powered trucks for TotalEnergies’ French customers.
On July 29, 2021, the Company entered into a Master Hub Agreement with Raven SR, LLC (“Raven SR”) whereby Raven SR granted to the Company a right of first refusal toco-invest
in up to 100 of Raven SR’s first 200 solidproduction hubs, and up to 150 of Raven SR’sproduction hubs across the U.S. on abasis. In connection with this agreement, Hyzon invested $2.5 million on July 30, 2021, to acquire a minority interest, and options to purchase additional common shares in Raven SR. We expect near-term realization of the firstproduction hub constructed by Raven SR coming online in Richmond, CA, with 5 tons per day of zero carbon intensity green hydrogen available for our near-termfleets at diesel parity, in 2022. On July 29, 2021, Hyzon announced the signing of an MoU with RenewH2, aUS-based
sustainable hydrogen production, liquefaction, distribution and dispensing company, to collaborate on the
Riverstone platformsupply and demand side of liquid hydrogen production. Under the MoU, RenewH2 plans to
identify, acquirereform biogenic methane gas to generate hydrogen. The hydrogen would then be liquefied and
operate a businessdelivered to hydrogen fueling stations, which are expected to be developed in
industries that may provide opportunities for attractive risk-adjusted returns in onecollaboration with Hyzon. Through this collaboration, the stations can be located near Hyzon customers to ensure consistent supply of
the multiple sectors that may advance the objectives of global decarbonization. This includes the energy and agriculture, industrials, transportation and commercial and residential sectors.hydrogen fuel.
The Registration Statement for our Public Offering was declared effective on October 19, 2020. On October 22, 2020, we consummated the Public Offering of 20,000,000 Units at $10.00 per Unit, generating gross proceeds of $200.0 million, and incurring transaction costs of approximately $11.7 million, consisting of $4.0 million of underwriting fees, $7.0 million of deferred underwriting fees and approximately $700,000 of other offering costs. The underwriters were granted a 45-day option from the date of the final prospectus relating to the Public Offering to purchase up to 3,000,000 additional units to cover over-allotments, if any, at $10.00 per unit, less underwriting discounts and commissions. On November 9, 2020,2021, Hyzon announced the underwriters partially exercisedsigning of an MoU with ITOCHU, the over-allotment optionleading Japanese business group. Under this
non-binding
MoU, the companies are expected to jointly develop hydrogen supply chain strategies as well as model customer projects for the deployment of Hyzon FCEVs and
on November 12, 2020, the underwriters purchased an additional 2,572,502 of the Over-allotment Units, generating gross proceeds of $25,725,020. In connection with the sale of the Over-allotment Units, we incurred an additional $514,500 of underwriting fees and $900,376 of deferred underwriting fees. The remaining over-allotment option subsequently expired.Simultaneously with the closing of the Public Offering, we consummated the sale (the “Private Placement”) of 6,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor, our independent directors and WRG, generating gross proceeds of $6.0 million. Simultaneously with the closing of the sale of the Over-allotment Units, our Sponsor and WRG purchased an additional 514,500 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of approximately $514,500.
Approximately $225.7 million ($10.00 per Unit) of the net proceeds of the Public Offering (including the Over-allotment Units) and certain of the proceeds of the Private Placement was placed in a trust account locatedfuel cell technology in the United Statesmining sector.
On November 10, 2021, Hyzon announced an agreement with
the Trustee,TC Energy to collaborate on development, construction, operation, and
invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16)ownership of
the Investment Company Act,hydrogen production hubs across North America. The hubs will be used to meet hydrogen FCEV demand by focusing oncarbon intensity hydrogen from renewable natural gas, biogas and other sustainable sources. The hubs will be located close to demand, supporting Hyzonvehicle deployments. On December 7, 2021, Hyzon announced an agreement with
a maturityWoodside Energy to collaborate on developing supply of
185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3)zero carbon intensity hydrogen and
(d)(4) of Rule 2a-7 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 our initial business combinationbuilding demand from heavy-duty and
(ii) the distribution of the Trust Account as otherwise permitted under our amended and restated certificate of incorporation.If we are unable to complete an initial business combination within 24 months from the closing of the Public Offering, or October 22, 2022, we 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 depositmedium-duty commercial vehicle customers in the Trust Account,U.S. and Australia. Under the agreement, the companies will evaluate opportunities to develop green hydrogen production hubs. Initially, the project will focus on liquid hydrogen supply projects to support Hyzon’s future liquid hydrogen onboard mobility use cases – including interest earned on the funds heldultra-long range trucks already under development, and aviation, marine and rail applications.
On January 19, 2022, Hyzon announced anon-binding
MoU with Transform Materials, a provider of renewable hydrogen through its innovative proprietary microwave reactor technology. Together, Hyzon and Transform Materials will evaluate proposals to develop facilities to producecarbon intensity hydrogen from various forms of methane, prioritizing biogas and renewable natural gas. Through Transform Material’s proprietary technology, these facilities (operating as hubs) can be built to produce hydrogen efficiently—even at small scales of1-5
tons/day—offering modular construction that allows capacity to grow as customer demand increases. Transform’s technology to be employed in
the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding public shares, which redemption will completely extinguish public stockholders’ rightsthese projects produces hydrogen as
stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.Proposed aco-product
with acetylene, providing significantly advantaged hydrogen cost structures.
Business Combination
Business Combination Agreement
On February 8, 2021,
weLegacy Hyzon, now Hyzon Motors USA Inc. (“Legacy Hyzon”), a subsidiary of Hyzon Motors Inc., entered into the Business Combination Agreement
and Plan of Reorganization (the “Business Combination”) with
DCRB and Merger Sub
and Hyzon, pursuant to which Merger Sub
will be merged with and into
Legacy Hyzon, with
Legacy Hyzon surviving the
Mergermerger as
oura wholly owned
subsidiary.subsidiary of DCRB. The
parties expecttransaction closed on July 16, 2021. Following the
Proposed Transactions to be completed in the second quarter of 2021, subject to, among other things, the approvalclose of the
Proposed Transactions by our stockholders, satisfaction ofbusiness combination, DCRB was named Hyzon Motors Inc., began trading on NASDAQ, and its common stock and public warrants trade under the
conditions stated in thesymbols “HYZN” and “HYZNW”, respectively. The Business Combination
Agreementgenerated proceeds of approximately $512.9 million in cash, net of transaction costs allocated to equity and
other customary closing conditions.
Lock-Up Agreement
In connection with the execution of the Business Combination Agreement, on February 8, 2021, certain stockholders of Hyzon, whose ownership interests collectively represent approximately 90% of the outstanding Hyzon Common Stock on a fully diluted basis, entered into the Lock-Up Agreement with us and Hyzon pursuant to which they agreed, subject to certain customary exceptions, not to effect any direct or indirect sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer, or entry into any agreement with respect to any sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer, with respect to any shares of our Class A common stock heldredemptions by them immediately after the effective time of the Merger, including any shares of our Class A common stock issuable upon the exercise of any warrants or other rights to purchase shares of our Class A common stock held by them immediately following the Closing, for six months after the Closing.
Founder Warrant Agreement
In connection with the execution of the Business Combination Agreement, on February 8, 2021, our Sponsor and the Founder Warrant Holders entered into the Founder Warrant Agreement with us pursuant to which each of the Founder Warrant Holders agreed that, following the Closing, such Founder Warrant Holder will not transfer 75% of its Private Placement Warrants until the earlier of (a) one year after the Closing and (b) subsequent to the Closing, (x) the date on which the last sale price of our Class A common stock quoted on NASDAQ (or the exchange on which the shares of our Class A common stock are then listed) equals or exceeds $11.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of our Class A common stock for cash, securities or other property.
Upon and subject to the Closing, 12.5% of each Founder Warrant Holder’s Private Placement Warrants will become subject to potential forfeiture, and each Founder Warrant Holder agrees not to exercise such $12.00 Warrants unless and until the occurrence of a date on which the last reported sales price of one share of our Class A common stock quoted on NASDAQ (or the exchange on which the shares of our Class A common stock are then listed) is greater to or equal to $12.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period within the five year period commencing on the one year anniversary of the Closing.
Upon and subject to the Closing, 12.5% of each Founder Warrant Holder’s Private Placement Warrants will become subject to potential forfeiture, and each Founder Warrant Holder agrees not to exercise such $14.00 Warrants unless and until the occurrence of a date on which the last reported sales price of one share of our Class A common stock quoted on NASDAQ (or the exchange on which the shares of our Class A common stock are then listed) is greater to or equal to $14.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period within the five year period commencing on the one year anniversary of the Closing.
Subscription Agreements
In connection with the execution of the Business Combination Agreement, on February 8, 2021, the Company and Hyzon entered into the Subscription Agreements with the Subscribers, pursuant to which the Subscribers agreed to purchase, and we agreed to sell to the Subscribers,DCRB’s public stockholders. This includes an aggregate of 40,500,000$355 million of gross proceeds from the PIPE Shares for a purchase price ofFinancing at $10.00 per sharePIPE Share. Hyzon’s cash on hand after giving effect to this transaction, including transaction costs and expenses, is expected to be used for
general corporate purposes, including developing infrastructure and supply chain, acquiring and leasing equipment for manufacturing, and investing in research and development.
TheCOVID-19
pandemic is currently impacting countries, communities, supply chains, and the global financial markets. Governments have imposed laws requiring social distancing, travel restrictions, shutdowns of businesses and quarantines, among others, and these laws may limit our ability to meet with potential customers or partners, or affect the ability of our personnel, suppliers, partners and customers to operate in the ordinary course of business. Although the economy has begun to recover, the severity and duration of the related global economic crisis is not fully known and the global outlook continues to remain uncertain due to a variety of factors including the Omicron variant and the potential emergence of additional variants, supply chain disruptions, labor shortages, and inflation. TheCOVID-19
pandemic is expected to continue to have residual negative impacts (including potentially after the outbreak has subsided and containment measures are lifted), and in particular, the supply chain continues to face disruptions that adversely affect our business. Rebounding demand in key components challenge the supply base and supply chain with short notice and increasing volume levels. The supply constraints include overseas freight congestion causing extended lead times, semiconductor allocation, other raw/component material shortages, and supplier staffing challenges. The COVID-19 pandemic and measures to prevent its spread have had the following impact on our business:
. Employee health and safety is our priority. In response toCOVID-19,
we established protocols to help protect the health and safety of our workforce. We will continue to stayand follow local, CDC, or WHO guidelines regarding safe work environment requirements. Operations and Supply Chain.
zero-emission
heavy commercial vehicles despite these challenges. In the future, we may experience supply chain disruptions from related or third-party suppliers and any such supply chain disruptions could cause delays in our development and delivery timelines. We continue to monitor the situation for any potential adverse impacts and execute appropriate countermeasures, where possible. To mitigate the impact of supply chain disruptions that we were experiencing in 2021, which disproportionately impacted our business in Europe, we focused on fulfilling orders for our vehicles in China where supply chain disruptions were not as significant.While we have experienced some operational challenges, the long-term implications of theCOVID-19
pandemic on our workforce, operations and supply chain, as well as demand remain uncertain. These factors may in turn have a material adverse effect on our results of operations, financial position, and cash flows. Key Trends and Uncertainties
We believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A “”. Commercial Launch of Hyzon-branded commercial vehicles and other hydrogen solutions
We reported $6.0 million of revenue in 2021; however, our business model has yet to be proven. Prior to full commercialization of our commercial vehicle business at scale, we must complete the construction of required manufacturing facilities and achieve research and development milestones. We must establish and operate facilities capable of producing our hydrogen fuel cell systems or assembling our hydrogen-powered commercial vehicles in appropriate volumes and at competitive costs.
Until we can generate sufficient additional revenue from our commercial vehicle business, we expect to finance our operations through equity and/or debt financing. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We expect that any delays in the successful completion of our manufacturing facilities, availability of critical parts, and/or validation and testing will impact our ability to generate revenue.
Hydrogen Production and Supply Infrastructure
We continue to develop anhydrogen ecosystem delivery model, with a partner-driven approach to design, build, own and operate hydrogen production hubs and downstream dispensing infrastructure expected to providecarbon intensity hydrogen at below diesel-parity cost structures supporting Hyzon vehicle fleet deployments. We intend to continue forming additional partnerships across the full hydrogen feedstock, production and dispensing value chain in each major region in which we operate, that will be designed to ensure that the hydrogen fuel required is available at the cost and carbon intensity requirements to drive fleet conversions to Hyzon hydrogen FCEVs. Because we have a partner-driven approach, we are naturally reliant upon our partners’ performance in fulfilling the obligations that we depend on for delivery of each segment of that value chain. Additionally, consistent with other construction projects, there are risks related to realized construction cost and schedule that can impact final cost to produce and deliver hydrogen and timing of that delivery, along with the availability of feedstock near our vehicle fleet deployments. We intend to manage these risks by partnering with high quality and high performing partners with a track record of timely delivery and instituting commercial agreements to drive down construction cost and achieveon-time
scheduled performance. Continued Investment in Innovation
We believe that we are the industry-leading hydrogen technology company with the most efficient and reliable fuel cell powertrain technologies and an aggregate purchase price of $400,000,000,unmatched product and service offering. Our financial performance will be significantly dependent on our ability to maintain this leading position. We expect to incur substantial and increasing research and development expenses and stock-based compensation expenses as a result. We dedicate significant resources towards research and development and invest heavily in recruiting talent, especially for vehicle design, vehicle software, fuel cell system, and electric powertrain. We will continue to recruit and retain talented personnel to grow our strength in our core technologies. We expect to incur additional stock-based compensation expenses as we support our growth and status as a publicly traded company. We expect our strategic focus on innovation will further solidify our leadership position.
We are continually seeking to expand our customer base; however we depend on a few major customers and we expect this will continue for the next several years. These customers will mostly employ a back-to-base model in the
PIPE.early adoption phase of FCEVs. Vehicles will return to a central “base” between operations, allowing them to refuel onsite and/or nearby, where hydrogen can be produced locally at or proximate to the central base. While we focus on back-to-base or regional customers, we expect to expand our target customer focus to include longer-haul truck and bus segments, additional vehicle classes, stationary power, and incremental mobility applications (e.g., rail, marine, aviation) for customers around the world.
We depend on third parties, including our majority beneficial shareholder and parent company Horizon for supply of key inputs and components for our products, such as fuel cells and automotive parts. We intend to negotiate potential relationships with industry-leading OEMs to supply chassis for our Hyzon-branded vehicles but do not yet have any binding agreements and there is no guarantee that definitive agreements will be reached. Even if we reach such agreements, such suppliers, including Horizon, may be unable to deliver the inputs and components necessary for us to produce our hydrogen-powered commercial vehicles or hydrogen fuel cell systems at prices, volumes, and specifications acceptable to us. If we are unable to source required inputs and other components from third parties on acceptable terms, it could have a material adverse effect on our business and results of operations.
The closingautomotive industry continues to face supply chain disruptions. We are experiencing increases in both the cost of and time to receive raw materials, such as semiconductors or chassis. Any such increase or supply interruptions could materially negatively impact our business, prospects, financial condition and operating results. Many of the saleparts for our products are sourced from suppliers in China and the manufacturing situation in China remains uncertain.
Market Trends and Competition
The last ten years have seen the PIPE Shares pursuantrapid development of alternative energy solutions in the transportation space. We believe this growth will continue to accelerate as increased product offerings, technological developments, reduced costs, additional supporting infrastructure, and increased global focus on climate goals drive broader adoption.
We believe that commercial vehicle operators, one of our initial target markets, will be driven towards hydrogen-powered commercial vehicles predominantly by the need to decarbonize activities, but also by the potential for lower total cost of ownership in comparison to the
Subscription Agreementscost of ownership associated with traditional gasoline and diesel ICE vehicles. Our fuel cell technology can be deployed across a broad range of mobility applications, includingon-road,
off-road,
rail, maritime and aviation. The competitive landscape for our commercial vehicles ranges from vehicles relying on legacy ICEs, to extended range BEVs, to other hydrogen fuel cell and alternativecarbon emission propulsion vehicles. Competitors include well established vehicle companies already deploying vehicles with internal fuel cell technology and other heavy vehicle companies that have announced their plans to offer fuel cell trucks in the future. We also face competition from other fuel cell manufacturers. We believe that our company is
contingent upon, amongwell positioned to capitalize on growth in demand for alternativecarbon emission propulsion vehicles expected from the numerous benefits of hydrogen power, including hydrogen’s abundance, its ability to be produced locally, and the generally faster refueling times for hydrogen-powered commercial vehicles as compared to electricity-powered vehicles. However, to successfully execute on our business plan, we must continue to innovate and convert successful research and development efforts into differentiated products, including new commercial vehicle models. Our current and potential competitors may have greater financial, technical, manufacturing, marketing, and other
customary closing conditions, the concurrent consummation of the Proposed Transactions. The purpose of the PIPE isresources. Our competitors may be able to
raise additional capital for use by the combined company following the Closing.Pursuantdeploy greater resources to the Subscription Agreements, we agreed that, within 15 calendar days after the consummationdesign, development, manufacturing, distribution, promotion, sales, marketing, and support of the Proposed Transactions, we will filetheir internal combustion, alternative fuel and electric truck programs.
We operate in a highly regulated industry. The failure to comply with
the SEC (atlaws or regulations, including but limited to rules and regulations covering vehicle safety, emissions, dealerships, and distributors, could subject us to significant regulatory risk and changing laws and regulations and changing enforcement policies and priorities could adversely affect our
sole costbusiness, prospects, financial condition and
expense) the PIPE Resale Registration Statement,operating results. We may be also required to obtain and
we will use our reasonable best efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Ardour Subscription Agreement
In connectioncomply with the execution of the Business Combination Agreement, on February 8, 2021, the Company, Ardour Capital, ACP Mgmt Corp. and Hyzon entered into the Ardour Subscription Agreement, pursuant to which ACP Mgmt Corp. agreed, in full satisfaction of Ardour Capital’s right to receive a warrant to purchase shares of Hyzon Common Stock for its services as a financial advisor to Hyzon, to purchase, and we agreed to sell to ACP Mgmt Corp., warrants exercisable for one share of our Class A common stock at an exercise price of $2.20, subject to the terms of a Warrant Agreement, to be entered into by and between the Company and Continental Stock Transfer & Trust Company in connection with Closing. Such warrants will be governed by and exercisable subject to the terms and conditions of the Ardour Warrant Agreement.
The foregoing descriptions of the Business Combination Agreement, the Lock-Up Agreement, the Founder Warrant Agreement, the Subscription Agreements and the Ardour Subscription Agreement are qualified in their entirety by reference to the full text of the Business Combination Agreement, the Lock-Up Agreement, the Founder Warrant Agreement, the form of the Subscription Agreement and the Ardour Subscription Agreement, copiesmultiple environmental permits, many of which are included as exhibitsdifficult and costly to obtain and could be subject to legal challenges. We depend on global customers and suppliers, and adverse changes in governmental policy or trade regimes could significantly impact the competitiveness of our Current Report on Form 8-K filed withproducts. Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect our business and future profitability. See the SEC on February 9, 2021, and incorporated herein by reference.
section entitled “” in Part I, Item 1.
Results of Operations
Our only activities from Inception through December 31, 2020 related to
The following table sets forth our formationhistorical operating results for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | |
| | | | | | (Inception) –
December 31, | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | 21,191 | | | | — | | | | 21,191 | | | | NM | |
| | | 16,443 | | | | 1,446 | | | | 14,997 | | | | 1037 | % |
Selling, general and administrative | | | 69,792 | | | | 12,785 | | | | 57,007 | | | | 446 | % |
| | | | | | | | | | | | | | | | |
| | | 107,426 | | | | 14,231 | | | | 93,195 | | | | 655 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Change in fair value of private placement warrant liability | | | 4,167 | | | | — | | | | 4,167 | | | | NM | |
Change in fair value of earnout liability | | | 84,612 | | | | — | | | | 84,612 | | | | NM | |
Foreign currency exchange loss and other expense | | | (1,452 | ) | | | (108 | ) | | | (1,344 | ) | | | 1244 | % |
| | | (5,235 | ) | | | (37 | ) | | | (5,198 | ) | | | 14049 | % |
Total other income (expense) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Less: Net loss attributable to noncontrolling interest | | | (5,439 | ) | | | (105 | ) | | | (5,334 | ) | | | 5080 | % |
Net loss attributable to Hyzon | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Hyzon was formed and
the Public Offering, as well as due diligence costs incurred. We expect to incur increased expenses ascommenced operations on January 21, 2020. As a result,
we have a very limited operating history from inception and limited prior period comparable information available to be presented in this “Management’s Discussion and Analysis of
being a public company (for legal, financial reporting, accountingFinancial Condition and
auditing compliance), as well as costs in the pursuitResults of
our acquisition plans.ForOperations of Hyzon.”
Revenue represents sales of hydrogen FCEVs. Revenue for the year ended December 31,
2019, we had a net loss of approximately $0.2 million, which consisted of approximately $0.2 million in expensed offering costs.For2021 was $6.0 million. We did not generate revenue for the period from January 21, 2020 (inception) through December 31, 2020.
Operating expenses for the year ended December 31,
2021 were $107.4 million compared to $14.2 million for the period from January 21, 2020
we had a net loss(inception) through December 31, 2020. Operating expenses consist of
approximately $5.5 million, which consistedcost of
approximately $5.5 million inrevenue, research and development expenses and selling, general and administrative expenses,
including due diligenceeach of which is discussed below. Cost of revenue includes direct materials, labor costs,
incurred in the pursuit of our acquisition plans.Liquidity and Capital Resources
Our liquidity needs up to the Public Offering were satisfied through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of Founder Shares to our Sponsor and a loan from our Sponsor for an aggregate amount of $300,000 to cover organizational expenses and expensesallocated overhead costs related to the Public Offeringmanufacture of hydrogen FCEVs, and estimated warranty costs. Cost of revenue for the year ended December 31, 2021 totaled $21.2 million. The total cost of FCEVs that were delivered to certain customers in China was recorded within Cost of revenue in the Consolidated Statements of Operations and Comprehensive Loss since the Company no longer has the control of these FCEVs, while the associated revenue recognized was limited, and did not reflect the total contractual price for these arrangements. We did not generate revenue for the period from January 21, 2020 (inception) through December 31, 2020.
Research and Development Expenses.
Research and development expenses were $16.4 million and $1.4 million for the year ended December 31, 2021 and the period from January 21, 2020 (inception) through December 31, 2020, respectively. The increase was primarily due to $8.2 million in personnel costs in research and development and headcount for our global customer base. The remaining increase of $6.7 million was primarily due to the advancing development of current and next generation hydrogen powered fuel cell systems, the design and development of electric powertrain, and the integration of those systems into various mobility applications. We expect research and development expenses to continue to increase significantly going forward as we build out our research facilities and organization.
Selling, General, and Administrative Expenses.
Selling, general, and administrative expenses were $69.8 million and $12.8 million for year ended December 31, 2021 and the period from January 21, 2020 (inception) through December 31, 2020, respectively. Stock-based compensation in selling, general and administrative expenses were $28.2 million and $9.9 million for year ended December 31, 2021 and the period from January 21, 2020 (inception) through December 31, 2020, respectively. The $18.3 million increase was primarily due to $13.4 million triggered by a key executive retirement arrangement and $13.1 million related to earnout equity awards pursuant to the
Note. On September 13, 2017, we drew down $300,000 onBusiness Combination, partially offset by the
Note. We repaid the2020 Executives’ Awards. See Note
in full to our Sponsor on October 21, 2020. Subsequent15, Stock-based Compensation Plans and Note 3, Business Combination to the
consummation ofaccompanying consolidated financial statements for additional information regarding the
Public Offering, our liquidity needs have been satisfied throughstock based compensation and equity awards. The remaining increase was primarily due to $11.9 million in legal and accounting fees, $5.3 million in consulting fees, $8.6 million in salary and related expenses, and $4.9 million in insurance expense. We incurred greater selling, general, and administrative expense in 2021 due to building out the
net proceeds of approximately $2.0 million from the Private Placement held outside of the Trust Account.In addition,Company’s corporate infrastructure, including accounting, audit, legal, regulatory and
tax-related
services, as well as expenses incurred in order to
financehelp maintain compliance with NASDAQ and SEC requirements. The increase in selling, general and administrative costs also resulted from director and officer insurance costs, investor and public relations costs, and transaction costs
related to the Business Combination. Change in connection withFair Value.
non-cash
gains in fair values of the private placement warrant and earnout liability required to be remeasured at each balance sheet date. Change in fair value of private placement warrants and earnout liability for the year ended December 31, 2021, were $4.2 million and $84.6 million, respectively. There were no equivalent instruments requiring fair value remeasurement during the period from January 21, 2020 (inception) through December 31, 2020.Foreign Currency Exchange Gain (Loss).
a
business combination, our Sponsorcurrency other than Hyzon’s or
an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligateda Hyzon subsidiary’s functional currency. Foreign currency exchange loss was $1.3 million for the year ended December 31, 2021, compared to
loan us funds as may be required. As of$0.1 million for the period from January 21, 2020 (inception) through December 31, 2020,
as there were
no amounts outstanding under any working capital loans.Contractual Obligations
Registration Rights
The holdersfew transactions in foreign currencies in the prior period. We expect the volume of foreign currency transactions to grow significantly in the future as we continue to expand our geographic footprint.
Interest expense, net was $5.2 million for the year ended December 31, 2021, compared to negligible expense for the period from January 21, 2020 (inception) through December 31, 2020. Interest expense relates primarily to convertible debt issued in February 2021 and is comprised primarily from changes in the fair value of the
Founder Shares, Private Placement Warrantsembedded derivative associated with the automatic conversion provision of the convertible note. Upon close of the Business Combination in July 2021, convertible debt and
warrants that may be issued upon conversion of working capital loans, if any, and anyaccrued interest converted into 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 and upon conversion of the Founder Shares will be entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $4.0 millionCompany. See Note 3, Business Combination in the aggregate, paid upon closingaccompanying consolidated financial statements for more information. There was minimal debt outstanding during the period from January 21, 2020 (inception) through December 31, 2020.
Income Tax Expense (Benefit).
Net Loss Attributable to Non-Controlling Interests.
to non-controlling interests
represents results attributable to third parties in our operating subsidiaries. Net loss is generally allocated based on such ownership interests held by third parties with respect to each of
these entities.Net loss attributableto non-controlling interests
was $5.4 million for the
Public Offering. An additional fee of approximately $514,500year ended December 31, 2021, compared to $0.1 million for the period from January 21, 2020 (inception) through December 31, 2020. The change in the
aggregate was duecomparative periods is the result of increased activities in
connection withour Netherlands joint venture and the
closingcreation of
the sale of the Over-allotment Units.a joint venture in Foshan, China in October 2021.
Non-GAAP
Financial MeasuresIn addition
$0.35 per unit, or approximately $7.90 millionto our results determined in
the aggregate, will be payable to the underwriters for deferred underwriting commissions. 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; Impact of COVID-19
The preparation of condensed financial statements and related disclosures in conformityaccordance with accounting principles generally accepted in the United States of America (“US GAAP”), we believe the following
non-GAAP
measures are useful in evaluating our operational performance. We use the followingnon-GAAP
financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe thatnon-GAAP
financial information, when taken collectively, may be helpful to investors in assessing our operating performance.EBITDA and Adjusted EBITDA
“EBITDA” is defined as net loss before interest income or expense, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation expense, change in fair value of private placement warrant liability, change in fair value of earnout liability and other special items determined by management, if applicable. EBITDA and Adjusted EBITDA are intended as supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similarnon-GAAP
financial measures to investors. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual ornon-recurring
items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because not all companies may calculate Adjusted EBITDA in the same fashion. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net income (loss) to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
The following table reconciles net loss to EBITDA and Adjusted EBITDA (in thousands):
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) –
December 31,
2020 | |
| | $ | (19,285 | ) | | $ | (14,376 | ) |
| | | | | | | | |
| | | 5,235 | | | | 37 | |
Income tax expense (benefit) | | | — | | | | — | |
Depreciation and amortization | | | 1,140 | | | | 185 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Change in fair value of private placement warrant liability | | | (4,167 | ) | | | — | |
Change in fair value of earnout liability | | | (84,612 | ) | | | — | |
| | | 15,768 | | | | 9,983 | |
Executive transition charges (1) | | | 13,860 | | | | — | |
Business combination transaction expenses (2) | | | 6,533 | | | | — | |
Regulatory and legal matters (3) | | | 1,147 | | | | — | |
Acquisition-related expenses (4) | | | 591 | | | | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| (1) | Executive transition charges include stock-based compensation costs of $13.4 million and salary expense of $0.5 million related to former CTO’s retirement. |
| (2) | Transaction costs of $6.4 million attributable to the liability classified earnout shares and $0.1 million ofwrite-off of debt issuance costs. |
| (3) | Regulatory and legal matters include legal, advisory, and other professional service fees incurred in connection with the short-seller analyst article from September 2021, and investigations and litigation related thereto. |
| (4) | Acquisition-related expenses incurred for potential and actual acquisitions that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results. |
Liquidity and Capital Resources
The Company has incurred losses from operations since inception. The Company incurred net losses of $19.3 million and $14.4 million for the year ended December 31, 2021, and the period from January 21, 2020 (inception) through December 31, 2020, respectively. Net cash used in operating activities was $95.2 million and $1.2 million for the year ended December 31, 2021, and the period from January 21, 2020 (inception) through December 31, 2020, respectively. As of December 31, 2021, we had $445.1 million in unrestricted cash and positive working capital of $464.0 million. The Business Combination closed on July 16, 2021, and generated proceeds of approximately $512.9 million of cash net of transaction costs and redemptions. We believe that our current cash balance will provide adequate liquidity during the 12-month period following the issuance of our December 31, 2021 consolidated financial statements.
Our future capital requirements will depend on many factors, including, but not limited to, the rate of our growth, our ability to generate sufficient revenue from commercial vehicle sales and leases to cover operating expenses, working capital expenditures, and additional cash resources due to changed business conditions or other developments, including supply chain challenges, disruptions due toCOVID-19,
competitive pressures, and regulatory developments, among other developments. Additionally, we are currently exploring raising additional capital through our subsidiary, Hyzon Zero Carbon, Inc., to invest in hydrogen production, distribution, and fueling stations. Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies. As such, we are exploring equity and/or debt financing through
Hyzon Zero Carbon, Inc., and we may be required to seek additional equity and/or debt financing at the Hyzon level or through one or more of Hyzon’s other subsidiaries. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Incurring debt would result in increased fixed obligations and could result in operating covenants that would restrict our operations. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations may be materially and adversely affected.
As of December 31, 2021, we have no debt. The Convertible Notes and accrued interest were converted to 5,022,052 shares of common stock upon close of the Business Combination.
The following table is summarized from our Consolidated Statements of Cash Flows (in thousands):
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period January 21, 2020 (Inception) - December 31, 2020 | |
Net cash used in operating activities | | $ | (95,191 | ) | | $ | (1,182 | ) |
Net cash used in investing activities | | | (23,706 | ) | | | (553 | ) |
Net cash provided by financing activities | | | 550,692 | | | | 18,894 | |
Cash Flows from Operating Activities
Net cash used in operating activities was $95.2 million for the year ended December 31, 2021, as compared to $1.2 million cash used for the period from January 21, 2020 (inception) through December 31, 2020. The cash flows used in operating activities for the year ended December 31, 2021 was primarily driven by net loss of $19.3 million and adjusted for certainnon-cash
items and changes in operating assets and liabilities.Non-cash
gain adjustments primarily consisted of changes in fair value of private placement warrant liability of $4.2 million and earnout liability of $84.6 million. Thesenon-cash
gain adjustments were partially offset by $29.1 million stock-based compensation expense and $1.1 million in depreciation and amortization. Changes in operating assets and liabilities were primarily driven by $23.0 million in prepayments for vehicle inventory, production equipment, other supplier deposits and D&O insurance, and a change of $19.3 million in inventory balances, offset by an increase in accounts payable of $8.2 million, accrued liabilities of $5.0 million and an increase in contract liabilities of $8.7 million. Net cash used in operating activities for the period from January 21, 2020 (inception) through December 31, 2020 was primarily driven by recording a net loss of $14.4 million and adjusted for thenon-cash
stock-based compensation expense of $10.0 million, offset by an increase in contract liabilities of $2.6 million. Cash Flows from Investing Activities
Net cash used in investing activities was $23.7 million for the year ended December 31, 2021, as compared to $0.6 million for the period from January 21, 2020 (inception) through December 31, 2020. The cash flows used in investing activities for the year ended December 31, 2021 was primarily driven by $14.5 million in capital expenditures, as well as $4.3 million in machinery and equipment deposits to begin production of hydrogen fuel cell systems and assembly of hydrogen storage systems, and $4.8 million in cash used for investments in equity securities of NRG and Raven SR.
Net cash used in investing activities for the period from January 21, 2020 (inception) through December 31, 2020 was primarily driven by capital expenditures of $0.4 million and an equity investment of $0.1 million in the period January 21, 2020 through December 31, 2020.
Cash Flows from Financing Activities
Net cash provided by financing activities was $550.7 million for the year ended December 31, 2021, as compared to $18.9 million for the period from January 21, 2020 (inception) through December 31, 2020. The cash flows provided by financing activities for the year ended December 31, 2021 was due primarily to $512.9 million in proceeds from the Business Combination, net of transaction costs allocated to equity and redemption and $45.0 million in proceeds from issuance of convertible debt, partially offset by $6.9 million payment towards the Horizon IP Agreement. The cash flows provided by financing activities for the period from January 21, 2020 (inception) through December 31, 2020 was due primarily to $18.6 million, net of transaction costs from the Round A Transaction (as defined in Note 16, Stockholders’ Equity in the accompanying consolidated financial statements) and $0.5 million in proceeds from issuance of convertible debt.
Contractual Obligations and Commitments
The following table presents our contractual obligations and commitments to make future payments as of December 31, 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | $ | 3,146 | | | $ | 3,146 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Finance Lease Obligation (2) | | | 688 | �� | | | 448 | | | | 240 | | | | — | | | | — | | | | — | |
Operating Lease Obligations (3) | | | 12,160 | | | | 1,978 | | | | 1,894 | | | | 1,806 | | | | 1,745 | | | | 4,737 | |
| | | 33,969 | | | | 29,069 | | | | 4,900 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | The final $3.1 million payment due to Jiangsu Horizon Powertrain, pursuant to the terms of the Horizon IP Agreement. Please see the section below entitled, “Material Transactions with Related Parties |
| (2) | The minimum lease payments for the finance lease obligation. |
| (3) | The minimum lease payments for operating lease obligations. The operating leases relate to real estate and vehicles. No asset is leased from any related party. |
| (4) | The Company enters into commitments under non-cancellable or partially cancellable purchase orders or vendor agreements in the ordinary course of business for FCEV components. |
Off-Balance
Sheet ArrangementsWe do not maintain anyoff-balance
sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations. Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and liabilities, disclosureexpenses. These estimates and assumptions are affected by management’s applications of contingent assetsaccounting policies. Certain policies are particularly important to the portrayal of our financial position and liabilitiesresults of operations and require the application of significant judgment by management to determine appropriate assumptions to be used in certain estimates; as a result, they are subject to an inherent degree of uncertainty and are considered critical. Accordingly, we believe the following policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
We measure and recognize compensation expense for all stock options and restricted stock awards based on the estimated fair value of the award on the grant date. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service. If vesting is subject to a market or performance condition, recognition is based on the derived service period of the award. Expense for awards with performance conditions is estimated and adjusted based upon the assessment of the probability that the performance condition will be met.
We use the Black-Scholes option pricing model to estimate the fair value of stock option awards with service and/or performance conditions. The Black-Scholes option pricing model requires management to make a number of assumptions, including the expected life of the option, the volatility of the underlying stock, the risk-free interest rate and expected dividends. The assumptions used in our Black-Scholes option-pricing model represent our best estimates at the time of grant. These estimates involve a number of variables, uncertainties and assumptions and the application of our judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.
These assumptions are estimated as follows:
Fair Value of Common Stock.
date
fair value of
our common stock utilized in the
calculation of share-based compensation was determined using valuation methodologies which utilize certain assumptions, including observations of comparable equity values and transactions, probability weighting of events, time to liquidation, a risk-adjusted interest rate, and assumptions regarding our projected future cash flows and growth potential. Following the Business Combination with DCRB, as Class A common stock is traded in the public market, fair value is measured on the grant date based on the closing fair market value of our common stock.The expected term represents the period that our stock options are expected to be outstanding. We determine the price volatility factor based on the historical volatilities of our publicly traded peer group as Hyzon does not have a long trading history for our common stock. Industry peers consist of several public companies in the automotive and energy storage industry that are similar to Hyzon in size, stage of life cycle, and financial
statements, and expenses duringleverage. The risk-free interest rate was based on U.S. Treasuryzero-coupon
securities with maturities consistent with the
periods reported. Actual results could materially differ from those estimates. estimated expected term. We have not
identified any critical accounting policies.Our Sponsor continuespaid dividends on our common stock nor do we expect to evaluatepay dividends in the impactforeseeable future.
Private Placement Warrant Liabilities
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the COVID-19 pandemicwarrant’s specific terms and has concludedapplicable authoritative guidance in ASC 480 and 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 and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, 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.
We account for the Private Placement Warrants, in connection with the Business Combination, as liabilities. In accordance with ASC 815, the Private Placement Warrants do not meet the criteria for equity classification and must be recorded as liabilities. As the Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, the warrants are measured at fair value at inception and remeasured at each reporting date.
We, with the assistance of third-party valuations, utilized the binominal lattice valuation model (“BLM”) to estimate the fair value of Private Placement Warrants as of July 16, 2021. The application of the BLM utilizes significant unobservable assumptions, including volatility. Significant judgment is required in determining the expected volatility of our common stock.
The earnout shares held by Legacy Hyzon’s common stockholders are accounted for as a liability. In accordance with ASC 815, the earnout shares held by Legacy Hyzon common stockholders do not meet the criteria for equity classification and must be recorded as liabilities. Pursuant to ASC 805 initial measurement of these earnout shares are measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. As these earnout shares meet the definition of a derivative as contemplated in ASC 815, they are remeasured at each reporting date. Changes in fair value are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss).
The earnout shares issued to other holders of outstanding equity awards are accounted for in accordance with ASC 718,, as they relate to stock-based compensation awards issued in exchange for service provided or to be provided to the Company. We recognized the earnout shares to other equity holders as separate and incremental awards from other equity holders’ underlying stock-based compensation awards. Upon the close of the Business Combination, we became contingently obligated to issue earnout shares if the vesting conditions were met. However, for unvested equity awards and where grant date was not established, we did not recognize any expense. We, with the assistance of third-party valuations, utilize the Monte-Carlo valuation model to estimate the fair value of earnout shares at each reporting date. The application of the Monte-Carlo pricing model utilizes significant unobservable assumptions, including volatility. Significant judgment is required in determining the expected volatility of our common stock. Monte Carlo analysis simulates the future path of the Company’s stock price over the earnout period. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value.
For all periods prior to the consummation of the Business Combination, there was not a market for our equity. Accordingly, valuations of our equity instruments require the application of significant estimates, assumptions, and judgments. These valuations impact share-based compensation reported in our consolidated financial statements. The following discussion provides additional details regarding the significant estimates, assumptions, and judgments that while it is reasonably possibleimpact the determination of the fair values of share-based compensation awards and the common stock that comprises our capital structure. The following discussion also explains why these estimates, assumptions, and judgments could be subject to uncertainties and future variability.
We used valuations of our common stock for various purposes, including, but not limited to, the virus could havedetermination of the exercise price of stock options and inclusion in the Black-Scholes option pricing model. As a negative effect on our financial position, results of operations and/or search for a targetprivately held company, the specific impact is not readily determinablelack of an active public market for our common stock required our management and board of directors to exercise reasonable judgment and consider a number of factors in order to make the best estimate of fair value of our equity. As our capital structure consisted of a single class of equity, Hyzon, with the assistance of a third-party valuation specialist, estimated the fair value of our total equity value using a combination of the comparable sales method (a market approach) and the excess earnings method (an income approach). Estimating our total equity value requires the application of significant judgment and assumptions. Factors considered in connection with estimating these values included:
Recent arms-length transactions involving the sale or transfer of our common stock;
Our historical financial results and future financial projections;
The market value of equity interests in substantially similar businesses, which equity interests can be valued through nondiscretionary, objective means;
The lack of marketability of our common stock;
The likelihood of achieving a liquidity event, such as the business combination, given prevailing market conditions;
General economic outlook, including economic growth, inflation and unemployment, interest rate environment and global economic trends.
The fair value ultimately assigned to our common stock may take into account any number or combination of the various factors described above, based upon their applicability at the time of measurement. Determination of the fair value of our common stock also may involve the application of multiple valuation methodologies and approaches, with varying weighting applied to each methodology as of the
grant date. Application of these approaches involves: the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows; discount rates; market multiples; the selection of comparable companies; and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date
of the balance date.Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, wouldand may have a material impact on the valuation of our common stock.
As of November 12, 2020, the estimated fair value of our common stock was $2.00 per share. In making this determination, we relied upon the previous Round A equity financing, which closed on November 12, 2020, as being the only reliable indication of fair value of our common stock before (and including) December 1, 2020. The price of the Round A capital raise was $2.00 per share of our common stock.
The estimated fair value of our common stock was $4.45 per share as of December 31, 2020. The increase in fair value was primarily due to our progress and steps taken to prepare for the Business Combination. The necessary steps undertaken to prepare for the Business Combination included meeting with DCRB and financial
statements.Off-Balance Sheet Arrangements
advisors, discussing timing expectations, negotiating a non-binding letter of intent and signing a binding exclusivity agreement between DCRB and Hyzon. As our ongoing negotiations related to the Business Combination reflected an increased likelihood of a near-term exit transaction and/or liquidity event, the valuation of our equity as of December 31, 2020, took into consideration the indicated equity value implied by the negotiations. While the December 31, 2020, valuation incorporated indicated equity values based upon traditional income and 2019, we didmarket approaches consisting of the excess earnings method and comparable sales method. The valuation also incorporated the equity value implied by the business combination. Accordingly, the valuation applied the probability-weighted expected return method (PWERM) to weight the indicated equity value determined under the traditional income and market approaches and the equity value implied by our expected business combination with DCRB. Due to the proximity in time and observability, management placed the most significant weighting on the value as implied by the comparable sales method.
The estimated fair value of our common stock was $9.90 per share as of June 30, 2021. The increase in fair value from December 31, 2020 to June 30, 2021 was primarily due to Hyzon executing a non-binding letter of intent with DCRB in January 2021, signing a Business Combination Agreement with DCRB, and issuing a convertible note payable in the amount of $45.0 million in February 2021. In addition, Hyzon made progress in procuring new orders from customers during the six months ended June 30, 2021.
As of June 30, 2021, the estimated fair value of our common stock was $9.90 per share, which equates to an implied equity value of $1.0 billion. The primary difference between the fair value derived on June 30, 2021 and the fair value implied by the Business Combination is that the fair value implied by the Business Combination is based only upon a scenario in which the parties complete the Business Combination and is not probability weighted, in contrast to the June 30, 2021 valuation which considered multiple potential outcomes, some of which would have any off-balance sheet arrangementsresulted in a lower value of our common stock than its implied transaction value.
Following the Business Combination with DCRB, it is no longer necessary for our management and its board of directors to estimate the fair value of our common stock, as definedthe Class A common stock is traded in Item 303(a)(4)(ii)the public market.
Emerging Growth Company Status
Section 102(b)(1) of
Regulation S-K.JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emergingexempts emerging growth company” under the JOBS Act and are allowedcompanies from being required to comply with new or revised financial accounting pronouncements based onstandards 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 effective date for private (not publicly traded) companies. We electedExchange Act) are required to delaycomply with the adoption of new or revised financial accounting standards,standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and as a result, we may not comply with the requirements that apply to
non-emerging
growth companies, but any such an election to opt out is irrevocable. Hyzon 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, Hyzon, as an emerging growth company, can adopt the new or revised
accounting standardsstandard at the time private companies adopt the new or revised standard, until such time Hyzon is no longer considered to be an emerging growth company. At times, Hyzon may elect to early adopt a new or revised standard. In addition, Hyzon intends to rely on the
relevant datesother exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, Hyzon intends to rely on such exemptions, Hyzon is not required to, among other things: (a) provide an auditor’s attestation report on Hyzon’s system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required ofnon-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. Hyzon will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of Hyzon’s first fiscal year following the fifth anniversary of the closing of DCRB’s initial public offering, (b) the last date of Hyzon’s fiscal year in which Hyzon has total annual gross revenue of at least $1.07 billion, (c) the date on which
adoptionHyzon is deemed to be a “large accelerated filer” under the rules of
such standardsthe SEC with at least $700.0 million of outstanding securities held bynon-affiliates
or (d) the date on which Hyzon has issued more than $1.0 billion innon-convertible
debt securities during the previous three years.
Material Transactions with Related Parties
In January 2021, Hyzon entered into the Horizon IP Agreement with JS Horizon, part of the Horizon group of Companies, and in September 2021 JS Powertrain was an added party to the agreement. Pursuant to the agreement, the parties convey to each other certain rights in intellectual property relating to Hyzon’s core fuel cell and mobility product technologies under which Hyzon will pay JS Horizon and JS Powertrain a total fixed payment of $10.0 million. As of December 31, 2021, $6.9 million was paid and the remaining $3.1 million was paid February 2022.
In January 2021, Hyzon entered into a supply agreement with Jiangsu Horizon New Energy Technologies Co. Ltd, a wholly owned subsidiary of Horizon, to supply certain fuel cell components. The Company made a deposit payment to Horizon in the amount of $5.0 million for long lead time components. This payment is requiredincluded in prepaid expenses as the components have yet been received as of December 31, 2021. The Company currently relies and expects to rely on Horizon as a single source supplier of hydrogen fuel cell systems until completion of Hyzon hydrogen fuel cell manufacturing facilities.
The Company entered into a joint venture agreement in 2020 to create Hyzon Europe with Holthausen. As Hyzon Europe builds out its production facilities, it relies on Holthausen for non-emerging growth companies.certain production resources that result in related party transactions. In addition, both companies rely on certain suppliers including Horizon.
In June 2021, the Company transferred inventory purchased from Horizon amounting to $1.2 million to Holthausen at cost and recorded a related party receivable of $1.2 million.
In July 2021, Hyzon Europe assumed certain customer sales contracts from Holthausen with an aggregate value of $5.1 million. As a result
our financial statements may not be comparableof this transaction, the Company recorded contract liabilities of $4.1 million,inventory of $3.4 million, and due from Holthausen of $0.7 million. For the year ended December 31, 2021, the Company paid $0.5 million to companies that complytwo affiliated entities of certain executives of Hyzon Europe for their director services.
The Company currently owns 50.5% of the equity interests of Hyzon Europe. On December 31, 2021, Hyzon executed a non-binding Letter of Intent (“LOI”) with new or revised accounting pronouncements asHolthausen to increase its stake to 75% in Hyzon Europe. Concurrent with the signing of public company effective dates.this LOI, €1 million refundable deposit was paid to Holthausen, approximately $1.1 million in USD. This deposit is recorded in the Consolidated Balance Sheets in Prepaid expenses and other current assets.
As of December 31, 2021, the Company has a net related party receivable in the amount of $0.3 million due from Holthausen.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.Risk
We are a smaller reporting company as defined in
Item 10(f) of Regulation S-K.Rule12b-2under the Exchange Act. As a result, pursuant to Item 305(e) of
Regulation S-K,
we are not required to provide the information required by this Item.
Item 8. Financial Statements and Supplementary
DataINDEX TO FINANCIAL STATEMENTS
Data.
Report of Independent Registered Public Accounting Firm
To the Stockholders and
the Board of Directors
ofDecarbonization Plus Acquisition Corporation
Opinion on the
Consolidated Financial Statements
We have audited the accompanying
consolidated balance sheets of
Decarbonization Plus Acquisition CorporationHyzon Motors Inc. and subsidiaries (the
“Company”),Company) as of December 31,
20202021 and
2019,2020, the related statements of operations
and comprehensive loss, changes in stockholders’ equity, and cash flows for the
yearsyear ended December 31,
2021, and for the period from January 21, 2020
and 2019,(inception) to December 31, 2020, and the related notes (collectively,
referred to as the
“financial statements”)consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
20202021 and
2019,2020, and the results of its operations and its cash flows for the
yearsyear ended December 31,
2021, and for the period from January 21, 2020
and 2019,(inception) to December 31, 2020, in conformity with
accounting principlesU.S. generally accepted
in the United States of America.accounting principles.
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company'sthese consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
auditsaudit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
WithumSmith+Brown, PCKPMG LLP
We have served as the
Company'sCompany’s auditor since
2017.
2020.
Rochester, New York
New York
HYZON MOTORS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | December 31,
2020 | | | December 31,
2019 | |
| ASSETS: | | | | | | |
| Current assets: | | | | | | |
| Cash | | $ | - | | | $ | 315,600 | |
| Total Current Assets | | | - | | | | 315,600 | |
| Investment held in Trust Account | | | 225,727,721 | | | | - | |
| Deferred offering costs | | | - | | | | 23,000 | |
| Prepaid insurance | | | 1,062,000 | | | | - | |
| Total assets | | $ | 226,789,721 | | | $ | 338,600 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable - offering costs (affiliate) | | $ | - | | | $ | 14,000 | |
| Accrued offering costs | | | 175,000 | | | | - | |
| Accounts payable - affiliate | | | 1,324,257 | | | | - | |
| Accrued expenses | | | 3,572,935 | | | | - | |
| Sponsor Note Payable | | | - | | | | 300,000 | |
| Total Current Liabilities | | | 5,072,192 | | | | 314,000 | |
| Deferred underwriting fee payable | | | 7,900,376 | | | | - | |
| Total liabilities | | | 12,972,568 | | | | 314,000 | |
| | | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| Class A common stock subject to possible redemption, 20,881,715 and 0 shares, respectively, at $10.00 per share | | | 208,817,150 | | | | - | |
| | | | | | | | | |
| Stockholders’ equity: | | | | | | | | |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | | | - | | | | - | |
| Class A common stock, $0.0001 par value, 250,000,000 shares authorized; 1,690,787 and 0 shares, respectively, issued and outstanding (excluding 20,881,715 and no shares subject to possible redemption) at December 31, 2020 and 2019, respectively | | | 169 | | | | - | |
| Class B common stock, $0.0001 par value, 20,000,000 shares authorized, 5,643,125 and 5,750,000 shares, respectively, issued and outstanding at December 31, 2020 and 2019, respectively | | | 564 | | | | 575 | |
| Additional paid-in capital | | | 10,695,690 | | | | 243,447 | |
| Retained earnings (accumulated deficit) | | | (5,696,420 | ) | | | (219,422 | ) |
| Total stockholders’ equity | | | 5,000,003 | | | | 24,600 | |
| Total liabilities and stockholders’ equity | | $ | 226,789,721 | | | $ | 338,600 | |
(in thousands, except share and per share amounts)
| | | | | | | | |
| | | | | | | |
| | | | | | | | |
| | | | | | | | |
Cash and cash equivalents | | $ | 445,146 | | | $ | 17,139 | |
| | | 2,598 | | | | 0 | |
| | | 264 | | | | 0 | |
| | | 19,245 | | | | 0 | |
Prepaid expenses and other current assets | | | 27,970 | | | | 848 | |
| | | | | | | | | |
| | | 495,223 | | | | 17,987 | |
Property, plant, and equipment, net | | | 14,311 | | | | 418 | |
| | | 10,265 | | | | 1,656 | |
Investment s in equity securities | | | 4,948 | | | | 122 | |
| | | 5,430 | | | | 822 | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | |
| | $ | 8,430 | | | $ | 215 | |
| | | 6,026 | | | | 1,062 | |
| | | 3,633 | | | | 560 | |
| | | 11,230 | | | | 2,608 | |
Current portion of lease liabilities | | | 1,886 | | | | 618 | |
| | | | | | | | | |
Total current liabilities | | | | | | | | |
| | | | | | | | | |
| | | | | | | | |
| | | 8,830 | | | | 1,181 | |
Private placement warrant liability | | | 15,228 | | | | — | |
| | | 103,761 | | | | — | |
| | | 1,296 | | | | — | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Commitments and contingencies (Note 1 4 ) | | | | | | | | |
| | | | | | | | |
Common stock, $0.0001 par value; 400,000,000 shares authorized, 247,758,412 and 166,125,000 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively . | | | 25 | | | | 17 | |
Additional paid-in capital | | | 403,016 | | | | 29,122 | |
| | | (28,117 | ) | | | (14,271 | ) |
Accumulated other comprehensive income (loss) | | | 373 | | | | (16 | ) |
| | | | | | | | | |
Total Hyzon Motors Inc. stockholders’ equity | | | 375,297 | | | | 14,852 | |
| | | (5,440 | ) | | | (91 | ) |
| | | | | | | | | |
Total Stockholders’ Equity | | | | | | | | |
| | | | | | | | | |
Total Liabilities and Stockholders’ Equity | | | | | | | | |
| | | | | | | | | |
The accompanying notes are an integral part of
thesethe consolidated financial statements.
HYZON MOTORS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | For the Year
Ended
December 31,
2020 | | | For the Year
Ended
December 31,
2019 | |
| | | | | | | |
| Operating expenses: | | | | | | |
| General and administrative expenses | | $ | 5,479,699 | | | $ | 1,780 | |
| Expensed offering costs | | | - | | | | 215,180 | |
| Loss from operations | | | (5,479,699 | ) | | | (216,960 | ) |
| | | | | | | | | |
| Other Income | | | | | | | | |
| Interest earned on marketable securities held in Trust Account | | $ | 2,701 | | | $ | - | |
| | | | | | | | | |
| Net loss | | $ | (5,476,998 | ) | | $ | (216,960 | ) |
| | | | | | | | | |
| Weighted average shares outstanding of Class A redeemable common stock, basic and diluted | | | 21,826,849 | | | | - | |
| | | | | | | | | |
| Basic and diluted net income per common share, Class A redeemable common stock | | $ | 0.00 | | | $ | - | |
| | | | | | | | | |
| Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted | | | 5,123,002 | | | | 5,000,000 | |
| | | | | | | | | |
| Basic and diluted net loss per common share, Class B non-redeemable common stock | | $ | (1.06 | ) | | $ | (0.04 | ) |
AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) –
December 31,
2020 | |
| | | | | | | | |
| | | | | | | | |
| | | 21,191 | | | | — | |
| | | 16,443 | | | | 1,446 | |
Selling, general , and administrative | | | 69,792 | | | | 12,785 | |
| | | | | | | | | |
| | | 107,426 | | | | 14,231 | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
| | | |
| | | | | | | | |
Change in fair value of private placement warrant liability | | | 4,167 | | | | — | |
Change in fair value of earnout liability | | | 84,612 | | | | — | |
Foreign currency exchange loss and other expense | | | (1,452 | ) | | | (108 | ) |
| | | (5,235 | ) | | | (37 | ) |
| | | | | | | | | |
Total other income (expense) | | | | | | | | |
| | | | | | | | | |
| | | | | | | | |
Less: Net loss attributable to noncontrolling interest | | | (5,439 | ) | | | (105 | ) |
| | | | | | | | | |
Net loss attributable to Hyzon | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign currency translation adjustment | | | 479 | | | | (20 | ) |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
Less: Comprehensive loss attributable to noncontrolling interest | | | (5,349 | ) | | | (109 | ) |
| | | | | | | | | |
Comprehensive loss attributable to Hyzon | | | | | | | | |
| | | | | | | | |
| | | |
Net loss attributable to Hyzon per share: | | | | | | | | |
| | $
| (0.07 | ) | | $ | (0.09 | ) |
| | $ | (0.07 | ) | | $ | (0.09 | ) |
| | | |
Weighted average common shares outstanding: | | | | | | | | |
| | | 203,897 | | | | 152,650 | |
| | | 203,897 | | | | 152,650 | |
The accompanying notes are an integral part of
thesethe consolidated financial statements.
HYZON MOTORS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM JANUARY 1, 2019 TO DECEMBER 31, 2020
| | | | | | | | | | | | | | | | | | Retained | | | | |
| | | | | | | | | | | | | | | Additional | | | Earnings | | | | |
| | | Class A Common Stock | | | Class B Common Stock | | | Paid-in | | | (Accumulated | | | Stockholders’ | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit) | | | Equity | |
| Balances, January 1, 2019 | | | - | | | $ | - | | | | 5,750,000 | | | $ | 575 | | | $ | 24,425 | | | $ | (2,462 | ) | | $ | 22,538 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (216,960 | ) | | | (216,960 | ) |
| Expense forgiveness from sponsor | | | - | | | | - | | | | - | | | | - | | | | 219,022 | | | | - | | | | 219,022 | |
| Balances as of December 31, 2019 | | | - | | | $ | - | | | | 5,750,000 | | | $ | 575 | | | $ | 243,447 | | | $ | (219,422 | ) | | $ | 24,600 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balances, January 1, 2020 | | | - | | | $ | - | | | | 5,750,000 | | | $ | 575 | | | $ | 243,447 | | | $ | (219,422 | ) | | $ | 24,600 | |
| Sale of Class A Common Stock to Public, net of underwriting discounts and offering costs | | | 22,572,502 | | | | 2,257 | | | | - | | | | - | | | | 212,752,794 | | | | - | | | | 212,755,051 | |
| Sale of Private Placement Warrants | | | - | | | | - | | | | - | | | | - | | | | 6,514,500 | | | | - | | | | 6,514,500 | |
| Forfeiture of Founder Shares | | | - | | | | - | | | | (106,875 | ) | | | (11 | ) | | | 11 | | | | - | | | | - | |
| Common stock subject to possible redemption | | | (20,881,715 | ) | | | (2,088 | ) | | | - | | | | - | | | | (208,815,062 | ) | | | - | | | | (208,817,150 | ) |
| Net loss | | | | | | | | | | | | | | | | | | | | | | | (5,476,998 | ) | | | (5,476,998 | ) |
| Balances as of December 31, 2020 | | | 1,690,787 | | | $ | 169 | | | | 5,643,125 | | | $ | 564 | | | $ | 10,695,690 | | | $ | (5,696,420 | ) | | $ | 5,000,003 | |
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Retained
Earnings
(Accumulated
Deficit) | | | Accumulated
Other
Comprehensive
Loss | | | Total Hyzon
Motors Inc.
Stockholders’
Equity (Deficit) | | | | | | Total
Stockholders’
Equity (Deficit) | |
| | | | | | | | | | | | | |
Balance at January 21, 2020 (Inception) | | | | | | | | | | | 0 | | | $ | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | |
Retroactive application of recapitalization | | | (83,750,000 | ) | | | (84 | ) | | | 148,405,000 | | | | 15 | | | | 69 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted balance, beginning of period | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of common stock, net of issuance costs of $1,024 | | | 0 | | | | 0 | | | | 17,277,000 | | | | 2 | | | | 18,474 | | | | — | | | | — | | | | 18,476 | | | | — | | | | 18,476 | |
Conversion of convertible notes | | | 0 | | | | — | | | | 443,000 | | | | 0 | | | | 500 | | | | — | | | | — | | | | 500 | | | | — | | | | 500 | |
| | | — | | | | — | | | | — | | | | — | | | | 10,079 | | | | — | | | | — | | | | 10,079 | | | | — | | | | 10,079 | |
Noncontrolling interest capital contribution | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 18 | | | | 18 | |
Net loss attributable to Hyzon | | | — | | | | — | | | | — | | | | — | | | | — | | | | (14,271 | ) | | | — | | | | (14,271 | ) | | | — | | | | (14,271 | ) |
Net loss attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (105 | ) | | | (105 | ) |
Foreign currency translation loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (16 | ) | | | (16 | ) | | | (4 | ) | | | (20 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reverse recapitalization transaction, net (Note 3) | | | — | | | | — | | | | 73,502,303 | | | | 7 | | | | 354,627 | | | | — | | | | — | | | | 354,634 | | | | — | | | | 354,634 | |
| | | — | | | | — | | | | 7,234,006 | | | | 1 | | | | (1 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
Exercise of stock options | | | — | | | | — | | | | 436,037 | | | | — | | | | 532 | | | | — | | | | — | | | | 532 | | | | — | | | | 532 | |
| | | — | | | | — | | | | — | | | | — | | | | 29,088 | | | | — | | | | — | | | | 29,088 | | | | — | | | | 29,088 | |
| | | — | | | | — | | | | 428,107 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Common stock issued for the cashless exercise of warrants | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
IP transaction – deemed distribution | | | — | | | | — | | | | — | | | | — | | | | (10,000 | ) | | | — | | | | — | | | | (10,000 | ) | | | — | | | | (10,000 | ) |
| | | — | | | | — | | | | — | | | | — | | | | (540 | ) | | | — | | | | — | | | | (540 | ) | | | — | | | | (540 | ) |
Issuance of Hongyun
Warrants | | | — | | | | — | | | | — | | | | — | | | | 188 | | | | — | | | | — | | | | 188 | | | | — | | | | 188 | |
Net loss attributable to Hyzon | | | — | | | | — | | | | — | | | | — | | | | — | | | | (13,846 | ) | | | — | | | | (13,846 | ) | | | — | | | | (13,846 | ) |
Net loss attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (5,439 | ) | | | (5,439 | ) |
Foreign currency translation loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 389 | | | | 389 | | | | 90 | | | | 479 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2021 | | | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Issuance of common stock, net of issuance costs of $1,024 and conversion of convertible notes have been retroactively restated to give effect to the recapitalization transaction. |
The accompanying notes are an integral part of
thesethe consolidated financial statements.
HYZON MOTORS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | For the Year Ended
December 31,
2020 | | | For the Year Ended
December 31,
2019 | |
| Cash flow from operating activities: | | | | | | |
| Net loss | | $ | (5,476,998 | ) | | $ | (216,960 | ) |
| Adjustments to reconcile net loss to net cash and used in operating activities: | | | | | | | | |
| Interest earned on marketable securities held in Trust Account | | | (2,701 | ) | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts payable | | | 1,324,257 | | | | 212,960 | |
| Accrued expenses | | | 3,572,935 | | | | - | |
| Prepaid expenses | | | (1,062,000 | ) | | | - | |
| Net cash used in operating activities | | | (1,644,507 | ) | | | (4,000 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Investment of cash in Trust Account | | | (225,725,020 | ) | | | - | |
| Net cash used in investing activities | | | (225,725,020 | ) | | | - | |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Proceeds from sale of Units, net of underwriting discounts paid | | | 221,210,520 | | | | - | |
| Proceeds from sale of Private Placement Warrants | | | 6,514,500 | | | | - | |
| Payment of offering costs | | | (371,093 | ) | | | - | |
| Payment of Sponsor note | | | (300,000 | ) | | | - | |
| Net cash provided by financing activities | | | 227,053,927 | | | | - | |
| | | | | | | | | |
| Net decrease in cash | | | (315,600 | ) | | | (4,000 | ) |
| Cash at beginning of year | | | 315,600 | | | | 319,600 | |
| Cash at end of year | | $ | - | | | $ | 315,600 | |
| | | | | | | | | |
| Supplemental disclosure of non-cash financing activities: | | | | | | | | |
| | | | | | | | | |
| Accrued offering costs | | $ | 175,000 | | | $ | 14,000 | |
| Forgiveness of debt - sponsor | | $ | - | | | $ | 219,022 | |
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) -
December 31,
2020 | |
Cash Flows from Operating Activities: | | | | | | | | |
| | $ | (19,285 | ) | | $ | (14,376 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 1,140 | | | | 185 | |
| | | 29,148 | | | | 9,983 | |
Loss on extinguishment of convertible notes | | | 107 | | | | — | |
| | | 5,224 | | | | — | |
| | | 188 | | | | — | |
Fair value adjustment of private placement warrant liability | | | (4,167 | ) | | | — | |
Fair value adjustment of earnout liability | | | (84,612 | ) | | | — | |
Changes in operating assets and liabilities: | | | | | | | | |
| | | (2,614 | ) | | | — | |
| | | (19,276 | ) | | | — | |
Prepaid expenses and other current assets | | | (22,970 | ) | | | (824 | ) |
| | | (1,023 | ) | | | 0 | |
| | | 8,164 | | | | 215 | |
| | | 4,966 | | | | 467 | |
| | | (290 | ) | | | 560 | |
| | | 8,684 | | | | 2,608 | |
| | | 1,425 | | | | — | |
| | | | | | | | | |
Net cash used in operating activities | | | (95,191 | ) | | | (1,182 | ) |
| | | | | | | | | |
Cash Flows from Investing Activities: | | | | | | | | |
Purchases of property and equipment | | | (14,525 | ) | | | (431 | ) |
Advanced payments for capital expenditures | | | (4,257 | ) | | | — | |
Investment in equity securities | | | (4,826 | ) | | | (122 | ) |
Investment in non-consolidated affiliates | | | (98 | ) | | | — | |
| | | | | | | | | |
Net cash used in investing activities | | | (23,706 | ) | | | (553 | ) |
| | | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | |
Proceeds from issuance of common stock , net of transaction costs | | | 0 | | | | 18,560 | |
Proceeds from Business Combination, net of redemption and transaction costs (Note 3) | | | 512,936 | | | | — | |
Payment f or purchase of Horizon IP | | | | | | | | |
Exercise of stock options | | | 532 | | | | — | |
Payment of finance lease liability | | | (203 | ) | | | (29 | ) |
| | | (133 | ) | | | — | |
| | | (540 | ) | | | — | |
Deferred transaction costs | | | 0 | | | | (137 | ) |
Proceeds from issuance of convertible notes | | | 45,000 | | | | 500 | |
| | | | | | | | | |
Net cash provided by financing activities | | | 550,692 | | | | 18,894 | |
| | | | | | | | | |
Effect of exchange rate changes on cash | | | 431 | | | | (20 | ) |
| | | | | | | | | |
Net change in cash and restricted cash | | | 432,226 | | | | 17,139 | |
| | | 17,139 | | | | — | |
| | | | | | | | | |
Cash and restricted cash—Ending | | | | | | | | |
| | | | | | | | | |
Supplemental schedule of non-cash investing activities and financing activities: | | | | | | | | |
Conversion of Legacy Hyzon Common Stock | | | 73 | | | | — | |
Recognition of earnout liability in Business Combination | | | 188,373 | | | | — | |
Recognition of Private Placement Warrant liability in Business Combination | | | 19,395 | | | | — | |
Horizon IP Agreement - Fee | | | 10,000 | | | | — | |
Conversion of convertible notes for common stock | | | 50,198 | | | | — | |
Acquisitions of property and equipment included in current liabilities | | | 61 | | | | — | |
The accompanying notes are an integral part of
thesethe consolidated financial statements.
HYZON MOTORS INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — 1. Nature of Business and Basis of Presentation
Description of
Organization and Business
OperationsOrganization and General
Silver Run
Hyzon Motors Inc. (“Hyzon” or the “Company”), formerly known as Decarbonization Plus Acquisition Corporation III(“DCRB”), headquartered in Honeoye Falls, New York, was incorporated in the State of Delaware on September 7, 2017. The Company is majority-owned by Hymas Pte. Ltd. (“Hymas”), which is majority-owned but indirectly controlled by Horizon Fuel Cell Technologies PTE Ltd., a Singapore company (“Horizon”). Hyzon assembles and supplies hydrogen fuel cell-powered commercial vehicles across the North American, Europe, China, and Australasia. In addition, Hyzon builds and fosters a clean hydrogen supply ecosystem with leading partners from feedstocks through production, dispensing and financing.
On February 8, 2021, legacy Hyzon Motors Inc. (“Legacy Hyzon”), incorporated in the State of Delaware on January 21, 2020, entered into a Business Combination Agreement and Plan of Reorganization (the “Business Combination��) with DCRB to effect a business combination between DCRB and Legacy Hyzon with DCRB Merger Sub Inc., a wholly owned subsidiary of DCRB, merging with and into Legacy Hyzon, with Legacy Hyzon surviving the merger as a wholly owned subsidiary of DCRB. The transaction was
formed for the purposeunanimously approved by DCRB’s Board of
effectingDirectors and was approved at a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similarspecial meeting of DCRB’s stockholders on July 15, 2021. On July 16, 2021, Legacy Hyzon completed its business combination with
one or more businesses (the “Initial Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). On August 18, 2020, the Company changed its name from Silver Run Acquisition Corporation III to Decarbonization Plus Acquisition Corporation (the “Company”).At December 31, 2020, the Company had not commenced any operations. All activity through December 31, 2020 relates to the Company’s formation and initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Initial Public Offering was declared effective on October 19, 2020. On October 22, 2020, the Company consummated the Initial Public Offering of 22,572,502 units (the “Units” and,DCRB. Concurrent with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the partial exercise by the underwriters of their over-allotment option in the amount of 2,572,502 units (the “Over-allotment Units”) on November 12, 2020, at $10.00 per Unit, generating gross proceeds of $225,725,020, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale of 6,514,500 warrants (the “Private Placement Warrants”), including 514,500 warrants as a result of the underwriters’ partial exercise of their over-allotment option on November 12, 2020, at a price of $1.00 per Private Placement Warrant in a private placement to Decarbonization Plus Acquisition Sponsor, LLC (the “Sponsor”), the Company’s independent directors and an affiliate of the Company’s chief executive officer, generating gross proceeds of $6,514,500, which is described in Note 4.
Transaction costs amounted to $12,969,969, consisting of $4,514,500 of underwriting fees, $7,900,376 of deferred underwriting fees and $555,093 per equity of other offering costs. In addition, at December 31, 2020, there was no cash held outside of the Trust Account (as defined below) available for working capital purposes, but the Company has access to working capital loans from the Sponsor, which is described in Note 4.
Following the closing of the Initial Public Offering on October 22, 2020 and the partial exercise of the underwriters’ over-allotment option on November 12, 2020, an amount of $225,725,020 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) located in the United States. The proceeds held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Initial Business Combination; (ii) the redemption of any Public Shares being sold in the Initial Public Offering that have been properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of its obligation to redeem 100% of Public Shares if it does not complete the Initial Business Combination, within 24 months from the closing of the Initial Public Offering or (B) with respectDCRB changed its name to any other provision relating“Hyzon Motors Inc.” and Legacy Hyzon changed its name to the rights of holders of Public Shares or pre-Initial Business Combination activity; and (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an Initial Business Combination within 24 months from the closing of the Initial Public Offering (subject to the requirements of law). The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the Initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an Initial Business Combination.
The Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under the Nasdaq Capital Market rules. If the Company seeks stockholder approval, it will complete its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A common stock will be recorded at redemption amount and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with the Financial Accounting Standards Board (“FASB“Hyzon Motors USA Inc.”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination within 24 months from the closing of the Initial Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, 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 us to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Sponsor and the Company’s independent directors and an affiliate of the Company’s chief executive officer have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company fails to complete the Initial Business Combination within 24 months of the closing of the Initial Public Offering. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
In the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, upon the completion of the Initial Business Combination, subject to the limitations described herein.
Going Concern and Liquidity
As of December 31, 2020, the Company had no cash balance, but the Company has access to working capital loans from the Sponsor, which is described in Note 4. This excludes interest income of approximately $2,701 from the Company’s investment in the Trust Account which is available to the Company for tax obligations. Through December 31, 2020, the Company has not withdrawn any interest income from the Trust Account to pay its income and franchise taxes.
Until the consummation of an Initial Business Combination, the Company will be using funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Initial Business Combination.
If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to an Initial Business Combination. Moreover, the Company may need to obtain additional financing either to complete an Initial Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of an Initial Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Initial Business Combination.
The Company does not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these financial statements. 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 the Company has access to funds from the Sponsor, which is described in Note 4, and the Sponsor has the financial ability to provide such funds, that are sufficient to fund the working capital needs of the Company until the earlier of the consummation of the Business Combination and one year from the date of issuance of these financial statements.
These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant Accounting Policies
The accompanying
consolidated financial statements
and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“
GAAP”U.S. GAAP”)
and pursuant to the
rulesrequirements and
regulations of the SEC.Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a)rules of the Securities Act,and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance refers to U.S. GAAP as modified byfound in U.S. Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the JOBS Act,Financial Accounting Standards Board (FASB).
Principles of Consolidation
The consolidated financial statements reflect the Company’s accounts and
it may take advantageoperations, those 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 complyits wholly owned subsidiaries and subsidiaries in which the Company has a controlling financial interest. In accordance with the
independent registered publicprovisions of ASC 810,, we consolidate any variable interest entity (“VIE”) of which we are the primary beneficiary. We assess our relationships with all the VIEs on an ongoing basis to evaluate whether we continue to be the primary beneficiary. All intercompany accounts and transactions are eliminated upon consolidation. Our share of earnings or losses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting
firm attestation requirements of Section 404when we are able to exercise significant influence over the operating and financial decisions of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationaffiliate. Investments in
the Company’s periodic reports and proxy statements, and exemptions from the requirementsother companies at carried at cost. Use of
holding a non-binding 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. Estimates
The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’sconsolidated 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.Net Loss Per Common Share
Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period, excluding shares of common stock subject to forfeiture, plus, to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. Weighted average shares were reduced for the effect of an aggregate of 106,875 of Class B shares of common stock that were forfeited as the over-allotment option for the Initial Public Offering was not exercised in full or in part by the underwriters (see Note 3). At December 31, 2020, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted loss per common share is the same as basic loss per common share for the periods.
The Company’s statements of operations include a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account (net of applicable franchise and income taxes of approximately $2,701 for the year ended December 31, 2020, by the weighted average number of redeemable common stock outstanding for the period or since original issuance. Net loss per common share, basic and diluted for non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
The following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
| | | Year Ended
December 31, 2020 | | | Year Ended
December 31,
2019 | |
| Redeemable Common Stock | | | | | | |
| Numerator: Earnings allocable to Redeemable Common Stock | | | | | | |
| Interest Income | | $ | 2,701 | | | $ | — | |
| Income and Franchise Tax | | $ | (2,701 | ) | | $ | — | |
| Net Loss | | $ | (0 | ) | | $ | — | |
| Denominator: Weighted Average Redeemable Common Stock | | | | | | | | |
| Redeemable Common Stock, Basic and Diluted | | | 21,826,849 | | | | — | |
| Loss/Basic and Diluted Redeemable Common Stock | | $ | 0.00 | | | $ | — | |
| | | | | | | | | |
| Non-Redeemable Common Stock | | | | | | | | |
| Numerator: Net Loss minus Redeemable Net Loss | | | | | | | | |
| Net Loss | | $ | (5,476,998 | ) | | $ | (216,960 | ) |
| Redeemable Net Loss | | $ | — | | | $ | — | |
| Non-Redeemable Net Loss | | $ | (5,476,998 | ) | | $ | (216,960 | ) |
| Denominator: Weighted Average Non-Redeemable Common Stock | | | | | | | | |
| Non-Redeemable Common Stock, Basic and Diluted | | | 5,123,002 | | | | 5,000,000 | |
| Loss/Basic and Diluted Non-Redeemable Common Stock | | $ | (1.06 | ) | | $ | (0.04 | ) |
Note: As of December 31, 2020, and 2019, basic and diluted shares are the same as there are no securities that are dilutive to the Company’s common stockholders.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primarily due to their short term nature.
Use of Estimates
The preparation of these financial statementsbeen prepared in conformity with U.S. GAAP, requires the Company’swhich require 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 thesethe consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Accordingly, the actualperiod. Actual results could differ from those estimates.
Cash
The Company’s Chief Executive Officer has been identified as the chief operating decision maker. As the chief operating decision maker reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance, the Company has determined that it operates in one operating and reportable segment.
Liquidity and Capital Resources
The Company has incurred losses from operations since inception. The Company incurred net losses of $19.3 million and $14.4
million for the year ended December 31, 2021 and the period from January 21, 2020 (inception) through December 31, 2020, respectively. Accumulated deficit amounts to
$28.1 million and $14.3 million as of December 31, 2021 and 2020, respectively. Net cash
equivalentsCash includes amounts held at banks with an original maturityused in operating activities was $95.2 million and $1.2
million for the year ended December 31, 2021 and the period from January 21, 2020 (inception) through December 31, 2020, respectively.
On July 16, 2021, the Company received
$512.9
million in cash, net of less than three months.redemption and transaction costs as a result of the Business Combination (see Note 3, Business Combination). As of December 31, 2020,2021, the Company has
$445.1
million in unrestricted cash. Management expects that the Company’s current source of liquidity including cash, after taking consideration of the current projections of cash flow used in operating and investing activities, will be sufficient to meet its liquidity requirements for at least one year from the issuance date of these consolidated financial statements. Based on the above considerations, the Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.
The Company is subject to a variety of risks and uncertainties common to early-stage companies with a history of losses and are expected to incur significant expenses and continuing losses for the foreseeable future. The risks and uncertainties include, but not limited to, further development of its technology, marketing and distribution channels, further development of its supply chain and manufacturing, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and the ability to secure additional capital to fund operations.
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation in the consolidated financial statements and the accompanying notes.
Note 2. Summary of Significant Accounting Policies
The Company enters into sales contracts with customers for the purchase of the Company’s products and service including fuel cell systems, fuel cell electric vehicles (“FCEVs”), parts, product support, and other related services. The Company accounts for revenue in accordance with ASC Topic 606,Revenue from Contracts with Customers
In general, payment terms for sales of FCEVs to certain customers have included installment billing terms to fund the Company’s working capital requirements. The Company does not adjust the transaction price for a significant financing component when the performance obligation is expected to be fulfilled within a year as the amount is not material. In China, the Company has granted extended payment terms on selected receivables (see Note 4, Revenue). The Company does not include a right of return on its products other than rights related to standard warranty provisions that permit repair or replacement of defective goods.
The Company recognizes the incremental costs of obtaining contracts, including commissions, as an expense when incurred as the contractual period of our arrangements are expected to be one year or less. Amounts billed to customers related to shipping and handling are classified as Revenue, and the Company has elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories have transferred to the customer as an expense in Cost of revenue.
Accounts receivable primarily arise from sales of FCEVs to customers in the normal course of business. They are stated at the amount billed or billable to customers, net of any allowance for credit losses. An allowance for credit losses accounts is established through a charge to Selling, general,
and administrative (“SG&A”) expenses. The allowance is an estimate of the amount required to absorb probable losses on receivables that may become uncollectible. The receivables are written-off when amounts due are determined to be uncollectible. Since the date of inception, the Company has not experienced significant losses or past due amounts on trade and other receivables. As of December 31,
2019,2021 and 2020, the Company
held $0 recorded 0 allowance for credit losses.
Concentration of Supply Risk
The Company is subject to risks related to its dependence on suppliers as some of the components and $315,600, respectively,technologies used in cash. Additionally,the Company’s products are produced by a limited number of sources or contract manufacturers. The inability of these suppliers to deliver necessary components in a timely manner, at prices and quantities acceptable to the Company may cause the Company to incur transition costs to other suppliers and could have a material and adverse impact on the Company’s business, growth and financial and operating results. The Company currently relies and expects to rely on Horizon as a single source supplier of hydrogen fuel cell systems until completion of Hyzon hydrogen fuel cell manufacturing facilities.
In most cases, products that customers purchase from us are covered by a
one to six-year limited product warranty. At the time products are sold, the Company estimates the cost of expected future warranty claims and accrues estimated future warranty costs in Cost of revenue. These estimates are based on industry information, actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Company’s relatively short history, and changes to the historical or projected warranty experience may cause changes to the warranty reserve when the Company accumulates more actual data and experience in the future. The Company will periodically review the adequacy of its product warranties and adjust, if necessary, the warranty percentage and accrued warranty liability for actual historical experience. The Company accrued warranty obligations of $1.1
million within Other liabilities as of December 31, 2020 and December 31, 2019, the Company held cash equivalents2021.
Leases
Common stock subject to possible redemption
The Company accounts for
its common stock subject to possible redemptionleases in accordance with
the guidance in ASC Topic
480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption842,(“ASC 842”). The Company determines if an arrangement is
classified asor contains a
lease at contract inception. The Company recognizes a right of use (ROU) asset and a lease liability
instrument(i.e., finance obligation) at the lease commencement date. For operating and finance leases, the lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date and is
subsequently measured at
fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either withinamortized cost using the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outsideeffective interest method. As most of the Company’s
controlleases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.The Company has operating or finance leases for office space, research and subject to occurrencedevelopment space, warehouse and manufacturing space. For finance leases, lease liabilities are increased by interest and reduced by payments each period, and the right of uncertain future events. Accordingly, at December 31, 2020, common stock subject to possible redemptionuse asset is presented as temporary equity, outsideamortized over the lease term. For operating leases, interest on the lease liability and the amortization of the stockholders’ equity sectionright of use asset results in straight-line rent expense over the lease term.
The lease term for all of the Company’s consolidatedleases includes the noncancelable period of the lease, plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
Lease payments included in the measurement of the lease liability comprise fixed payments, and the exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise the option. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.
The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. The Company has elected not to recognize leases with original lease terms of 12 months or less (“short-term leases”) on the Company’s balance
sheets.Offering Costs
Offering costs consistsheet. Short-term lease cost was immaterial for the year ended December 31, 2021 and for the period from January 21, 2020 (inception) through December 31, 2020.
Cash includes cash held in banks. The Company deposits its cash with high credit quality institutions to minimize credit risk exposure.
Restricted cash is pledged as security for letters of legal, accounting, underwriting feescredit or other collateral amounts established by the Company for certain lease obligations, corporate credit cards, and other costs incurred throughcontractual arrangements. The Company presents restricted cash separately from unrestricted cash on the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs amounting to $11,555,093 were initially charged to stockholders’ equity upon the completion of the Initial Public Offering. In connection with the sale of the Over-allotment Units, the Company incurred an additional $514,500 of underwriting fees and $900,376 of deferred underwriting fees.Consolidated Balance Sheets, included within Other assets. As of December 31, 2020, and2021, the Company has
$4.2 million in restricted cash. The Company had 0 restricted cash as of December 31, 2019,2020.
Inventories are stated at the lower of cost and net realizable value (“NRV”). Cost is determined using the first-in, first-out method (FIFO) for all inventories. We write-down inventory for any excess or obsolete inventoried or when we believe that the net realizable value of inventories is less than the carrying value. Inventory write-downs are recognized in Cost of revenue.
Property, Plant, and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Major improvements that extend the useful life or add functionality are capitalized. Repair and maintenance costs are expensed as incurred. The cost of properties sold or otherwise disposed of and the related accumulated depreciation and amortization are eliminated from the balance sheet accounts at the time of disposal and resulting gains and losses are included as a component of operating income. Depreciation is recorded on a straight-line basis over the shorter of the lease term or the following estimated useful lives of the assets.
| | |
| | |
Buildings and improvements | | 30 years |
| | 5 years |
| | 7 years |
| | 3 - 5 years |
| | 5 years |
Investments in Equity Securities
The Company owns common shares, participation rights, and options to purchase additional common shares in certain private companies. The Company does not have control and does not have the ability to exercise significant influence over operating and financial policies of these entities. The investment does not have a readily determinable fair value and thus the investment is measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. Changes in the fair values of the investments are recorded in Other income (expense) on the Consolidated Statements of Operations and Comprehensive Loss (see Note 10, Investments in Equity Securities).
Investments in Non-consolidated Affiliates
Equity method investments are recorded at original cost and adjusted periodically to recognize (i) the Company’s proportionate share of the investees’ net income or losses after the date of investment, (ii) additional contributions made and dividends or distributions received, and (iii) impairment losses resulting from adjustments to fair value.
The Company assesses the potential impairment of equity method investments and determines fair value based on valuation methodologies, as appropriate, including the present value of estimated future cash flows, estimates of sales proceeds, and market multiples. If an investment is determined to be impaired and the decline in value is other than temporary, a write-down is recorded as appropriate.
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
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 FASB ASC 480,Distinguishing Liabilities from Equity
Derivatives and Hedging—Contracts
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 adjusted to the current fair value at 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 Consolidated Statements of Operations and Comprehensive Loss (see Note 16, Stockholders’ Equity).
As a result of the Business Combination, the Company
had $0recognized earnout shares to Legacy Hyzon’s common stockholders as a liability. Pursuant to ASC 805-10,(“ASC 805”) the Company determined that the initial fair value of the earnout shares should be recorded as a liability with the offset recorded to additional paid-in capital and
$23,000, respectively,with subsequent changes in fair value recorded in the Consolidated Statements of
deferred offering costsOperations and Comprehensive Loss at each reporting period. The earnout shares to other holders of outstanding equity awards are accounted for under ASC 718,(“ASC 718”), as these earnout shares are compensatory in nature, as they relate to services provided or to be provided to the Company. Impairment of Long-Lived Assets
The Company assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The assessment of possible impairment is based on the
accompanying balance sheets.Income Taxes
ability to recover the carrying value of the assets from expected undiscounted future cash flows from operations. An impairment charge would be recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the asset. Fair value is determined using either the market or sales comparison approach, cost approach or anticipated cash flows discounted at a rate commensurate with the risk involved. The Company followsdid 0t
record any impairment loss for the year ended December 31, 2021, nor for the period from January 21, 2020 (inception) through December 31, 2020.
Income taxes are accounted for under the asset and liability
method of accounting for income taxes under FASB ASC 740, “Income Taxes.”method. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between
thesethe financial
statementsstatement carrying amounts of existing assets and liabilities and their respective tax
bases.basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that
includedincludes the enactment date.
Valuation allowances are established, when necessary,A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets
to the amount expected to be realized.FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must beif it is more likely than not tothat such assets will not be realized.
The Company accounts for uncertain tax positions in accordance with ASC Topic 740,(“ASC 740”), which clarifies the accounting for uncertainty in tax positions. This interpretation requires that an entity recognizes in its consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination,
by taxing authorities. There were no unrecognizedbased on the technical merits of the position. Recognized income tax
benefits, deferred tax assetspositions are measured at the largest amount that is greater th an
50%
likely of being realized. Changes in recognition or
valuations against them as of December 31, 2020 and December 31, 2019, respectively.measurement are reflected in the period in which the change in judgment occurs. The Company
recognizes accruedhas elected to classify interest and penalties related to unrecognized tax benefits,
if and when required, as
part of income tax
expense in the Consolidated Statements of Operations and Comprehensive Loss.
Foreign Currency Translation and Transactions
The functional and reporting currency of each of the Company’s foreign subsidiaries is determined based on the primary currency in which they operate and appropriate economic factors. For the translation from the applicable foreign currencies to U.S. dollars, period-end exchange rates are utilized for balance sheet accounts and weighted average exchange rates for each period for revenue and expense accounts. The cumulative translation adjustments are recognized as a component of Accumulated other comprehensive loss.
For all transactions denominated in a currency other than a subsidiary’s functional currency, exchange rate gains and losses are recognized in earnings in the period incurred. Net foreign currency transaction losses of $1.3
million and a negligible amount were recorded for the year ended December 31, 2021 and for the period from January 21, 2020 (inception) through December 31, 2020, respectively. These amounts are recorded in Other income (expense) on the Consolidated Statements of Operations and Comprehensive Loss.
Incentive plans that provide for the granting of stock-based compensation to employees, directors, and consultants are described in Note 15, Stock-based Compensation Plans. The Company recognizes compensation expense for its stock-based compensation programs, which can include stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and performance awards.
The fair value of stock option awards with only service and/or performance conditions is estimated on the grant or offering date using the Black-Scholes option-pricing model. Assumptions used to estimate compensation expense include fair value of common stock, expected price volatility of common stock, expected term, risk-free interest rates, and expected dividend yield. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, net of actual forfeitures in the period.
For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable. In the period in which the qualifying event is probable, we will record a cumulative one-time stock-based compensation expense determined using the grant-date fair values.
Research and development costs arise from ongoing activities associated with improving existing products and advancing development of new and next generation products. Research and development costs that do not meet the requirements to be recognized as an asset, as the associated future benefits are uncertain and no alternative future use is identified, are expensed as incurred.
Selling, General,
and Administrative Expense Selling, general, and administrative expense consist of personnel costs, depreciation and amortization, sales and marketing costs, and facilities expense. NoThese costs are recognized when incurred.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of two components, net income (loss) and comprehensive income (loss). Foreign currency translation adjustments are reported in Comprehensive income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Variable Interest Entity Arrangements
The Company performs both qualitative and quantitative analysis of its variable interests, including loans, guarantees, and equity investments, to determine if the Company has any variable interests in variable interest entities. Qualitative analysis is based on an evaluation of the design of the entity, its organizational structure including decision maki
ng ability, and financial agreements. Quantitative analysis is based on the entity’s forecasted cash flows. U.S. GAAP requires a reporting entity to consolidate a variable interest entity when the reporting entity has a variable interest that provides it with a controlling financial interest in the variable interest entity. The entity that consolidates a variable interest entity is referred to as the primary beneficiary of that variable interest entity. The Company uses qualitative and quantitative analyses to determine if it is the primary beneficiary of variable interest entities.
Hyzon entered into a joint venture agreement (the “JV Agreement”) with Holthausen Clean Technology Investment B.V. (“Holthausen”) (together referred to as the “Shareholders”) to establish a venture in the Netherlands called Hyzon Motors Europe B.V. (“Hyzon Europe”). The Shareholders combined their resources in accordance with the JV Agreement to mass commercialize fuel cell trucks within the European Union and nearby markets such as the United Kingdom, the Nordic countries, and Switzerland through Hyzon Europe. Hyzon and Holthausen have
50.5% and
49.5% ownership interest in the equity of Hyzon Europe, respectively.
determined it is the primary beneficiary of Hyzon Europe because it serves as the manager of the Hyzon Europe’s operations, for which it owns 50.5%, thereby giving the Company the power
of the Hyzon Europe that most significantly impact its economic performance. The Company also has exposure to the losses of the entity and the right to receive benefits from the entity that could potentially be significant to the entity as a result of its equity interest. The Consolidated Balance Sheets after elimination of any intercompany transactions and balances include assets of $50.7 million and $1.0 million as of December 31, 2021 and 2020, respectively, and liabilities of $15.9 million and $1.2 million as of December 31, 2021 and 2020, respectively, related to Hyzon Europe. The noncontrolling interest represents Holthausen’s ownership interest in Hyzon Europe.
On October 18, 2021, the Company’s wholly owned subsidiary, Hyzon Automotive Technology Co., Ltd. (“Hyzon China”) entered into a joint venture agreement (the “Foshan JV Agreement”) with Foshan Zhongbang Earthwork Engineering Co., Ltd. (“FSZB”) and a private citizen of People’s Republic of China (together referred to as the “Foshan JV Shareholders”) forming Foshan Hyzon New Energy Technology Co., Ltd. (“Hyzon Foshan”). Foshan JV Shareholders engages in the commercial sales, operation, leasing and promotion of fuel cell muck-truck, mixer-truck and other construction vehicles within Foshan City, Guangdong Province. Hyzon, FSZB, and the private citizen shareholder have a 51.0%, 44.0%, and 5.0% interest in the equity of the Company, respectively.
The Company determined it is primary beneficiary of Hyzon Foshan, with 51.0% control of shareholder voting, thereby giving the Company the power to direct activities of Hyzon Foshan. The Company also has exposure to the losses of the entity and the right to receive benefits from the entity that could potentially be significant to the entity as a result of its equity interest. The Consolidated Balance Sheets after elimination of any intercompany transactions and balances include assets of $1.6
million and de minimis liabilities as of December 31, 2021, related to Hyzon Foshan. The noncontrolling interest represents the other joint venture partners’ ownership interest in Hyzon Foshan.
Net Income (Loss) Per Share
Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) by the weighted average number of common shares and all potential common shares outstanding, unless the impact would be anti-dilutive, during each period presented.
The diluted net income (loss) per share attributable to common stockholders’ calculation recognizes the dilution that would occur if stock options, other stock-based awards or other contracts to issue common stock were exercised or converted into shares using the treasury stock method (see Note 18, Loss Per Share).
Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet adopted
In October 2021, the FASB issued ASU No. 2021-08,Business Combination (Topic 805)
Recently adopted accounting pronouncements
In November 2021, the FASB issued ASU No. 2021-10,Government Assistance (Topic 832)
amounts
applicable to each financial statement line item and the significant terms and conditions of the transactions, including commitments and contingencies. The ASU is effective for annual periods beginning after December 15, 2021. Early application of the amendments is permitted. The disclosure requirements can be applied either retrospectively or prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application. The ASU does not have and is currently not expected to have a material impact on the consolidated financial statements. The Company considers the applicability and impact of all ASUs. The Company assessed ASUs not listed above and determined that they either were not applicable or were not expected to have a material impact on the consolidated financial statements.
Note 3. Business Combination
As discussed in Note 1, on July 16, 2021, Legacy Hyzon consummated the transaction contemplated by the Business Combination. Immediately upon the completion of the Business Combination and the other transactions contemplated by the Business Combination, Legacy Hyzon became a direct, wholly owned subsidiary of DCRB. In connection with these transactions, DCRB changed its name to “Hyzon Motors Inc.”
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, with no goodwill or other intangible assets recorded and the net assets of Legacy Hyzon consolidated with DCRB at historical cost. Under this method of accounting, DCRB is treated as the “acquired” company for financial reporting purposes. The reverse recapitalization is retrospectively adjusted in the consolidated statements of stockholders’ equity to reflect the Company’s equity structure for all periods presented.
As a result of the Business Combination, each share of common stock of Legacy Hyzon, par value $0.001 per share, was converted to 1.772shares of Class A common stock (the “Exchange Ratio”), par value
$0.0001per
share of the Company, resulting in the issuance of approximately 173.4 million shares of Class A common stock. Additionally, the Company reserved for issuance approximately 21.7 million shares of Class A common stock in respect to outstanding options and RSUs issued in exchange for options, RSUs and warrants of the Company.
Immediately prior to the Business Combination, Legacy Hyzon issued to Hymas approximately 4.1 million shares of Legacy Hyzon common stock without any consideration, which was converted to approximately 7.2 million of Class A common stock.
DCRB held subscription agreements with certain investors to issue and sell an aggregate of 35,500,000 shares of Class A common stock of DCRB for $10.00 per share for an aggregate commitment of $355,000,000 (the “PIPE Financing”). At the closing of the Business Combination, DCRB consummated the PIPE Financing, and those proceeds became part of the Company’s
Pursuant to the terms of the Convertible Notes described in Note 9, immediately prior to the Business Combination the outstanding principal
of $45 million as well as the accrued interest on the Convertible Notes automatically converted into shares of the Company at a price per share equal to 90% of the price per share paid by the PIPE Financing investors, and upon the closing, converted into 5,022,052 shares of common stock of the post-combination company.In accordance with an agreement executed in
July 2020, Ascent Funds Management LLC (“Ascent”) was granted options to purchase shares of Legacy Hyzon common stock (the “Ascent Options”) at an exercise price of $2.73 per share. Immediately prior to the consummation of the Business Combination, the Ascent Options were automatically exercised in full on a cashless basis into approximately 3.9 million shares of Legacy Hyzon common stock, which converted into approximately 6.9 million shares of Class A common stock in connection with the Business Combination. Immediately after giving effect to the Business Combination, PIPE Financing, Convertible Note conversion, and Ascent Options exercise described above, there were 246,994,209 shares of Class A common stock of the Company issued and outstanding.
The number of shares of common stock issued immediately following the consummation of the Business Combination:
| | | | |
| | | |
| | | 20,483,179 | |
| | | 5,643,125 | |
| | | | |
| | | | |
Conversion of Ascent options (Post-Cashless Exercise)
| | | 6,871,667 | |
Conversion of convertible notes
| | | 5,022,052 | |
| | | 35,500,000 | |
| | | | |
Reverse recapitalization transaction
| | | | |
Legacy Hyzon Shares after conversion(1)
| | | | |
Total shares of Common Stock immediately after Business Combination
| | | | |
| | | | |
| (1) | The number of Legacy Hyzon shares was determined from the 97,897,396 shares of Legacy Hyzon common stock outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio of 1.772. All fractional shares were rounded down. |
The following table reconciles the elements of the Business Combination to the Consolidated Statements of Cash Flows for the year ended December 31, 2021 (in thousands):
| | | | |
| | | |
Cash – DCRB trust and cash, net of redemptions and liabilities recorded by DCRB of $13.5 million | | $ | 191,181 | |
Cash – PIPE Financing, net of transaction costs of $14.2 million | | | 340,797 | |
Less: transaction costs allocated to equity | | | (19,042 | ) |
| | | | | |
Effect of Business Combination, net of redemption and transaction costs | | | | |
| | | | | |
The Company issued equity classified common shares and certain liability classified earnout shares. Transaction costs of $
6.4million attributable to the liability classified earnout shares were expensed. The rest was attributable to the equity classified common shares and recorded as a reduction to Additional paid-in capital in the Consolidated Balance Sheets.
The following table reconciles the elements of the Business Combination to the Consolidated Statements of Changes in Stockholders’ Equity for the year ended December 31, 2021 (in thousands):
| | | | |
| | | |
Cash – DCRB trust and cash, net of redemptions and liabilities recorded by DCRB of $13.5 million | | $ | 191,181 | |
Cash – PIPE Financing, net of transaction costs of $14.2 million | | | 340,797 | |
Conversion of convertible notes into common stock | | | 50,198 | |
Recognize earnout liability | | | (188,373 | ) |
Recognize Private Placement Warrants liability | | | (19,395 | ) |
Recapitalization of Legacy Hyzon common shares | | | 83 | |
Less: transaction costs allocated to equity | | | (19,857 | ) |
| | | | | |
Effect of Business Combination, net of redemption and transaction
costs | | | | |
| | | | | |
On October 22, 2020, DCRB consummated the Initial Public Offering of 22,572,502 units and each unit consists of one share of Class A common stock and one-half of one public warrants (the “Public Warrants”). Simultaneously with the closing of the Initial Public Offering, DCRB consummated the private sale of 6,514,500 warrants (the “Private Placement Warrants”), including 514,500 warrants as a result of the underwriters’ partial exercise of their over-allotment option on November 12, 2020, at a price of $1.00 per Private Placement Warrant in a private placement to Decarbonization Plus Acquisition Sponsor, LLC (the “Sponsor”), DCRB’s independent directors and an affiliate of DCRB’s chief executive officer. At the closing of the Business Combination, DCRB and the Sponsor entered into a note agreement, whereby the Sponsor agreed to loan DCRB an aggregate of $1,500,000 to cover working capital requirements. The note agreement converted at the Business Combination date into 1,500,000 additional Private Placement Warrants.Upon the closing of the Business Combination, Hyzon assumed these outstanding warrants. See Note 16, Shareholders’ Equity.
Following the closing of the Business Combination, holders of the Company’s legacy common stock and outstanding equity awards (including warrant, stock option and RSU holders) were granted the right to
receive up to an aggregate amount of 23,250,000 shares of Class A common stock
that would vest in
three tranches of (i)
9,000,000, (ii)
9,000,000and (iii)
5,250,000shares if the trading price of the common stock of the Company achieves $
18, $
20, and $
35, respectively, as its last reported sales price per share for any
20trading days within any
30consecutive trading day period within
five yearsfollowing the closing date of the Business Combination, provided that in no event will the issuance of the
5,250,000earnout shares occur prior to the one-year anniversary of the closing date. Upon forfeiture of underlying unvested equity awards prior to occurrence of targeted trading price noted above, the associated earnout shares shall be allocated pro-rata among the remaining eligible Company’s common stock and equity awards holders.
The Company recognized earnout shares to Legacy Hyzon’s common stockholders as a liability. The earnout liability was $103.8 million and $188.4
million as of December 31, 2021 and at the close of the Business Combination, respectively. The change in earnout liability was recorded within other income inthe
Consolidated Statements of Operations and Comprehensive Loss. The Company recognized the earnout shares to other equity holders as separate and incremental awards from other equity holders’ underlying stock-based compensation awards in accordance with ASC 718.
Certain earnout awards accounted for under ASC 718 were vested at the time of grant, and therefore recognized immediately as compensation expense. Certain other earnout awards accounted for under ASC 718 contained performance and market-based vesting conditions, and as the performance conditions are not deemed probable at December 31, 2021, no compensation expense has been recorded related to these awards. Total compensation expense recorded for the year ended December 31, 2021 related to earnout awards was $13.1 million.
For the year ended December 31, 2021, the Company recognized $6.0
million in sales of FCEVs, of which
$2.2
million was recognized in the European region an
d $3.8
million was recognized in China. See Note 17, Related Party Transactions, discussing the assignment of certain sales contracts from our related party Holthausen. The Company had not recognized any revenue for the periodfrom
January 21, 2020 (inception) through December 31, 2020. In accordance with ASC 606, we are required to evaluate customers’ ability and intent to pay substantially all of the consideration to which the Company is entitled in exchange for the vehicles transferred to the customer, i.e., collectability of contracts with customers. Certain of our customers in China are special purpose entities established in response to China’s national hydrogen fuel cell vehicle pilot program. While in the Company’s estimation these customers have strong business plans and management teams, in consideration of these customers’ limited operating history and extended payment terms in their contracts, the Company determined the collectability criterion is not met with respect to contract existence under ASC 606, and therefore, an alternative model of revenue recognition has been applied to this arrangement.
million of revenue recognized under these arrangements is equal to the consideration received as of December 31, 2021, as such amounts are non-refundable, and the Company has transferred control of the vehicles delivered to the customer. As of December 31, 2021, the Company is entitled to million in future payments for vehicles delivered in 2021. The Company will continue to monitor these customers and evaluate the collectability criterion as of each reporting period.
The total cost of FCEVs delivered to these customers in China were recorded within Cost of revenue in the Consolidated Statements of Operations and Comprehensive Loss since the Company no longer has the control of these FCEVs.
We have established relationships with a number of customers, many of whom could unilaterally terminate their relationship with us or materially reduce the amount of business they conduct with us at any time. Market competition, customer requirements, customer financial condition and customer consolidation through mergers or acquisitions also could adversely affect our ability to continue or expand these relationships. There is no guarantee that we will be able to retain or renew existing agreements, maintain relationships with any of our customers on acceptable terms or at all or collect amounts owed to us from insolvent customers. The loss of one or more of our major customers could adversely affect our business, financial condition and results of operations.
For the year ended December 31, 2021, the Company’s top two customers made up
of revenue, respectively. As of December 31, 2021, three customers made up 39.4%, 19.6%, and 13.0% of accounts receivable, respectively.
Contract liabilities relate to the advance consideration invoiced or received from customers for products and services prior to satisfying a performance obligation or in excess of amounts allocated to a previously satisfied performance obligation. These amounts are included within Contract liabilities in the Consolidated Balance Sheets.
Significant changes in the contract liabilities balances are as follows (in thousands):
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) –
December 31,
2020 | |
Contract liabilities - beginning of period | | | | | | $
| | |
Increases net of amounts recognized as revenue during the
period | | | 8,622 | | | | 2,608 | |
Revenue recognized, included in the contract liability balance in the beginning of the period | | | 0 | | | | 0 | |
Contract liabilities - end of period | | | | | | | | |
Remaining Performance Obligations
The transaction price associated with remaining performance obligations related to binding orders for commercial vehicles and other contracts with customers was $22.4 million and $10.0 million as of December 31, 2021 and December 31, 2020, respectively. The Company expects to recognize substantially all its remaining performance obligations as revenue over the next 12 months.
Inventory consisted of the following (in thousands):
We write-down inventory for any excess or obsolete inventories or when we believe that the net realizable value of inventories is less than the carrying value. Inventory write-downs recognized in cost of revenue for the year ended December 31, 2021 were nil. The Company had no inventory as of December 31, 2020.
Note 6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| | | | | | | | |
| | | | | | | |
Deposit for fuel cell components (see Note 1 7 ) | | $ | 5,008 | | | $ | 0 | |
Vehicle inventory deposits | | | 7,907 | | | | 577 | |
Production equipment deposits | | | 4,423 | | | | 0 | |
| | | 2,477 | | | | 271 | |
| | | 5,079 | | | | 0 | |
VAT receivable from government | | | | | | | | |
VAT receivable from customers | | | 903 | | | | 0 | |
| | | | | | | | | |
Total prepaid expenses and other current assets | | | | | |
| | |
| | | | | | | | | |
Note 7. Property, Plant, and Equipment, net
Property, plant, and equipment, net consisted of the following (in thousands):
| | | | | | | | |
| | | | | | | |
| | $ | 2,818 | | | $ | — | |
| | | 8,792 | | | | 371 | |
| | | 596 | | | | — | |
| | | 968 | | | | — | |
| | | 1,828 | | | | 60 | |
| | | | | | | | | |
Total Property, plant, and equipment | | | 15,002 | | | | 431 | |
Less: Accumulated depreciation and amortization | | | (691 | ) | | | (13 | ) |
| | | | | | | | | |
Property, plant and equipment, net | | | | | | | | |
| | | | | | | | | |
Depreciation and amortization expense totaled $0.7million for the year ended December 31, 2021. Depreciation and amortization expense was negligible for the period from January 21, 2020 (inception) to December 31, 2020.
Note 8. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
| | | | | | | | |
| | | | | | | |
Payroll and payroll related expenses | | $ | 2,247 | | | $ | 54 | |
Accrued professional fees | | | 2,545 | | | | 900 | |
| | | 1,234 | | | | 108 | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
Note 9. Convertible Notes
On August 24, 2020, Legacy Hyzon entered into two Convertible Note Purchase Agreements (the “Agreements”), each with a separate purchaser. Each agreement authorized the issuance and sale of convertible promissory notes (the “2020 Notes”). The 2020 Notes issued on August 24, 2020 had a
combined principal amount of $0.5 million and each bore an interest rate of 10%, payable semi-annually in cash or in the form of the 2020 Notes. The 2020 Notes were set to mature one year after the issuance date (i.e., August 24, 2021), unless converted at a prior date.
Upon the consummation of an initial closing of a Qualified Financing, as defined, the 2020 Notes were convertible into a variable number of shares of the series or class of capital stock sold in the Qualified Financing equal to the par value of the 2020 Notes, either automatically or at the option of Legacy Hyzon. A Qualified Financing is defined as a private round of equity financing consummated by Legacy Hyzon resulting in aggregate proceeds of at least $10 million including the aggregate principal balance of the 2020 Notes as converted, with a minimum pre-money valuation equal to at least $175 million.
On October 19, 2020, Legacy Hyzon closed a Qualified Financing and the 2020 Notes were converted into 250,000 common shares.
2021, the Company entered into a Convertible Notes Purchase Agreement with certain investors for the purchase and sale of $45 million in Convertible Notes (the “Convertible Notes”). The Convertible Notes accrued interest at an annual rate of 1% commencing upon issuance and compounding semi-annually on each August 1 and February 1. Interest was payable by increasing the principal amount of the Convertible Notes (with such increased amount accruing interest as well) on each interest payment
As the Convertible Notes contained various settlement outcomes, the Company evaluated each scenario for accounting purposes. The conversion features settled at discounts upon certain financing events were determined to be redemption features and were evaluated as embedded derivatives and bifurcated from the Convertible Notes due to the substantial premium to be paid upon redemption. At issuance, option-based features were determined to have a de minimis fair value, and non-option-based features were bifurcated assuming the issuance fair value was zero. Changes in the derivative liability fair values were reported in operating results each reporting period, prior to the close of the Business Combination.
For the period from February 2021 to the close date of the Business Combination, the Company recorded $0.2 million of interest expense related to the stated interest for the Convertible Notes and $5.0 million related to the change in the value of the bifurcated embedded derivative within interest expense.
Upon the closing, immediately prior to the Business Combination, the Convertible Notes and the accrued interest automatically converted into 5,022,052 shares of common stock of the Company (see Note 3,
Business Combination). Note10
. Investments in Equity Securities We have certain equity security investments which are included in Investments in equity securities on the Consolidated Balance Sheets.
The Company owns common shares, participation rights, and options to purchase additional common shares in Global NRG H2 Limited (“NRG”). The Company does not have control and does not have the ability to exercise significant influence over the operating and financial policies of this entity. The Company’s investment totaled $0.1 million as of December 31, 2020 andincreased its investment
to $2.5 million as of December 31, 2021. On July 29, 2021, the Company entered into a Master Hub Agreement with Raven SR, LLC (“Raven SR”) whereby Raven SR granted to the Company a right of first refusal to co-invest in up to 100 of Raven SR’sfirst 200 solid waste-to-hydrogen generation and production facilities hubs), and up to 150 of Raven SR’s gas-to-hydrogen generation and production facilities across the United States on a hub-by-hub basis. In
connection with this agreement, Hyzon invested $2.5 million on July 30, 2021, to acquire a minority interest in Raven SR, and options to purchase additional common shares. The Company’s investment in Raven SR was
$2.5��million as of December 31, 2021. The Company’s total investments in equity securities as of December 31, 2021 and 2020, were
$5.0 million and $0.1 million,
Note 11. Investments in Non-consolidated Affiliates
Investments in non-consolidated affiliates
is comprised of our interests in partially-owned affiliates of which our ownership percentages range from 25% to 40% as of December 31, 2021. We do not control these affiliates but have the ability to exercise significant influence over their operating and financial policies. We account for them using the equity method of accounting.In July 2021, the Company entered into two joint ventures in the People’s Republic of China. Hyzon China partnered with Jiushuang Tiancheng Motors Service Ltd. (“JSTC”) to form Jiushuang-Hyzon Motor Services, Ltd. (“JSYS”) and partnered with Jiushuang Suda Logistics Ltd. (“JSSD”) to form Jiushuang-Hyzon Logistics, Ltd. (“JSHYS”), (collectively, “Jiushuang JVs”). Jiushuang JVs were established for the purpose of promoting the commercial operation of fuel cell vehicles in the Shanghai, China market. JSYS will be focused on operation of fuel cell buses and JSHYS will be focused on the operation of fuel cell logistics vehicles. The Company’s direct ownership interest in the non-consolidated joint ventures JSYS and JSHYS are
40% and 25%,We recognize the Company’s equity in earnings (losses) for Jiushuang JVs on a quarter lag. Accordingly, the Company recognized the Company’s share of Jiushuang JV’s earnings (losses) for the period, inception through September 30, 2021 in the year ended December 31, 2021 results. As of September 30, 2021, the joint ventures had no business activity. The Company will recognize the Company’s share of Jiushuang JV’s earnings (losses) for the period, from October through December 2021 in the quarter ended March 31, 2022 results.
The Company is subject to income taxes in the U.S. and several non-U.S. jurisdictions. There was no provision for income taxes for the year ended December 31, 2021 and for the period from January 2020 (inception) to December 31, 2020, because the Company is generating tax losses, and the Company’s net deferred tax assets continue to be fully offset by a valuation allowance.
Income (loss) before income taxes is summarized as follows (in thousands):
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) –
December 31,
2020 | |
| | $ | 12,095 | | | $ | (13,863 | ) |
| | | (31,380 | ) | | | (513 | ) |
| | | | | | | | | |
| | $ | (19,285 | ) | | $ | (14,376 | ) |
| | | | | | | | | |
A reconciliation of the Company’s effective income tax rate is as follows:
| | | | | | | | |
| | | Year Ended
December 31, 2021 | | | For the period
January 21, 2020
(Inception) –
December 31, 2020 | |
Federal tax at a statutory rate | | | 21.0 | % | | | 21.0 | % |
Earnings taxed at other than Federal statutory rate | | | 6.8 | | | | 0.3 | |
Non-deductible interest expense | | | (5.7 | ) | | | 0.0 | |
| | | (25.8 | ) | | | 0.0 | |
Change in fair value of earnout liability | | | 96.7 | | | | 0.0 | |
| | | 0.3 | | | | 0.0 | |
| | | | | | | | |
Change in valuation allowance
| | | | | | | | |
| | | 0.0 |
| | | 0.0 | % |
Deferred income tax assets and liabilities are summarized as follows (in thousands):
| | | | | | | | |
| | | | | | | |
Deferred income tax assets: | | | | | | | | |
Net operating loss carryforward s | | $ | 18,672 | | | $ | 931 | |
| | | 486 | | | | 2,097 | |
| | | 2,565 | | | | 378 | |
| | | 2,031 | | | | — | |
| | | 920 | | | | — | |
Deferred income tax assets - total | | | 24,674 | | | | 3,406 | |
| | | | | | | | |
Deferred income tax liabilities: | | | | | | | | |
| | | (289 | ) | | | (4 | ) |
| | | (2,471 | ) | | | (348 | ) |
| | | | | | | | | |
Deferred income tax liabilities - total | | | (2,760 | ) | | | (352 | ) |
| Deferred income tax assets, net | | | 21,914 | | | | 3,054 | |
Less: Valuation allowance | | | 21,914 | | | | 3,054 | |
| | | | | | | | | |
Deferred income taxes, net | | $ | 0 | | | $ | 0 | |
| | | | | | | | | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes as well as carryforward tax losses. At December 31, 2021, the Company had U.S. federal and foreign net operating loss carryforwards (“NOLs”) of
$53.0 million and $30.0
million, respectively, to be used to offset future taxable income. The enti
re $53.0million of U.S federal losses and
million of foreign losses can be carried forward indefinitely; the remaining
million of foreign losses expire on various dates through 2026.
Under the provisions of Section 382 of the Internal Revenue Code (“IRC”), the U.S. net operating loss and credit carryforwards and other tax attributes may be subject to limitation if there has been a significant change in ownership of the Company, as defined by the IRC. In connection with the Business Combination and the resulting change in ownership, the future utilization of NOL’s maybe be subject to limitation under Section 382 in the US, as well as in some foreign jurisdictions.
In assessing the realizability of deferred tax assets, the Company considers, within each taxing jurisdiction, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the consideration of the weight of both positive and negative evidence, the Company has determined it is more likely than not that the deferred tax assets as of December 31, 2021 will not be realized. As such, a valuation allowance has been provided against each entity’s net deferred tax assets.
The following table summarizes the activity related to the Company’s valuation allowances (in thousands):
| | | | | | | | |
| | | | | | | |
Valuation Allowances - beginning of period | | $ | 3,054 | | | $ | 0 | |
Local currency increase in reserve | | | 18,860 | | | | 3,054 | |
Valuation Allowances - end of period | | | | | | | | |
| | | | | | | | | |
ere 0 unrecognized tax benefits and 0 amounts accrued for the payment of interest and penalties atas of December 31, 20202021, and December 31, 2019, respectively.2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.positions. The
Company is subject to income tax examinations by major taxing authorities
since inception.The Company had no tax liability as of December 31, 2020 and December 31, 2019, respectively.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Public Offering
Pursuant to the Initial Public Offering, the Company sold 22,572,502 Units, at a purchase price of $10.00 per Unit, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 2,572,502 Over-allotment Units at $10.00 per Unit. Each Unit consists of one share of 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 a price of $11.50 per share, subject to adjustment (see Note 6).
Note 4 — Related Party Transactions
Founder Shares
On September 12, 2017, the Sponsor purchased 11,500,000 shares of Class B common stock (the “Founder Shares”) for an aggregate price of $25,000, or approximately $0.002 per share. As used herein, unless the context otherwise requires, “Founder Shares” shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the Public Shares except that the Founder Shares automatically convert into shares of Class A common stock at the time of the Company’s Initial Business Combination and are subject to certain transfer restrictions, as described in more detail below. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time. On September 18, 2020, the Sponsor agreed to return 2,875,000 Founder Shares to the Company at no cost. In October 2020, the Sponsor agreed to return an additional 2,875,000 Founder Shares to the Company at no cost. The Sponsor and an affiliate of the Company’s chief executive officer agreed to forfeit up to an aggregate of 750,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture would be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. As a result of the underwriters’ partial exercise their over-allotment option, 643,125 Founder Shares are no longer subject to forfeiture. The over-allotment option expired on December 3, 2020, resulting in the forfeiture of 106,875 Founder Shares to the Company at no cost.
The Sponsor and the Company’s officers, directors and an affiliate of the Company’s chief executive officer have waived their redemption rights with respect to any Founder Shares and any Public Shares held by them in connection with the completion of an Initial Business Combination. If the Initial Business Combination is not completed within 24 months from the closing of the Initial Public Offering, the Sponsor and the Company’s officers, directors and an affiliate of the Company’s chief executive officer have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them.
The Company’s initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor and the Company’s independent directors and an affiliate of the Company’s chief executive officer purchased 6,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $6,000,000. The Sponsor and an affiliate of the Company’s chief executive officer agreed to purchase up to an additional 600,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or an aggregate additional $600,000, to the extent the underwriter’s over-allotment option was exercised in full. Simultaneously with the closing of the sale of the Over-allotment Units, the Sponsor and the affiliate of the Company’s chief executive officer purchased an additional 514,500 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating gross proceeds of approximately $514,500.
Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within 24 months from the closing of the Initial Public Offering, the proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to partially fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants and all underlying securities will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.
The Sponsor and the Company’s officers, directors and an affiliate of the Company’s chief executive officer 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.
Registration Rights
Pursuant to a Registration Rights Agreements entered into on October 19, 2020, the holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Related Party Loans
On September 12, 2017, the Company and the Sponsor entered into a loan agreement, whereby the Sponsor agreed to loan the Company an aggregate of $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan is non-interest bearing and payable on the earlier of December 31, 2020 (as amended) or the completion of the Initial Public Offering (the “Maturity Date”). On September 13, 2017, the Company drew down $300,000 on this Note. On October 21, 2020, the Company paid back the Sponsor for the full amount of the outstanding Note.
In addition to the Note, the Sponsor paid certain costs related to formation and offering for the Company. Costs in the amount of $219,022 were forgiven by the Sponsor in December 2019 and have been recorded within additional paid-in capital.
As of December 31, 2020, the Company owed the Sponsor $1,324,257 for additional expenses paid on its behalf.
Advance from Related Party
As of October 22, 2020, the Sponsor and affiliate of the Company’s chief executive officer advanced $600,000 to the Company to cover the purchase of additional Private Placement Warrants if the over-allotment is exercised in full. Simultaneously with the closing of the sale of the Over-allotment Units, the Company utilized the advance from the Sponsor and the affiliate of the Company’s chief executive officer to issue an additional 514,500 Private Placement Warrants at a price of $1.00 per Private Placement Warrant. The over-allotment option expired on December 3, 2020, resulting in the return of $85,500 of the advancement not utilized. As of December 31, 2020, there were no advances outstanding.
Administrative Support Agreement
The Company has agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the year ended December 31, 2020, the Company had accrued and paid $23,871 of monthly fees to the affiliate of the Sponsor and no amounts payable were outstanding at December 31, 2020.
Working Capital Loans
In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. If the Sponsor makes any working capital loans, up to $1,500,000 of such loans may be converted into warrants of the post business combination entity at the price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. As of December 31, 2020 and December 31, 2019, the Company had no borrowings under the Working Capital Loans.
Note 5 — Commitments and Contingencies
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,900,376 in the aggregate. 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 an Initial Business Combination, subject to the terms of the underwriting agreement.
Business Combination Agreement
On February 8, 2021, the Company entered into a business combination agreement and plan of reorganization (the “Business Combination Agreement”) with DCRB Merger Sub Inc., a Delaware corporation and our wholly owned subsidiary (“Merger Sub”), and Hyzon Motors, Inc., a Delaware corporation (“Hyzon”), pursuant to which Merger Sub will be merged with and into Hyzon (the “Merger,” together with the other transactions related thereto, the “Proposed Transactions”), with Hyzon surviving the Merger as our wholly owned subsidiary. The parties expect the Proposed Transactions to be completed in the second quarter of 2021, subject to, among other things, the approval of the Proposed Transactions by the Company’s stockholders, satisfaction of the conditions stated in the Business Combination Agreement and other customary closing conditions. Please see the Form 8-K filed with the SEC on February 9, 2021 for additional information.
Risks and Uncertainties
The Sponsor continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 6 — Stockholders’ Equity
Common Stock
On October 19, 2020, the Company amended and restated its certificate of incorporation to, among other things, increase the number of authorized shares of Class A Common Stock from 200,000,000 to 250,000,000. The authorized common stock of the Company includes up to 250,000,000 shares of Class A common stock with a par value of $0.0001 per share and 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. If the Company enters into an Initial Business Combination, it may (depending on the terms of such an Initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on the Initial Business Combination to the extent the Company seeks stockholder approval in connection with the Initial Business Combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock. At December 31, 2020, and December 31, 2019, there were 22,572,502 and 0 shares, respectively, of Class A common stock issued and outstanding, of which 20,881,715 and 0 shares, respectively, were subject to possible redemption. At December 31, 2020 and December 31, 2019, there were 5,643,125 and 5,750,000 shares, respectively, of Class B common stock issued and outstanding, which reflects that on September 18, 2020, October 7, 2020, October 8, 2020 and December 3, 2020, the Sponsor returned 2,875,000, 1,437,500, 1,437,500 and 106,875 Founder Shares, respectively, to the Company at no cost.
The Sponsor and an affiliate of the Company’s chief executive officer agreed to forfeit up to an aggregate of 750,000 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters. The forfeiture would be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. As a result of the underwriters’ election to partially exercise their over-allotment option, 643,125 Founder Shares were forfeited.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
Warrants
Each whole warrant entitles the holder thereof to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as described in the prospectus for the Initial Public Offering. Only whole warrants are exercisable. The warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination or 12 months from the closing of the Initial Public Offering, and will expire five years after the completion of the Initial Business Combination or earlier upon redemption or liquidation, as described in the prospectus for the Initial Public Offering. No fractional warrants will be issued upon separation of the units and only whole warrants will trade.
The exercise price of each warrant is $11.50 per share, subject to adjustment as described in the prospectus for the Initial Public Offering. In addition, if 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 Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s 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”), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the newly issued price.
The warrants will become exercisable on the later of:
| ● | 30 days after the completion of the Initial Business Combination or, |
| | |
| ● | 12 months from the closing of the Initial Public Offering; |
provided in each case that we have an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the 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 permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement).
The Company has not registered the shares of Class A common stock issuable upon exercise of the warrants. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of an Initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Company’s Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at the Company’s option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The warrants will expire at 5:00 p.m., New York City time, five years after the completion of an Initial Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.
Once the warrants become exercisable, the Company may redeem the outstanding warrants for cash (except as described in the prospectus for the Initial Public Offering 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, referred to as the 30-day redemption period; and |
| | |
| ● | if, and only if, the last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrantholders. |
The Company will not redeem the warrants for cash unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Except as described in the prospectus for the Initial Public Offering, none of the Private Placement Warrants will be redeemable by the Company so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described in the prospectus for the Initial Public Offering with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| | |
| ● | at a price of $0.10 per warrant, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference to the table set forth in the warrant agreement based on the redemption date and the “fair market value” of the Company’s Class A common stock (as defined below) except as otherwise described in the warrant agreement; |
| ● | upon a minimum of 30 days’ prior written notice of redemption; |
| | |
| ● | if, and only if, the last sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrantholders; and |
| | |
| ● | if the last sale price of the Company’s Class A common stock on the trading day prior to the date on which the Company sends the notice of redemption to the warrantholders is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding warrants, as described above. |
The “fair market value” of the Company’s Class A common stock shall mean the average reported last sale price of the Company’s Class A common stock for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants.
No fractional shares of Class A common stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company will round down to the nearest whole number the number of shares of Class A common stock to be issued to the holder.
Note 7 — Income Tax
The Company’s net deferred tax assets are as follows:
| | | December 31,
2020 | |
| Deferred tax asset | | | | |
| Organizational costs/Startup expenses | | $ | 5,476,998 | |
| Total deferred tax asset | | | 5,476,998 | |
| Valuation allowance | | | (5,476,998 | ) |
| Deferred tax asset, net of allowance | | $ | — | |
The income tax provision consists of the following:
| | December 31,
2020 | |
Federal | | | | |
Current | | $ | — | |
Deferred | | | (5,476,998 | ) |
| | | | |
State | | | | |
Current | | $ | — | |
Deferred | | | — | |
Change in valuation allowance | | | 5,476,998 | |
Income tax provision | | $ | — | |
As of December 31, 2020, the Company did not have any U.S. federal and state net operating loss carryovers available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periodscountries in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2020, the change in the valuation allowance was $5,476,998.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2020 is as follows:
Statutory federal income tax rate | | | 21.0 | % |
State taxes, net of federal tax benefit | | | 0.0 | % |
Change in valuation allowance | | | (21.0 | )% |
Income tax provision | | | 0.0 | % |
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities.
it operates since inception.
Note
8 —13
. Fair Value Measurements
At December 31, 2020, assets held
The Company follows the guidance in
the Trust Account were comprised of $225,727,721 in money market funds which are invested in U.S. Treasury Securities. Through December 31, 2020, the Company has not withdrawn any interest earned on the Trust Account to pay its franchise and income tax obligations.The fair value of the Company’s financialASC Topic 820,
Fair Value Measurement
. For assets and liabilities
reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participantsmeasured at
the measurement date. In connection with measuring the fair value
on a recurring and nonrecurring basis, a three-level hierarchy of
its assetsmeasurements based upon observable and
liabilities, theunobservable inputs is used to arrive at fair value. The Company
seeks touses valuation approaches that maximize the use of observable inputs
(market data obtained from independent sources) and
to minimize the use of unobservable inputs
(internalto the extent possible. The Company determines fair value based on assumptions
about howthat market participants would
price assets and liabilities). Theuse in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy
is used to classify assets and liabilities based on thedistinguishes between observable
inputs and unobservable inputs,
which are categorized in one of the following levels: Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in orderwhich there is little, if any, market activity for the asset or liability at measurement date.
As of December 31, 2021 and 2020, the carrying amount of accounts receivable, other current assets, other assets, accounts payable, and accrued and other current liabilities approximated their estimated fair value due to
value the assets and liabilities:Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| |
Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| |
Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
their relatively short maturities.
The Company did not have warrant liabilities or earnout liabilities as of December 31, 2020. The following table presents information about the Company’s assets
and liabilities that are measured at fair value on a recurring basis
atas of December 31,
20202021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:| Description | | Level | | | December 31,
2020 | |
| Assets: | | | | | | | |
| Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund | | 1 | | | $ | 225,727,721 | |
value (in thousands):
| | | | | | | | | | | | | | | | |
| | | Fair Value Measurements on a Recurring Basis | |
| | | | | | | | | | | | | |
Warrant Liability – Private Placement Warrants | | $ | 15,228
| | | $ | — | | | $ | — | | | $ | 15,228 | |
| | | — | | | | — | | | | 103,761 | | | | 103,761 | |
Private Placement Warrants
The estimated fair value of the private placement warrants (the “Private Placement Warrants”) at July 16, 2021 is determined using Level 3 inputs by using the binominal lattice model (“BLM”), the application of BLM requires the use of several inputs and significant unobservable assumptions, including volatility. Significant judgment is required in determining the expected volatility of our common stock. The following table provides quantitative information regarding Level 3 fair value measurement inputs:
| | | | |
| | | |
| | $ | 10.33 | |
Exercise price (strike price) | | $ | 11.50 | |
| | | 0.8 | % |
| | | 34.2 | % |
Remaining term (in years) | | | 5.00 | |
Following the lapsing of certain transferability restrictions subsequent to the Business Combination, the features of the Private Placement Warrants became identical to the Public Warrants (as defined in Note
9 — Subsequent EventsManagement16, Stockholders’ Equity), except that so long as they are held by the sponsor of the Business Combination, the Private Placement Warrants are not redeemable by the Company. Due to these similarities, the estimated fair value of the Private Placement warrants was equal to the fair value of the Public Warrants using level 1 inputs at December 31, 2021.
The following table presents the changes in the liability for Private Placement Warrants during the year ended December 31, 2021 (in thousands):
| | | | |
Balance as of July 16, 2021 | | $ | 19,395 | |
Change in estimated fair value | | | (4,167 | ) |
| | | | | |
Balance as of December 31, 2021 | | $ | 15,228 | |
| | | | | |
The fair value of the earnout shares was estimated by utilizing a Monte-Carlo simulation model. The inputs into the Monte-Carlo pricing model included significant unobservable inputs. The following table provides quantitative information regarding Level 3 fair value measurement inputs:
| | | | | | | | |
| | | | | | |
| | $ | 6.49 | | | $ | 10.33 | |
| | | 1.2 | % | | | 0.8 | % |
| | | 90.0 | % | | | 90.0 | % |
Remaining term (in years) | | | 4.54 | | | | 5.00 | |
The following table presents the changes in earnout liability during the nine months ended December 31, 2021 (in thousands):
| | | | |
Balance as of July 16, 2021 | | $ | 188,373 | |
Change in estimated fair value | | | (84,612 | ) |
| | | | | |
Balance as of December 31, 2021 | | $ | 103,761 | |
| | | | | |
The Company performs routine procedures such as comparing prices obtained from independent sources to ensure that appropriate fair values are recorded.
Note 14
. Commitments and Contingencies The Company is subject to, and may become a party to, a variety of litigation, other claims, suits, regulatory actions and government investigations and inquiries in the ordinary course of business. The Company is party to current legal proceedings as discussed more fully below.
Three related putative securities class action lawsuits were filed between September 30, 2021 and November 15, 2021, in the U.S. District Court for the Western District of New York against the Company, certain of the Company’s current officers and directors and certain officers and directors of DCRB: (Kauffmann v. Hyzon Motors Inc., et al. (No. 21-cv-06612-CJS), Brennan v. Hyzon Motors Inc., et al. (No. 21-cv-06636-CJS), and Miller v. Hyzon Motors Inc. et al. (No. 21-cv-06695-CJS)), asserting violations of federal securities laws. The complaints generally allege that the Company and individual defendants made materially false and misleading statements relating to the nature of the Company’s customer contracts, vehicle orders, and sales and earnings projections, based on allegations in a report released on September 28, 2021, by Blue Orca Capital, an investment firm that indicated that it held a short position in our stock and which has evaluatedmade numerous allegations about the Company. These lawsuits have been consolidated under the caption In re Hyzon Motors Inc. Securities Litigation (Case No. 6:21-cv-06612-CJS-MWP), and on March 21, 2022, the court-appointed lead plaintiff filed a consolidated amended complaint seeking monetary damages.
Between December 16, 2021 and January 14, 2022, three related shareholder derivative lawsuits were filed in the U.S. District Court for the Western District of New York: (Lee v. Anderson et al. (No. 21-cv-06744-CJS); Révész v. Anderson et al. (No. 22-cv-06012-CJS); and Shorab v. Anderson et al. (No. 22-cv-06023CJS)). On February 2, 2022, a similar shareholder derivative lawsuit was filed in the U.S. District Court for the District of Delaware (Yellets v. Gu et al. (No. 22-cv-00156), and on February 3, 2022, another similar shareholder derivative lawsuit was filed in the Supreme Court of the State of New York, Kings County (Ruddiman v. Anderson et al. (No. 503402/2022)). These lawsuits name as defendants the Company’s current directors and certain former directors of DCRB, along with the Company as a nominal defendant, and generally allege that the individual defendants breached their fiduciary duties by making or failing to prevent the misrepresentations alleged in the consolidated securities class action, and assert claims for violations of federal securities laws, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. These lawsuits generally seek equitable relief and monetary damages.
On March 18, 2022, a putative class action complaint, Malork v. Anderson et al. (C.A. No. 2022-0260- KSJM), was filed in the Delaware Court of Chancery against certain officers and directors of DCRB, DCRB’s sponsor, and certain investors in DCRB’s sponsor, alleging that the director defendants and controlling shareholders of DCRB’s sponsor breached their fiduciary duties in connection with the merger between DCRB and Legacy Hyzon. The complaint seeks equitable relief and monetary damages.
Between January 26, 2022 and March28
, 2022, Hyzon receivedfour
demands for books and records pursuant to Section 220 of the Delaware General Corporation Law from stockholders who state they are investigating whether to file similar derivative or stockholder lawsuits, among other purposes. The proceedings are subject to uncertainties inherent in the litigation process. We cannot predict the outcome of these matters or estimate the possible loss or range of possible loss, if any. On January 12, 2022, the Company announced that it had received a subpoena from the SEC for production of documents and information, including documents and information related to the allegations made in the September 28, 2021 report issued by Blue Orca Capital. The Company is cooperating with the SEC.
The proceedings are subject to uncertainties inherent in the litigation process. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of subsequent eventslegal defense and settlement costs, diversion of resources, and other factors, and there can be no assurances that favorable outcomes will be obtained. Based on the early-stage nature of these cases, we cannot predict the outcome of these matters or estimate the possible loss or range of possible loss, if any.
Note 15. Stock-based Compensation Plans
2020 Stock Incentive Plan
In January 2020, Legacy Hyzon adopted the 2020 Stock Incentive Plan (the “2020 Plan”) under which employees, directors, and consultants may be granted various forms of equity incentive compensation including incentive and non-qualified options.
A total number of 16,250,000 reserved shares of common stock were reserved for awards under the 2020 Plan. Shares of common stock issued under the Plan may be either authorized but unissued shares or reacquired common stock of Legacy Hyzon. Under the 2020 Plan, the exercise period of options is determined when granted, and options expire no later than fifteen years from the date of grant, subject to terms and limitations relative to termination of service and ownership percentages of the voting power of all classes of Legacy Hyzon’s stock.
The 2020 Plan was terminated in connection with the Business Combination in July 2021, and Legacy Hyzon will not grant any additional awards under the 2020 Plan. Any ungranted shares under the 2020 plan expired. However, the 2020 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under it. At the closing of the Business Combination, the outstanding awards under the 2020 Plan were converted at the Exchange Ratio. Share and per share information below have been converted from historical disclosure based on the Exchange Ratio.
2021 Equity Incentive Plan
The 2021 Equity Incentive Plan (the “2021 Plan”) was approved by the Board of Directors on June 24, 2021, and subsequently approved by the stockholders on July 15, 2021. The 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs and performance awards to the Company’s employees, directors, and consultants. The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan
is 23,226,543 shares. In connection with the Business Combination, 21,339,493
shares of Class A common stock subject to outstanding equity awards granted under the 2020 Plan were converted into equity awards under the 2021 Plan. The number of shares of common stock available for issuance under the 2021 Plan will also include an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of (A) two and one-half percent of the shares outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the Board of Directors.
The following table summarizes the Company’s stock option and RSU activity:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | Weighted
Average
Exercise
Price | | | Weighted
Average
Remaining
Contractual
(Years) | | | Aggregate
Intrinsic
Value
(in 000s) | | | | | | Weighted
Average
Grant
Date Fair
Value | |
Outstanding at December 31, 2020 (1) | | | 19,826,031 | | | $ | 1.13 | | | | | | | | | | | | — | | | $ | — | |
| | | 281,748 | | | $ | 1.13 | | | | | | | | | | | | 2,799,657 | | | $ | 6.03 | |
| | | (436,037 | ) | | $ | (1.22 | ) | | | | | | | | | | | (428,107 | ) | | $ | 6.28 | |
| | | (360,602 | ) | | $ | (1.13 | ) | | | | | | | | | | | (518,865 | ) | | $ | 5.39 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2021 | | | 19,311,140 | | | $ | 1.29 | | | | 13.07 | | | | 100,885 | | | | 1,852,685 | | | $ | 6.14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Vested and expected to vest, December 31, 2021 | | | 13,773,623 | | | $ | 1.13 | | | | 12.69 | | | | 74,322 | | | | 1,852,685 | | | $ | 6.14 | |
Exercisable and vested at December 31, 2021 | | | 12,126,266 | | | $ | 1.13 | | | | 13.39 | | | | 65,013 | | | | | | | | | |
| (1) | Prior period options have been adjusted to give effect to the reverse recapitalization transaction, see Note 3, Business Combination. |
For all employees other than executives described below, option awards are generally granted with an exercise price equal to the fair value of the Company’s stock at the date of the grant. The awards generally have a five-year contractual term. The option period and provisions for each option granted are determined at the time of the grant, but generally vest a portion on the date of grant and then ratably each anniversary after issuance over
a 5-year
period of continuous service. The fair value of these stock option awards is estimated as of the grant date using a Black Scholes option pricing model and the following assumptions: a risk-free interest rate based on the U.S. Treasury yield curve at the date of grant; an expected or contractual term; and expected volatility based on an evaluation of comparable public companies’ measures of volatility. The Company does not anticipate declaring dividends on common shares now or in the near future and has therefore assumed no dividend rate.
The following table discloses the assumptions, or range of assumptions, utilized for stock options for each of the grant years as follows:
| | | | | | | | |
| | | | | | | |
Expected term of options (years) | | | 5.0 | | | | 0.4 to 5.0 | |
| | | 0.79 | % | | | 0.1-0.4 | % |
| | | 90 | % | | | 90 | % |
| | $ | 0.00 | | | $ | 0.00 | |
As of December 31, 2021, there was $2.1 million of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 4.58 years.
units granted under the Plans typically vest over a-year period beginning on the date of grant. Restricted stock units will be settled through the
issuance of an equivalent number of shares of our common stock and are equity classified. The fair value of restricted shares is determined based upon the stock price on the date
these financial statements were availableof grant. As of December 31, 2021, unrecognized compensation costs related to nonvested RSUs of $10.1 million is expected to be
issued. All subsequent eventsrecognized over a remaining weighted average period
of 3.69
On November 12, 2020, included in the stock options discussed above, 11,075,000 options were granted
to the Company’s Executive
Chairman which vest in two equal tranches and have a contractual term
15years. The first tranche vested on the grant date, are immediately exercisable, have an exercise price of $
1.13per share, and resulted in $
4.9million of compensation expense during 2020. The second tranche contains performance and market conditions for vesting which require an exit event of Horizon at escalating minimum equity values each year, within six years. The exercise price for the second tranche is initially $
1.13per share but increases by $
0.56per share each year during which the award remains outstanding. The fair value of the second tranche was estimated as of the grant date using a Monte Carlo simulation with key assumptions beyond those typical of option pricing models described below including the probability of achieving a Horizon exit at the required valuation in each year of the six year period. The grant date fair value of the second tranche is estimated to be disclosed are$
1.2million which may or may not be recognized in the future depending on the outcome
of
the conditions for vesting.
Additionally, on November 12, 2020, included in the stock options discussed above, 5,537,500 options were
CEO which have a contractual term of 15 years, are immediately exercisable, and have an exercise price of $1.13 per share. Half of this award is subject to a two-year transferability restriction for the underlying shares of common stock, which resulted in a discount on the fair value of common stock assumption used in the determination of the fair value of this portion of the award. The grant date fair value of this award was determined using a Black Scholes option pricing model and resulted in $4.5 million of
compensation expense for the period from January 21, 2020 (inception) through December 31, 2020.
For the awardsdescribed
above which vested immediately, the following table discloses the assumptions utilized in the Black Scholes option pricing model: | | | | | | | | |
| | | | | | | 90 | % |
| | | | | | $ | 0.00 | |
Weighted average expected term (in years) | | | | | | | 7.5 | |
| | | | | | | 68 | % |
Former CTO Retirement Agreement
In September 2021, included in the stock options and RSUs discussed above, the Company and former Chief Technology Officer (“former CTO”) entered into a Letter Agreement (the “Agreement”) concerning the former CTO’s retirement and separation from Hyzon. Pursuant to the Agreement, for a period of 24 months commencing on September 18, 2021 (the “Initial Consulting Period”), he serves as a consultant to Hyzon. In exchange for services provided during the Initial Consulting Period, he receives
$20,000 per month. Subject to conditions of the Letter Agreement, the 1,772,000stock options previously granted pursuant to his employment agreement with the Company continues to vest annually in equal installments on April 1, 2022 through April 1, 2025. He is also entitled to receive
250,000 RSUs of Hyzon, half of which vested after his retirement date and half of which will vest on or after the one-year anniversary of his retirement date. The service condition in the Agreement related to the vesting of these
financial statements.awards was determined to be non-substantive, and therefore, the Company recognized stock-based compensation expense of $13.4 million immediately in September 2021. In addition, the Company recognized salary expense of $0.5 million in September 2021 related to his monthly consulting payments.
Note 16
. Stockholders’ Equity The Company is authorized to issue 400,000,000 shares of common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2021 and 2020, there were 247,758,412 and 166,125,000 common stock issued and outstanding, respectively.
On
September 16, 2020, Hyzon entered into a purchase agreement (“Purchase Agreement”) with the purchasers named therein (collectively the “Purchasers”) to sell up to 17,720,000 common shares (“Round A Transaction”). The Round A Transaction closed on various dates between October 7, 2020 and November 12, 2020. The Company raised $20.0 million and issued 17,720,000 common shares upon the close of the Round A Transaction. The Company incurred $1.0 million in costs that were both direct and incremental to the issuance of these common shares, whichwas
recorded as a reduction of the proceeds received in additional paid-in capital.
On July 27, 2020, Hyzon entered into an agreement (the “Option Agreement”) with Ascent to induce Ascent to make an initial purchase of
$3.0 million of Hyzon common stock as part of a subscription in the Round A Transaction by granting Ascent an option to purchase up to 3.9 million shares of Legacy Hyzon common stock at an exercise price of $1.54 per share. Ascent options were automatically exercised upon the execution of the Business Combination (see Note 3, Business Combination).As of December 31, 2021, there were
11,286,242P
ublicW
arrantsand 8,014,500 Private Placement Warrants outstanding, for a total of 19,300,742 warrants outstanding. Each whole warrant entitles the registered holder to purchase
share of common stock at a price of $
11.50per share, subject to adjustment as discussed below. Only whole warrants are exercisable. The warrants will expire on the earlier to occur of: (i) the
fifth anniversaryof the completion of the Company’s Business Combination, (ii) their redemption or (iii) the liquidation of the
Company.
Once the warrants become exercisable, the Company may redeem the outstanding warrants for cash:
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, which the Company refers to as the “30-day redemption period”; and
if, and only if, the last reported sale price of the Company’s common stock has been at least $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) on each of 20 trading days within the 30-trading day period ending on the third business day prior to the date on which the notice of redemption is given.
Once the warrants become exercisable, the Company may redeem the outstanding warrants for common stock:
in whole and not in part;
at a price of $0.10 per warrant;
upon a minimum of 30 days’ prior written notice of redemption;
if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) on the trading day prior to the date on which the notice of redemption is given; and
if the last sale price of the Company’s common stock on the trading day prior to the date on which the notice of redemption is given is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants.
The terms of the Private Placement Warrants areidentical
to the Public Warrants as described above, except that the Private Placement Warrants are not redeemable (except as described above) so long as they are held by the sponsor or its permitted transferees.
The Public Warrants are classified as equity and subsequent remeasurement is not required. The Private Placement Warrants are classified as liabilities and are initially recorded at their fair value, within warrant liability on the Consolidated Balance Sheets, and remeasured at each subsequent reporting date. Changes in the fair value of these instruments are recognized within Change in fair value of warrant liabilities in the Consolidated Statements of Operations and Comprehensive Loss.
The fair value of the Private Placement Warrants on July 16, 2021, in the amount of $19.4 million was recorded as a Warrant liability and a reduction to Additional paid-in capital on the Consolidated Balance Sheets. The change in fair value for the year ended December 31, 2021, in the amount of $4.2 million was recorded as a reduction in Warrant liability on the Consolidated Balance Sheets and a gain from change in fair value of warrant liability on the Consolidated Statements of Operations and Comprehensive Loss.
Ardour Subscription Agreement
In connection with the execution of the February 8, 2021
weBusiness Combination Agreement, DCRB, ACP Mgmt Corp., Ardour Capital Investment LLC (“Ardour”) and Hyzon entered into
a subscription agreement (the “Ardour Subscription Agreement”), pursuant to which ACP Mgmt Corp. agreed, in full satisfaction of Ardour’s right to receive a warrant to purchase shares of Legacy Hyzon Common Stock for its services as a financial advisor to Hyzon, to purchase, and DCRB agreed to sell to ACP Mgmt Corp., such number of warrants exercisable for one share of Class A Common Stock at an exercise price of $2.20
(the “Ardour Warrants”), subject to the terms of the warrant agreement, dated as of July 16, 2021, by and between DCRB and Continental Stock Transfer & Trust Company (the “Ardour Warrant Agreement”), equal to (x)
184,000 multiplied by (y) the Exchange Ratio. On the close date of the Business Combination, Agreement with Merger Suba total of 326,048
Ardour Warrants were issued to Ardour. Such warrants are governed by and Hyzon, pursuant to which Merger Sub will be merged with and into Hyzon, with Hyzon surviving the Merger as our wholly owned subsidiary. The parties expect the Proposed Transactions to be completed in the second quarter of 2021,exercisable subject to among other things, the approvalterms and conditions of the Proposed Transactions by our stockholders, satisfactionArdour Warrant Agreement. The Ardour Warrants are equity classified and accounted for under ASC 718, as they relate to advisory services provided to the Company.
As of December 31, 2021, there were 293,087 Ardour Warrants outstanding. Each whole warrant entitles the registered holder to purchase one share of common stock at a price of $2.20 per
share, subject to adjustment per the Ardour Warrant Agreement. Only whole warrants are exercisable. The warrants will expire on the earlier to occur of: (i) the fifth anniversary of the conditions stated incompletion of the Business Combination, (ii) the liquidation of the Company or (iii) their redemption.
On November 17, 2021, the Company’s board of directors authorized the repurchase of up to $5.0 million
of its outstanding common stock and/or Public Warrants
. The timing and amount of any share repurchases under the Company’s share repurchase authorization will be determined by management based on market conditions and other considerations; such repurchases may be executed in the open market. As of December 31, 2021, the Company repurchased 256,977 public warrants for $0.5 million.
On November 23, 2021, Hyzon Motors Inc. entered into a warrant agreement to issue warrants (the “Hongyun Warrants”) to Hydro Fortune Logistics (Hong Kong) Co., Limited, a subsidiary of
Motors Co. (“Shanghai Hongyun”), to purchase up to 2 million shares of Class A Common Stock, $0.0001 par value per share, of Hyzon at an exercise price of $7.75per share. The warrants become vested and exercisable as Shanghai Hongyun makes payment on the purchase price for such vehicles and are classified within equity. The vested and exercisable Hongyun Warrants will expire on December 31, 2028. As of December 31, 2021, the Company issued
31,000for 2021 vehicle deliveries and approximately 8,300 are vested.The provision of $0.2 million for the Hongyun Warrants is recorded as a reduction of revenue as they represent consideration payable to a customer, in accordance with ASC 606.
Note 17
. Related Party Transactions In January 2021, the Company entered into an intellectual property agreement (the “Horizon IP Agreement”) with Jiangsu Qingneng New Energy Technologies Co., Ltd. and Shanghai Qingneng Horizon New Energy Ltd. (together, “JS Horizon”) both of which are affiliates of the Company’s ultimate parent, Horizon. Under the Horizon IP Agreement, JS Horizon assigned to the Company a joint ownership interest in certain intellectual property rights previously developed by JS Horizon (“Background IP”), and each of Hyzon and JS Horizon granted to the other, within such other party’s field of use, exclusive licenses under their respective joint ownership rights in the Background IP, as well as their rights in improvements made in the future with respect to such Background IP. Under that agreement, the Company also grants JS Horizon a perpetual non-exclusive license under certain provisional patent applications (and any patents issuing therefrom), as well as improvements thereto. On September 27, 2021, the Horizon IP Agreement was amended to add Jiangsu Horizon Powertrain Technologies Co. Ltd. (“JS Powertrain”) as a party.
The Horizon IP Agreement revised and clarified the intellectual property arrangements existing as of the Company’s inception, as set forth under two previous agreements. Under a license agreement made effective at the time of the Company’s inception (the “License Agreement”), the Company received an exclusive license under certain of the Background IP. That agreement was later terminated and replaced with a Partial Assignment Agreement of Fuel Cell Technology, dated November 19, 2020 (the “Partial Assignment Agreement”), which contemplated a joint ownership structure with respect to certain of the Background IP similar to the structure set forth under the now existing Horizon IP Agreement. Both the original License Agreement and Partial Assignment Agreement have been superseded by the Horizon IP Agreement.
Under the terms of the Horizon IP Agreement, the Company was to pay JS Horizon and JS Powertrain $10 million as consideration for the rights it receives under the Background IP and improvements thereto. As of December 31, 2021, $6.9 million was paid and the remaining $3.1million was paid in February 2022. Because the Company is under common control with Horizon and JS Horizon, the cost of the intellectual property transferred should equal the historical cost of the Background IP to the Company’s ultimate parent, Horizon. Due to the creation of the Background IP through research and development over a long historical period of time, the historical cost of the intellectual property acquired was zero. As such, no asset was recorded for the Background IP on the Company’s Consolidated Balance Sheets. The difference between the fixed amounts payable to JS Horizon and JS Powertrain and the historical cost was treated as a deemed distribution to Horizon, given the common control of the entities.
Horizon Fuel Cell Technologies and Related Subsidiaries
Hyzon utilizes Horizon and its affiliates to supply certain fuel cell components. In March 2021, the Company made a deposit payment to Horizon in the amount of
$5.0
million to secure fuel cell components. This payment is included in prepaid expenses as none of the components have yet been received. As of December 31, 2021, the Company’s Consolidated Balance Sheet includes
$7.3 million of inventory, $0.7 million of fixed asset and additional $0.3 million of prepayment from Horizon. For the year ended December 31, 2021,$0.4million of fuel cell components purchased from Horizon and its affiliates were recorded in the Cost of goods sold in the Company’s Consolidated Statements of Operations and Comprehensive Loss.
Certain employees of Horizon and its affiliates provide research and development, sales, and administrative services to the Company. Approximately
$2.9
0.5
million was recorded in the Company’s Consolidated Statements of Operations and Comprehensive Loss related to such services for the year ended December 31, 2021, and for the period from January 21, 2020 (inception) through December 31, 2020, respectively. The related party liability to Horizon and affiliates is
$3.6 million and $0.4
million as of December 31, 2021 and 2020, respectively.
The Company entered into a joint venture agreement in 2020 to create Hyzon Europe with Holthausen. As Hyzon Europe builds out its production facilities, it relies on Holthausen for back office administrative services and certain production resources that result in related party transactions. In addition, both companies rely on certain suppliers, including Horizon.
In June 2021, the Company transferred inventory purchased from Horizon amounting to $1.2 million to Holthausen at cost and recorded a related party receivable of $1.2 million.
In July 2021, Hyzon Europe assumed certain customer sales contracts from Holthausen with an aggregate value of $5.1 million. As a result of this transaction, the Company recorded Contract liabilities of $4.1 million, work-in-process inventory of $3.4 million, and due from Holthausen of $0.7
For the yearended
December 31, 2021, the Company paid $0.5 million to two affiliated entities of certain executives of Hyzon Europe for their director services. currently owns 50.5
of the equity interests of Hyzon Europe. On December 31, 2021, Hyzon executed a non-binding Letter of Intent (“LOI”) with Holthausen to increase its stake to
75% in Hyzon Europe. Concurrent with the signing of this LOI, €
1 million refundable deposit was paid to Holthausen, approximately $1.1 million in USD. This deposit is recorded in the Consolidated Balance Sheets in Prepaid expenses and other
customary closing conditions.current assets. As of December 31, 2021, the related party receivable from Holthausen
is $0.3
million. As of December 31, 2020, the related party payable due to Holthausen was
$0.2
Jiushuang (Shanghai) New Energy Technology Co., Ltd.
In December 2021, Hyzon China entered into a new energy vehicle sales contract with Jiushuang (Shanghai) New Energy Technology Co., Ltd. Hyzon delivered 20 FCEVs in 2021 and recognized revenue of $0.1 million. As discussed in Note 4, Revenue, the Company is entitled to $13.6 million in future payments from certain customer contracts in China,$2.9 million of which relates to this Jiushuang sales contract. Jiushuang (Shanghai) New Energy Technology Co., Ltd. is the parent of both JSTC and JSSD, which the Company partnered with to form Jiushuang JVs, discussed in Note 11
, Investments in Non-consolidated Affiliates. The following table presents the information used in the calculation of our basic and diluted earnings (loss) per share attributable to Hyzon common stockholders (in thousands, except per share data):
| | | | | | | | |
| | | | | | For the period
January 21, 2020
(Inception) –
December 31, | |
| | | | | | | |
Ne t loss attributable to Hyzon | | $ | (13,846 | ) | | $ | (14,271 | ) |
Weighted average shares outstanding: | | | | | | | | |
| | | 203,897 | | | | 152,650 | |
Effect of dilutive securities | | | 0 | | | | — | |
| | | | | | | | | |
| | | 203,897 | | | | 152,650 | |
Net loss per share attributable to Hyzon: | | | | | | | | |
| | $
| (0.07 | ) | | $ | (0.09 | ) |
| | $
| (0.07 | ) | | $ | (0.09 | ) |
The weighted average number of shares outstanding prior to Business Combination were converted at the Exchange Ratio.
Potentially dilutive shares are excluded from the computation of diluted net loss when their effect was antidilutive.
The following outstanding common stock equivalents (in thousands) were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive.
| | | | | | | | |
| | | | | | For the Period
January 21, 2020
(Inception) –
December 31, | |
| | | | | | | |
| | | 1,853 | | | | — | |
Stock options with service conditions | | | 12,296 | | | | 14,288
| |
Stock options for former CTO
| | | | | | | | |
Stock options with market and performance conditions | | | 5,538 | | | | 5,538 | |
Private placement warrants | | | 8,015 | | | | 0 | |
| | | 11,286 | | | | 0 | |
| | | 23,250 | | | | 0 | |
| | | 31 | | | | 0 | |
| | | 293 | | | | 0 | |
The Company has entered into various non-cancellable operating and finance lease agreements for certain offices, warehouses, R&D and manufacturing locations, equipment and vehicles worldwide. The Company determines if an arrangement is a lease, or contains a lease, at inception and records the leases in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.
The following table presents supplemental balance sheet information related to leases (in thousands):
| | | | | | | | |
| | | | | | | |
| | | | | | | | |
Operating lease right-of-use assets | | $ | 9,933 | | | $ | 943 | |
Operating lease liabilities | | $ | (10,062 | ) | | $ | (942 | ) |
| | | | | | | | |
Finance lease right-of-use assets | | $ | 332 | | | $ | 713 | |
Finance lease liabilities | | $ | (654 | ) | | $ | (857 | ) |
| | | |
Weighted average remaining lease term: | | | | | | | | |
| | | 7.3 years | | | | 4.9 years | |
| | | 1.4 years | | | | 2.4 years | |
Weighted average discount rate: | | | | | | | | |
| | | 5.7 | % | | | 7.1 | % |
| | | 7.0 | %
| | | 6.9 | % |
The components of the lease expensesare
as follows (in thousands): | | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) –
December 31, 2020 | |
| | $
| 862 | | | $ | 19 | |
| | | 205 | | | | 30 | |
| | | | | | | | |
Amortization of right-of-use assets | | | 381 | | | | 172 | |
Interest on lease liabilities | | | 53 | | | | 35 | |
| | | | | | | | | |
| | $ | 1,501 | | | $ | 256 | |
| | | | | | | | | |
Supplemental cash flow information related to leases is as follows (in thousands):
| | | | | | | | |
| | | Year Ended
December 31,
2021 | | | For the period
January 21, 2020
(Inception) -
December 31, 2020 | |
Cash paid for amount included in the measurement of lease liabilities: | | | | | | | | |
Operating cash flows from operating leases | | $
| 739 | | | $ | 19 | |
Operating cash flows from finance leases | | $ | 53 | | | $ | 35 | |
Financing cash flows from finance leases | | $
| 203 | | | $ | 29 | |
Right-of-use assets obtained in exchange for new lease liabilities: | | | | | | | | |
| | $
| 9,588 | | | $ | 780 | |
| | $
| 0 | | | $ | 886 | |
The maturities of operating and finance lease liabilities (excluding short-term leases) are as follows (in thousands):
| | | | | | | | |
| | | | |
| | | | | | | |
| | $
| 1,978 | | | $
| 448 | |
| | | 1,894 | | | | 240 | |
| | | 1,806 | | | | 0 | |
| | | 1,745 | | | | 0 | |
| | | 4,737 | | | | 0 | |
| | | | | | | | | |
Total minimum lease payments | | | 12,160 | | | | 688 | |
| | | 2,098 | | | | 34 | |
| | | | | | | | | |
Present value of lease obligations | | | 10,062 | | | | 654 | |
| | | 1,453 | | | | 433 | |
| | | | | | | | | |
Long-term portion of lease obligations | | $ | 8,609 | | | $ | 221 | |
| | | | | | | | | |
Item 9. Changes in and Disagreements
Withwith Accountants on Accounting and Financial
Disclosure.Disclosure
Item 9A. Controls and Procedures
Evaluation of Disclosure 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 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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable- not absolute - assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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 December 31,
2020.2021. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
(as definedwere not effective as of December 31, 2021, solely due to the material weakness in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.Internal Control over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation reportdescribed below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the Company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
During the most recently completed fiscal quarter, there has been no changematerial weakness in our internal control over financial reporting, the consolidated financial statements for the periods covered by and included in this Annual Report on
Form 10-K
fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We identified a material weakness in our internal control over financial reporting as of December 31, 2021. Specifically, due to our size and limited operating history, particularly prior to the Business Combination, we had limited resources and did not have the appropriate resources and business processes necessary to ensure the appropriate segregation of duties and effective review procedures with respect to the processing and recording of financial transactions, as well as an appropriate level of control oversight over the financial statement reporting process.
The measures we have taken and continue to take to remediate the identified material weakness and further evolving our accounting processes include:
| (i) | hiring additional finance and accounting personnel over time to augment our accounting staff and to provide more resources for complex accounting matters and financial reporting; |
| (ii) | further developing and implementing formal policies, processes and documentation procedures relating to our financial reporting and consulting with accounting experts; |
| (iii) | engaging with external consultants with public company and technical accounting experience to facilitate accurate and timely accounting closes and to accurately prepare and review the consolidated financial statements and related footnote disclosures. We plan to retain these financial consultants, as needed, until such time that the required financial controls have been fully implemented; and |
| (iv) | adopting new technological solutions. |
The actions we are taking are subject to ongoing executive management review and are also subject to audit committee oversight. To date, we have hired additional financial and accounting personnel with technical accounting experience and are in the process of implementing new technology solutions to assist with our financial reporting process. We are still executing an assessment to identify process design gaps and implementing additional controls to mitigate segregation of duty risk. We will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a sufficient period of time. If we are unable to successfully remediate the material weakness, or if in the future, we identify further material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated.
Management’s Report on Internal Control over Financial Reporting
As discussed elsewhere in this Annual Report, we completed the Business Combination on July 16, 2021. Prior to the Business Combination, we were a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating businesses. As a result, previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date as our operations prior to the Business Combination were insignificant compared to those of the consolidated entity post-Business Combination. The design of internal controls over financial reporting for the Company post-Business Combination has required and will continue to require significant time and resources from management and other personnel. As a result, management was unable, without incurring unreasonable effort or expense to conduct an assessment of our internal control over financial reporting as of December 31, 2021. Accordingly, we are excluding management’s report on internal control over financial reporting pursuant to Section 215.02 of the SEC Division of Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations.
Changes in Internal Control over Financial Reporting
Other than in connection with the implementation of the remedial measures described above, there have not been any changes in our internal control over financial reporting (as such term is defined inRules 13a-15(f)
and15d-15(f)
under the Exchange Act) during the period to which this Annual Report relates that have materially affected, or
isare reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other
Information.Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers and Corporate
Governance.Governance
Executive Officers and Directors
Our
currentdirectors and executive officers, and
directorstheir respective ages, are
set forth below:as follows: | | | | | | |
| | | | | |
Erik Anderson | | | | | | |
| | | 51 | | | Executive Chairman |
| | | 53 | | | Director and Chief Executive Officer |
| | | 51 | | | Director and Chief Financial Officer |
| | | 62 | | | Chief ExecutiveTechnology Officer and Director |
Peter Haskopoulos | | 45 | 62 | | | General Counsel & Chief Legal Officer |
| | | 40 | | | Chief FinancialStrategy Officer Chief Accounting Officer and Secretary |
Dr. Jennifer Aaker | | 53 | 57 | | | President of Vehicle Operations |
| | | | | | |
| | | 62 | | | Director |
Jane Kearns | | | 58 | | | Director |
| | | 50 | | | Director |
Pierre Lapeyre, Jr. | | 58 | 46 | | | Director |
David Leuschen | | 69 | 52 | | | Director |
Robert Tichio | | 43 | 46 | | Director |
Jim McDermott | | 51 | | Director |
Jeffrey Tepper | 54 | | Director |
Michael Warren | | 53 | | Director; Lead Independent Director |
Erik Anderson| (1) | Member of the audit committee. |
| (2) | Member of the compensation committee. |
| (3) | Member of the nominating and corporate governance committee. |
Mr. Gu has served as
ourExecutive Chairman and a member of the Board since August 2020. Prior to that, Mr. Gu served as Chief Executive Officer
of Hyzon from January 2020, when heco-founded
the company, until August 2020. Mr. Guco-founded
Horizon, a leading international fuel cell producer, in 2003 and has served as Horizon’s Chairman since August 2019. Prior to that, Mr. Gu served as Horizon’s Chief Executive Officer from the company’s formation until August 2019. Mr. Gu served as the Chairman of Horizon Educational Group, an affiliate of Horizon focused on fuel cell education, from August 2019 to February 2021. From June 1999 to October 2003, Mr. Gu was the Digital Ventures Manager at Eastman Chemical Company, a specialty materials company primarily in the chemical industry, where he was responsible for clean technology ande-commerce.
Mr. Gu holds an M.B.A. from the University of North Carolina (Chapel Hill) and a B.S. degree in Finance from Fudan University. We believe Mr. Gu is qualified to serve on the Board due to his operational experience as Hyzon’s Executive Chairman and as a member of Legacy Hyzon’s board of directors, his historical knowledge of Hyzon and its strategic objectives as one of itsco-founders,
business leadership experience in the hydrogen mobility sector and his experience serving on the board of directors of a hydrogen-focused company. Mr. Knight has served as Hyzon’s Chief Executive Officer and as a member of the Board since August 2020. From January 2020 when Mr. Knightco-founded
Hyzon until August 2020, Mr. Knight served as its Chief Commercial Officer. Mr. Knight served as Chief Executive Officer of Horizon from September 2019 to August 2020, and as Horizon’s Chief Commercial Officer from August 2006 to September 2019. Mr. Knight has been the Managing Director of Hymas, an affiliate of Hyzon, since its formation in May 2018. Mr. Knight holds an M.B.A. and a B.S. degree in Chemistry and Pure Mathematics from the University of Sydney.
We believe Mr. Knight is qualified to serve on the Board due to his operational experience as Hyzon’s Chief Executive Officer and a member of Legacy Hyzon’s board of directors, his historical knowledge of Hyzon and its strategic objectives as one of itsco-founders,
and extensive business leadership and professional experience in the hydrogen mobility and chemical sectors. Mr. Gordon has served as Chief Financial Officer of Hyzon since August 2020 and as a member of the Board since July, 2021. Mr. Gordon has served as the Chief Investment Officer and Managing Partner of Ascent Funds, an energy transition investment platform since January 2018. From October 2015 to January 2018, Mr. Gordon served as a senior portfolio manager at Janus Henderson, a leading global active asset manager, and its predecessor, where he managed the Alphagen Energy Funds. From December 2012 to December 2014, Mr. Gordon worked as a senior analyst at Paulson & Co, Inc., an investment management firm, where he was responsible for the energy sector. Prior to his tenure at Paulson, Mr. Gordon was a portfolio manager at Soros Fund Management, an investment management firm, from April 2009 to March 2012, where he ran an energy and natural resources fund. Mr. Gordon was a Managing Director of Goldman Sachs Asset Management from December 2007 to January 2009, and previously worked as a portfolio manager from September 2004 to January 2009. Prior to that, he worked as a research analyst from September 2000 to August 2004. Mr. Gordon holds an M.B.A. (honors) from the University of Chicago with concentrations in Analytic Finance and Economics, an M.A. degree from Stanford University and a B.A. degree from Brown University (honors). Mr. Gordon is a CFA charter holder. We believe Mr. Gordon is qualified to serve on the Board due to his operational experience as Hyzon’s Chief Financial Officer, his historical knowledge of Hyzon and his extensive business and financial experience at various investment and asset management firms, particularly in the energy transition industry.
Mr. Hirano has served as Hyzon’s Chief Technology Officer since September
21,2021 and joined Hyzon in May 2021. He is a30-year
veteran of the automotive fuel cell technology field. Mr. Hirano most recently spent17-years
in leadership at the Ford Motor Company, including the Ford-Daimler fuel cell alliance and USDRIVE/USCAR Fuel Cell teams in the partnership with the US Department of Energy. Prior to the Ford Motor Company, Mr. Hirano served in various research roles spanning 9 years at the Mazda Motor Corporation. Mr. Hirano holds 25 U.S. patents in the automotive hydrogen fuel cell and battery space. He has published 15 papers for scholarly journals, provided numerous lectures, plenary talks and professional presentations at universities and international conferences. He has also served as a guest scientist at Texas A&M University, Center for Electrochemical System and Hydrogen Research, in pursuit of fuel cell catalyst and MEA research. Mr. Hirano holds an Electrical Engineering degree from the Science University of Tokyo. Mr. Zavoli has served as General Counsel and Chief Legal Officer of Hyzon since February 2021. From March 2020
to February 2021, Mr. Zavoli served as General Counsel, and
from January 2020 to March 2020, as Assistant General Counsel, of Karma Automotive, an electric vehicle manufacturer and alternative energy mobility company. From January 2017 to May 2019, Mr. Zavoli served as Senior Vice President and Senior Corporate Counsel of Conduent Inc., a software company focused on delivering mission-critical services and solutions on behalf of businesses and governments. Prior to that, Mr. Zavoli served as Senior Vice President and Senior Corporate Counsel in the Law Department of Xerox Corporation, a print and digital document products and services provider, from August 2014 to January 2017, where he supported the StrataCare business unit and other Xerox services businesses. Prior to that, Mr. Zavoli served as Chief Financial Officer and General Counsel of StrataCare, LLC from December 2007 to August 2014, when StrataCare, LLC was acquired by Xerox Corporation and eventually spun off into Conduent Inc. Mr. Zavoli holds an LL.M. from Boston University School of Law, a J.D. from University of Illinois Chicago Law School, and B.S. degree in Accounting from the University of Illinois Chicago. Mr. Meeks has served as Chief Strategy Officer of Hyzon since June 2021. From November 2018 to January 2021, Mr. Meeks served as President, Infrastructure Sector for TRC Companies, a design and construction management business in transportation, renewable energy and water resources end markets. Prior to that, from February 2012 to October 2018, Mr. Meeks served as Partner of McKinsey & Company, a global management consulting services company that Mr. Meeks joined in July 2005. Mr. Meeks served as the Managing Partner of McKinsey & Company’s Houston office from June 2013 to June 2016. Mr. Meeks holds an M.B.A degree in Finance from William Marsh Rice University and a B.S. degree in Electrical Engineering from Columbia University.
Mr. Griffin has served as President of Vehicle Operations of Hyzon since October 2021. Prior to joining Hyzon, Mr. Griffin served as CEO of Crane Carrier Corporation from 2020 to 2021. From 2019 to 2020, Mr. Griffin served as President of Light Duty Truck & EV Solutions for Fontaine Modification, a startup business for the Marmon Group. Prior to these roles, Mr. Griffin served as President of Marmon-Herrington from 2015 to 2019 for the Marmon Group (a Berkshire-Hathaway company). Mr. Griffin holds an M.A. degree in Organizational Management from Tusculum University, and a B.S degree in Welding Engineering from The Ohio State University. Additionally, he is aSix-Sigma
Black Belt with 7 patent awards to his name. Mr. Anderson has served as a member of the
DCRB Board since
July 2021. Mr. Anderson served as DCRB’s Chief Executive Officer from September 2020 until July 2021 and as a member of the DCRB board of directors from October
22, 2020.2020 until July 2021. Mr. Anderson has served as the chief executive officer of Decarbonization Plus Acquisition Corporation III since February 11, 2021 and
will become a member of its board of directors
following its initial public offering.since March 2021. Mr. Anderson has served as the chief executive officer of Decarbonization Plus Acquisition Corporation II since January
14, 2021 and a member of its board of directors since February 2021. Mr. Anderson founded WRG, a collaboration of leading investment firms providing integrated capital solutions to the global innovation economy, in 2002 and has served as chief executive officer of WRG since its inception. In 2018, Mr. Anderson became executive chairman of Singularity University, a company that offers executive educational programs, a business incubator and innovation consultancy service. Mr. Anderson is also the executive chairman of Topgolf Entertainment Group, a global sports and entertainment company. Mr. Anderson has received numerous honors, including the Ernst & Young Entrepreneur of the Year Award. In 2018 and 2017, Mr. Anderson was honored by Goldman Sachs as one of their Top 100 Most Intriguing Entrepreneurs. In 2019 and 2018, Mr. Anderson was ranked by Golf
Inc.asInc. as the No. 3 most powerful person in the golf industry after being ranked No. 8 in 2017. Mr. Anderson is
Vice-Chairman
of ONEHOPE, a cause-centric consumer brand and technology company, and is the founder of America’s Foundation for Chess, currently serving 160,000 children in the United States with its First Move curriculum. Mr. Anderson serves on the Board of Play Magnus, an interactive chess app. In 2019, Mr. Anderson became a member of the board of Pro.com, a leader in the home improvement experience industry. His investment experience includes being partner at Frazier Healthcare Partners, chief executive officer of Matthew G Norton Co. and vice president at Goldman, Sachs & Co. Mr. Anderson was recognized early in his career as one of the top “40 under 40” young achievers and emerging leaders by Seattle’s Puget Sound Business Journal. Mr. Anderson holds a master’s and bachelor’s degree in Industrial Engineering from Stanford University and a bachelor’s degree (Cum Laude) in Management Engineering from Claremont McKenna College.
Peter Haskopoulos has served
We believe Mr. Anderson is qualified to serve on the Board due to his experience serving as
ourDCRB’s Chief
Financial Officer, Chief AccountingExecutive Officer and
Secretary since August 2020. Mr. Haskopoulos has served asmember of the
chiefDCRB board of directors, and his financial,
officer, chief accounting officerinvesting and
secretary of Decarbonization Plus Acquisition Corporation III since February 2021. Mr. Haskopoulous has served as the chief financial officer, chief accounting officer and secretary of Decarbonization Plus Acquisition Corporation II since December 2020. Mr. Haskopoulos is a managing director of Riverstone and serves as Riverstone’s chief financial officer. Prior to joining Riverstone in 2007, Mr. Haskopoulos served in several financial roles within Thomson Reuters Corporation (NYSE: TRI), most recently as the director of finance. Previously, he was a manager with Ernst & Young, where he worked with both public and private companies. Mr. Haskopoulos started his career at Arthur Andersen. Mr. Haskopoulos earned his M.B.A. and undergraduate degree from Rutgers University and is a certified public accountant.management expertise. Ivy Brown
Dr. Jennifer Aaker
has served as a member of the
DCRB Board since
October 22,July 2021. Ms. Brown was the President of United Parcel Service Northeast from April 2013 to January 2020.
Dr. AakerMs. Brown’s career at UPS spanned 32 years, including positions as Package Division Manager from July 2006 to April 2013 and Director of Sales from August 2000 to July 2006. She has
served asbeen a member of the board of directors of
Decarbonization Plus Acquisition Corporation IIThe Chef’s Warehouse (NASDAQ: CHEF), a specialty foods distributor, since
February 2021. Dr. Aaker has been the General Atlantic Professor at Stanford Graduate School of Business since 2001November 2020. Ms. Brown holds an M.B.A. (Information Technology) from Golden Gate University and
serves as the Coulter Family Faculty Fellow at Stanford Graduate School of Business. A behavioral scientist and author, Dr. Aakera B.S. degree (Industrial Engineering) from Southern Illinois University.We believe Ms. Brown is widely published in leading scientific journals and her work has been featured in The Economist, The New York Times, The Wall Street Journal, The Washington Post, BusinessWeek, Forbes, NPR, CBS MoneyWatch, Inc., and Science. Dr. Aaker is the coauthor of several books including the award-winning book, The Dragonfly Effect, which has been translated into over ten languages, as well as Power of Story, which drew on behavioral sciencequalified to provide a hands-on tool putting The Dragonfly Effect model to work. Her professional areas of focus include artificial intelligence, digitization and brand value. Dr. Aaker currently servesserve on the boardBoard based on her extensive executive and professional experience in the transportation and logistics industries and experience as a director of directorsa public company.
Table of Codexis Inc. and on the board of directors and audit committee of the Stephen and Ayesha Curry Eat. Learn. Play. Foundation. Ms. Aaker served on the boards of Corporate Visions, Inc. from 2011 to 2016, California Casualty Insurance from 2009 to 2015, and Accompany from 2014 to 2018. She is the recipient of the Distinguished Scientific Achievement Award, Stanford Distinguished Teaching Award, Citibank Best Teacher Award, George Robbins Best Teacher Award, Robert Jaedicke Silver Apple Award, and the MBA Professor of the Year Award. Dr. Aaker completed her PhD degrees at Stanford University, and holds a BA from UC Berkeley.We believe that Dr. Aaker’s expertise in behavioral science, artificial intelligence, digitization and brand value and significant experience on numerous boards of directors bring important and valuable skills to our board of directors.
Jane KearnsContents
Mr. Edwards has served as a member of the
DCRB Board since
July 2021. Mr. Edwards has been the President of Detroit Chassis, an assembler of rolling strip chassis, since November 2017 and has deep leadership experience overseeing global operations, program and launch management for major auto suppliers such as Lear Corporation, Advanced Engineered Products and Dura Automotive Regional plant responsibilities throughout Southeast Asia at Lear. From September 2015 to October
22, 2020. Ms. Kearns2017, Mr. Edwards served as Vice President of Program Management and Process Engineering at Dura Automotive Systems LLC, an automotive supplier. Prior to that, Mr. Edwards served as Vice President of Operations of Advanced Engineered Products from May 2013 to August 2015, and as Vice President of Operations of Lear Corporation from 1996 to 2012. Mr. Edwards holds an M.B.A. (Management) from Georgia State University and a B.A. degree from Oregon State University. We believe Mr. Edwards is qualified to serve on the Board due to his extensive executive and senior management experience in the automotive industry, and his proficiencies in lean manufacturing, process engineering, capital/tooling acquisition, manufacturing, supply chain management and plant management.
Mr. Meng has served as
a member of the Board since August 2020. Mr. Meng has served as the Managing Director of Bscope Ltd., part of thePiëch-Nordhoff
family office, which is focused on the management and execution of the long term strategic and sustainability interests of thePiëch-Nordhoff
family, since March 2012 and Bscope Pte Ltd since 2017. One of the family office’s investment vehicles holds shares in Horizon Fuel Cell Technologies Pte. Ltd. Prior toco-founding
Bscope, Mr. Meng prepared the entry of Porsche Holding GmbH, Europe’s largest automobile distribution and retailing company at the time, into the rapidly growing Chinese market as an independent consultant from 2002 to 2003. Mr. Meng worked as a Consultant at Haarmann Hemmelrath in Shanghai from 2001 to 2002 and at United Management Technologies in New York and London from 1999 to 2001, advising on corporate efficiency and alignment. Mr. Meng holds a B.S.in Business Administration from the State University of New York at Stony Brook and an MSc. in Management from the London School of Economics. We believe Mr. Meng is qualified to serve on the Board due to his expertise gained from serving as a member of Legacy Hyzon’s board of directors, and his nearly two decades of experience in global direct and venture investment.
Mr. Park has served as a member of the Board since July 2021. Mr. Park has served as an Executive Managing Director of Korea Zinc Co., Ltd. since January 2020 and has over 29 years of experience with the company in strategy and planning. From January 2015 to December 2019, Mr. Park served as Managing Director of Strategies and Planning, after he served as Director for the same division from 2011 to 2014. Prior to that, Mr. Park was the Chief Financial Officer of Sun Metals Corporation Pty Ltd (Korea Zinc Australian Operations) from 2008 to 2010 and a member of the board of directors of
Decarbonization Plus Acquisition Corporation II since February 2021. Ms. KearnsSun Metals Holding Ltd (Korea Zin Australian Holding Company) from 2006 to 2010. Mr. Park holds a B.A. in Business Administration from Busan National University in Korea. We believe Mr. Park is
Vice President, Growth Services (since May 2019), and Senior Advisor, Cleantech (since October 2012), at MaRS Discovery District. MaRS isqualified to serve on the Board based on his experience as an executive of a
launchpad for startups, a platform for researchers and a home to innovators, supporting over 1,200 Canadian science and technology companies tackling society’s greatest challenges in four core categories: cleantech, health, fintech and enterprise software. Ms. Kearns co-founded, grew and profitably sold a renewable energypublicly traded company and
leverages over 20 yearsbecause of
experiencehis knowledge of strategy development in
venture capital, cleantechthenon-ferrous
metal industry, for use in steel, automobiles, electronics and
sustainability to help build businesses that matter. construction materials. Ms.
Kearns is a co-founder of the CanadaCleantech Alliance, sits on the board of Clear Blue Technologies International (TSXV: CBLU), is an advisory board member for StandUp Ventures and Amplify Ventures, and is a member of the Expert Panel on Clean Growth for the Canadian Institute for Climate Choices. She holds an MBA from Columbia University.We believe that Ms. Kearns’s leadership in sustainable innovation and extensive experience growing successful companies at the intersection of business and sustainability bring important and valuable skills to our board of directors.
Pierre Lapeyre, Jr.Wong has served as a member of the DCRB Board since October 22, 2020. Mr. Lapeyre has servedJuly 2021 and is the Lead Independent Director. Ms. Wong is a co-founder and a partner of H+ Partners, which was formed in 2021 to make private equity investments in companies that accelerate decarbonization, with a particular emphasis on companies in the hydrogen ecosystem. Prior to that, she co-founded Hydrogen Capital Partners in 2019 and co-founded HAO Capital, a China-focused Growth Equity Fund in June 2006. Ms. Wong worked at The Carlyle Group as an Associate in Washington, DC from July 1999 to August 2001 and as a memberSenior Associate in Hong Kong from June 2003 to June 2006. Prior to that, from August 1997 to July 1999, Ms. Wong worked as an Analyst at Arthur D. Little’s chemicals practice in Cambridge, MA. Ms. Wong holds an M.B.A. from Stanford Graduate School of Business and a B.S. (Chemical Engineering) from MIT.
We believe Ms. Wong is qualified to serve on the Board due to her over 20 years’ business experience in the private equity sector, her knowledge of the board of directors of Decarbonization Plus Acquisition Corporation II since February 2021. Mr. Lapeyre is the co-founderhydrogen energy economy and senior managing director of Riverstone Holdings LLC. Mr. Lapeyre was a managing director of Goldman Sachs in its Global Energy & Power Group. Mr. Lapeyre joined Goldman Sachs in 1986 and spent his 14-year investment banking career focused on energy and power, and leading client coverage and execution of a wide variety of M&A, IPO, strategic advisory and capital markets financings for clients across all sectors of the industry. Mr. Lapeyre received his B.S. in Finance/Economics from the University of Kentucky and his M.B.A. from the University of North Carolina at Chapel Hill. Mr. Lapeyre servesher experience serving on the boards of directors or equivalent bodiesnumerous companies that have gone on to become publicly listed companies.
Director Independence; Controlled Company Exemption
The Board determined that each of the
Board of Visitors of the MD Anderson Cancer Centerdirectors other than George Gu, Craig Knight and
is a Trustee and Treasurer of The Convent of the Sacred Heart.We believe that Mr. Lapeyre’s considerable energy and power private equity and investment banking experience bring important and valuable skills to our board of directors.
David Leuschen has servedMark Gordon qualifies as a member of the DCRB Board since October 22, 2020. Mr. Leuschen has served as a member of the board of directors of Decarbonization Plus Acquisition Corporation II since February 2021. Mr. Leuschen is the co-founder and senior managing director of Riverstone Holdings LLC. Prior to Riverstone, Mr. Leuschen was a partner and managing director at Goldman Sachs and founder and head of the Goldman Sachs Global Energy and Power Group. Mr. Leuschen was responsible for building the Goldman Sachs energy and power investment banking practice into one of the leading franchises in the global energy and power industry. Mr. Leuschen additionally served as chairman of the Goldman Sachs Energy Investment Committee, where he was responsible for screening potential direct investments by Goldman Sachs in the energy and power industry. In addition to his board roles at various Riverstone portfolio companies and investment vehicles, Mr. Leuschen has served as a director of Cambridge Energy Research Associates, Cross Timbers Oil Company (predecessor to XTO Energy) and J. Aron Resources. He is also president and sole owner of Switchback Ranch LLC and on the Advisory Board of Big Sky Investment Holdings LLC. David serves on a number of nonprofit boards of directors, including as a Trustee of United States Olympic Committee Foundation, a Director of Conservation International, a Director of the Peterson Institute for International Economics, a Founding Member of the Peterson Institute’s Economic Leadership Council, a Director of the Wyoming Stock Growers Association and a Director of the Montana Land Reliance. Mr. Leuschen received his A.B. from Dartmouth and his M.B.A. from Dartmouth’s Amos Tuck School of Business.
We believe that Mr. Leuschen’s considerable energy and power private equity and investment banking experience, as well as his experience on the boards of various Riverstone portfolio companies and investment vehicles, bring important and valuable skills to our board of directors.
Robert Tichio has served as a member of the DCRB Board since August 2020 and served as our chief executive officer until September 2020. Mr. Tichio has served as a member of the board of directors of Decarbonization Plus Acquisition Corporation III since February 2021 and temporarily served as its chief executive officer in February 2021. Mr. Tichio has served as a member of the board of directors of Decarbonization Plus Acquisition Corporation II since December 2020 and served as its chief executive officer from December 2020 to January 2021. Mr. Tichio is a partner and managing director of Riverstone Holdings LLC. Mr. Tichio joined the firm in 2006 and has been focused on the firm’s Private Equity business. Prior to joining Riverstone, Mr. Tichio was in the Principal Investment Area (PIA) of Goldman Sachs, which manages the firm’s private corporate equity investments. Mr. Tichio began his career at J.P. Morgan in the Mergers & Acquisition Group, where he concentrated on assignments that included public company combinations, asset sales, takeover defenses, and leveraged buyouts. Mr. Tichio received his A.B. from Dartmouth College as a Phi Beta Kappa graduate, and later received his M.B.A. with Distinction from Harvard Business School. Mr. Tichio serves on a number of nonprofit and Riverstone portfolio company boards.
We believe that Mr. Tichio’s considerable investment experience, as well as his experience on the boards of Riverstone portfolio companies, bring important and valuable skills to our board of directors.
Jim McDermott has served as the leadan independent director of the DCRB Board, since October 22, 2020. Mr. McDermott has served as a member ofdefined under the board of directors of Decarbonization Plus Acquisition Corporation II since February 2021. Mr. McDermott is the founder and chief executive officer of Rusheen Capital Management, a private equity firm that invests in growth-stage companies in the carbon capture and utilization, low-carbon energy and water sustainability sectors. As an investor and entrepreneur, Mr. McDermott has founded, run and invested in over 35 businesses over a 25 year career and has built an extensive professional network in the low-carbon energy, water and sustainability sectors. From 1996 to 2003, Mr. McDermott founded and ran Stamps.com (NASDAQ: STMP), Archive.com (sold to Cyclone Commerce) and Spoke.com. From 2003 to 2017, Mr. McDermott co-founded and served as Managing Partner of US Renewables Group, a private investment firm, where he raised and invested approximately $1 billion into clean energy businesses. Mr. McDermott was founder and board member of NanoH2O, is the founder and executive chairman of Fulcrum BioEnergy, investor and board observer of Moleaer, a board member of Carbon Engineering and the chief executive officer of 1PointFive. For five years, Mr. McDermott has been a board member of the Los Angeles Cleantech Incubator. Mr. McDermott holds a MBA from UCLA, and a BA in Philosophy from Colorado College.
We believe Mr. McDermott’s extensive investment and leadership experience brings important and valuable skills to our board of directors.
Jeffrey Tepper has served as a member of the DCRB Board since October 22, 2020. Mr. Tepper has served as a member of the board of directors of Decarbonization Plus Acquisition Corporation II since February 2021. Mr. Tepper is founder of JHT Advisors LLC, a mergers and acquisitions (“M&A”) advisory and investment firm. From 1990 to 2013, Mr. Tepper served in a variety of senior management and operating roles at the investment bank Gleacher & Company, Inc. and its predecessors and affiliates (“Gleacher”). Mr. Tepper was head of investment banking and a member of Gleacher’s Management Committee. Mr. Tepper is also Gleacher’s former chief operating officer overseeing operations, compliance, technology and financial reporting. In 2001, Mr. Tepper co-founded Gleacher’s asset management activities and served as president. Gleacher managed over $1 billion of institutional capital in the mezzanine capital and hedge fund areas. Mr. Tepper served on the investment committees of Gleacher Mezzanine and Gleacher Fund Advisors. Between 1987 and 1990, Mr. Tepper was employed by Morgan Stanley & Co. as a financial analyst in the M&A and merchant banking departments. Mr. Tepper served as a director of Silver Run Acquisition Corporation from its inception in November 2015 until the completion of its acquisition of Centennial in October 2016 and has served as a director of Centennial Resource Development, Inc. (NASDAQ: CDEV) since October 2016. Mr. Tepper is a former director of Alta Mesa Resources, Inc. (NASDAQ: AMR) and its predecessor, Silver Run Acquisition Corporation II, between March 2017 and June 2020. Mr. Tepper received a Master of Business Administration from Columbia Business School and a Bachelor of Science in Economics from The Wharton School of the University of Pennsylvania with concentrations in finance and accounting.
We believe Mr. Tepper’s extensive M&A experience, including service on the boards of directors of two blank check companies, brings important and valuable skills to our board of directors.
Michael Warren has served as a member of the DCRB Board since November 18, 2020. Mr. Warren has served as a member of the board of directors of Decarbonization Plus Acquisition Corporation II since February 2021. Mr. Warren is the Managing Director of Albright Stonebridge Group (“ASG”). Mr. Warren served as ASG’s Managing Principal from 2013 to 2017 and as Principal from 2009 to 2013. Prior to ASG, Mr. Warren served as the Chief Operating Officer and Chief Financial Officer of Stonebridge International from 2004 to 2009, where he managed operations, business development, finance, and personnel portfolios. Mr. Warren served in various capacities in the Obama Administration, including as senior advisor in the White House Presidential Personnel Office and as co-lead for the Treasury and Federal Reserve agency review teams of the Obama-Biden Presidential Transition. Mr. Warren serves on the board of Brookfield Property Partners, the Board of Trustees and the risk & audit committees at Commonfund, the Board of Directors of Walker & Dunlop, Inc,NASDAQ listing rules, and the Board consists of Directorsa majority of MAXIMUS. He serves“independent directors,” as a Trustee of Yale University and is a memberdefined under the rules of the Yale Corporation Investment Committee. Mr. Warren formerly served as a TrusteeSEC and NASDAQ listing rules relating to director independence requirements. In addition, we are subject to the rules of the District of Columbia Retirement BoardSEC and as a memberNASDAQ relating to the membership, qualifications, and operations of the Board of Directorsaudit committee, as discussed below.
Hymas and its affiliates control a majority of the
United States Overseas Private Investment Corporation. Mr. Warren received degrees from Yale University and Oxford University where he was a Rhodes Scholar.We believe Mr. Warren is well qualified to serve as a director due to his familiarity with strategic planning, investment, financial expertise, operations and government programs gained through his service on other boards, his current and prior positions in private industry and government.
Number and Terms of Office of Officers and Directors
We have nine directors. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. The term of officevoting power of the first classClass A Common Stock. As a result, we are a “controlled company” under NASDAQ rules. As a controlled company, we may elect not to comply with certain NASDAQ corporate governance requirements, including those that would require:
the Board to have a majority of independent directors;
that Hyzon establish a compensation committee comprised entirely of independent directors consistingwith a written charter addressing the committee’s purpose and responsibilities; and
that Hyzon have independent director oversight of Dr. Jennifer Aaker, Jane Kearns and Michael Warren, will expire at our first annual meetingHyzon’s director nominations.
While we do not currently rely on any of
stockholders. The term of office of the second class of directors, consisting of Erik Anderson, Jim McDermott and Jeffrey Tepper, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Pierre Lapeyre, Jr., David Leuschen and Robert Tichio, will expire at the third annual meeting of stockholders. We may not hold an annual meeting of stockholders until after we consummate our initial business combination.Holders of our Founder Shares will have the right to elect all of our directors priorthese exemptions (including with respect to the consummationrequirement for a majority of our initial business combinationindependent directors), we will be entitled to do so for as long as we are considered a “controlled company,” and to the extent we rely on one or more of these exemptions, holders of our public sharesClass A Common Stock will not have the rightsame protections afforded to vote on the electionstockholders of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended if approved by a majority of at least 90% of our common stock voting at a stockholder meeting.
Approval of our initial business combination will require the affirmative vote of a majority of our board of directors, which must include a majority of our independent directors and a majoritycompanies that are subject to all of the non-independent directors nominated by our Sponsor.
Our officers are appointed by the boardNASDAQ corporate governance requirements.
Role of directors and serve at the discretionBoard in Risk Oversight
One of the
board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairmankey functions of the Board
Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Treasurer and such other officesis informed oversight of our risk management process. The Board administers this oversight function directly through the Board as
may be determined by the board of directors.
Committeesa whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of Directors
Our board of directors has two standing committees: anoversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure, and Hyzon’s audit committee has the responsibility to consider and a compensation committee. Subjectdiscuss Hyzon’s major financial risk exposures and the steps its management will take to phase-in rulesmonitor and a limited exception,control such exposures, including guidelines and policies to govern the rules of NASDAQprocess by which risk assessment and Rule 10A-3 under the Exchange Act require that themanagement is undertaken. The audit committee of a listed company be comprised solely of independent directors,also monitors compliance with legal and the rules of NASDAQ require that theregulatory requirements. Hyzon’s compensation committee also assesses and monitors whether Hyzon’s compensation plans, policies and programs comply with applicable legal and regulatory requirements, and Hyzon’s nominating and corporate governance committee provides oversight with respect to corporate governance and monitor the effectiveness of a listed company be comprised solely of independent directors.
Audit Committee
Our board of directors hasHyzon’s corporate governance policies and principles.
The Board established an audit committee, a compensation committee, and a nominating and corporate governance committee. The Board adopted a charter for each of the board of directors. Jim McDermott, Jeffrey Tepper and Robert Tichio serve as members of our audit committee. Under the NASDAQ listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent, subject to the exception described below. Jim McDermott and Jeffrey Tepper are independent. Because we listed our securities on NASDAQ in connectionthese committees, which charters comply with the Public Offering, we have one year from the effective dateapplicable requirements of the Registration Statement to have our audit committee be comprised solely of independent members.NASDAQ rules. We intend to identify one additional independent directorcomply with future requirements to servethe extent they will be applicable to us. Copies of the charters for each committee are available on the investor relations portion of our website at www.hyzonmotors.com. Each committee has the composition and responsibilities described below.
Our audit committee
within one yearconsists of
the effective date of the Registration Statement, at which time Robert Tichio will resign from the committee. We expect such additional director to enter into a letter agreement substantially similar to the letter agreement signed by our sponsor, officersIvy Brown, Ki Deok Park, and
directors included as an exhibit to the Registration Statement.Jeffrey Tepper serves as chair of the audit committee. AllElaine Wong. The Board determined that each of the members of the audit committee are financially literate,satisfies the independence requirements of the NASDAQ listing rules and our board of directors has determined that Jeffrey Tepper qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We have adopted an audit committee charter, which detailsRule
10A-3
under the
principal functionsExchange Act. Each member of the audit committee
including: | ● | the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us; |
| | |
| ● | pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
| | |
| ● | reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence; |
| | |
| ● | setting clear hiring policies for employees or former employees of the independent auditors; |
| | |
| ● | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| | |
| ● | obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| | |
| ● | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| | |
| ● | reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Compensation Committee
Our boardcan read and understand fundamental financial statements in accordance with NASDAQ audit committee requirements. In arriving at this determination, the Board examined each audit committee member’s scope of directors has established a compensation committeeexperience and the nature of their prior and/or current employment.
Ivy Brown serves as the chair of the boardaudit committee. The Board determined that Ki Deok Park qualifies as an audit committee financial expert within the meaning of directors. Dr. Jennifer AakerSEC regulations and Jeffrey Tepper serve as membersmeets the financial sophistication requirements of our compensation committee. Under the NASDAQ listing standardsrules. In making this determination, the Board considered Ki Deok Park’s formal education and previous experience in financial roles. Both our independent registered public accounting firm and management periodically meet privately with our audit committee.
The functions of this committee include, among other things:
evaluating the performance, independence and qualifications of our independent auditors and determining their compensation and whether to retain our existing independent auditors or engage new independent auditors;
reviewing our financial reporting processes and disclosure controls;
reviewing and approving the engagement of our independent auditors to perform audit services and any permissiblenon-audit
services; reviewing the adequacy and effectiveness of our internal control policies and procedures, including the agenda, responsibilities, priorities, plan and staffing of our internal audit function;
reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and estimates to be used by us;
obtaining and reviewing at least annually a report by our independent auditors describing the independent auditors’ internal quality control procedures and any material issues raised by the most recent internal quality-control review;
monitoring the rotation of partners of our independent auditors on our engagement team as required by law;
prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditor;
preparing any report of the audit committee required by the rules and regulations of the SEC for inclusion in our annual proxy statement and reviewing our annual and quarterly financial statements and reports, including the disclosures contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management;
reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of our financial controls and critical accounting policies and estimates;
reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees or any provider of accounting-related services of concerns regarding questionable accounting and auditing matters and review of submissions and the treatment of any such complaints;
reviewing and approving of any related party transactions that are required to be disclosed under SEC rules that require such approval under our related party transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of ethics;
reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented;
conducting and reviewing with the Board an annual self-assessment of the performance of the audit committee, and reviewing and assessing the audit committee charter at least annually; and
reporting to the Board on a regular basis.
The composition and function of the audit committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC rules we are requiredand regulations. We will seek to have at least twocomply with future requirements to the extent they become applicable to us.
Our compensation committee consists of Erik Anderson, Dennis Edwards, and Viktor Meng. Erik Anderson serves as the chair of the compensation committee. The Board has determined that each of the members of the compensation committee
arenon-employee
directors, as defined in Rule16b-3
promulgated under the Exchange Act and satisfy the independence requirements of NASDAQ. The functions of the committee include, among other things: establishing our general compensation philosophy and, in consultation with management, overseeing the development and implementation of compensation programs;
reviewing and approving the corporate objectives that pertain to the determination of executive compensation;
determining and approving the compensation and other terms of employment of our executive officers;
reviewing and approving performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives;
making recommendations to the Board regarding the adoption or amendment of equity and cash incentive plans and approving such plans or amendments thereto to the extent authorized by the Board;
overseeing the activities of the committee or committees administering our retirement and benefit plans;
reviewing and making recommendations to the Board regarding the type and amount of compensation to be paid or awarded tonon-employee
board members; reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act;
administering our equity incentive plans, to the extent such authority is delegated by the Board;
reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections, indemnification agreements and any other material agreements for our executive officers;
reviewing with management our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC, to the extent such caption is required to be included in any such report or proxy statement;
preparing an annual report on executive compensation, to the extent such report is required to be included in our annual proxy statement or Form10-K;
reviewing and evaluating on an annual basis the performance of the compensation committee and recommending such changes as deemed necessary with the Board; and
in consultation with management, overseeing regulatory compliance with respect to compensation matters including overseeing our policies on structuring compensation programs to preserve tax deductibility.
The composition and function of the compensation committee complies with all applicable requirements of whom must be independent. Dr. Jennifer Aakerthe Sarbanes-Oxley Act and Jeffrey Tepper are independent. Dr. Jennifer Aakerall applicable SEC and NASDAQ rules and regulations. We will seek to comply with future requirements to the extent they become applicable to us.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Dennis Edwards, Viktor Meng and Elaine Wong. Elaine Wong serves as the chair of the nominating and corporate governance committee. The Board has determined that each of the members of our nominating and corporate governance committee satisfy the independence requirements of NASDAQ. The functions of this committee include, among other things:
identifying, reviewing and making recommendations of candidates to serve on the Board;
evaluating the performance of the Board, committees of the Board and individual directors and determining whether continued service on the Board is appropriate;
evaluating nominations by stockholders and management of candidates for election to the Board;
evaluating the current size, composition and organization of the Board and its committees and making recommendations to the Board for approvals;
evaluating the “independence” of directors and director nominees against the independence requirements under the NASDAQ Rules and regulations promulgated by the SEC and such other qualifications as may be established by the Board from time to time and make recommendations to the Board as to the independence of directors and nominees;
recommending to the Board directors to serve as members of each committee, as well as candidates to fill vacancies on any committee of the Board;
reviewing annually our corporate governance policies and principles and recommending to the Board any changes to such policies and principles;
advising and making recommendations to the Board on corporate governance matters; and
reviewing annually the nominating and corporate governance committee charter and recommending any proposed changes to the Board, including undertaking an annual review of its own performance.
The composition and function of the nominating and corporate governance committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and NASDAQ rules and regulations. We will seek to comply with future requirements to the extent they become applicable to us.
There have been no material changes to the procedures by which holders of our Class A Common Stock may recommend nominees to our Board since the date of the Business Combination.
Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serve, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers that serves as a member of the Board or compensation committee.
Limitation on Liability and Indemnification of Directors and Officers
The Charter limits our directors’ liability to the fullest extent permitted under the DGCL. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability:
for any transaction from which the director derives an improper personal benefit;
for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
for any unlawful payment of dividends or redemption of shares; or
for any breach of a director’s duty of loyalty to the corporation or its stockholders.
If the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of Hyzon’s directors will be eliminated or limited to the fullest extent authorized by the DGCL, as so amended.
Delaware law and the Company’s amended and restated bylaws, provide that the Company will, in certain situations, indemnify directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to advancement, direct payment, or reimbursement of expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding.
In addition, the Company entered into separate indemnification agreements with directors and officers. These agreements, among other things, require Hyzon to indemnify its directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of Hyzon’s directors or officers or any other company or enterprise to which the person provides services at Hyzon’s request.
Hyzon maintains a directors’ and officers’ insurance policy pursuant to which Hyzon’s directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe these provisions in the Charter, Hyzon’s amended and restated bylaws, and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Code of Business Conduct and Ethics for Employees, Executive Officers, and Directors
We have adopted a
compensationCode of Business Conduct and Ethics (the “Code of Conduct”), applicable to all of our employees, executive officers and directors. The Code of Conduct is available on our website at www.hyzonmotors.com. Our website and the information contained on, or that can be accessed through, our website is not deemed to be incorporated by reference in, and is not considered a part of, this Annual Report, and the inclusion of our website address in this Annual Report is an inactive textual reference only. The nominating and corporate governance committee
charter, which details the principal functions of the
compensation committee, including: | ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our chief executive officer’s compensation, evaluating our chief executive officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our chief executive officer based on such evaluation; |
| | |
| ● | reviewing and approving on an annual basis the compensation of all of our other officers; |
| | |
| ● | reviewing on an annual basis our executive compensation policies and plans; |
| | |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| | |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| | |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| | |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| | |
| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
NotwithstandingBoard is responsible for overseeing the foregoing, as indicated above, other thanCode of Conduct and must approve any waivers of the $10,000 per month administrative fee payableCode of Conduct for employees, executive officers and directors. We expect that any amendments to an affiliatethe Code of our sponsor and reimbursementConduct, or any waivers of expenses, no compensation of any kind, including finders, consulting or other similar fees,its requirements, will be paid to anydisclosed on our website.
Table of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the closing of a business combination. Accordingly, prior to the closing of an initial business combination, the compensation committee is only responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.
Contents
Director Nominations
We do not have a standing nominating committee. In accordance with Rule 5605(e) of the NASDAQ Rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. Our board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. As there is no standing nominating committee, we do not have a nominating committee charter in place.
Our board of directors also considers director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, our board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom and the ability to represent the best interests of our stockholders. Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for nomination to our board of directors.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers directors and persons who beneficially own more than ten percent10% of anya registered class of our equity security which is registered pursuant to Section 12 of the Exchange Actsecurities to file reports of beneficial ownership and changes in beneficial ownership with the SEC. BasedA Form 4 was not timely filed with the SEC reporting the vesting of restricted stock units on November 23, 2021 for Mr. Griffin; however, a Form 5 reporting such transaction was subsequently filed with the SEC on February 14, 2022.
To our knowledge, based solely
uponon a review of
copies of such
forms,reports furnished to us by our officers and directors, we believe that, during the
fiscal year ended December 31,
2020,2021, there were no
delinquent filers, except that a Form 3 was filed lateother failures to timely file reports by
each of our Sponsor, Dr. Jennifer Aaker, Robert Tichio, Jeffrey Tepper, Pierre Lapeyre, Jr., David Leuschen, Jim McDermott, Jane Kearns, Peter Haskopoulos and Erik Anderson.Code of Ethics and Committee Charters
We have adopted a Code of Ethics applicablepersons required to our directors, officers and employees. We filed a copy of our Code of Ethics and our audit and compensation committee charters as exhibits to the Registration Statement. You can review these documents by accessing our public filings at the SEC’s website at www.sec.gov. Our Code of Ethics and audit committee and compensation committee charters are available on our website, www.dcrbplus.com. In addition, a copyfile reports under Section 16(a) of the Code of Ethics will be provided without charge upon request from us in writing at 2744 Sand Hill Road, Menlo Park, CA 94025 or by telephone at (212) 993-0076. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Conflicts of Interest
Riverstone manages several investment vehicles. Riverstone Funds or its affiliates may compete with us for acquisition opportunities. If these funds decide to pursue any such opportunity, we may be precluded from procuring such opportunities. In addition, investment ideas generated within Riverstone may be suitable for both us and for a current or future Riverstone Fund and may be directed to such investment vehicle rather than to us. Neither Riverstone nor members of our management team who are also employed by Riverstone have any obligation to present us with any opportunity for a potential business combination of which they become aware. Riverstone and/or our management, in their capacities as officers or managing directors of Riverstone or in their other endeavors, may be required to present potential business combinations to the related entities, current or future investment vehicles, or third parties, before they present such opportunities to us.
Notwithstanding the foregoing, we may, at our option, pursue an Affiliated Joint Acquisition. Such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by making a specified future issuance to any such fund or vehicle.
Exchange Act.
Each of our officers and directors presently has, and any of them in the future may have additional fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such other entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination. In addition, we may pursue an Affiliated Joint Acquisition opportunity with an entity to which an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by issuing to such entity a class of equity or equity-linked securities. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
In addition, Riverstone or its affiliates, including our officers and directors who are affiliated with Riverstone, may sponsor or form other blank check companies similar to ours during the period in which we are seeking an initial business combination, and members of our management team may participate in such blank check companies. Any such companies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among the management teams. However, we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.
Investors and potential investors should also be aware of the following other potential conflicts of interest:
| ● | None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities. |
| | |
| ● | In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented. |
| | |
| ● | Our initial stockholders have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by them in connection with the consummation of our initial business combination. Additionally, our initial stockholders have agreed to waive their redemption rights with respect to any Founder Shares held by them if we fail to consummate our initial business combination within 24 months after the closing of our Public Offering. If we do not complete our initial business combination within such applicable time period, the proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of our public shares, and the Private Placement Warrants will expire worthless. With certain limited exceptions, the Founder Shares are not transferable, assignable or saleable until the earlier of: (i) one year after the completion of our initial business combination or (ii) subsequent to our initial business combination, (x)if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the Private Placement Warrants and the Class A common stock underlying such warrants will not be transferable, assignable or salable until 30 days after the completion of our initial business combination. Since our Sponsor and officers and directors directly or indirectly own common stock and warrants, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. |
| | |
| ● | Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. |
| | |
| ● | Our Sponsor, officers or directors may have a conflict of interest with respect to evaluating a business combination and financing arrangements as we may obtain loans from our Sponsor or an affiliate of our Sponsor or any of our officers or directors to finance transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. |
The conflicts described above may not be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| ● | the corporation could financially undertake the opportunity; |
| | |
| ● | the opportunity is within the corporation’s line of business; and |
| | |
| ● | it would not be fair to the Company and its stockholders for the opportunity not to be brought to the attention of the corporation. |
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation provides that the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our initial business combination with a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that such initial business combination is fair to the Company from a financial point of view.
In the event that we submit our initial business combination to our public stockholders for a vote, our initial stockholders have agreed to vote any Founder Shares held by them and any public shares held by them in favor of our initial business combination, and our officers and directors have also agreed to vote any public shares held by them in favor of our initial business combination.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Item 11. Executive
Compensation.NoneCompensation
This section provides an overview of Hyzon’s executive compensation programs, including a narrative description of the material factors necessary to understand the information disclosed in the summary compensation table below.
Hyzon’s board of directors, with input from its Executive Chairman, determines the compensation for Hyzon’s named executive officers. For the year ended December 31, 2021, Hyzon’s named executive officers were:
George Gu, Executive Chairman;
Craig Knight, Chief Executive Officer;
Parker Meeks, Chief Strategy Officer; and
Gary Robb, Former Chief Technology Officer
Hyzon has designed, and intends to modify as necessary, its compensation and benefits program to attract, retain, incentivize and reward qualified executives who share its philosophy and desire to work towards achieving Hyzon’s goals. Hyzon believes its compensation program should promote the success of the company and align executive incentives with the long-term interests of its stockholders. As Hyzon’s needs evolve, Hyzon intends to continue to evaluate its philosophy and compensation programs as circumstances require.
2021 Summary Compensation Table
For 2021, the compensation program for Hyzon’s named executive officers consisted of base salary, incentive compensation delivered in the form of restricted stock units and certain other compensation. The following table sets forth information concerning the compensation of the named executive officers for the year ended December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | All Other
Compensation
($) (D) | | | | |
| |
| 2021
2020 |
| |
| 410,577
211,591 |
| |
| —
|
| |
| —
6,140,625 |
| |
| —
|
| |
| 18,942
5,493 |
| |
| 429,519
6,357,709 |
|
| |
| 2021
2020 |
| |
| 378,658
148,090 |
| |
| —
|
| |
| —
4,492,188 |
| |
| —
|
| |
| 35,757
— |
| |
| 414,415
4,640,278 |
|
Chief Strategy Officer (1) | | | 2021 | | | | 250,961 | | | | — | | | | — | | | | 2,603,997 | | | | 11,133 | | | | 2,866,091 | |
Former Chief Technology Officer | |
| 2021
2020 |
| |
| 151,038
120,000 |
| |
| —
7,500 |
| |
| —
1,378,000 |
| |
| 2,535,000
— |
| |
| 111,530
6,494 |
| |
| 2,797,568
1,511,994 |
|
| (1) | Parker Meeks became a Named Executive Officer of Hyzon for the first time in 2021. |
$124,992 of Mr. Knight’s 2021 annual salary was paid by Horizon and was reimbursed by Hyzon. Mr. Knight’s 2020 full annual salary was paid by Horizon and was reimbursed by Hyzon for that amount. $101,722 of Mr. Gu’s 2020 annual salary was paid by Horizon and reimbursed by Hyzon for that amount.
Amounts in this column represent the aggregate grant date fair value of the options computed in accordance with FASB ASC 718. See Note 15, Stock-based Compensation Plans to our consolidated financial statements in this Annual Report onForm 10-K for
a discussion of assumptions made in determining the grant date fair value and compensation expense of our
officers or directors has received any cashstock awards. Amounts in this column represent the aggregate grant date fair value of restricted stock unit awards computed in accordance with ASC 718. See Note 15, Stock-based Compensation Plans to our consolidated financial statements in this Annual Report onForm 10-K
for a discussion of assumptions made in determining the grant date fair value and compensation
for services rendered to us. Commencing on October 21, 2020, we have agreed to pay an affiliateexpense of our
Sponsorstock awards. The RSU awards reported for Gary Robb in 2021 were granted as part of his retirement agreement September 2021. Hyzon provides benefits to its named executive officers on the same basis as provided to all of its employees, including with respect to health, dental and vision insurance; life insurance; and access to a
totaltax-qualified
Section 401(k) plan. Hyzon does not maintain any executive-specific benefit or perquisite programs. For Mr. Gu, amount for 2021 includes Hyzon 401(k) contribution of
$10,000$18,942. For Mr. Knight, amount for 2021 includes Hyzon 401(k) contribution of $10,757 and relocation benefits of $25,000. For Mr. Meek, amount for 2021 includes Hyzon 401(k) contribution of $11,133. For Mr. Robb, amount for 2021 includes Hyzon 401(k) contribution of $8,694, consultant arrangement-related fees of $80,000 and reimbursement of unused vacation of $22,836.
Additional Narrative Disclosure
Agreements with Hyzon’s Named Executive Officers
Hyzon has entered into employment agreements with Messrs. Gu, Knight, and Meeks with respect to their respective roles with the Company. The employment agreements are summarized below.
Employment Agreement with Mr. Knight
On July 9, 2021, Hyzon entered into an employment agreement with Mr. Knight with respect to Mr. Knight’s service as Chief Executive Officer of Hyzon. The employment agreement provides Mr. Knight with an annual base salary of $450,000. Mr. Knight is eligible to receive an annual cash bonus with an annual target of up to 70% of his base salary. Pursuant to his employment agreement, Mr. Knight is also eligible to receive one grant under the Hyzon’s 2021 Equity Incentive Plan (the “2021 Plan”) in an amount equal to 3% of the fully diluted outstanding shares of Class A Common Stock following the consummation of the Business Combination; the grant is expected to be in the form of options and RSUs, with certain awards subject to performance-based vesting conditions. Mr. Knight is also entitled to participate in Hyzon employee health/welfare and retirement benefit plans and programs as are made available to senior-level executives or employees generally.
Mr. Knight’s employment agreement provides for“at-will”
employment and, at any time, either Mr. Knight or Hyzon may terminate the employment agreement, generally upon 60 days’ notice. Upon a termination for any reason, Mr. Knight is entitled to receive any earned, but unpaid base salary, any accrued and unused vacation and any owed reimbursements pursuant to the employment agreement. Upon a termination by Hyzon without cause or by Mr. Knight for good reason (as such terms are defined in the employment agreement), Mr. Knight will also receive: (i) a lump sum payment equal to 24 months’ base salary (in the case of a qualifying change in control termination, as defined in the employment agreement) or 12 months’ base salary (if there is not a qualifying change in control termination), (ii) apro-rata
bonus for the year of termination, (iii) reimbursement for continued medical benefits for a period of up to 24 months in connection with a qualifying change in control termination or up to 12 months for a qualifying termination not in connection with a change in control and (iv) full vesting of outstanding equity awards under the 2021 Plan (in the case of a qualifying change in control termination) or accelerated vesting of outstanding equity awards under the 2021 Plan that would have vested during the 12 month period following termination had Mr. Knight remained continuously employed by Hyzon (if there is not a qualifying change in control termination). Mr. Knight’s employment agreement also contains certain restrictions, including not to disclose confidential information, as well as customarynon-competition
andnon-solicitation
covenants by which Mr. Knight is bound during his employment and for one year thereafter. Employment Agreement with Mr. Gu
On July 9, 2021, Hyzon entered into an employment agreement with Mr. Gu with respect to Mr. Gu’s service as Executive Chairman of Hyzon. The employment agreement provides Mr. Gu with an annual base salary of $475,000. Mr. Gu is eligible to receive an annual cash bonus with an annual target of up to 70% of his base salary. Mr. Gu is also eligible to receive one grant under the 2021 Plan in an amount equal to 3% of the fully diluted outstanding shares of Class A Common Stock following the consummation of the Business Combination; the grant is expected to be in the form of options and RSUs, with certain awards subject to performance-based vesting conditions. Mr. Gu is also entitled to participate in Hyzon employee health/welfare and retirement benefit plans and programs as are made available to senior-level executives or employees generally. ‘
Mr. Gu’s employment agreement provides for“at-will”
employment and, at any time, either Mr. Gu or Hyzon may terminate the employment agreement, generally upon 60 days’ notice. Upon a termination for any reason, Mr. Gu is entitled to receive any earned, but unpaid base salary, any accrued and unused vacation and any owed reimbursements pursuant to the employment agreement. Upon a termination by Hyzon without cause or by Mr. Gu for good reason (as such terms are defined in the employment agreement), Mr. Gu will also receive: (i) a
lump sum payment equal to 24 months’ base salary (in the case of a qualifying change in control termination, as defined in the employment agreement) or 12 months’ base salary (if there is not a qualifying change in control termination), (ii) apro-rata
bonus for the year of termination, (iii) reimbursement for continued medical benefits for a period of up to 24 months in connection with a qualifying change in control termination or up to 12 months for a qualifying termination not in connection with a change in control and (iv) full vesting of outstanding equity awards under the 2021 Plan (in the case of a qualifying change in control termination) or 12 months’ accelerated vesting of outstanding equity awards under the 2021 Plan (if there is not a qualifying change in control termination). Mr. Gu’s employment agreement also contains certain restrictions, including not to disclose confidential information, as well as customarynon-competition
andnon-solicitation
covenants by which Mr. Gu is bound during his employment and for one year thereafter. Employment Agreement with Mr. Meeks
On June 7, 2021 Hyzon entered into an employment agreement with Mr. Meeks with respect to Mr. Meeks’ service as Chief Strategy Officer of Hyzon. The employment agreement provides Mr. Meeks with an annual base salary of $450,000. Mr. Meeks is eligible to receive an annual cash bonus with an annual target of up to 70% of his base salary. Mr. Meeks also received one grant under the 2021 Plan in an amount equal to 496,160 restricted stock units, which vest in equal tranches over a four-year vesting schedule starting in 2021. Mr. Meeks is also entitled to participate in Hyzon employee health/welfare and retirement benefit plans and programs as are made available to senior-level executives or employees generally.
Mr. Meeks’ employment agreement provides for“at-will”
employment and, at any time, either Mr. Meeks or Hyzon may terminate the employment agreement, generally upon 60 days’ notice. Upon a termination for any reason, Mr. Meeks is entitled to receive any earned, but unpaid base salary, any accrued and unused vacation and any owed reimbursements pursuant to the employment agreement. Upon a termination by Hyzon without cause or by Mr. Meeks for good reason (as such terms are defined in the employment agreement), Mr. Meeks will also receive: (i) a lump sum payment equal to 18 months’ base salary (in the case of a qualifying change in control termination, as defined in the employment agreement) or 12 months’ base salary (if there is not a qualifying change in control termination), (ii) apro-rata
bonus for the year of termination, (iii) reimbursement for continued medical benefits for a period of up to 18 months in connection with a qualifying change in control termination or up to 12 months for a qualifying termination not in connection with a change in control and (iv) full vesting of outstanding equity awards under the 2021 Plan (in the case of a qualifying change in control termination) or accelerated vesting of outstanding equity awards under the 2021 Plan that would have vested during the 12 month period following termination had Mr. Meeks remained continuously employed by Hyzon (if there is not a qualifying change in control termination). Mr. Meeks’ employment agreement also contains certain restrictions, including not to disclose confidential information, as well as customarynon-competition
andnon-solicitation
covenants by which Mr. Meeks is bound during his employment and for one year thereafter. Employment Agreement with Mr. Robb
On January 20, 2020, Hymas entered into an employment agreement with Mr. Robb with respect to Mr. Robb’s service as Chief Engineer and Vice President of Fuel Cell Powertrain of Hyzon. Following the closing of the Preferred A round fundraising, Hyzon became the employing entity under the employment agreement. The employment agreement provided Mr. Robb with an annual base salary of $200,000, which increased 5% each year. Mr. Robb was eligible to receive (i) an annual performance bonus based on meeting documented objectives equal to0-20%
of base salary and (ii) a profit-sharing bonus based on the economic performance of the Company equal to0-20%
of base salary. Mr. Robb also received 1,772,000 stock options in connection with his employment, which vest in six equal tranches over five years beginning on the grant date.
The employment agreement also contained certain restrictions, including a covenant not to be engaged or interested in any trade, business or occupation other than the business of Hyzon and its affiliates, except for personal financial investments in publicly traded companies or mutual funds, or entirely unrelated private companies, during the period in which the consulting agreement is in effect. As a condition to employment, Mr. Robb was required to sign a standard confidentiality agreement, which will remain in effect for two years after the termination of the employment agreement.
Retirement Agreement with Mr. Robb
On August 27, 2021, Hyzon entered into a retirement agreement with Mr. Robb. Mr. Robb’s last day with the Company was September 17, 2021. Pursuant to the retirement agreement, Mr. Robb will serve as a consultant to Hyzon in exchange for consulting pay of $20,000 per month for
office space, utilities24 months, beginning September 2021. Mr. Robb also received a grant of 250,000 restricted stock units, of which 125,000 RSUs vested on September 17, 2021 and
secretarialthe remaining 125,000 RSUs will vest on September 17, 2022. Mr. Robb’s previously-awarded 1,772,000 stock options will continue to vest pursuant to the original vesting schedule (in equal tranches over 6 years from the date of grant) even if Mr. Robb stops providing services to the Company. Pursuant to the retirement agreement, during the24-month
consulting period, Mr. Robb will not (i) provide services in the areas of PEM fuel cell system development or PEM stack development and
administrative.materials to international or domestic companies or (ii) solicit any Hyzon employees or customers to leave Hyzon. Outstanding Equity Awards at 2021 Fiscal Year End
The following table presents information regarding outstanding equity awards held by Hyzon’s named executive officers as of December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | Number of
Securities
Underlying
Unexercised
Options -
Exercisable
| | | Number of
Securities
Underlying
Unexercised
Options -
Unexercisable
| | |
| | | | | | Number
of Shares
or Units
of Stock
that
Have Not
Vested
| | | Market Value of Shares or Units of Stock that Have Not Vested (5)
| |
| | Options | | | 11/12/2020 | | | | 5,537,500 | | | | — | | | | 1.13 | | | | 1/4/2036 | | | | — | | | | — | |
| | Options | | | 11/12/2020 | | | | 5,537,500 | | | | 5,537,500 | | | | 1.41 | | | | 1/3/2036 | | | | — | | | | — | |
| | RSUs | | | 6/9/2021 | | | | — | | | | — | | | | — | | | | — | | | | 372,120 | | |
| 2,415,059
|
|
| | Options | | | 11/12/2020 | | | | 590,666 | | | | 1,181,334 | | | | 1.13 | | | | 11/11/2030 | | | | — | | | | — | |
| | RSUs | | | — | | | | — | | | | — | | | | — | | | | — | | | | 125,000 | | | | 811,250 | |
| (1) | The option awards reported in these columns granted to Mr. Knight were fully vested on the grant date. |
| (2) | The option awards reported in this column granted to Mr. Gu vest as follows: 50% on the grant date and 50% on the occurrence of a Qualified HFCT Exit Event (as defined therein and described below under “Additional Narrative Disclosure—Potential Payments Upon a Termination or Change in Control”). |
| (3) | The RSUs granted to Mr. Meeks vest in four equal annual installments commencing upon the grant date, subject to continued employment. |
| (4) | The option awards granted to Mr. Robb on November 20, 2020 will vest in six equal tranches over first years beginning on the grant date such that two tranches are currently vested and exercisable. The 125,000 RSUs reported for Mr. Robb will vest on September 17, 2022. |
| (5) | Market value is calculated by multiplying the closing market price of $6.49 for Hyzon common stock, as reported by NASDAQ, by the number of shares or units of stock. |
Additional Narrative Disclosure
Hyzon provides atax-qualified
Section 401(k) plan for all employees, including the named executive officers. Hyzon does not provide to employees, including its named executive officers, any other retirement benefits, including but not limited totax-qualified
defined benefit plans, supplemental executive retirement plans and nonqualified defined contribution plans. Potential Payments Upon Termination or Change in Control
Pursuant to the employment agreements of Messrs. Gu, Knight, and Meeks with Hyzon, upon a termination by Hyzon without cause or by the executive for good reason, the executive will also receive: (i) a lump sum payment equal to 24 months’ (18 months’ in the case of Mr, Meeks) base salary (in the case of a qualifying change in control termination, as defined in the employment agreement) or 12 months’ base salary (if there is not a qualifying change in control termination), (ii) apro-rata
bonus for the year of termination, (iii) reimbursement for continued medical benefits for a period of up to 24 months (up to 18 months in the case of Mr. Meeks) in connection with a qualifying change in control termination or up to 12 months for a qualifying termination not in connection with a change in control and (iv) full vesting of outstanding equity awards under the 2021 Plan (in the case of a qualifying change in control termination) or 12 months’ accelerated vesting of outstanding equity awards under the 2021 Plan (if there is not a qualifying change in control termination). The award agreement evidencing Mr. Gu’s option grant provides that 50% of the option vests in the event of a Qualified HFCT Exit Event (as defined below). The award agreement also provides that if Mr. Gu experiences a termination of employment for any reason prior to the occurrence of a Qualified HFCT Exit Event, then the portion of the option related to the Qualified HFCT Exit Event immediately terminates. Because a Qualified HFCT Exit Event had not occurred as of December 31, 2020, if Mr. Gu experienced a termination of employment on that date, he would have forfeited all 5,537,500 of the unvested option shares.
For purposes of Mr. Gu’s option grant, “Qualified HFCT Exit Event” means the occurrence of (x) a bona fide and enforceable obligation or obligations, by one or more related buyers pursuant to a single agreement or multiple related agreements, to purchase all of the issued and outstanding shares of Horizon Fuel Cell Technology that are outstanding on the date of grant of the option; provided that such obligation(s) and agreement(s) shall not be subject to any conditions to closing other than those that are usual and customary for transactions under similar circumstances (including legally required regulatory approvals), but for the avoidance of doubt excluding discretionary termination rights such as satisfactory completion of ourdue diligence; or (y) an initial business combination or our liquidation, we will cease paying these monthly fees. Nopublic offering of the equity securities of Horizon Fuel Cell Technology, in either case, subject to the achievement of certain performance metrics related to the valuation of Horizon Fuel Cell Technology.
To establish aNon-Employee
Director Compensation Program (the “Director Program”), the Compensation Committee engaged Pearl Meyer. The Company felt using Pearl Meyer would ensure that the Director Program would align the directors’ interests with the long-term interests of stockholders and that the structure of the compensation
is simple, transparent and easy for stockholders to understand. The Compensation Committee also considered whether the Director Program fairly compensates the Company’s directors in light of
any kind, including finder’sthe size and
consulting fees, will be paidscope of the Company. Employee directors do not receive additional compensation for their services as directors. Pursuant to
our Sponsor, officersthe Director Program, eachnon-employee
director of Hyzon is eligible to receive: An annual retainer of $60,000;
An annual retainer of $20,000 for the chair of the Audit Committee, $15,000 for the chair of the Compensation Committee and directors, or any$10,000 for the chair of their respective affiliates,the Nominating and Corporate Governance Committee;
An annual retainer of $10,000 for services rendered priormembers of the Audit Committee, $7,500 for members of the Compensation Committee and $5,000 for members of the Nominating and Corporate Governance Committee;
An initial equity retainer with a value of $225,000 (payable in the form of stock options and restricted stock units, granted in connection with initial election to orthe Board);
An annual equity retainer with a value of $165,000 in connection with the
completion of our initial business combination. However, these individuals will be reimbursed for any reasonable out-of-pocket expenses incurred in connection with activitiesannual shareholders meeting, split equally betweennon-qualified
stock options and restricted stock units, that vests on
our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers or directors, or our or their affiliates.After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time
one-year
anniversary of the
proposed business combination, becausegrant; and An additional annual cash retainer of $30,000 for serving as Lead Director.
Director Compensation Table
The following table shows the
directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation
to be paid to our officers will be determined,received or
recommended to the board of directors for determination, eitherearned by
a compensation committee constituted solely of independent directors or by a majority of the independent directors on our board of directors.We do not intend to take any action to ensure that memberseach of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and
non-employee
directors
may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in
identifying or selecting a target business, but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.fiscal year 2021: | | | | | | | | | | | | | | | | |
| | Fees Earned or Paid in Cash (1)
| | |
| | |
| | |
| |
| | | 37,500 | | | | — | | | | — | | | | 37,500 | |
| | | 40,000 | | | | — | | | | — | | | | 40,000 | |
| | | 35,000 | | | | — | | | | — | | | | 35,000 | |
| | | 35,000 | | | | — | | | | — | | | | 35,000 | |
| | | 35,000 | | | | — | | | | — | | | | 35,000 | |
| | | 70,000 | | | | — | | | | — | | | | 70,000 | |
| (1) | Amounts reflected apro-rated annual cash retainer of $30,000 in 2021 for all directors. Fees for service as a committee member and committee chair in 2021 were also prorated. |
| (2) | No stock or option awards were granted in 2021. |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.Matters
The following table sets forth information
known to the Company regarding the beneficial ownership of
our common stockClass A Common Stock as of March
1, 202111, 2022 by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
| | |
| ● | each of our named executive officers and directors that beneficially owns shares of our common stock; and |
| | |
| ● | all our executive officers and directors as a group. |
each person known to the Company to be the beneficial owner of more than 5% of outstanding Class A Common Stock;
each of the Company’s named executive officers and directors; and
all executive officers and directors of the Company as a group.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Class A Common Stock issuable upon exercise of options and warrants currently exercisable within 60 days are deemed outstanding solely for purposes of calculating the percentage of total voting power of the beneficial owner thereof.
The beneficial ownership of Class A Common Stock is based on 247,856,052 shares of Class A Common Stock issued and outstanding as of March 11, 2022. Unless otherwise indicated,
we believethe Company believes that
all personseach person named in the table
havebelow has sole voting and investment power with respect to all shares of
common stockClass A Common Stock beneficially owned by them.
The following table does not reflect record or beneficial ownership of the Warrants or the Private Placement Warrants.4
| Name and Address of Beneficial Owner(1) | | Number of Shares Beneficially Owned | | | Approximate Percentage of Outstanding Common Stock | |
| Decarbonization Plus Acquisition Sponsor(2)(3) | | | 4,591,708 | | | | 16.3 | % |
| Erik Anderson(2)(4) | | | 630,947 | | | | 2.2 | % |
| Peter Haskopoulos | | | — | | | | — | |
| Dr. Jennifer Aaker(2) | | | 22,130 | | | | * | |
| Jane Kearns(2) | | | 22,130 | | | | * | |
| Pierre Lapeyre, Jr.(2)(3) | | | 4,591,708 | | | | 16.3 | % |
| David Leuschen(2)(3) | | | 4,591,708 | | | | 16.3 | % |
| Robert Tichio | | | — | | | | — | |
| Jim McDermott(2) | | | 331,950 | | | | 1.2 | % |
| Jeffrey Tepper(2) | | | 22,130 | | | | * | |
| Michael Warren(2) | | | 22,130 | | | | * | |
| All directors and executive officers as a group (10 individuals) | | | 5,643,125 | (5) | | | 20.0 | % |
| Luxor Capital Group, LP(6) | | | 1,528,856 | | | | 5.4 | % |
| Adage Capital Partners GP, L.L.C.(7) | | | 1,800,000 | | | | 6.4 | % |
| | | | | | | | |
Name and Address of Beneficial Owners | | Number of
Shares of
Class A
Common
Stock
Beneficially
Owned | | | % of
Outstanding
Class A
Common
Stock | |
| | | 155,639,006 | | | | 62.8 | % |
Horizon Fuel Cell Technologies Pte. Ltd. (2) | | | | | | | | |
Directors and Executive Officers | | | | | | | | |
| | | 630,947 | | | | * | |
| | | — | | | | * | |
| | | 177,200 | | | | * | |
| | | 44,300 | | | | * | |
| | | — | | | | * | |
| | | 781,386 | | | | * | |
| | | 2,735,984 | | | | 1.1 | % |
| | | 5,759,000 | | | | 2.3 | % |
| | | 5,880,700 | | | | 2.3 | % |
| | | 89,404 | | | | * | |
| | | 1,010,999 | | | | * | |
All Directors and Executive Officers as a group (14 persons, including the foregoing) (8) | | | 17,146,661 | | | | 6.6 | % |
| (1) | This tableThe Company is basedpermitted to rely on 28,215,627 shares of Common Stock outstanding at February 24, 2021, of which 22,572,502 were shares of Class A common stockthe information reported by each beneficial owner in filings with the SEC and 5,643,125 were shares of Class B common stock. Unless otherwise noted,has no reason to believe that the business address of each ofinformation is incomplete or inaccurate or that the following entities or individuals is 2744 Sand Hill Road, Menlo Park, CA 94025. |
| beneficial owner should have filed an amended report and did not. |
| (2) | Interests shown consist solely of Founder Shares, classified as shares of Class B common stock. Such shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment. |
| |
(3) | Decarbonization Plus Acquisition Sponsor, LLC (“Sponsor”)Hymas is the record holder of the shares reported herein. David M. Leuschenshares. Hymas is 79.62% owned indirectly by Horizon, through its subsidiaries, including JS Horizon and Pierre F. Lapeyre, Jr. areHorizon Fuel Cell Technology (Hong Kong) Ltd. (“HFCT HK”). Horizon, by reason of its ownership of the managing directorsvoting securities of Riverstone Holdings LLCJS Horizon, JS Horizon’s ownership of the voting securities of HFCT HK, and have sharedHFCT HK’s ownership of the voting securities of Hymas, ultimately has the right to elect or appoint the members of the governing body of Hymas and, therefore, to direct the management and policies of Hymas. As a result, Horizon has voting and investment discretion with respect topower over the common stockshares of Class A Common Stock held of record by our Sponsor. As such, eachHymas. Mr. Gu beneficially owns 17.6% of Riverstone Holdings LLC, David M. LeuschenHorizon, consisting of 119,892 Ordinary Shares of Horizon, which is approximately 46.9% of the outstanding Ordinary Shares of Horizon, and Pierre F. Lapeyre, Jr. may be deemed to have or share1D-1 Preferred Share of Horizon, which is approximately 0.0% of the outstandingD-1 Preferred Shares of Horizon. Mr. Knight beneficially 2.4% of Horizon, consisting of 1,205 Ordinary Shares of Horizon, which is approximately 0.5% of the outstanding Ordinary Shares of Horizon, and 15,257 shares of A Preferred Shares of Horizon, which is approximately 19.9% of the outstanding A Preferred Shares of Horizon. Mr. Gu and Mr. Knight disclaim any beneficial ownership of the Class B common stock held directlyA Common Stock by our Sponsor. Each such entity or person disclaims any suchreason of their beneficial ownership.ownership of shares of Horizon. The business address of each of these entitiesfor Horizon and individualsHymas is c/o Riverstone Holdings LLC, 712 Fifth Avenue, 36th Floor,Enterprise Hub, 48 Toh Guan Road East, Postal 608586,#05-124, Singapore. The address for JS Horizon is302-309BOT Building A, New York, NY 10019.Environmental Materials Industrial Park, Huada Road, Jingang Town, Zhangjiagang City, Jiangsu, China. The address for HFCT HK is 11/F., Capital Centre, 151 Gloucester Road, Wanchai, Hong Kong. |
| (3) | |
(4) | WRG DCRB Investors, LLC is the record holder of the shares reported herein. WestRiver Management, LLC is the managing member and majority owner of WRG DCRB Investors, LLC with 82% ownership.LLC. Erik Anderson is the sole member of WestRiver Management, LLC and has voting and investment discretion with respect to the common stock held of record by WRG DCRB Investors, LLC. As such, each of WestRiver Management, LLC and Erik Anderson may be deemed to have or share beneficial ownership of the Class B common stockA Common Stock held directly by WRG DCRB Investors, LLC.WRG. Each such entity or person disclaims any such beneficial ownership. The business address of each of these entities and Erik Anderson is 920 5th Ave, Ste 3450, Seattle, WA 98104. |
4NTD: Table to be updated prior to filing to reflect 13Gs and 13Ds filed by beneficial owners.
(5)(4) | These shares represent 100%Consists of the Founder Shares. |
(6) | Based solely on an Amendment No. 1 to Schedule 13G filed with the SEC on February 16, 2021 on behalf of Luxor Capital Partners, LP (the “Onshore Fund”), Luxor Capital Partners Offshore Master Fund, LP (the “Offshore Master Fund”), Luxor Capital Partners Offshore, Ltd. (the “Offshore Feeder Fund”), Lugard Road Capital Master Fund, LP (the “Lugard Master Fund”), Luxor Wavefront, LP (the “Wavefront Fund”), LCG Holdings, LLC (“LCG Holdings”), Lugard Road Capital GP, LLC (“Lugard GP”), Luxor Capital Group, LP (“Luxor Capital Group”), Luxor Management, LLC (“Luxor Management”), Jonathan Green (“Mr. Green”) and Christian Leone (“Mr. Leone”), the Onshore Fund beneficially owns 13,33926,580 shares of Class A common stock. The Offshore Master Fund beneficially owns 9,199Common Stock, and 17,720 shares of Class A common stock. The Offshore Feeder Fund, asCommon Stock issuable upon the ownerexercise of a controlling interest in the Offshore Master Fund, may be deemed to beneficially own theoptions within 60 days. |
| (5) | Consists of 221,500 shares of Class A common stock beneficially owned by the Offshore Master Fund. The Lugard Master Fund beneficially owns 1,502,591Common Stock, and 5,537,500 shares of Class A common stock. The Wavefront Fund beneficially owns 3,727Common Stock issuable upon the exercise of options within 60 days. |
| (6) | Consists of 343,200 shares of Class A common stock. LCG Holdings, as the general partner of the Onshore Fund, the Offshore Master FundCommon Stock, and the Wavefront Fund may be deemed to beneficially own the 26,2655,537,500 shares of Class A common stock beneficially owned byCommon Stock issuable upon the Onshore Fund, the Offshore Master Fund and the Wavefront Fund. Lugard GP, as the general partnerexercise of the Lugard Master Fund, may be deemed to beneficially own the 1,502,591options within 60 days. |
| (7) | Consists of 125,000 shares of Class A common stock beneficially owned by the Lugard Master Fund. Mr. Green, as a managing member of Lugard GP, may be deemed to have beneficially owned the 1,502,591Common Stock, and 885,999 shares of Class A commonCommon Stock issuable upon the exercise of options or restricted stock beneficially owned by Lugard GP. Luxor Capital Group, as the investment managerunits within 60 days. |
| (8) | Consists of the Onshore Fund, the Offshore Feeder Fund, the Offshore Master Fund, the Lugard Master Fund and the Wavefront Fund (collectively, the “Funds”), may be deemed to beneficially own the 1,528,8565,167,942 shares of Class A common stock beneficially owned by the Funds. Luxor Management, as the general partner of Luxor Capital Group, may be deemed to beneficially own the 1,528,856Common Stock and 11,978,719 shares of Class A commonCommon Stock issuable upon the exercise of options or restricted stock beneficially owned by Luxor Capital Group. Mr. Leone, as the managing member of Luxor Management, may be deemed to beneficially own the 1,528,856 shares of Class A common stock beneficially owned by Luxor Management. The principal address of each of the Onshore Fund, the Wavefront Fund, Luxor Capital Group, Luxor Management, Lugard GP, LCG Holdings, Mr. Green and Mr. Leone is 1114 Avenue of the Americas, 28th Floor, New York, NY 10036. The principal business address of each of the Offshore Master Fund, the Offshore Feeder Fund and the Lugard Master Fund is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
| |
(7) | Based solely on a Schedule 13G filed with the SEC on November 2, 2020 on behalf of Adage Capital Partners, L.P., a Delaware limited partnership (“ACP”), Adage Capital Partners GP, L.L.C., a Delaware limited liability company (“ACPGP”), Adage Capital Advisors, L.L.C., a Delaware limited liability company (“ACA”), Robert Atchinson and Phillip Gross, the shares reported herein are directly owned by ACP. ACPGP is the general partner of ACP, ACA is the managing member of ACPGP, and Messrs. Atchinson and Gross are managing members of ACA. ACP has the power to dispose of and the power to vote the shares of Class A common stock beneficially owned by it, which power may be exercised by its general partner, ACPGP. ACA, as managing member of ACPGP, directs ACPGP’s operations. Messrs. Atchinson and Gross, as managing members of ACA, have shared power to vote the shares of Class A common stock beneficially owned by ACP. The business address of this stockholder is 200 Clarendon Street, 52nd Floor, Boston, MA 02116units within 60 days. |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions
On September 12, 2017,
weDCRB issued an aggregate of 11,500,000
shares of DCRB Class B Common Stock (the “DCRB Founder
SharesShares”) to
ourits Sponsor for a capital contribution of $25,000, or approximately $0.002 per share. In September and October 2020,
ourDCRB’s Sponsor returned to
usDCRB, at no cost, an aggregate of 5,750,000
DCRB Founder Shares, which
weDCRB cancelled. The number of
DCRB Founder Shares issued was determined based on the expectation that such
DCRB Founder Shares would represent 20% of the outstanding shares upon completion of
our Public Offering.DCRB’s initial public offering. In October 2020,
ourDCRB’s Sponsor transferred an aggregate of 1,042,198
DCRB Founder Shares to
ourDCRB’s independent directors and WRG
DCRB Investors, LLC (“WRG”) at their original purchase price. In November 2020,
ourDCRB’s Sponsor transferred an additional 22,130
DCRB Founder Shares to one of
ourDCRB’s independent directors. In December 2020,
ourDCRB’s Sponsor and WRG forfeited an aggregate of 106,875
DCRB Founder Shares in connection with the underwriters’ partial exercise of their over-allotment option resulting in
ourDCRB’s initial stockholders holding an aggregate of 5,643,125
DCRB Founder Shares.
Our Sponsor and On the Company’s officers and directors and WRG have waived their redemption rights with respect to anyClosing Date, each share of DCRB’s Class B Common Stock, which represented the DCRB Founder Shares, and any public shares held by them in connection with the completionconverted into one share of an initial business combination. If the initial business combination is not completed within 24 months from the closing of the Public Offering, our Sponsor and the Company’s officers and directors and WRG have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares held by them.
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of (i) one year after the completion of the initial business combination or (ii) subsequent to the initial business combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations andCommon Stock, resulting in the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in allissuance of the Company’s stockholders having the right to exchange their5,643,125 shares of common stock for cash, securities or other property.
Class A Common Stock in the aggregate.
DCRB Founder Warrant Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, the FounderDCRB, DCRB’s Sponsor, WRG and DCRB’s independent directors (the “DCRB Founders Warrant HoldersParties”) entered into the Founder Warrant Agreement with usan agreement pursuant to which eachthey agreed that:
The DCRB Founders Warrant Parties shall not, with respect to an aggregate of 4,885,875 private placement warrants (or shares of Class A Common Stock issued upon exercise of private placement warrants), (a)(i) sell or assign, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of, (ii) agree to dispose of, directly or indirectly, or (iii) establish or increase a “put equivalent position” or liquidation with respect to or decrease of a “call equivalent position” within the meaning of Section 16 of the Founder Warrant Holders agreedExchange Act and the rules and regulations of the SEC promulgated thereunder with respect to, in each case (i), (ii) and (iii), any security, (b) enter into any swap or other arrangement that followingtransfers to another, in whole or in part, any of the Closing,economic consequences of ownership of any security, whether any such Founder Warrant Holder will not transfer 75%transaction is to be settled by delivery of its Private Placement Warrantssuch securities, in cash or otherwise, or (c) publicly announce any intention to effect any transaction specified in clause (a) or (b), until the earlier of (a)(i) one year after the Closing and (b) subsequent to the Closing, (x) the date on which the last sale price
| (ii) subsequent to the Closing, (x) the date on which the last sale price of the Class A Common Stock quoted on NASDAQ (or the exchange on which the shares of DCRB Class A Common Stock are then listed) equals or exceeds $11.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any30-trading day period or (y) the date on which DCRB completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in the holders of DCRB Class A Common Stock having the right to exchange their shares of Class A Common Stock for cash, securities or other property; |
Upon and subject to the Closing,
12.5%an aggregate of
each $12.00 Warrant will become814,313 private placement warrants (the “$12.00 Warrants”) became subject to potential forfeiture, and each
FounderDCRB Founders Warrant
Holder agreesParty agreed not to exercise such $12.00 Warrants, unless and until
a $12.00 Triggering Event (as defined below) occurs. Prior to the occurrence of a $12.00 Triggering Event, each DCRB Founders Warrant Party shall not Transfer any of the $12.00 Warrants. In the event no $12.00 Triggering Event occurs during the five year period commencing on the one year anniversary of the Closing (the “Earnout Period”), the $12.00 Warrants shall immediately be forfeited to Hyzon for no consideration as a contribution to the capital of Hyzon and immediately cancelled. “$12.00 Triggering Event” means the occurrence of a date on which the last reported sales price of one share of
our Class A
common stockCommon Stock quoted on NASDAQ (or the exchange on which the shares of
our Class A
common stockCommon Stock are then listed) is greater
tothan or equal to $12.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period within the
five year period commencing onEarnout Period; provided, that, if, during the
one year anniversaryEarnout Period, there is a change of
control pursuant to which the
Closing.holders of Class A Common Stock have the right to receive consideration implying a value of Class A Common Stock (as determined in good faith by the Board) of (i) less than $12.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), then the $12.00 Warrants shall immediately be forfeited to us for no consideration and immediately cancelled; or (ii) greater than or equal to $12.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), then the $12.00 Triggering Event shall be deemed to have occurred.
Upon and subject to the Closing,
12.5%an aggregate of
each $14.00 Warrant will become814,312 private placement warrants (the “$14.00 Warrants”) became subject to potential forfeiture, and each
FounderDCRB Founders Warrant
Holder agreesParty agreed not to exercise such $14.00 Warrants, unless and until
a $14.00 Triggering Event (as defined below) occurs. Prior to the occurrence of a $14.00 Triggering Event, each DCRB Founders Warrant Party shall not transfer any of the $14.00 Warrants. In the event no $14.00 Triggering Event occurs during the Earnout Period, the $14.00 Warrants shall immediately be forfeited to Hyzon for no consideration as a contribution to the capital of Hyzon and immediately cancelled. “$14.00 Triggering Event” means the occurrence of a date on which the last reported sales price of one share of
our Class A
common stockCommon Stock quoted on NASDAQ (or the exchange on which the shares of
our Class A
common stockCommon Stock are then listed) is greater
tothan or equal to $14.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period within the
five year period commencing onEarnout Period; provided, that, if, during the
one year anniversaryEarnout Period, there is a change of
control pursuant to which the
Closing.holders of Class A Common Stock have the right to receive consideration implying a value of Class A Common Stock (as determined in good faith by the Board) (i) less than $14.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), then the $14.00 Warrants shall immediately be forfeited to us for no consideration and immediately cancelled; or (ii) of greater than or equal to $14.00 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), then the $14.00 Triggering Event shall be deemed to have occurred.
Private Placement Warrants
Simultaneously
DCRB’s Sponsor, certain of DCRB’s independent directors consisting of Dr. Jennifer Aaker, Jane Kearns, Jim McDermott, Jeffrey Tepper and Michael Warren and WRG purchased an aggregate of 6,000,000 private placement warrants for a purchase price of $1.00 per warrant in a private placement that occurred simultaneously with the closing of
the Public Offering, ourDCRB’s initial public offering. On November 12, 2020, DCRB completed a private placement with its Sponsor and
the Company’s independent directors and WRG
purchased 6,000,000 Private Placement Warrantsfor an additional 514,500 warrants at a price of $1.00 per
Private Placement Warrant, for an aggregate purchase price of $6,000,000. Our Sponsor and WRG agreed to purchase up to an additional 600,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or an aggregate additional $600,000, to the extent the underwriter’s over-allotment option is exercised in full. Simultaneously with the closing of the sale of the Over-allotment Units, our Sponsor and WRG purchased an additional 514,500 Private Placement Warrants at a price of $1.00 per Private Placement Warrant,warrant, generating gross proceeds of approximately $514,500.
As such, the interest of DCRB’s Sponsor, certain of DCRB’s independent directors and WRG in this transaction is valued at approximately $6,514,500.
In connection with the Closing, an additional 1,500,000 private placement warrants were also issued to the DCRB Sponsor, see “Related Party Loans and Advances
Each Private Placement Warrant is exercisable forprivate placement warrant entitles the holder to purchase one share of our Class A common stockCommon Stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Public Offering held in the Trust Account. If the Company does not completeshare.
Administrative Support Agreement
On October 19, 2020, DCRB entered into an
initial business combination within 24 months from the closing of the Public Offering, the proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to partially fund the redemption of the public shares (subject to the requirements of applicable law), and the Private Placement Warrants and all underlying securities will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees.Our Sponsor and the Company’s officers, directors and WRG 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 our initial business combination.
Conflicts of Interest
As more fully discussed in “Part III, Item 10. Directors, Executive Officers and Corporate Governance” if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us. We may pursue an Affiliated Joint Acquisition opportunityadministrative support agreement with an entity to which an officer or director has a fiduciary or contractual obligation. Any such entity may co-invest with us in the target business at the time of our initial business combination, or we could raise additional proceeds to complete the acquisition by issuing to such entity a class of equity or equity-linked securities.
Administrative Services Agreement
The Company has agreed to pay an affiliate of theits Sponsor, pursuant to which DCRB paid an affiliate of its Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completionconsummation of the initial business combination or the Company’s liquidation, the Company will ceaseBusiness Combination, we ceased paying these monthly fees. For the year ended December 31, 2020, the Company had accrued and paid $23,871 of monthly fees to the affiliate of the Sponsor and no amounts payable were outstanding at December 31, 2020.
Our
DCRB’s Sponsor, officers and directors, or any of their respective affiliates,
will behave been reimbursed for any
expenses incurred in connection with activities on
our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed.DCRB’s behalf. There
iswas no cap or ceiling on the reimbursement of
expenses incurred by such persons in connection with activities on
ourDCRB’s behalf.
Related Party Loans and Advances
Our
DCRB’s liquidity needs up to
the Public Offeringits initial public offering were satisfied through receipt of a $25,000 capital contribution from
ourDCRB’s Sponsor in exchange for the issuance of
DCRB Founder Shares to
ourDCRB’s Sponsor and a loan from
ourDCRB’s Sponsor for an aggregate amount of $300,000 to cover organizational expenses and expenses related to the
Public Offeringinitial public offering pursuant to
the Note.a promissory note. On September 13, 2017,
weDCRB drew down $300,000 on
the Note. Wethis promissory note. DCRB repaid
the Notethis promissory note in full to
ourits Sponsor on October 21, 2020. Subsequent to the consummation of
our Public Offering, ourits initial public offering, DCRB’s liquidity needs
havehad been satisfied through the net proceeds of approximately $2.0 million from the
Private Placementprivate placement held outside of the Trust Account.
In addition to the
Note, ourpromissory note, DCRB’s Sponsor paid certain costs related to
ourDCRB’s formation and offering. Costs in the amount of $219,022 were forgiven by the Sponsor in December 2019 and
have beenwere recorded within additional
paid-in
capital. As of October 22, 2020,
weDCRB owed
ourits Sponsor $135,941 for additional offering costs, which were subsequently paid back in November 2020.
As of October 22, 2020, the Sponsor and WRG advanced $600,000 to
usDCRB to cover the purchase of additional
Private Placement Warrantsprivate placement warrants if the over-allotment were to be exercised in full. As of October 22, 2020, advances amounting to $600,000 were outstanding. Simultaneously with the closing of the sale of the
Over-allotment Units, weunits from the underwriters’ partial exercise of their over-allotment option, DCRB utilized the advance from
ourits Sponsor and WRG to issue an additional 514,500
Private Placement Warrants at a price of $1.00 per Private Placement Warrant.In addition, in order to finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible intoprivate placement warrants at a price of $1.00 per warrantprivate placement warrant.
On June 28, 2021, DCRB issued an unsecured promissory note (the “Sponsor Note”) in the principal amount of $1,500,000 to the Sponsor. Pursuant to the terms of the Sponsor Note, at the optionClosing of the lender. The warrants would be identical toBusiness Combination, the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The termsSponsor converted $1,500,000 principal amount of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completionSponsor Note into 1,500,000 private placement warrants.
The holders of the
DCRB Founder Shares
Private Placement Warrants and
private placement warrants
that may be issued upon conversion of working capital loans (and any shares of Class A
common stockCommon Stock issuable upon the exercise of the
Private Placement Warrants andprivate placement warrants
that may be issued upon conversion of working capital loans and upon conversion of the
DCRB Founder Shares)
will beare entitled to registration rights pursuant to
a registration rights agreement,the IPO Registration Rights Agreement, dated October 19, 2020
(the “IPO Registration Rights Agreement”), requiring us to register such securities for resale (in the case of the
DCRB Founder Shares,
only after conversion to ourthe shares of Class A
common stock)Common Stock that the DCRB Founder Shares converted into on the Closing Date). The holders of at least $25 million in value of these securities are entitled to demand that we file a registration statement covering such securities and to require us to effect up to an aggregate of three underwritten offerings of such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of
our initial business combination.the Business Combination.
In connection with the Closing,
that certainthe Company entered into the amended and restated IPO Registration Rights Agreement
dated October 19, 2020 (the
“IPO“A&R Registration Rights Agreement”)
will be amended and restated and DCRB,with certain persons and entities holding securities of DCRB prior to the Closing
(the “Initial Holders”) and certain persons and entities receiving Class A
common stockCommon Stock in connection with the
business combinationBusiness Combination (the
“New Holders” and together with the Initial Holders, the “Reg Rights Holders”)
will enter into that amendedto amend and
restatedrestate the IPO Registration Rights
Agreement attached as an exhibit to the Business Combination Agreement (the “A&R Registration Rights Agreement”).Agreement. Pursuant to the A&R Registration Rights Agreement,
DCRB will agreewe agreed that, within 15 business days after the Closing,
DCRBwe will file
a registration statement (the “Initial Registration Statement”) with the SEC (at
DCRB’sour sole cost and expense)
a registration statement registering the resale of certain securities held by or issuable to the Initial Holders and certain of the New Holders (the “Initial Registration Statement”), and
DCRBwe will use
itsour reasonable best efforts to have the Initial Registration Statement become effective as soon as reasonably practicable after the filing thereof.
Additionally, DCRB will agree that, as soon as reasonably practicable after DCRB is eligible to register the Reg Rights Holders’ securities on aA registration statement on Form
S-3, DCRB will fileS-1
(the “2021 Registration Statement”) satisfying these requirements was filed with the SEC
(at DCRB’s sole coston July 30, 2021 and
expense) a registration statement registering the resale of certain securities that were not includedbecame effective on
the Initial Registration Statement (the “Subsequent Registration Statement”) and DCRB will use its reasonable best efforts to have the Subsequent Registration Statement become effective as soon as reasonably practicable after the filing thereof.July 30, 2021. In certain circumstances, the Reg Rights Holders can demand up to three underwritten offerings in any
12 month 12-month
period and will be entitled to customary piggyback registration rights. The A&R Registration Rights Agreement does not provide for the payment of any cash penalties by
DCRBus if
it failswe fail to satisfy any of
itsour obligations under the A&R Registration Rights Agreement.
Lock-Up
Director Independence
NASDAQ listing standards require that a majorityAgreements
On February 8, 2021, certain stockholders of Legacy Hyzon, collectively holding 92,775,000 shares of Legacy Hyzon Common Stock or securities convertible into shares of Legacy Hyzon Common Stock as of the
date thereof, entered into an agreement with DCRB
Boardand Legacy Hyzon (the“Lock-Up
Agreement”) pursuant to which they agreed, following the Closing Date subject to certain customary exceptions, not to (a) directly or indirectly sell, assign, encumber, pledge, hypothecate, dispose, loan or otherwise transfer, or enter into any agreement with respect to any sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer, any shares of Class A Common Stock or any shares of Class A Common Stock issued or issuable upon the exercise of any warrant or other right to acquire shares of such Class A Common Stock beneficially owned or otherwise held by such stockholders or (b) publicly announce any intention to effect any transaction specified in clause (a) for six months following the Closing Date. Thislock-up
period expired in January 2022, and shares held by the parties to theLock-Up
Agreement are no longer under these contractual restrictions. Additionally, pursuant to the terms of a letter agreement entered into by the Sponsor and certain executives and directors of DCRB at the time of DCRB’s initial public offering, the DCRB Founder Shares (which converted into shares of Class A Common Stock at the Closing) may not be independent. An “independent director” is defined generallytransferred until the earlier to occur of (a) one year after the Closing or (b) the date on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last reported sale price of our Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days after the Closing, the shares of Class A Common Stock into which the DCRB Founder Shares converted will be released from these transfer restrictions.
In connection with the execution of the Business Combination Agreement, on February 8, 2021, DCRB entered into separate subscription agreements (the “Subscription Agreements”) with a number of investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, and DCRB agreed to sell to the PIPE Investors, an aggregate of 35,500,000 PIPE Shares for a purchase price of $10.00 per share and an aggregate purchase price of $355,000,000, in a private placement. The PIPE Shares do not include the shares of Class A Common Stock converted from the Legacy Hyzon Convertible Notes, pursuant to their terms, at a price of $9.00 per share (based on 90% of the price per PIPE Share) in connection with the PIPE Financing. The purpose of the PIPE Financing was to raise additional capital for use by Hyzon following the Closing.
Pursuant to the Subscription Agreements, DCRB agreed that, within 15 calendar days after the consummation of the Business Combination, DCRB will file a registration statement to register the resale of the PIPE Shares with the SEC (at DCRB’s sole cost and expense), which requirement was satisfied by the 2021 Registration Statement.
Ardour Subscription Agreement
In connection with the execution of the Business Combination Agreement, on February 8, 2021, DCRB, ACP Mgmt Corp., Ardour Capital Investment LLC (“Ardour”) and Hyzon entered into a subscription agreement (the “Ardour Subscription Agreement”), pursuant to which ACP Mgmt Corp. agreed, in full satisfaction of Ardour’s right to receive a warrant to purchase shares of Legacy Hyzon Common Stock for its services as a person other thanfinancial advisor to Hyzon, to purchase, and DCRB agreed to sell to ACP Mgmt Corp., such number of warrants exercisable for one share of Class A Common Stock at an officer or employeeexercise price of $2.20 (the “Ardour Warrants”), subject to the terms of the company or its subsidiaries or anywarrant agreement, dated as of July 16, 2021, by and between DCRB and Continental Stock Transfer & Trust Company (the “Ardour Warrant Agreement”), equal to (x) 184,000 multiplied by (y) the Exchange Ratio. On the Closing Date, a total of 326,048 Ardour Warrants were issued to Ardour. Such warrants are governed by and exercisable subject to the terms and conditions of the Ardour Warrant Agreement.
In January 2021, Hyzon entered into the Horizon IP Agreement with JS Horizon, part of the Horizon group of Companies, and in September 2021 JS Powertrain was an added party to the agreement. Pursuant to the agreement, the parties convey to each other individual havingcertain rights in intellectual property relating to Hyzon’s core fuel cell and mobility product technologies under which Hyzon will pay JS Horizon and JS Powertrain a relationship whichtotal fixed payment of $10.0 million. As of December 31, 2021, $6.9 million was paid and the remaining $3.1 million was paid February 2022.
Please see the section entitled “” in Part I, Item 1 for additional information concerning the Horizon IP Agreement. Horizon is the beneficial owner of approximately 62.8% of our outstanding Class A Common Stock as of March 11, 2022. See “” in Part III, Item 12. In January 2021, Hyzon entered into the Horizon Supply Agreement with Jiangsu Horizon New Energy Technologies Co. Ltd, a wholly owned subsidiary of Horizon, to supply certain fuel cell components. The Company made a deposit payment to Horizon in the opinionamount of $5.0 million for long lead time components. This payment is included in prepaid expenses as the components have yet been received as of December 31, 2021. The Company currently relies and expects to rely on Horizon as a single source supplier of hydrogen fuel cell systems until completion of Hyzon hydrogen fuel cell manufacturing facilities.
The Company entered into a joint venture agreement in 2020 to create Hyzon Europe with Holthausen. As of December 31, 2021, the Company owns 50.5% of the
company’s boardequity interests of
directors, would interfereHyzon Europe. On December 31, 2021, the Company signed anon-binding
Letter of Intent with Holthausen to purchase an increased equity interest in Hyzon Europe; the Letter of Intent provides that the Company intends to increase its total equity interest to 75% from 50.5%. Concurrent with the
director’s exercisesigning of
independent judgementthis Letter of Intent, Hyzon provided a €1 million refundable deposit to Holthausen, approximately $1.1 million in
carryingUSD. As Hyzon Europe builds out
its production facilities, it relies on Holthausen for certain production resources that result in related party transactions. In addition, both companies rely on certain suppliers including Horizon. In June 2021, the responsibilitiesCompany transferred inventory purchased from Horizon amounting to $1.2 million to Holthausen at cost and recorded a related party receivable of $1.2 million.
In July 2021, Hyzon Europe assumed certain customer sales contracts from Holthausen with an aggregate value of $5.1 million. As a
director. The DCRB Boardresult of this transaction, the Company recorded contract liabilities of $4.1 million,inventory of $3.4 million, and due from Holthausen of $0.7 million. For the year ended December 31, 2021, the Company paid $0.5 million to two affiliated entities of certain executives of Hyzon Europe for their director services.
As of December 31, 2021, the Company has determined that Dr. Jennifer Aaker, Jane Kearns, Jim McDermott, Jeffrey H. Tepper and Michael Warren are “independent directors” as defineda net related party receivable in the NASDAQ listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.amount of $0.3 million due from Holthausen.
The information required by this section has been discussed within Item 10 of this Form10-K.
Item 14. Principal Accountant Fees and Services.
Fees for professional services provided by
On July 16, 2021, the Audit Committee of the board of directors approved the engagement of KPMG LLP (“KPMG”) as our independent registered public accounting firm
since inception include:| | | For the year
ended
December 31,
2019 | | | For the year
ended
December 31,
2020 | |
| Audit Fees(1) | | $ | - | | | $ | 91,820 | |
| Audit-Related Fees(2) | | | - | | | | - | |
| Tax Fees(3) | | | 4,000 | | | | 5,000 | |
| All Other Fees(4) | | | - | | | | - | |
| | | | | | | | | |
| Total | | $ | 4,000 | | | $ | 96,820 | |
pre-merger
special purpose acquisition company. The consolidated financial statements as of December 31, 2020, and for the period from January 21, 2020 (date of inception) through December 31, 2020, of Legacy Hyzon Motors included in this Annual Report on Form 10-K in Item 8, entitled “Financial Statements and Supplementary Data.” were also audited by KPMG.
The following table presents fees billed to us by KPMG for professional services rendered for the year ended December 31, 2021 and the period from January 21, 2020 (date of inception) through December 31, 2020.
| | | | | | | | |
| | | | | | | |
| | $ | 1,441,326 | | | $ | 1,022,048 | |
| | | 73,465 | | | | 137,952 | |
| | | 93,000 | | | | — | |
| | | — | | | | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| (1)
| . Audit fees consist of fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements and reviewthe reviews of our interim financial statements included in our Quarterly Reports on Form 10-Q orstatements. Audit fees for each period also include related services that are normally provided by our independent registered public accounting firm in connection with statutoryregistration statements and regulatoryother SEC filings, or engagements. |
| | including the fees associated with our Business Combination transaction which closed on July 16, 2021. |
| . Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. |
| standards |
| . Tax fees consist of fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning. |
| |
| . All other fees consist of the cost of our subscription to an accounting research tool provided by KPMG. |
The following table presents fees billed to us by Withum for professional services rendered for the period from January 1, 2021 through July 16, 2021 and for the year ended December 31, 2020.
| | | | | | | | |
| | | | | | | |
| | $ | 85,125 | | | $ | 91,820 | |
| | | — | | | | — | |
| | | 5,000 | | | | 5,000 | |
| | | — | | | | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| . Audit fees consist of fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements and review of financial statements included in our Quarterly Reports on Form10-Q, the audit of our December 31, 2020 financial statements included in the Original Filing and the audit of our restated financial statements included in this Amendment, and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements. |
| . Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards |
| . Tax fees consist of fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning. |
| . All other fees consist of fees billed for all other services. |
Policy on Board Pre-Approval
Item 15.
ExhibitsExhibit and Financial Statement Schedules.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
Financial Statements: See “Index to Financial Statements” at “Item 8. Financial Statements and Supplementary Data” herein.
| 1. | Financial Statements: The information concerning the consolidated financial statements and Report of Independent Registered Public Accounting Firm required by this Item is incorporated by reference herein to the section of this Annual Report on Form10-K in Item 8, titled “Financial Statements and Supplementary Data.” |
| 2. | Financial Statement Schedules: No schedules are required |
(b)
Exhibits:. The exhibits listed in the
accompanying indexfollowing Index to
exhibitsExhibits are filed or incorporated by reference as part of this
Annual Report on Form 10-K.report. | | |
| | Description |
2.1* | |
| 2.1† | | Business Combination Agreement and Plan of Reorganization, dated as of February 8, 2021, by and among Decarbonization Plus Acquisition Corp., DCRB Merger Sub Inc. and the CompanyHyzon Motors Inc. (incorporated by reference to Exhibit 2.1 toof the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on February 9,8, 2021). |
| |
| | | |
| 3.1 | | Second Amended and Restated Certificate of Incorporation of Decarbonization Plus Acquisition CorporationHyzon Motors Inc. (incorporated by reference to Exhibit 3.1 toof the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on OctoberJuly 22, 2020)2021). |
| |
| | | |
| 3.2 | | Amended and Restated Bylaws of Decarbonization Plus Acquisition CorporationHyzon Motors Inc. (incorporated by reference to Exhibit 3.4 to3.2 of the Company’s Registration StatementCurrent Report on Form S-1 (File No. 333-248958)8-K filed with the SEC on SeptemberJuly 22, 2020)2021). |
| |
| | | |
| 4.1 | | Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-248958) filed with the SEC on October 15, 2020) |
| | |
4.2 | | Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 toof the Company’s Registration Statement on Form S-1 (File No. 333-248958) filed with the SEC on September 30,20, 2020). |
| |
| 4.2 | | |
4.3 | | Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 toof the Company’s Registration Statement on Form S-1 (File No. 333-248958) filed with the SEC on September 30,20, 2020). |
| |
| 4.3 | | |
4.4 | | Warrant Agreement, dated as of October 19, 2020, by and between Decarbonization Plus Acquisition CorporationCorp. and Continental Stock Transfer & Trust Company as warrant agent (incorporated by reference to Exhibit 4.4 toof the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on October 22, 2020). |
| |
| 4.4 | | |
4.5 | | Description of Securities of Decarbonization Plus Acquisition Corporation |
| | |
10.1 | | LetterArdour Warrant Agreement, dated October 19, 2020, among Decarbonization Plus Acquisition Corporation, its officersas of July 16, 2021, by and directors, Decarbonization Plus Acquisition Sponsor, LLC and WRG DCRB Investors, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on October 22, 2020) |
| | |
10.2 | | Insider Letter Acknowledgement and Agreement dated November 18, 2020, between Decarbonization Plus Acquisition Corporation and Michael Warren (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on November 18, 2020) |
| | |
10.3 | | Investment Management Trust Agreement, dated October 19, 2020, between Decarbonization Plus Acquisition CorporationCorp. and Continental Stock Transfer & Trust Company as trustee (incorporated by reference to Exhibit 10.2 to4.4 of the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on OctoberJuly 22, 2020)2021). |
10.5 | | Administrative Support Agreement, dated October 19, 2020, between Decarbonization Plus Acquisition Corporation and Decarbonization Plus Acquisition Sponsor, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on October 22, 2020) |
| | |
10.6 | | Amended and Restated Promissory Note, dated August 19, 2020, issued to Decarbonization Plus Acquisition Sponsor, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-248958) filed with the SEC on September 22, 2020) |
| | |
10.7 | | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-248958) filed with the SEC on September 30, 2020) |
| | |
10.8 | | Securities Subscription Agreement, dated September 12, 2017, between the Registrant (f/k/a Silver Run Acquisition Corporation III) and Sponsor (f/k/a Silver Run Sponsor III, LLC) (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-232501) filed with the SEC on September 22, 2020) |
| | |
10.9 | | Private Placement Warrants Purchase Agreement, dated October 19, 2020, between Decarbonization Plus Acquisition Corporation and the Purchasers (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on October 22, 2020) |
| | |
10.10 | | Lock-Up Agreement, dated as of February 8, 2021, by and among DCRB, Hyzon and certain stockholders of Hyzon (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on February 9,8, 2021). |
| |
| 10.2 | | |
10.11 | | Founder Warrant Agreement, dated as of February 8, 2021 by and among DCRB,Decarbonization Plus Acquisition Corp., Decarbonization Plus Acquisition Sponsor, LLC and the other parties thereto (incorporated by reference to Exhibit 10.2 toof the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on February 9,8, 2021). |
| |
| 10.3 | | |
10.12 | | Form of Subscription Agreement (incorporated by reference to Exhibit 10.3 toof the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on February 9,8, 2021). |
| |
| 10.4 | | |
10.13 | | Ardour Subscription Agreement, dated as of February 8, 2021 by and among DCRB,Decarbonization Plus Acquisition Corp., Ardour Capital Investments LLC and Hyzon Motors Inc. (incorporated by reference to Exhibit 10.4 toof the Company’s Current Report on Form 8-K (File No. 001-39632) filed with the SEC on February 9,8, 2021). |
| | |
| | |
24 | |
| 10.5 | | PowerAmended and Restated Registration Rights Agreement, dated as of Attorney (included on signature pageJuly 16, 2021, by and among Decarbonization Plus Acquisition Corp. and certain security holders (incorporated by reference to Exhibit 10.5 of this Annualthe Company’s Current Report on Form 10-K)8-K filed with the SEC on July 22, 2021). |
| |
| 10.6# | | Hyzon Motors Inc. 2021 Equity and Incentive Compensation Plan (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.7# | | Employment Agreement, dated as of July 9, 2021, between Hyzon Motors Inc. and Craig Knight (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.8# | | Employment Agreement, dated as of July 9, 2021, between Hyzon Motors Inc. and George Gu (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.9# | | Employment Agreement, dated as of July 15, 2021, between Hyzon Motors Inc. and John Zavoli (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.10# | | Employment Agreement, dated as of June 7, 2021, between Hyzon Motors Inc. and Parker Meeks (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.11# | | Form of Indemnification Agreement, by and between Hyzon Motors Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.12 | | Intellectual Property Agreement, dated January 12, 2021, between Jiangsu Qingneng New Energy Technologies Co., Ltd. and Shanghai Qingneng Horizon New Energy Ltd. and Hyzon Motors Inc. (incorporated by reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.13 | | Framework Supply Contract Template, dated January 7, 2021, between Jiangsu Qingneng New Energy Technologies Co. Ltd. and Hyzon Motors Inc. (incorporated by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K filed with the SEC on July 22, 2021). |
| |
| 10.14# | | Employment Agreement, dated as of August 5, 2021, between Hyzon Motors Inc. and Mark Gordon (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2021). |
| |
| 10.15# | | Letter Agreement, dated August 27, 2021, between Hyzon Motors Inc. and Gary Robb (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 2, 2021). |
| |
| 10.16# | | Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2022). |
| |
| 10.17# | | Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2022). |
| |
| 10.18# | | Form of Director Agreement |
| |
| 21.1* | | List of Subsidiaries |
| |
| 23.1* | | Consent of KPMG LLP, independent registered accounting firm of Hyzon Motors Inc. |
| |
| 31.1* | | |
31.1 | | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934. |
| |
| 31.2* | | |
31.2 | | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934. |
101.INS | |
| 101.INS* | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
| |
| 101.SCH* | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
| |
| 101.CAL* | | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| |
| 101.DEF* | | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| |
| 101.LAB* | | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| |
| 101.PRE* | | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| |
| 104.1* | | Cover Page Interactive Data File (embedded within the Inline XBRL) |
*
| † | All schedules have been omitted pursuant to Item 601(a)(5) of RegulationS-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
| * | Filed or furnished herewith. |
| # | Indicates management contract or compensatory arrangement. |
Item 601(a)(5)16. Form 10–K Summary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DECARBONIZATION PLUS ACQUISITION CORPORATION | | | | | |
| | |
Date: March 1, 2021
| By: | /s/ Erik Anderson |
| | Erik Anderson |
| | HYZON MOTORS INC. |
| | | |
| Date: March 30, 2022 | | | | | | |
| | | | | | Chief Executive Officer (Principal Executive Officer)
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each
Each person whose signature appears below
hereby constitutes and appoints
Erik Andersoneach of Craig Knight, George Gu, Mark Gordon, and
Peter Haskopoulos and eachJohn Zavoli, acting alone or
any one of them,together with anotheras his or her true and lawful
attorney-in-fact and
agent,agents, with full power of substitution and resubstitution, for
him or hersuch person and in his or her name, place and stead, in any and all capacities, to sign any
andor all amendments to this Annual Report on Form
10-K,
and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
United States Securities and Exchange Commission, granting unto said
and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done,
in connection therewith, as fully
tofor all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said
and agents,
or any of them, or their or his or her
substitutessubstitute or
substitute,substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this
Annual Report on Form 10-Kreport has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
| | | | |
| | | | |
| | | | |
/s/ Erik Andersons Craig Knight | | Chief Executive Officer and Director | | March 1, 202130, 2022 |
Erik AndersonCraig Knight | | (Principal Executive Officer) | | |
| | | | |
/s/ Peter HaskopoulosMark Gordon | | Chief Financial Officer Chief Accounting Officer and SecretaryDirector | | March 1, 202130, 2022 |
Peter HaskopoulosMark Gordon | | (Principal Financial Officer) | | |
| | Chief Accounting Officer and | | March 30, 2022 |
| Jiajia Wu | | (Principal Accounting Officer) | | |
| | Executive Chairman | | March 30, 2022 |
| George Gu | | | | |
/s/ Dr. Jennifer AakerErik Anderson | | Director | | March 1, 202130, 2022 |
Dr. Jennifer AakerErik Anderson | | | | |
| | | | |
| | Director | | March 1, 202130, 2022 |
Jane KearnsIvy Brown | | | | |
| | | | |
/s/ Pierre Lapeyre, Jr.Dennis Edwards | | Director | | March 1, 202130, 2022 |
Pierre Lapeyre, JrDennis Edwards | | | | |
| | | | |
/s/ David LeuschenViktor Meng | | Director | | March 1, 202130, 2022 |
David LeuschenViktor Meng | | | | |
| | | | |
/s/ Robert TichioKi Deok Park | | Director | | March 1, 202130, 2022 |
Robert TichioKi Deok Park | | | | |
| | | | |
/s/ Jim McDermottElaine Wong | | Director | | March 1, 202130, 2022 |
Jim McDermottElaine Wong | | | | |
| | | | |
/s/ Jeffrey Tepper | | Director | | March 1, 2021 |
Jeffrey Tepper | | | | |
| | | | |
/s/ Michael Warren | | Director | | March 1, 2021 |
Michael Warren | | | | |
76
