☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Decarbonization Plus Acquisition Corporation
__________
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Delaware | 001-39632 | 82-2726724 | ||||||
(State or other jurisdiction of incorporation) | (Commission | (I.R.S. Employer
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475 Quaker Meeting House Road Honeoye Falls, NY | 14472 | ||||
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(Address of principal executive offices) | (Zip Code) |
(212) 993-0076
Title of each class | Trading Symbol(s) | Name of each exchange on | ||||||||||||
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Warrants, each whole warrant exercisable for one share of |
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Large accelerated filer |
| Accelerated filer |
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Non-accelerated filer |
| Smaller reporting company |
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Emerging growth company |
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DECARBONIZATION PLUS ACQUISITION CORPORATION
contains forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, without limitation, statements regarding the financial position, business strategy, plans and objectives of management for future operations, and any statements that refer to characterizations of future events or circumstances, including any underlying circumstances. These statements constitute projections, forecasts and forward-looking statements, and are not 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,” “expect,” “estimate,” “intend,” “plan,” “project,” the negative of such terms, and other similar expressions are intended to identify forward looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.
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i
| Item 1. Financial Statements |
Decarbonization Plus Acquisition Corporation
CONDENSED
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| March 31, 2021 (unaudited) |
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| December 31, 2020 |
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ASSETS: |
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Current assets: |
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Cash |
| $ | - |
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| $ | - |
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Total current assets |
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| - |
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| - |
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Investment held in Trust Account |
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| 225,731,056 |
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| 225,727,721 |
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Prepaid insurance |
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| 916,521 |
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| 1,062,000 |
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Total assets |
| $ | 226,647,577 |
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| $ | 226,789,721 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable - affiliate |
| $ | 1,984,190 |
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| $ | 1,324,257 |
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Accrued offering costs |
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| 175,000 |
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| 175,000 |
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Accrued expenses |
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| 3,543,646 |
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|
| 3,572,935 |
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Total Current Liabilities |
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| 5,702,836 |
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| 5,072,192 |
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Warrant liabilities |
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| 33,938,854 |
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| 33,600,270 |
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Deferred underwriting fee payable |
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| 7,900,376 |
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| 7,900,376 |
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Total liabilities |
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| 47,542,066 |
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| 46,572,838 |
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COMMITMENTS AND CONTINGENCIES |
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Class A common stock subject to possible redemption, 17,410,551 and 17,521,688 shares, respectively, at $10.00 per share |
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| 174,105,510 |
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| 175,216,880 |
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Stockholders' equity: |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0ne issued and outstanding |
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| - |
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| - |
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Class A common stock, $0.0001 par value, 250,000,000 shares authorized; 5,161,951 and 5,050,814 shares, respectively, issued and outstanding (excluding 17,410,551 and 17,521,688 shares subject to possible redemption) at March 31, 2021 and December 31, 2020, respectively |
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| 516 |
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| 505 |
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Class B common stock, $0.0001 par value, 20,000,000 shares authorized, 5,643,125 and 5,643,125 shares, respectively, issued and outstanding at March 31, 2021 and December 31, 2020, respectively |
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| 564 |
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| 564 |
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Additional paid-in capital |
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| 27,952,590 |
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| 26,841,231 |
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Accumulated deficit |
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| (22,953,669 | ) |
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| (21,842,297 | ) |
Total stockholders' equity |
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| 5,000,001 |
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| 5,000,003 |
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Total liabilities and stockholders' equity |
| $ | 226,647,577 |
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| $ | 226,789,721 |
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Decarbonization Plus Acquisition Corporation
UNAUDITED CONDENSED
March 31, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash | $ | 407,333 | $ | 445,146 | |||||||
Accounts receivable | 774 | 2,598 | |||||||||
Related party receivable | 417 | 264 | |||||||||
Inventory | 26,082 | 19,245 | |||||||||
Prepaid expenses and other current assets | 29,951 | 27,970 | |||||||||
Total current assets | 464,557 | 495,223 | |||||||||
Property, plant, and equipment, net | 18,249 | 14,311 | |||||||||
Right-of-use assets | 10,970 | 10,265 | |||||||||
Investments in equity securities | 17,478 | 4,948 | |||||||||
Other assets | 6,146 | 5,430 | |||||||||
Total Assets | $ | 517,400 | $ | 530,177 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 7,938 | $ | 8,430 | |||||||
Accrued liabilities | 9,034 | 6,026 | |||||||||
Related party payables | 648 | 3,633 | |||||||||
Contract liabilities | 11,063 | 11,230 | |||||||||
Current portion of lease liabilities | 2,409 | 1,886 | |||||||||
Total current liabilities | 31,092 | 31,205 | |||||||||
Long term liabilities | |||||||||||
Lease liabilities | 9,249 | 8,830 | |||||||||
Private placement warrant liability | 13,705 | 15,228 | |||||||||
Earnout liability | 100,520 | 103,761 | |||||||||
Deferred income taxes | 526 | — | |||||||||
Other liabilities | 1,243 | 1,296 | |||||||||
Total liabilities | 156,335 | 160,320 | |||||||||
Commitments and contingencies (Note 11) | 0 | 0 | |||||||||
Stockholders’ Equity | |||||||||||
Common stock, $0.0001 par value; 400,000,000 shares authorized, 247,881,568 and 247,758,412 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively. | 25 | 25 | |||||||||
Additional paid-in capital | 404,992 | 403,016 | |||||||||
Accumulated deficit | (37,182) | (28,117) | |||||||||
Accumulated other comprehensive gain | 486 | 373 | |||||||||
Total Hyzon Motors Inc. stockholders’ equity | 368,321 | 375,297 | |||||||||
Noncontrolling interest | (7,256) | (5,440) | |||||||||
Total Stockholders’ Equity | 361,065 | 369,857 | |||||||||
Total Liabilities and Stockholders’ Equity | $ | 517,400 | $ | 530,177 |
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| For the Period Ended March 31, 2021 |
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| For the Period Ended March 31, 2020 |
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Operating expenses: |
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General and administrative expenses |
| $ | 776,122 |
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| $ | 859 |
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Loss from operations |
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| (776,122 | ) |
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| (859 | ) |
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Other Income |
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Interest earned on marketable securities held in Trust Account |
| $ | 3,334 |
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| $ | - |
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Change in fair value of warrant liabilities |
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| (338,584 | ) |
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| - |
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Net loss |
| $ | (1,111,372 | ) |
| $ | (859 | ) |
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Weighted average shares outstanding of redeemable common stock, basic and diluted |
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| 22,572,502 |
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| - |
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Basic and diluted net income per common share, redeemable common stock |
| $ | 0.00 |
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| $ | - |
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Weighted average shares outstanding of non-redeemable common stock, basic and diluted |
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| 5,643,125 |
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| 5,643,125 |
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Basic and diluted net loss per common share, non-redeemable common stock |
| $ | (0.20 | ) |
| $ | (0.00 | ) |
Decarbonization Plus Acquisition Corporation
UNAUDITED CONDENSED
Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Revenue | $ | 356 | $ | — | |||||||||||||||||||
Operating expense: | |||||||||||||||||||||||
Cost of revenue | 424 | — | |||||||||||||||||||||
Research and development | 6,212 | 627 | |||||||||||||||||||||
Selling, general, and administrative | 20,470 | 3,146 | |||||||||||||||||||||
Total operating expenses | 27,106 | 3,773 | |||||||||||||||||||||
Loss from operations | (26,750) | (3,773) | |||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Change in fair value of private placement warrant liability | 1,523 | — | |||||||||||||||||||||
Change in fair value of earnout liability | 3,241 | — | |||||||||||||||||||||
Change in fair value of equity securities | 12,530 | — | |||||||||||||||||||||
Foreign currency exchange loss and other expense | (1,057) | (28) | |||||||||||||||||||||
Interest income (expense), net | 17 | (4,588) | |||||||||||||||||||||
Total other income (expense) | 16,254 | (4,616) | |||||||||||||||||||||
Net loss before income taxes | (10,496) | (8,389) | |||||||||||||||||||||
Income tax expense | 526 | — | |||||||||||||||||||||
Net loss | $ | (11,022) | $ | (8,389) | |||||||||||||||||||
Less: Net loss attributable to noncontrolling interest | (1,957) | (242) | |||||||||||||||||||||
Net loss attributable to Hyzon | $ | (9,065) | $ | (8,147) | |||||||||||||||||||
Comprehensive loss: | |||||||||||||||||||||||
Net loss | $ | (11,022) | $ | (8,389) | |||||||||||||||||||
Foreign currency translation adjustment | 254 | (29) | |||||||||||||||||||||
Comprehensive loss | $ | (10,768) | $ | (8,418) | |||||||||||||||||||
Less: Comprehensive loss attributable to noncontrolling interest | (1,816) | (233) | |||||||||||||||||||||
Comprehensive loss attributable to Hyzon | $ | (8,952) | $ | (8,185) | |||||||||||||||||||
Net loss per share attributable to Hyzon: | |||||||||||||||||||||||
Basic | $ | (0.04) | $ | (0.05) | |||||||||||||||||||
Diluted | $ | (0.04) | $ | (0.05) | |||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Basic | 247,940 | 166,201 | |||||||||||||||||||||
Diluted | 247,940 | 166,201 |
For the period from January 1, 2020 to March 31, 2020 and the period from January 1, 2021 to March 31, 2021
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| Additional |
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| Class A Common Stock |
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| Class B Common Stock |
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| Paid-in |
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| Accumulated |
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| Stockholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
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Balances, January 1, 2020 |
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| - |
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| $ | - |
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| 5,750,000 |
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| $ | 575 |
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| $ | 243,447 |
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| $ | (219,422 | ) |
| $ | 24,600 |
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Net loss |
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| - |
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| - |
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| - |
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| - |
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| - |
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| (859 | ) |
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| (859 | ) |
Balances as of March 31, 2020 |
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| - |
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| $ | - |
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| 5,750,000 |
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| $ | 575 |
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| $ | 243,447 |
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| $ | (220,281 | ) |
| $ | 23,741 |
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Balances, January 1, 2021 |
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| 5,050,814 |
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| $ | 505 |
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| 5,643,125 |
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| $ | 564 |
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| $ | 26,841,231 |
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| $ | (21,842,297 | ) |
| $ | 5,000,003 |
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Common stock subject to possible redemption |
|
| 111,137 |
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| 11 |
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| - |
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| - |
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| 1,111,359 |
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| - |
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| 1,111,370 |
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Net loss |
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| - |
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| - |
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| - |
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| - |
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| - |
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| (1,111,372 | ) |
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| (1,111,372 | ) |
Balances as of March 31, 2021 |
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| 5,161,951 |
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| $ | 516 |
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| 5,643,125 |
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| $ | 564 |
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| $ | 27,952,590 |
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| $ | (22,953,669 | ) |
| $ | 5,000,001 |
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Decarbonization Plus Acquisition Corporation
UNAUDITED CONDENSED
Legacy Common Stock | Common Stock Class A | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Total Hyzon Motors Inc. Stockholders’ Equity (Deficit) | Noncontrolling Interest | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | — | $ | — | 247,758,412 | $ | 25 | $ | 403,016 | $ | (28,117) | $ | 373 | $ | 375,297 | $ | (5,440) | $ | 369,857 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | 30,008 | — | 34 | — | — | 34 | — | 34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,133 | — | — | 2,133 | — | 2,133 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Vesting of RSUs | — | — | 64,815 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net share settlement of equity awards | — | — | — | — | (160) | — | — | (160) | — | (160) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for the cashless exercise of warrants | — | — | 28,333 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of warrants | — | — | — | — | (31) | — | — | (31) | — | (31) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to Hyzon | — | — | — | — | — | (9,065) | — | (9,065) | — | (9,065) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | — | — | — | — | — | — | — | — | (1,957) | (1,957) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss | — | — | — | — | — | — | 113 | 113 | 141 | 254 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | — | $ | — | 247,881,568 | $ | 25 | $ | 404,992 | $ | (37,182) | $ | 486 | $ | 368,321 | $ | (7,256) | $ | 361,065 | ||||||||||||||||||||||||||||||||||||||||||||
Legacy Common Stock | Common Stock Class A | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Total Hyzon Motors Inc. Stockholders’ Equity (Deficit) | Noncontrolling Interest | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | 93,750,000 | $ | 94 | — | $ | — | $ | 29,045 | $ | (14,271) | $ | (16) | $ | 14,852 | $ | (91) | $ | 14,761 | ||||||||||||||||||||||||||||||||||||||||||||
Retroactive application of recapitalization | (93,750,000) | (94) | 166,125,000 | 17 | 77 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted balance, beginning of period | — | — | 166,125,000 | 17 | 29,122 | (14,271) | (16) | 14,852 | (91) | 14,761 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | 115,189 | — | 187 | — | — | 187 | — | 187 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 290 | — | — | 290 | — | 290 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
IP transaction - deemed distribution | — | — | — | — | (10,000) | — | — | (10,000) | — | (10,000) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to Hyzon | — | — | — | — | — | (8,147) | — | (8,147) | — | (8,147) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | — | — | — | — | — | — | — | — | (242) | (242) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss | — | — | — | — | — | — | (38) | (38) | 9 | (29) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | — | $ | — | 166,240,189 | $ | 17 | $ | 19,599 | $ | (22,418) | $ | (54) | $ | (2,856) | $ | (324) | $ | (3,180) |
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| For the Period Ended March 31, 2021 |
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| For the Period Ended March 31, 2020 |
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Cash flow from operating activities: |
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Net loss |
| $ | (1,111,372 | ) |
| $ | (859 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Change in fair value of warrant liabilities |
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| 338,584 |
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|
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Interest earned on marketable securities held in Trust Account |
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| (3,334 | ) |
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| - |
|
Changes in operating assets and liabilities: |
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Accounts payable |
|
| 659,932 |
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| 859 |
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Accrued expenses |
|
| (29,289 | ) |
|
| - |
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Prepaid insurance |
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| 145,479 |
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| - |
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Net cash used in operating activities |
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| - |
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| - |
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Net decrease in cash |
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| 0 |
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| 0 |
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Cash at beginning of period |
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| - |
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| 315,600 |
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Cash at end of period |
| $ | - |
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| $ | 315,600 |
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Supplemental disclosure of non-cash financing activities: |
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Change in value of Class A common stock subject to possible redemption |
| $ | (1,111,370 | ) |
| $ | - |
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Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Cash Flows from Operating Activities: | |||||||||||
Net loss | $ | (11,022) | $ | (8,389) | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | 912 | 129 | |||||||||
Stock-based compensation | 2,133 | 290 | |||||||||
Deferred income tax expense | 526 | — | |||||||||
Noncash interest expense | — | 4,500 | |||||||||
Fair value adjustment of private placement warrant liability | (1,523) | — | |||||||||
Fair value adjustment of earnout liability | (3,241) | — | |||||||||
Fair value adjustment of value of equity securities | (12,530) | — | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | 1,839 | (191) | |||||||||
Inventory | (6,864) | (626) | |||||||||
Prepaid expenses and other current assets | (1,599) | (6,982) | |||||||||
Other assets | (65) | — | |||||||||
Accounts payable | (568) | 375 | |||||||||
Accrued liabilities | 3,003 | 316 | |||||||||
Related party payables, net | 8 | 811 | |||||||||
Contract liabilities | (165) | 297 | |||||||||
Other liabilities | (92) | — | |||||||||
Net cash used in operating activities | (29,248) | (9,470) | |||||||||
Cash Flows from Investing Activities: | |||||||||||
Purchases of property and equipment | (4,440) | (3,950) | |||||||||
Advanced payments for capital expenditures | (387) | — | |||||||||
Investment in equity securities | — | (123) | |||||||||
Net cash used in investing activities | (4,827) | (4,073) | |||||||||
Cash Flows from Financing Activities: | |||||||||||
Exercise of stock options | 34 | 187 | |||||||||
Payment of finance lease liability | (86) | (38) | |||||||||
Debt issuance costs | — | (59) | |||||||||
Proceeds from issuance of convertible notes | — | 45,000 | |||||||||
Net share settlement of incentive equity awards | (160) | — | |||||||||
Payment for purchase of Horizon IP | (3,146) | — | |||||||||
Repurchase of warrants | (31) | — | |||||||||
Deferred transaction costs | — | (487) | |||||||||
Net cash (used in) provided by financing activities | (3,389) | 44,603 | |||||||||
Effect of exchange rate changes on cash | 300 | (26) | |||||||||
Net change in cash and restricted cash | (37,164) | 31,034 | |||||||||
Cash and restricted cash — Beginning | 449,365 | 17,139 | |||||||||
Cash and restricted cash — Ending | $ | 412,201 | $ | 48,173 | |||||||
Supplemental schedule of non-cash investing activities and financing activities: | |||||||||||
Horizon license agreement payable | — | 10,000 | |||||||||
Transaction costs included in accrued expenses | — | 2,978 |
Organizationsupplies hydrogen fuel cell-powered commercial vehicles across North America, Europe, China, and General
Silver Run Acquisition Corporation III was incorporated in Delaware on September 7, 2017. The Company was formed for the purpose of effectingAustralasia. In addition, Hyzon builds and fosters a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combinationclean hydrogen supply ecosystem with one or more businesses (the “Initial Business Combination”).leading partners from feedstocks through production, dispensing, and financing. The Company is an “emerging growthmajority-owned by Hymas Pte. Ltd. (“Hymas”), a Singapore 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 March 31, 2021, the Company had not commenced any operations. All activity through March 31, 2021 relates to the Company’s formation and initial public offering (“Initial Public Offering”), which is described below, as well as the identification and evaluation of prospective acquisition targets for an Initial majority-owned but indirectly controlled by Horizon Fuel Cell Technologies PTE Ltd., a Singapore company (“Horizon”).
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, 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 of other offering costs. In addition, at March 31, 2021, there was 0 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 respect to any other provision relating 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.
6
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”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity”(“ASC 480”).
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
7
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 March 31, 2021, the Company had no cash balance, but the Company has access to working capital loans from the Sponsor, which is described in Note 4, to partially cover the working capital deficit of $5.7 million as of March 31, 2021. This excludes interest income of approximately $3,334 from the Company’s investment in the Trust Account which is available to the Company for tax obligations. Through March 31, 2021, 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
Principles of Consolidation
Theaccompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary since its formation. All material intercompany balances and transactions have been eliminated.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statementsrelated 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 regulationsrules of the SEC.Securities and Exchange Commission (“SEC”) regarding interim reporting. Certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, they do notthe unaudited consolidated financial statements should be read in connection with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2021.
March 31, 2022 | December 31, 2021 | |||||||||||||
Raw materials | $ | 20,051 | $ | 15,727 | ||||||||||
Work in process | 6,031 | 3,518 | ||||||||||||
Total inventory | $ | 26,082 | $ | 19,245 |
March 31, 2022 | December 31, 2021 | |||||||||||||
Deposit for fuel cell components (Note 14) | $ | 5,905 | $ | 5,008 | ||||||||||
Vehicle inventory deposits | 10,068 | 7,907 | ||||||||||||
Production equipment deposits | 1,552 | 4,423 | ||||||||||||
Other prepaids | 5,142 | 2,477 | ||||||||||||
Prepaid Insurance | 2,744 | 5,079 | ||||||||||||
VAT receivable from government | 3,637 | 2,173 | ||||||||||||
VAT receivable from customers | 903 | 903 | ||||||||||||
Total prepaid expenses and other current assets | $ | 29,951 | $ | 27,970 |
March 31, 2022 | December 31, 2021 | |||||||||||||
Land and building | $ | 2,818 | $ | 2,818 | ||||||||||
Machinery and equipment | 11,679 | 8,792 | ||||||||||||
Software | 1,176 | 596 | ||||||||||||
Leasehold improvements | 1,153 | 968 | ||||||||||||
Construction in progress | 2,693 | 1,828 | ||||||||||||
Total Property, plant, and equipment | 19,519 | 15,002 | ||||||||||||
Less: Accumulated depreciation and amortization | (1,270) | (691) | ||||||||||||
Property, plant and equipment, net | $ | 18,249 | $ | 14,311 |
March 31, 2022 | December 31, 2021 | |||||||||||||
Payroll and payroll related expenses | $ | 3,833 | $ | 2,247 | ||||||||||
Accrued professional fees | 4,032 | 2,545 | ||||||||||||
Other accrued expenses | 1,169 | 1,234 | ||||||||||||
Accrued liabilities | $ | 9,034 | $ | 6,026 |
March 31, 2022 | December 31, 2021 | ||||||||||
Total initial cost basis | $ | 4,948 | $ | 4,948 | |||||||
Adjustments: | |||||||||||
Cumulative unrealized gain | 12,530 | — | |||||||||
Carrying amount, end of period | $ | 17,478 | $ | 4,948 |
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the Company’s 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.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that 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,because the Company as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
The accompanying unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Amendment No. 1 of the Form 10-K/A filed generated tax losses.
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. At March 31, 2021 and 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
9
(loss), less income attributable to redeemable common stock, bytax effects of temporary differences between the weighted average number of Class B non-redeemable common stock outstanding for the period. Non-redeemable common stock includes the Founder Shares (as defined below) 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):
|
| Period Ended March 31, 2021 |
|
| Period Ended March 31, 2020 |
| ||
Redeemable Common Stock |
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to Redeemable Common Stock |
|
|
|
|
|
|
|
|
Interest Income |
| $ | 3,334 |
|
| $ | - |
|
Income and Franchise Tax |
| $ | (3,334 | ) |
| $ | - |
|
Net Loss |
| $ | (0 | ) |
| $ | - |
|
Denominator: Weighted Average Redeemable Common Stock |
|
|
|
|
|
|
|
|
Redeemable Common Stock, Basic and Diluted |
|
| 22,572,502 |
|
|
| - |
|
Loss/Basic and Diluted Redeemable Common Stock |
| $ | 0.00 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock |
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Redeemable Net Loss |
|
|
|
|
|
|
|
|
Net Loss |
| $ | (1,111,372 | ) |
| $ | (859 | ) |
Redeemable Net Loss |
| $ | - |
|
| $ | - |
|
Non-Redeemable Net Loss |
| $ | (1,111,372 | ) |
| $ | (859 | ) |
Denominator: Weighted Average Non-Redeemable Common Stock |
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock, Basic and Diluted |
|
| 5,643,125 |
|
|
| 5,000,000 |
|
Loss/Basic and Diluted Non-Redeemable Common Stock |
| $ | (0.20 | ) |
| $ | (0.00 | ) |
Note: As of March 31, 2021 and 2020, 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.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 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, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company utilized a Monte Carlo simulation
10
model to value the warrant liabilities that are categorized within Level 1 at the date of the Initial Public Offering and utilizes a Black-Scholes model to value the warrant liabilities that are categorized within Level 3 at each reporting period, with changes in fair value recognized in the Statements of Operations (see Note 7).
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the balance sheets, primarily due to their short term nature. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. See Note 7 for the levels within the valuation hierarchy, as well as additional information on assets and liabilities measured at fair value.
Use of Estimates
The preparation of these financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thesefor financial statementsreporting purposes and the reported amounts used for income tax purposes. The Company assesses all available evidence, both positive and negative, to determine the amount of expenses duringany required valuation allowance within each taxing jurisdiction. Full valuation allowances have been established for the reporting periods. Accordingly, the actual results could differ from those estimates.
Cash and cash equivalents
Cash includes amounts held at banks with an original maturity of less than three months.Company’s operations in all jurisdictions. As of March 31, 2021,2022, and December 31, 2020, the Company held $0 and $0, respectively, in cash.
Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC 480. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) 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 outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2021, and December 31, 2020, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s consolidated balance sheets.
Offering Costs
Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that are directly related to the Initial Public Offering. The Company incurred offering costs amounting to $11,555,093 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.
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A - Expenses of Offering.Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and
11
liabilities are expensed immediately. The Company recorded $12,315,313 of offering costs as a reduction of equity in connection with the Public Shares included in the Units. The Company immediately expensed $654,656 of offering costs in connection with the Public Warrants included in the Units that were classified as liabilities.
As of March 31, 2021 and December 31, 2020, the Company had 0 deferred offering costs on the accompanying balance sheets.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between these financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 onnet deferred tax assets of approximately $25.1 million and liabilities$21.9 million, respectively, each of which was fully offset by a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce 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 measurementvaluation allowance.
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 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
12
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 on November 12, 2020, 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 (see Note 2 for further information regarding the accounting treatment of the Private Placement Warrants).
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 (as defined below), if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares
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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 March 31, 2021, and December 31, 2020, the Company owed the Sponsor $1,984,190 and $1,324,257, respectively, for additional expenses paid on its behalf, which are unrelated to the Note or Working Capital Loans.
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 (see Note 2 for further information regarding the accounting treatment of the Private Placement Warrants). The over-allotment option expired on December 3, 2020, resulting in the return of $85,500 of the advancement not utilized. As of March 31, 2021 and December 31, 2020, there were 0 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 period ended March 31, 2021, the Company had accrued $30,000 of monthly fees to the affiliate of the Sponsor, which remained outstanding at March 31, 2021.
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 an Initial Business Combination, the Company would repay the Working Capital Loans. In the event that an Initial 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 March 31, 2021 and December 31, 2020, the Company had 0 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 March 31, 2021, and December 31, 2020, there were 22,572,502 and 22,572,502 shares, respectively, of Class A common stock issued and outstanding, of which 17,410,551 and 17,521,688 shares, respectively, were subject to possible redemption. At March 31, 2021 and December 31, 2020, there were 5,643,125 and 5,643,125 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, 106,875 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
15
Company’s board of directors. At March 31, 2021 and December 31, 2020, there were 0 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:
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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 the 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):
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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):
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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.
As of March 31, 2021, there were 11,286,251 Public Warrants and 6,514,500 Private Placement Warrants outstanding. The Company classifies the outstanding Public Warrants and Private Placement Warrants as warrant liabilities on the Balance Sheet in accordance withfollows the guidance contained in ASC 815-40.
The WarrantTopic 820, Fair Value Measurement. For assets and liabilities are initially measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon the closing of the Initial Public Offeringobservable and subsequently re-measuredunobservable inputs is used to arrive at each reporting period using a Monte-Carlo model. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. The Company recognized gains (losses) in connection with changes in the fair value of Warrant liabilities of $338,584 within change in fair value of Warrant liabilities in the Statements of Operations during the period ended March 31, 2021.
Note 7 — Fair Value Measurements
At March 31, 2021, assets held in the Trust Account were comprised of $225,731,056 in money market funds which are invested in U.S. Treasury Securities. Through March 31, 2021, 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 financial assets and liabilities reflects management’s estimate of amountsuses valuation approaches 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 participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to 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:
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Description |
| Amount at Fair Value |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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March 31, 2021 |
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Assets: |
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Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund |
| $ | 225,731,056 |
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| $ | 225,731,056 |
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| $ | - |
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| $ | - |
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Liabilities: |
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Warrant liability – Public Warrants |
| $ | 21,105,289 |
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| $ | 21,105,289 |
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| $ | - |
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| $ | - |
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Warrant liability – Private Placement Warrants |
| $ | 12,833,565 |
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| $ | - |
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| $ | - |
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| $ | 12,833,565 |
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December 31, 2020 |
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Assets: |
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Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund |
| $ | 225,727,721 |
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| $ | 225,727,721 |
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| $ | - |
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| $ | - |
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Liabilities: |
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Warrant liability – Public Warrants |
| $ | 20,766,705 |
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| $ | 20,766,705 |
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| $ | - |
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| $ | - |
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Warrant liability – Private Placement Warrants |
| $ | 12,833,565 |
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| $ | - |
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| $ | - |
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| $ | 12,833,565 |
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The Company utilized a Monte Carlo simulation model
As of March 31, 2022 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Warrant liability – Private Placement Warrants | $ | — | $ | 13,705 | $ | — | $ | 13,705 | ||||||||||||||||||
Earnout shares liability | — | — | 100,520 | 100,520 |
As of December 31, 2021 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Warrant liability – Private Placement Warrants | $ | 15,228 | $ | — | $ | — | $ | 15,228 | ||||||||||||||||||
Earnout shares liability | — | — | 103,761 | 103,761 |
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matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The significant unobservable inputs used in the Black-Scholes model to measure the warrant liabilities that are categorized within Level 3 of the fair value hierarchy are as follows:
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Stock price |
| $ | 10.60 |
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| $ | 10.49 |
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| $ | 11.50 |
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| $ | 11.50 |
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Term (in years) |
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| 5.4 |
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| 5.2 |
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Volatility |
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| 27.8 | % |
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| 25.5 | % |
Risk-free rate |
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| 0.4 | % |
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| 1.0 | % |
Dividend yield |
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Fair value of warrants |
| $ | 1.97 |
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| $ | 1.97 |
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March 31, 2022 | December 31, 2021 | ||||||||||
Stock price | $ | 6.39 | $ | 6.49 | |||||||
Risk-free interest rate | 2.4 | % | 1.2 | % | |||||||
Volatility | 90.00 | % | 90.00 | % | |||||||
Remaining term (in years) | 4.29 | 4.54 |
Private Placement Warrants | Earnout | ||||||||||
Balance as of December 31, 2021 | $ | 15,228 | $ | 103,761 | |||||||
Change in estimated fair value | (1,523) | (3,241) | |||||||||
Balance as of March 31, 2022 | $ | 13,705 | $ | 100,520 |
Stock Options | RSUs | |||||||||||||||||||||||||||||||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual (Years) | Aggregate Intrinsic Value (in 000s) | Number of RSUs | Weighted Average Grant Date Fair Value | |||||||||||||||||||||||||||||||||
Outstanding at December 31, 2021 | 19,311,140 | $ | 1.29 | 13.07 | 100,885 | 1,852,685 | $ | 6.14 | ||||||||||||||||||||||||||||||
Granted | 188,232 | $ | 6.29 | — | — | 107,310 | $ | 5.22 | ||||||||||||||||||||||||||||||
Exercised or released | (30,008) | $ | 1.13 | — | — | (95,576) | $ | 3.53 | ||||||||||||||||||||||||||||||
Forfeited/Cancelled | (38,984) | $ | 1.13 | — | — | — | $ | — | ||||||||||||||||||||||||||||||
Outstanding at March 31, 2022 | 19,430,380 | $ | 1.30 | 12.78 | 99,280 | 1,864,419 | $ | 6.22 | ||||||||||||||||||||||||||||||
Vested and expected to vest, March 31, 2022 | 13,892,880 | $ | 1.15 | 12.39 | 73,271 | 1,864,419 | $ | 6.22 | ||||||||||||||||||||||||||||||
Exercisable and vested at March 31, 2022 | 12,116,476 | $ | 1.13 | 13.15 | 63,749 | — |
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| Private Placement |
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| Public |
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| Warrant Liabilities |
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Fair value as of December 31, 2020 |
| $ | 12,833,565 |
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| $ | 20,766,705 |
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| $ | 33,600,270 |
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Change in valuation inputs or other assumptions |
| - |
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| 338,584 |
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| 338,584 |
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Fair value as of March 31, 2021 |
| $ | 12,833,565 |
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| $ | 21,105,289 |
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| $ | 33,938,854 |
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There were 0 transfers between Levels 1, 2 or 3 during the periodtime of grant, and therefore recognized immediately as compensation expense. Total compensation expense recorded in the three months ended March 31, 2021.
2022 related to these earnout awards was $1.0 million. Certain earnout awards to other equity holders contained performance and market-based vesting conditions, and as the performance conditions are not deemed probable at March 31, 2022, no compensation expense has been recorded related to these awards.
Management13. Stockholders' Equity
prepaid expenses as none of the components have yet been received. In connectionaddition, the Company made other deposit payments to purchase fuel cell systems and components from Horizon and its affiliates. For the three months ended March 31, 2022, Cost of revenue of $0.1 million for fuel cell components purchased from Horizon and its affiliates were recorded in the Company’s unaudited Consolidated Statements of Operations and Comprehensive Loss.
Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Net loss attributable to Hyzon | $ | (9,065) | $ | (8,147) | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | 247,940 | 166,201 | |||||||||||||||||||||
Effect of dilutive securities | — | — | |||||||||||||||||||||
Diluted | 247,940 | 166,201 | |||||||||||||||||||||
Loss per share attributable to Hyzon: | |||||||||||||||||||||||
Basic | $ | (0.04) | $ | (0.05) | |||||||||||||||||||
Diluted | $ | (0.04) | $ | (0.05) |
Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Restricted stock units | 1,864 | 872 | |||||||||||||||||||||
Stock options with service conditions | 12,121 | 12,525 | |||||||||||||||||||||
Stock options for former CTO | 1,772 | 1,772 | |||||||||||||||||||||
Stock options with market and performance conditions | 5,538 | 5,538 | |||||||||||||||||||||
Private placement warrants | 8,015 | — | |||||||||||||||||||||
Public Warrants | 11,286 | — | |||||||||||||||||||||
Earnout shares | 23,250 | — | |||||||||||||||||||||
Hongyun warrants | 31 | — | |||||||||||||||||||||
Ardour warrants | 230 | 326 |
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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References to the “Company,” “our,” “us” or “we” refer to Decarbonization Plus Acquisition Corporation.
Cautionary Note Regarding Forward-Looking Statements
This Quarterlyour 2021 Annual Report filed on Form 10-Q includes forward-looking statements within10-K. Unless the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well ascontext otherwise requires, all other statements other than statements of historical fact includedreferences in this Form 10-Q. Factors that might cause or contributesection to such a discrepancy include, but“Hyzon,” “we,” “us,” and “our” are not limitedintended to those described in our other Securitiesmean the business and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purposeoperations of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “initial business combination”). Our Sponsor is Decarbonization Plus Acquisition Sponsor, LLC, a Delaware limited liability company (“Sponsor”) and an affiliate of Riverstone Investment Group LLC, a Delaware limited liability company,Hyzon Motors Inc. and its affiliates (“Riverstone”). 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.
The Registration Statement for our initial public offering was declared effective on October 19, 2020 (the “Public Offering”). On October 22, 2020, (the “Closing Date”) we consummated the Public Offering of 20,000,000 units (the “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, the underwriters partially exercised the over-allotment option 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 (the “Over-allotment Units”). 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 withconsolidated subsidiaries following the consummation of the Public Offering,Business Combination and to Legacy Hyzon and its consolidated subsidiaries prior to the Business Combination.
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 (the “Trust Account”) located in the United States with the Continental Stock Transfer & Trust Company, and invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) 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 combination 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 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.
Proposed Business Combination
Business Combination Agreement
On February 8, 2021, we entered into a business combination agreement (the “Business Combination Agreement”) with Merger Sub and Hyzon Motors Inc. (“Hyzon”), pursuant to which Merger Sub will be merged with and into Hyzon, with Hyzon surviving the Merger as our wholly owned subsidiary (the “Proposed Transactions”). 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 our stockholders, satisfaction 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, whose 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 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 held 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 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 Sponsor 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, 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 (the “Ardour Warrant Agreement”). 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, copies of which are included as exhibits to our Current Report on Form 8-K filed with the SEC on February 9, 2021, and incorporated herein by reference.
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Results of Operations
Our only activities from inception through March 31, 2021 related to our formation and the Public Offering,supply chain, as well as due diligence costs incurred. demand remain uncertain. These factors may in turn, have a material adverse effect on our results of operations, financial position, and cash flows.
ForHyzon-branded commercial vehicles and other hydrogen solutions
Three Months Ended March 31, | ||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||
Revenue | $ | 356 | $ | — | $ | 356 | N/M | |||||||||||||||||||
Operating expense: | ||||||||||||||||||||||||||
Cost of revenue | 424 | — | 424 | N/M | ||||||||||||||||||||||
Research and development | 6,212 | 627 | 5,585 | 891 | % | |||||||||||||||||||||
Selling, general, and administrative | 20,470 | 3,146 | 17,324 | 551 | % | |||||||||||||||||||||
Total operating expenses | 27,106 | 3,773 | 23,333 | 618 | % | |||||||||||||||||||||
Loss from operations | (26,750) | (3,773) | (22,977) | 609 | % | |||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||
Change in fair value of private placement warrant liability | 1,523 | — | 1,523 | N/M | ||||||||||||||||||||||
Change in fair value of earnout liability | 3,241 | — | 3,241 | N/M | ||||||||||||||||||||||
Change in fair value of equity securities | 12,530 | — | 12,530 | N/M | ||||||||||||||||||||||
Foreign currency exchange loss and other expense | (1,057) | (28) | (1,029) | 3675 | % | |||||||||||||||||||||
Interest income (expense), net | 17 | (4,588) | 4,605 | (100) | % | |||||||||||||||||||||
Total other income (expense) | 16,254 | (4,616) | 20,870 | (452) | % | |||||||||||||||||||||
Net loss before income taxes | (10,496) | (8,389) | (2,107) | 25 | % | |||||||||||||||||||||
Income tax expense | 526 | — | 526 | N/M | ||||||||||||||||||||||
Net loss | $ | (11,022) | $ | (8,389) | $ | (2,633) | 31 | % | ||||||||||||||||||
Less: Net loss attributable to noncontrolling interest | (1,957) | (242) | (1,715) | 709 | % | |||||||||||||||||||||
Net loss attributable to Hyzon | $ | (9,065) | $ | (8,147) | $ | (918) | 11 | % |
For2021
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 Class B common stock (the “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 Offering pursuant to a promissory note (the “Note”). On September 13, 2017, we drew down $300,000 onmanufacture of hydrogen FCEVs, fuel cell systems, and estimated warranty costs. Cost of revenue for the Note. We repaid the Note in full to our Sponsor on October 21, 2020. Subsequent to the consummation of the Public Offering, our liquidity needs have been satisfied through the net proceeds of approximately $2.0 million from the Private Placement held outside of the Trust Account.
In addition, in the short term and the long term, in order to finance transaction costs in connection with a 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. As ofthree months ended March 31, 2020 there were no amounts outstanding under any working capital loans.
Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans 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.2022 was $0.4 million. 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 million in the aggregate, paid upon closing of the Public Offering. An additional fee of approximately $514,500 in the aggregate was due in connection with the closing of the sale of the Over-allotment Units.
In addition, $0.35 per unit, or approximately $7.90 million 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.
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Administrative Services Agreement
Commencing on the date that our securities were first listed on the NASDAQ Capital Market and continuing until the earlier of our consummation of an initial business combination or our liquidation, we have agreed to pay an affiliate of our Sponsor a total of $10,000 per month for office space, utilities, secretarial support and administrative services. We recorded an aggregate of $30,000did not generate revenue for the three months ended March 31, 2021 and therefore had no cost of revenue for the three months ended March 31, 2021.
As2022 as the Company continues to build out its corporate infrastructure, including accounting, audit, legal, regulatory and tax-related services. The increase in selling, general and administrative costs also resulted from director and officer insurance costs, investor and public relations costs.
Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accountsthree months ended March 31, 2021. Interest expense relates primarily to the convertible debt issued in February 2021 and is comprised primarily from changes in the fair value of the embedded derivative associated with the automatic conversion provision of the convertible notes. Upon close of the Business Combination in July 2021, the convertible debt and accrued interest converted into shares of common stock of the Company. There was no debt outstanding during the three months ended March 31, 2022.
Basis$0.2 million for the three months ended March 31, 2022 and 2021, respectively. The change in the comparative periods is the result of Presentation
The preparationincreased activities in our Netherlands joint venture and the creation of condensed consolidated financial statements and related disclosuresa joint venture in conformityFoshan, China in October 2021.
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Net loss | $ | (11,022) | $ | (8,389) | |||||||
Interest (income) expense, net | (17) | 4,588 | |||||||||
Income tax expense | 526 | — | |||||||||
Depreciation and amortization | 912 | 129 | |||||||||
EBITDA | $ | (9,601) | $ | (3,672) | |||||||
Adjusted for: | |||||||||||
Change in fair value of private placement warrant liability | (1,523) | — | |||||||||
Change in fair value of earnout liability | (3,241) | — | |||||||||
Change in fair value of equity securities | (12,530) | — | |||||||||
Stock-based compensation | 2,133 | 290 | |||||||||
Regulatory and legal matters (1) | 2,730 | — | |||||||||
Adjusted EBITDA | $ | (22,032) | $ | (3,382) |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Net cash used in operating activities | $ | (29,248) | $ | (9,470) | ||||||||||
Net cash used in investing activities | (4,827) | (4,073) | ||||||||||||
Net cash (used in) provided by financing activities | (3,389) | 44,603 |
Warrant Liabilities
We account for the warrants issued in connection with our initial public offering in accordance with Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815”), under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities. As the warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statements of Operations in the period of change.
Impact of COVID-19
Our Sponsor continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position and results of operations and/or search forand require the application of significant judgment by management to determine appropriate assumptions to be used in certain estimates; as a target company,result, they are subject to an inherent degree of uncertainty and are considered critical. Accordingly, we believe the specific impact is not readily determinable as offollowing policies are the balance date.
Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact onmost critical to aid in fully understanding and evaluating our financial statements.
Off-Balance Sheet Arrangements
Ascondition and results of operations.
JOBS Act
On April 5, 2012,our Annual Report filed on Form 10-K for the Jumpstart Our Business Startups Actyear ended December 31, 2021.
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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 standards onstandard at the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable totime private companies that comply withadopt the new or revised accounting pronouncementsstandard, 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.
As an “emerging growth company,” we areHyzon intends to rely on such exemptions, Hyzon is not required to, among other things, (i)things: (a) provide an auditor’s attestation report on ourHyzon’s system of internal controlscontrol over financial reporting (ii)pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies (iii)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 financial statements (auditor discussion and analysis),; and (iv)(d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the CEO’sChief Executive Officer’s compensation to median employee compensation. These exemptions
Item 3.Quantitative and Qualitative Disclosures About Market Risk |
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| Item 4. Controls and Procedures |
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting described below in “Changes in Internal Control Over Financial Reporting.” In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented
Changes
Duringfinancial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the most recently completed fiscal quarter, there has been no changematerial weakness in our internal control over financial reporting, the unaudited consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q 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.
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In light of the Restatement of our financial statements, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Restatement of Previously Issued Financial Statements
On May 13, 2021, we revised our prior position on accounting for warrants and restated our financial statements to reclassify the Company’s warrants as described in the Restatement. However, the non-cash adjustments to the financial statements do not impact the amounts previously reported for our cash and cash equivalents, total assets, revenue or cash flows.
| Item 1. Legal Proceedings |
None.
| Item 1A. Risk Factors |
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds |
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None.
Item 3.Defaults Upon Senior Securities |
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Item 4.Mine Safety Disclosures |
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Item 5.Other Information |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
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Hyzon Motors Inc. | ||||||||||
Date: May | By: | /s/ | ||||||||
Name: |
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Title: | Chief |
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