| ☒ | QUARTERLY 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 |
Delaware | 001-39948 | 85-3310839 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) |
West Palm Beach,FL | 33401 | |
(Address Of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A common | ||||
NYSE American LLC |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ | |||||
ELECTRIQ POWER HOLDINGS, INC.
(F/K/A TLG ACQUISITION ONE CORP.)
Form 10-Q
For the Quarter Ended SeptemberJune 30, 2022
Table of Contents2023
| Page | ||||||
| PART I. FINANCIAL INFORMATION | ||||||
| Item 1. | 1 | |||||
| 1 | ||||||
| 2 | ||||||
| 3 | ||||||
| 4 | ||||||
Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | ||||
| Item 3. | ||||||
| Item 4. | ||||||
| PART II. OTHER INFORMATION | ||||||
| Item 1. | ||||||
| Item 1A. | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities | |||||
| Item 3. | 28 | |||||
| Item 4. | 28 | |||||
| Item 5. | 28 | |||||
| Item 6. | ||||||
September 30, 2022 | December 31, 2021 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | 242,304 | $ | 48,491 | ||||
Prepaid expenses | 413,132 | 105,654 | ||||||
Total current assets | 655,436 | 154,145 | ||||||
Investments held in Trust Account | 402,112,433 | 400,023,684 | ||||||
Total Assets | $ | 402,767,869 | $ | 400,177,829 | ||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 167,288 | $ | 48,917 | ||||
Accrued expenses | 2,770,245 | 2,428,864 | ||||||
Working capital loan—related party | 2,820,000 | 920,000 | ||||||
Income tax payable | 426,868 | — | ||||||
Franchise tax payable | 30,000 | 121,425 | ||||||
Total current liabilities | 6,214,401 | 3,519,206 | ||||||
Derivative warrant liabilities | 1,000,000 | 10,600,000 | ||||||
Deferred underwriting commissions | 14,000,000 | 14,000,000 | ||||||
Total Liabilities | 21,214,401 | 28,119,206 | ||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, $0.0001 par value; 40,000,000 shares at redemption value of approximately $10.04 and $10.00 per share as of September 30, 2022 and December 31, 2021 | 401,505,838 | 400,000,000 | ||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding as of September 30, 2022 and December 31, 2021 | — | — | ||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; no non-redeemable shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively (excluding 40,000,000 shares subject to possible redemption) | — | — | ||||||
Class F common stock, $0.0001 par value; 20,000,000 shares authorized; 10,000,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | 1,000 | 1,000 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (19,953,370 | ) | (27,942,377 | ) | ||||
Total stockholders’ deficit | (19,952,370 | ) | (27,941,377 | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 402,767,869 | $ | 400,177,829 | ||||
June 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash | $ | 105,457 | $ | 19,750 | ||||
Prepaid expenses | 112,099 | 108,156 | ||||||
Total current assets | 217,556 | 127,906 | ||||||
Cash and investments held in Trust Account | 85,098,433 | 80,945,242 | ||||||
Total Assets | $ | 85,315,989 | $ | 81,073,148 | ||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 246,388 | $ | 276,917 | ||||
Accrued expenses | 6,326,892 | 4,472,261 | ||||||
| Working capital loan- related party | 5,408,857 | 2,330,370 | ||||||
Income tax payable | 1,556,523 | 1,055,680 | ||||||
Franchise tax payable | 20,050 | 50 | ||||||
Total current liabilities | 13,558,710 | 8,135,278 | ||||||
Derivative warrant liabilities | 800,000 | 800,000 | ||||||
Deferred underwriting commissions | — | 14,000,000 | ||||||
Total Liabilities | 14,358,710 | 22,935,278 | ||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, $0.0001 par value; 7,948,405 shares at redemption value of approximately $10.50 and $10.03 per share as of June 30, 2023 and December 31, 2022, respectively | 83,461,641 | 79,739,786 | ||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding as of June 30, 2023 and December 31, 2022 | — | — | ||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; no non-redeemable shares issued andoutstanding as of June 30, 2023 and December 31, 2022 (excluding 7,948,405 shares subject to possible | — | — | ||||||
Class F common stock, $0.0001 par value; 20,000,000 shares authorized; 5,000,000 and 10,000,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 500 | 1,000 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (12,504,862 | ) | (21,602,916 | ) | ||||
Total stockholders’ deficit | (12,504,362 | ) | (21,601,916 | ) | ||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 85,315,989 | $ | 81,073,148 | ||||
For The Three Months Ended September 30, | For The Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
General and administrative expenses | $ | 1,676,761 | $ | 161,058 | $ | 1,835,743 | $ | 3,337,532 | ||||||||
General and administrative expenses—related party | 21,000 | 22,000 | 62,500 | 57,000 | ||||||||||||
Franchise tax expenses | 50,000 | 59,808 | 188,844 | 207,119 | ||||||||||||
Loss from operations | (1,747,761 | ) | (242,866 | ) | (2,087,087 | ) | (3,601,651 | ) | ||||||||
Offering costs associated with derivative warrant liabilities | — | — | — | (1,413,340 | ) | |||||||||||
Change in fair value of derivative warrant liabilities | 600,000 | 4,933,340 | 9,600,000 | 20,800,000 | ||||||||||||
Income from investments held in Trust Account | 1,808,010 | 6,145 | 2,408,800 | 16,098 | ||||||||||||
Net income before income taxes | 660,249 | 4,696,619 | 9,921,713 | 15,801,107 | ||||||||||||
Income tax expense | (369,182 | ) | — | (426,868 | ) | — | ||||||||||
Net income | $ | 291,067 | $ | 4,696,619 | $ | 9,494,845 | $ | 15,801,107 | ||||||||
Weighted average shares outstanding of Class A common stock | 40,000,000 | 40,000,000 | 40,000,000 | 35,457,875 | ||||||||||||
Basic and diluted net income per share, Class A common stock | $ | 0.01 | $ | 0.09 | $ | 0.19 | $ | 0.35 | ||||||||
Weighted average shares outstanding of Class F common stock, basic | 10,000,000 | 10,000,000 | 10,000,000 | 9,858,059 | ||||||||||||
Basic net income per share, Class F common stock | $ | 0.01 | $ | 0.09 | $ | 0.19 | $ | 0.35 | ||||||||
Weighted average shares outstanding of Class F common stock, diluted | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 | ||||||||||||
Diluted net income per share, Class F common stock | $ | 0.01 | $ | 0.09 | $ | 0.19 | $ | 0.35 | ||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
General and administrative expenses | $ | 1,666,324 | $ | 84,749 | $ | 3,051,026 | $ | 158,982 | ||||||||
General and administrative expenses - related party | 21,000 | 21,000 | 42,000 | 41,500 | ||||||||||||
Franchise tax expenses | 50,000 | 50,000 | 100,000 | 138,844 | ||||||||||||
Loss from operations | (1,737,324 | ) | (155,749 | ) | (3,193,026 | ) | (339,326 | ) | ||||||||
| Gain on forgiveness of deferred underwriting fee payable | 1,113,200 | — | 1,113,200 | — | ||||||||||||
Change in fair value of working capital loan - related party | 428,594 | — | 886,513 | — | ||||||||||||
Change in fair value of derivative warrant liabilities | 600,000 | 2,400,000 | — | 9,000,000 | ||||||||||||
Income from cash and investments held in Trust Account | 759,391 | 568,143 | 1,371,765 | 600,790 | ||||||||||||
Net income (loss) before income taxes | 1,163,861 | 2,812,394 | 178,452 | 9,261,464 | ||||||||||||
Income tax expense | (382,744 | ) | (57,686 | ) | (500,843 | ) | (57,686 | ) | ||||||||
Net income (loss) | $ | 781,117 | $ | 2,754,708 | $ | (322,391 | ) | $ | 9,203,778 | |||||||
Weighted average shares outstanding of Class A common stock | 7,948,405 | 40,000,000 | 7,948,405 | 40,000,000 | ||||||||||||
Basic and diluted net income (loss) per share, Class A common stock | $ | 0.06 | $ | 0.06 | $ | (0.02 | ) | $ | 0.18 | |||||||
Weighted average shares outstanding of Class F common stock, basic | 5,000,000 | 10,000,000 | 5,801,105 | 10,000,000 | ||||||||||||
Basic and diluted net income (loss) per share, Class F common stock | $ | 0.06 | $ | 0.06 | $ | (0.02 | ) | $ | 0.18 | |||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||
Class A | Class F | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance - December 31, 2022 | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (21,602,916 | ) | $ | (21,601,916 | ) | ||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | — | — | — | — | (500 | ) | (1,874,487 | ) | (1,874,987 | ) | ||||||||||||||||||
Forfeiture of Class F shares | (5,000,000 | ) | (500 | ) | 500 | |||||||||||||||||||||||
Net loss | — | — | — | — | — | (1,103,508 | ) | (1,103,508 | ) | |||||||||||||||||||
Balance - March 31, 2023 (unaudited) | — | $ | — | 5,000,000 | $ | 500 | $ | — | $ | (24,580,911 | ) | $ | (24,580,411 | ) | ||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | — | — | — | — | — | 11,294,932 | 11,294,932 | |||||||||||||||||||||
Net income | — | — | — | — | — | 781,117 | 781,117 | |||||||||||||||||||||
Balance - June 30, 2023 (unaudited) | — | $ | — | 5,000,000 | $ | 500 | $ | — | $ | (12,504,862 | ) | $ | (12,504,362 | ) | ||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||
Class A | Class F | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance—December 31, 2021 | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (27,942,377 | ) | $ | (27,941,377 | ) | ||||||||||||||
Net income | — | — | — | — | — | 6,449,070 | 6,449,070 | |||||||||||||||||||||
Balance—March 31, 2022 (unaudited) | — | — | 10,000,000 | 1,000 | — | (21,493,307 | ) | (21,492,307 | ) | |||||||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | — | — | — | — | — | (117,010 | ) | (117,010 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 2,754,708 | 2,754,708 | |||||||||||||||||||||
Balance—June 30, 2022 (unaudited) | — | — | 10,000,000 | 1,000 | — | (18,855,609 | ) | (18,854,609 | ) | |||||||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | — | — | — | — | — | (1,388,828 | ) | (1,388,828 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 291,067 | 291,067 | |||||||||||||||||||||
Balance—September 30, 2022 (unaudited) | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (19,953,370 | ) | $ | (19,952,370 | ) | ||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 | ||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||
Class A | Class F | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance—January 1, 2021 | — | $ | — | 10,000,000 | $ | 1,000 | $ | 24,000 | $ | (3,329 | ) | $ | 21,671 | |||||||||||||||
Accretion of Class A common stock subject to possible redemption amount | — | — | — | — | (24,000 | ) | (45,861,780 | ) | (45,885,780 | ) | ||||||||||||||||||
Net income | — | — | — | — | — | 11,072,129 | 11,072,129 | |||||||||||||||||||||
Balance—March 31, 2021 (unaudited) | — | — | 10,000,000 | 1,000 | — | (34,792,980 | ) | (34,791,980 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 32,359 | 32,359 | |||||||||||||||||||||
Balance—June 30, 2021 (unaudited) | — | — | 10,000,000 | 1,000 | — | (34,760,621 | ) | (34,759,621 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 4,696,619 | 4,696,619 | |||||||||||||||||||||
Balance—September 30, 2021 (unaudited) | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (30,064,002 | ) | $ | (30,063,002 | ) | ||||||||||||||
Common Stock | Total | |||||||||||||||||||||||||||
Class A | Class F | Additional Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2021 | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (27,942,377 | ) | $ | (27,941,377 | ) | ||||||||||||||
Net income | — | — | — | — | — | 6,449,070 | 6,449,070 | |||||||||||||||||||||
Balance - March 31, 2022 (unaudited) | — | — | 10,000,000 | 1,000 | — | (21,493,307 | ) | (21,492,307 | ) | |||||||||||||||||||
Increase in redemption value of Class A common stock subject to possible redemption | — | — | — | — | — | (117,010 | ) | (117,010 | ) | |||||||||||||||||||
Net income | — | — | — | — | — | 2,754,708 | 2,754,708 | |||||||||||||||||||||
Balance - June 30, 2022 (unaudited) | — | $ | — | 10,000,000 | $ | 1,000 | $ | — | $ | (18,855,609 | ) | $ | (18,854,609 | ) | ||||||||||||||
For The Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 9,494,845 | $ | 15,801,107 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
General and administrative expenses paid by related party under note payable | — | 1,530 | ||||||
Offering costs allocated to derivative warrant liabilities | — | 1,413,340 | ||||||
Change in fair value of derivative warrant liabilities | (9,600,000 | ) | (20,800,000 | ) | ||||
Income from investments held in Trust Account | (2,408,800 | ) | (16,098 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (307,478 | ) | (365,391 | ) | ||||
Accounts payable | 118,371 | 270,064 | ||||||
Accrued expenses | 341,382 | 1,675,330 | ||||||
Income tax payable | 426,868 | — | ||||||
Franchise tax payable | (91,425 | ) | 147,448 | |||||
Net cash used in operating activities | (2,026,237 | ) | (1,872,670 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Investment income released from Trust Account to pay for taxes | 320,050 | — | ||||||
Cash deposited in Trust Account | — | (400,000,000 | ) | |||||
Net cash provided by (used in) investing activities | 320,050 | (400,000,000 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Repayment of note payable to related party | — | (192,312 | ) | |||||
Proceeds received from initial public offering, gross | — | 400,000,000 | ||||||
Proceeds received from private placement | — | 10,000,000 | ||||||
Working Capital Loan—related party | 1,900,000 | 570,000 | ||||||
Offering costs paid | — | (8,467,900 | ) | |||||
Net cash provided by financing activities | 1,900,000 | 401,909,788 | ||||||
Net change in cash | 193,813 | 37,118 | ||||||
Cash—beginning of the period | 48,491 | 500 | ||||||
Cash—end of the period | $ | 242,304 | $ | 37,618 | ||||
Supplemental disclosure of noncash activities: | ||||||||
Deferred offering costs included in accrued expenses | $ | — | $ | 85,000 | ||||
Deferred offering costs paid by related party under promissory note | $ | — | $ | 51,890 | ||||
Accounts payable paid through promissory note | $ | — | $ | 750 | ||||
Deferred underwriting commissions in connection with the initial public offering | $ | — | $ | 14,000,000 | ||||
For The Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net (loss) income | $ | (322,391 | ) | $ | 9,203,778 | |||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
Change in fair value of derivative warrant liabilities | — | (9,000,000 | ) | |||||
| Gain on forgiveness of deferred underwriting fee payable | (1,113,200 | ) | — | |||||
Change in fair value of working capital loan - related party | (886,513 | ) | — | |||||
Income from investments held in Trust Account | (1,371,765 | ) | (600,790 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (3,943 | ) | (604,006 | ) | ||||
Accounts payable | (30,529 | ) | (44,404 | ) | ||||
Accrued expenses | 2,109,631 | (810,222 | ) | |||||
Income tax payable | 500,843 | 57,686 | ||||||
Franchise tax payable | 20,000 | (101,425 | ) | |||||
Net cash used in operating activities | (1,097,867 | ) | (1,899,383 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Investment income released from Trust Account to pay for taxes | 80,000 | — | ||||||
Cash deposited in Trust Account | (2,861,426 | ) | — | |||||
Net cash used in investing activities | (2,781,426 | ) | — | |||||
Cash Flows from Financing Activities: | ||||||||
| Proceeds received from working capital loan- related party | 3,965,000 | 1,900,000 | ||||||
Net cash provided by financing activities | 3,965,000 | 1,900,000 | ||||||
Net change in cash | 85,707 | 617 | ||||||
Cash - beginning of the period | 19,750 | 48,491 | ||||||
Cash - end of the period | $ | 105,457 | $ | 49,108 | ||||
Supplemental Disclosure of Non-cash Financing Activities: | ||||||||
| Forgiveness of deferred underwriting fee payable allocated to Class A common stock | $ | 13,141,800 | $ | — | ||||
For The Three Months Ended September 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Class A | Class F | Class A | Class F | |||||||||||||
Basic and diluted net income per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income, basic | $ | 232,854 | $ | 58,213 | $ | 3,757,295 | $ | 939,324 | ||||||||
Allocation of net income, diluted | 232,854 | 58,213 | 3,757,295 | 939,324 | ||||||||||||
Denominator: | ||||||||||||||||
Basic weighted average common stock outstanding | 40,000,000 | 10,000,000 | 40,000,000 | 10,000,000 | ||||||||||||
Diluted weighted average common stock outstanding | 40,000,000 | 10,000,000 | 40,000,000 | 10,000,000 | ||||||||||||
Basic net income per common stock | $ | 0.01 | $ | 0.01 | $ | 0.09 | $ | 0.09 | ||||||||
Diluted net income per common stock | $ | 0.01 | $ | 0.01 | $ | 0.09 | $ | 0.09 | ||||||||
For The Nine Months Ended September 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Class A | Class F | Class A | Class F | |||||||||||||
Basic and diluted net income per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income, basic | $ | 7,595,876 | $ | 1,898,969 | $ | 12,363,724 | $ | 3,437,383 | ||||||||
Allocation of net income, diluted | 7,595,876 | 1,898,969 | 12,325,118 | 3,475,989 | ||||||||||||
Denominator: | ||||||||||||||||
Basic weighted average common stock outstanding | 40,000,000 | 10,000,000 | 35,457,875 | 9,858,059 | ||||||||||||
Diluted weighted average common stock outstanding | 40,000,000 | 10,000,000 | 35,457,875 | 10,000,000 | ||||||||||||
Basic net income per common stock | $ | 0.19 | $ | 0.19 | $ | 0.35 | $ | 0.35 | ||||||||
Diluted net income per common stock | $ | 0.19 | $ | 0.19 | $ | 0.35 | $ | 0.35 | ||||||||
For the Three Months Ended June 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Class A | Class F | Class A | Class F | |||||||||||||
Basic and diluted net income per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income, basic and diluted | $ | 479,490 | $ | 301,627 | $ | 2,203,766 | $ | 550,942 | ||||||||
Denominator: | ||||||||||||||||
Basic and diluted weighted average common stock outstanding | 7,948,405 | 5,000,000 | 40,000,000 | 10,000,000 | ||||||||||||
Basic and diluted net income per common stock | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | ||||||||
For the Six Months Ended June 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Class A | Class F | Class A | Class F | |||||||||||||
Basic and diluted net (loss) income per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net (loss) income, basic and diluted | $ | (186,370 | ) | $ | (136,021 | ) | $ | 7,363,022 | $ | 1,840,756 | ||||||
Denominator: | ||||||||||||||||
Basic and diluted weighted average common stock outstanding | 7,948,405 | 5,801,105 | 40,000,000 | 10,000,000 | ||||||||||||
Basic and diluted net (loss) income per common stock | $ | (0.02 | ) | $ | (0.02 | ) | $ | 0.18 | $ | 0.18 | ||||||
Gross proceeds from Initial Public Offering | $ | 400,000,000 | $ | 400,000,000 | ||||
Less: | ||||||||
Fair value of Public Warrants at issuance | (24,533,330 | ) | (24,533,330 | ) | ||||
Offering costs allocated to Class A common stock subject to possible redemption | (21,284,250 | ) | (21,284,250 | ) | ||||
Plus: | ||||||||
Accretion on Class A common stock subject to possible redemption amount | 45,817,580 | |||||||
Class A common stock subject to possible redemption, as of December 31, 2021 | 400,000,000 | |||||||
| Plus: | ||||||||
| Accretion on Class A common stock subject to possible redemption amount | 4,101,927 | |||||||
| Less: | ||||||||
| Redemption of Class A common stock subject to possible redemption amount | (324,362,141 | ) | ||||||
Class A common stock subject to possible redemption, as of December 31, 2022 | 79,739,786 | |||||||
| Plus: | ||||||||
| Accretion on Class A common stock subject to possible redemption amount | 1,874,987 | |||||||
Class A common stock subject to possible redemption, as of March 31, 2023 | 81,614,773 | |||||||
| Plus: | ||||||||
| Waiver of Class A share issuance costs | 13,141,800 | |||||||
| Less: | ||||||||
| Accretion on Class A common stock subject to possible redemption amount | (11,294,932 | ) | ||||||
Class A common stock subject to possible redemption, as of June 30, 2023 | $ | 83,461,641 | ||||||
Accretion on Class A common stock subject to possible redemption amount | 45,817,580 | |||
Class A common stock subject to possible redemption as of December 31, 2021 | 400,000,000 | |||
Increase in redemption value of Class A common stock subject to possible redemption | 1,505,838 | |||
Class A common stock subject to possible redemption as of September 30, 2022 | $ | 401,505,838 | ||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Liabilities: | ||||||||||||
| Derivative warrant liabilities – Public warrants | $ | — | $ | 533,330 | $ | — | ||||||
| Derivative warrant liabilities – Private placement warrants | $ | — | $ | 266,670 | $ | — | ||||||
| Working capital loan – related party | $ | — | $ | — | $ | 5,408,857 | ||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account-Money market fund | $ | 402,112,433 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities-Public warrants | $ | 666,670 | — | — | ||||||||
Derivative warrant liabilities-Private placement warrants | $ | — | $ | 333,330 | $ | |||||||
Working Capital Loan-related party | $ | — | $ | — | $ | 2,820,000 | ||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Liabilities: | ||||||||||||
| Derivative warrant liabilities – Public warrants | $ | 533,330 | $ | — | $ | — | ||||||
| Derivative warrant liabilities – Private placement warrants | $ | — | $ | 266,670 | $ | — | ||||||
| Working capital loan – related party | $ | — | $ | — | $ | 2,330,370 | ||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
Investments held in Trust Account-Money market fund | $ | 400,023,684 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Derivative warrant liabilities-Public warrants | $ | 6,933,330 | — | — | ||||||||
Derivative warrant liabilities-Private placement warrants | $ | — | $ | — | $ | 3,666,670 | ||||||
Working Capital Loan-related party | $ | — | $ | — | $ | 920,000 | ||||||
December 31, 2021 | June 30, 2023 | December 31, 2022 | ||||||||||
Exercise price | $ | 11.50 | ||||||||||
Stock price | $ | 9.73 | ||||||||||
Term (years) | 5 | |||||||||||
Working Capital Loan: | ||||||||||||
Warrant price | $ | 0.04 | $ | 0.04 | ||||||||
Volatility | 10.5 | % | 0.01 | % | 0.01 | % | ||||||
Risk-free rate | 1.44 | % | 3.52 | % | 3.99 | % | ||||||
Discount rate | 13.80 | % | 15.76 | % | ||||||||
Probability of Business Combination | 80.00 | % | 80.00 | % | ||||||||
Term (years) | 0.25 | 0.25 | ||||||||||
| Derivative Warrant Liabilities | Working Capital Loans- Related Party | |||||||
Level 3 - Instruments January 1, 2021 | $ | — | $ | — | ||||
Issuance of Public and Private Placement Warrants | 38,400,000 | — | ||||||
Transfer of Public Warrants to Level 1 | (24,533,330 | ) | — | |||||
Change in fair value of derivative warrant liabilities | (10,200,000 | ) | — | |||||
Working capital loan - related party | — | 920,000 | ||||||
Level 3 - Instruments at December 31, 2021 | 3,666,670 | 920,000 | ||||||
Transfer of Private Placement Warrants from Level 3 to Level 2 | (3,666,670 | ) | — | |||||
Working capital loan - related party | — | 1,400,000 | ||||||
Level 3 - Instruments at March 31, 2022 | — | 2,320,000 | ||||||
Working capital loan - related party | — | 500,000 | ||||||
Level 3 - Instruments at June 30, 2022 | $ | — | $ | 2,820,000 | ||||
Level 3 - Instruments at September 30, 2022 | $ | — | $ | 2,820,000 | ||||
Working Capital Loans- Related Party | ||||
Level 3 - Instruments December 31, 2022 | $ | 2,330,370 | ||
| Borrowings of working capital loan – related party | 2,025,000 | |||
| Change in fair value of working capital loan – related party | (457,919 | ) | ||
Level 3 - Instruments at March 31, 2023 | $ | 3,897,451 | ||
| Borrowings of working capital loan – related party | 1,940,000 | |||
| Change in fair value of working capital loan – related party | (428,594 | ) | ||
| Level 3 – Instruments at June 30, 2023 | $ | 5,408,857 | ||
| Derivative Warrant Liabilities | Working Capital Loans- Related Party | Derivative Warrant Liabilities | Working Capital Loans- Related Party | |||||||||||||
Level 3 - Instruments January 1, 2021 | $ | — | $ | — | ||||||||||||
| Level 3 – Instruments January 1, 2021 | $ | — | $ | — | ||||||||||||
Issuance of Public and Private Placement Warrants | 38,400,000 | — | 38,400,000 | — | ||||||||||||
Transfer of Public Warrants to Level 1 | (24,533,330 | ) | — | (24,533,330 | ) | — | ||||||||||
Change in fair value of derivative warrant liabilities | 200,000 | — | (10,200,000 | ) | — | |||||||||||
| Working capital loan – related party | — | 920,000 | ||||||||||||||
| Level 3 – Instruments at December 31, 2021 | 3,666,670 | 920,000 | ||||||||||||||
Transfer of Private Placement Warrants from Level 3 to Level 2 | (3,666,670 | ) | — | |||||||||||||
| Working capital loan – related party | — | 1,400,000 | ||||||||||||||
Level 3 - Instruments at March 31, 2021 | 14,066,670 | — | ||||||||||||||
Change in fair value of derivative warrant liabilities | (6,066,670 | ) | 100,000 | |||||||||||||
Working capital loan - related party | — | 100,000 | ||||||||||||||
| Level 3 – Instruments at March 31, 2022 | — | 2,320,000 | ||||||||||||||
| Working capital loan – related party | — | 500,000 | ||||||||||||||
Level 3 - Instruments at June 30, 2021 | 8,000,000 | 100,000 | ||||||||||||||
Change in fair value of derivative warrant liabilities | (1,866,670 | ) | 470,000 | |||||||||||||
| Level 3 – Instruments at June 30, 2022 | $ | — | $ | 2,820,000 | ||||||||||||
Level 3 - Instruments at September 30, 2021 | $ | 6,133,330 | $ | 570,000 | ||||||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
References to the “Company,” “TLG Acquisition One Corp.,” “our,” “us” or “we” refer to Electriq Power Holdings, Inc. (formerly known as TLG Acquisition One Corp.). The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021,2022 and our Quarterly ReportsReport on Form 10-Q for the periods endingperiod ended March 31, 2022 and June 30, 20222023 and our other SEC filings. Any of those factors could result in a significant material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Overview
We arewere a blank check company incorporated in Delaware on October 2, 2020. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the(a “Business Combination”). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our sponsor iswas TLG Acquisition Founder LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on January 27, 2021. On February 1, 2021, we consummated our Initial Public Offering of 40,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 5,000,000 additional Units to cover over-allotments, (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $400.0 million, and incurring offering costs of approximately $22.7 million, of which $14.0 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 4,666,667 and 2,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) to the Sponsor and RBC Capital Markets, LLC (“RBC”), in its capacity as a purchaser of Private Placement Warrants, (“RBC”), respectively, at a price of $1.50 per Private Placement Warrant, generating total proceeds of $10.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $400.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement waswere placed in a trust account (the “Trust Account”), and will beuntil December 28, 2022, were invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as determined by us, until the earlier of: (i) the completionus. On December 28, 2022, we liquidated our portfolio of a Business Combination and (ii) the distribution ofinvestments held in the Trust Account as described below.and converted it into cash held in the Trust Account.
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Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if any, and excluding the amount of any deferred underwriting discount held in trust) at the time of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-business combination company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or February 1, 2023, (as such period may be extended pursuant to a stockholder vote, the “Combination 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, subject to lawfully available funds therefor, redeem 100% of 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 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); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the 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 Business Combination
On November 13, 2022, we entered into a Merger Agreement (as amended by that First Amendment to Merger Agreement, dated December 23, 2022, the Second Amendment to Merger Agreement, dated March 22, 2023, the Third Amendment to Merger Agreement dated June 8, 2023 and as it may be further amended, supplemented or otherwise modified from time to time in accordance with its terms, the “Merger Agreement”) with Electriq Power, Inc., a Delaware Corporation (“Electriq”), as disclosed in a Current Report on Form 8-K as filed with the U.S. Securities and Exchange Commission (the “SEC”) by the Company on November 14, 20222022.
IfAs previously reported on the Current Report on Form 8-K filed by TLG with the Securities and Exchange Commission (“SEC”) on July 26, 2023, TLG held a special meeting of its stockholders on July 25, 2023 (the “Special Meeting”), at which holders of 11,365,663 shares of TLG’s Class A Common Stock and Class F Common Stock (together, the “TLG Common Stock”) were present in person or by proxy, constituting a quorum for the transaction of business. Only stockholders of record as of the close of business on June 8, 2023, the record date (the “Record Date”) for the Special Meeting, were entitled to vote at the Special Meeting. As of the Record Date, 12,948,405 shares of TLG Common Stock were outstanding and entitled to vote at the Special Meeting.
At the Special Meeting, TLG’s stockholders voted to approve the proposals outlined in the final prospectus and definitive proxy statement filed by TLG with the SEC on July 12, 2023 (the “Proxy Statement/Consent Solicitation/Prospectus”), including, among other things, the adoption of the Merger Agreement and approval of the transactions contemplated by the Merger Agreement, are completed (the “Transactions”),including the merger of Merger Sub with and into Electriq, will survive such mergerwith Electriq continuing as the surviving corporation and as a wholly ownedwholly-owned subsidiary of TLG, and the Companyissuance of TLG securities as consideration thereunder (the “Merger”). As a result of the Merger, and, upon consummation of the Merger andtogether with the other Transactionstransactions contemplated by the Merger Agreement, (togetherthe “Business Combination”).
On July 31, 2023 (the “Closing Date”), the Business Combination, including the Merger, was completed (the “Closing”). In connection with the Merger,Closing, the “Proposed Business Combination”), the separate corporate existence of Electriq will cease and the holders of Electriq common stock, preferred stock, options and warrants will become equityholders of the Company, which will changeregistrant changed its name from TLG Acquisition One Corp. to
“” in connection with the Proposed Business Combination.
For additional information regarding the Merger Agreement and the Transactions contemplated therein, see the Current Report on Form 8-K as filed with the SEC by the Company on November 14, 2022.
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Liquidity and Going Concern
As of SeptemberJune 30, 2022,2023, we had approximately $242,000$105,457 in our operating bank account and a working capital deficit of approximately $5.1 million$11,804,362 (excluding income and franchise taxes).
Our liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from our Sponsor to cover certain of our offering costs in exchange for issuance of Class F common stock, and a loan from our Sponsor of approximately $192,000 under a promissory note. We repaid the promissory note in full upon consummation of the Private Placement. Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us working capital loans as may be required. The Sponsor and the Company executed a non-interest-bearing promissory note in May 2021, providing the Company the ability to borrow up to $2,000,000 (the “Original Note”). In March 2022, the Sponsor and the Company amended and restated the Original Note, providing the Company the ability to borrow up to $5,000,000. On September 29, 2022, the Sponsor and the Company amended the Working Capital Loan, providing the Company the ability to borrow up to $8,000,000. On June 6, 2023, the Sponsor and TLG amended and restated the Second A&R Note, providing TLG the ability to borrow up to $10,000,000. The Company has drawn approximately $2.8 million$6,985,000 under such loans as of SeptemberJune 30, 2022.2023.
In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements-Going Concern,” we have determined thatOn July 31, 2023, the liquidity condition, mandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after February 1, 2023 (as such period may be extended pursuant to a stockholder vote). The condensed consolidated financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.
We intend to seek an extension of the date by which we must consummateCompany completed a Business Combination as our Board currentlywith Electriq Power Holdings, Inc. and closed the related financing agreements in connection therewith. As a result, management believes that therethe Company will not behave sufficient time before February 1, 2023liquidity to complete a Business Combination. On November 3, 2022, we filed a preliminary proxy statement on Schedule 14A with the SEC for the purposes of seeking stockholder approval to extend the Combination Period from February 1, 2023 to May 1, 2023 (the date that is 27 monthsfund its operations through one year from the closing date of the IPO) (the “Amended Date”) and on a monthly basis up to three times from the Amended Date to August 1, 2023 (the date that is 30 months from the closing date of the IPO).this filing.
Management 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 our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded
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U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise
24
tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent we would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by us and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in our ability to complete a Business Combination.
Results of Operations
Our entire activity from inception up to SeptemberJune 30, 20222023 was in preparation for our formation and the Initial Public Offering and, after the Initial Public Offering, identifying a target company for a Business Combination. We do not expect to be generating any operating revenues until the closing and completion of our initial Business Combination. For the three months ended June 30, 2023, we had net income of approximately $781,000, which consisted of $759,000 in interest income from investments held in the trust account, gain on forgiveness of deferred underwriting fee payable of $1,113,200 and non-operating expense of approximately $1 million resulting from changes in fair value of derivative warrant liabilities and convertible note, partially offset by approximately $1.7 million in general and administrative expenses, approximately $382,000 in income tax expense and $50,000 in franchise tax expense.
For the three months ended SeptemberJune 30, 2022, we had net income of approximately $291,000,$2.8 million, which consisted of approximately $1.8 million$568,000 in interest income from investments held in the trust account and non-operating income of approximately $600,000$2.4 million resulting from changes in fair value of derivative warrant liabilities, partially offset by approximately $1.7$58,000 in income tax expenses, and approximately $156,000 in general and administrative expenses.
For the six months ended June 30, 2023, we had net loss of approximately $323,000, which consisted of approximately $3 million in general and administrative expenses, $50,000approximately $500,000 in income tax expense and $100,000 in franchise tax expense, offset by approximately $1.4 million in interest income from investments held in the trust account, gain on forgiveness of deferred underwriting fee payable of $1,113,200 and approximately $369,000 in income tax expense.
For the three months ended September 30, 2021, we had net incomenon-operating expense of approximately $4.7 million, due largely to a noncash gain$887,000 resulting from changes in fair value of derivative warrant liabilities of approximately $4.9 million, partially offset by operating expenses of approximately $236,000. Operating expenses consisted of approximately $161,000 in general and administrative expenses, $22,000 in general and administrative expenses with related parties and approximately $60,000 in franchise tax expenses.convertible note.
For the ninesix months ended SeptemberJune 30, 2022, we had net income of approximately $9.5$9.2 million, which consisted of approximately $2.4 million$601,000 in interest income from investments held in the trust account and non-operating income of approximately $9.6$9.0 million resulting from changes in fair value of derivative warrant liabilities, partially offset by approximately $1.9 million$58,000 in income tax expenses, and approximately $339,000 in general and administrative expenses, approximately $189,000 in franchise tax expense and approximately $427,000 in income tax expense.
For the nine months ended September 30, 2021, we had net income of approximately $15.8 million, due largely to a noncash gain resulting from changes in fair value of derivative warrant liabilities of approximately $20.8 million, partially offset by a non-operating expense of approximately $1.4 million related to offering costs for derivative warrant liabilities and operating expenses of approximately $3.6 million. Operating expenses consisted of approximately $3.3 million in general and administrative expenses, $57,000 in general and administrative expenses with related parties and approximately $207,000 in franchise tax expenses.
Contractual Obligations
Administrative Support Agreement
We entered into an agreement with an affiliate of the Sponsor, pursuant to which we agreed to pay a total of $7,000 per month for office space, administrative and support services to such affiliate. Upon completion of the initial
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Business Combination or the liquidation, we will cease paying these monthly fees. We incurred $21,000 and $21,000 in general and administrative expenses related to the agreement, which is recognized in the accompanying unaudited condensed consolidated statements of operations for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. We incurred $62,500$42,000 and $56,000$41,500 in general and administrative expenses related to the agreement, which is recognized in the accompanying unaudited condensed consolidated statements of operations for the ninesix months ended SeptemberJune 30, 20222023 and 2021, respectively. As of September 30, 2022, and December, 2021, there was $0 and $35,000 in accounts payable related to this agreement, respectively.
The Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any reasonable out-of-pocket 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 by us to the Sponsor, officers, directors or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of reasonable out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
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Underwriting Agreement
We granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 5,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriter exercised its over-allotment option in full on February 1, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $8.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, the underwriters were entitled to a deferred fee of $0.35 per Unit, or $14.0 million in the aggregate. TheEffective as of May 10, 2023, RBC, the sole underwriter of the Initial Public Offering, waived its entitlement to the deferred underwriting fee will becomeof $14.0 million.
In connection with the waiving of the deferred underwriting fee, the Company reduced the deferred underwriting fee payable on the unaudited condensed consolidated balance sheets by $14,000,000, as a result $858,200 and $255,000 is reflected on the Company’s unaudited condensed consolidated statement of operations for the amounts allocated in connection with the Company’s warrants at the Initial Public Offering and accrued expenses related to the underwriters, fromrespectively. Additionally, $13,141,800 was charged to accumulated deficit for the amounts held inportion allocated to Class A ordinary shares at the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.Initial Public Offering
Critical Accounting PoliciesEstimates
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to the FASB ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The preparation of financial statementswarrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with accounting principles generally acceptedASC 815. Accordingly, we recognized the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the United StatesCompany’s unaudited consolidated statements of America requires managementoperations. The initial fair value of the Public Warrants and Private Placement Warrants have each been measured at fair value using a modified Black-Scholes option pricing model. The fair value of the Public Warrants and Private Placement Warrants has subsequently been determined using listed prices in an active market for such warrants. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 2 to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our condensed consolidated financial statements and require significant, difficult or complex judgments, often employing the use of current assets or require the creation of current liabilities. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Working Capital Loan-Related Party
We have elected the fair value option to account for borrowings under the Working Capital Loan with our affiliates. As a result of applying the fair value option, we recognize each borrowing, when drawn, at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recognized as change in the fair value of Working Capital Loan-related party in the consolidated statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own estimates about the effects of matters that are inherently uncertain. Such policies are summarizedassumptions a market participant would use in pricing the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our Annual Report on Form 10-K filed with the SEC on March 25, 2022. There have been no significant changes in the application of our critical accounting policies during the nine months ended September 30, 2022.liability.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting pronouncements.
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Off-Balance Sheet Arrangements
As of SeptemberJune 30, 2022,2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
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standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended SeptemberJune 30, 2022,2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were effective as of SeptemberJune 30, 2022.2023.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended SeptemberJune 30, 20222023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings. |
None.
Item 1A. Risk Factors. |
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 25, 202220, 2023 and updated in our Quarterly Report on Form 10-Q filed with the SEC on May 16, 2022, other than as described below.15, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent we would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by us and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in our ability to complete a Business Combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities. |
Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 4,666,667 and 2,000,000 Private Placement Warrants to the Sponsor and RBC, respectively, at a price of $1.50 per Private Placement Warrant, generating total proceeds of $10.0 million. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
In connection with the Initial Public Offering, our sponsor had agreed to loan us an aggregate of up to $300,000 pursuant to a promissory note. This loan is non-interest bearing and payable on the consummation of the Initial Public Offering. We borrowed an aggregate of $192,000 under a promissory note. We repaid the promissory note in full upon consummation of the Private Placement.
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Of the gross proceeds received from the Initial Public Offering and the full exercise of the option to purchase additional Shares, $400,000,000 was placed in the Trust Account. TheFrom the closing of the Initial Public Offering until December 28, 2022, the net proceeds of the Initial Public Offering and certain proceeds from the Private Placement arewere invested in U.S. government treasury bills with a maturity of 180185 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. On December 28, 2022, we liquidated our portfolio of investments held in the Trust Account and converted it into cash held in the Trust Account.
We paid a total of approximately $8.7 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $14.0 million in underwriting discounts and commissions. Effective as of May 10, 2023, RBC waived its entitlement to the deferred underwriting commissions payable in connection with the Initial Public Offering in the amount of $14.0 million.
Item 3. Defaults upon Senior Securities. |
None.
Item 4. Mine Safety Disclosures. |
Not applicable.
|
None.Item 5. Other Information.
During the last fiscal quarter, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.
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Item 6. Exhibits. |
| Second Amended and Restated Certificate of Incorporation of Electriq Power Holdings, Inc. (incorporated herein by reference to Annex B to the Proxy Statement/Consent Solicitation/Prospectus). |
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| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: | ELECTRIQ POWER HOLDINGS, INC. | |||||
| By: | /s/ | |||||
| Name | Frank Magnotti | |||||
| Title: | Chief Executive Officer (Principal Executive Officer) | |||||
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