| Organization and Description of Business | Organization and Description of Business Electriq Power Holdings, Inc. (formerly known as TLG Acquisition One Corp. “TLG” prior to July 31, 2023, the Closing Date (as defined below) and on and after the Closing Date, the “Company” or “Electriq”) is a leading energy solutions provider that designs, develops, manages, delivers and services integrated energy storage systems for residential applications primarily in North America. The Company sells its integrated energy storage systems through a network of channel partners, including solar and electrical distributors and installation companies, utility companies, municipalities, community choice aggregators and homebuilders. The Company has also historically sold its products through partnerships with large strategic corporations where it has rebranded the Company’s products (“white-label”) and, while the Company currently has no such partnerships, it continues to seek such partnerships. Electriq’s wholly owned subsidiaries are Electriq Power Labs, Inc., formed in Canada in June 2016 and closed in January 2021, EIQP Limited, formed in Hong Kong in December 2016 and closed in July 2021, Parlier Home Solar, LLC, formed in California in April 2021, and Santa Barbara Home Power Program, LLC, formed in California in September 2022. Electriq has an 80% owned subsidiary, Electriq Microgrid Services LLC, formed in Delaware in May 2022. Business Combination and Related Transactions On July 31, 2023 (the “Closing Date”), the Company consummated the previously announced merger (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger, dated November 13, 2022 (as amended by the First Amendment to Merger Agreement dated December 23, 2022, the Second Amendment to Merger Agreement dated March 22, 2023, and the Third Amendment to Merger Agreement dated June 8, 2023, the “Merger Agreement”), among the Company, Eagle Merger Corp., a Delaware corporation and wholly-owned subsidiary of TLG (“Merger Sub”), and Electriq Power, Inc. (“Legacy Electriq”). Pursuant to the Merger Agreement, on the Closing Date, Merger Sub merged with and into Legacy Electriq, with Legacy Electriq continuing as the surviving corporation and as a wholly-owned subsidiary of TLG and the Legacy Electriq equity holders became the equity holders of TLG (the “Closing”). In connection with the Closing, TLG changed its name to Electriq Power Holdings, Inc. In connection with TLG’s special meeting of stockholders in lieu of the 2023 annual meeting of stockholders held to, among other things, approve the Business Combination, holders of TLG’s Class A common stock, par value $0.0001 per share (“TLG common stock”), had the right to elect to redeem all or a portion of their TLG common stock for a per share price calculated in accordance with the Amended and Restated Certificate of Incorporation of TLG. As previously disclosed on July 26, 2023, holders of approximately 97.3% or 7,736,608 shares of TLG common stock had validly elected to redeem their shares of TLG common stock for a pro rata portion of the trust account holding the proceeds from TLG’s initial public offering and the sale of private placement warrants, or approximately $10.63 per share and $82.2 million in the aggregate, as of July 25, 2023. The Business Combination is accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). TLG is not considered a business pursuant to Accounting Standards Codification Topic (“ASC”) 805, and business combination guidance does not apply to this transaction. When business combination guidance in ASC 805 doesn’t apply, the transaction is accounted for in a manner that is similar to a reverse acquisition, which is often referred to as a reverse merger. TLG’s only pre-combination identifiable assets were the cash received from its public investors, and it did not meet the definition of a business as defined in ASC 805. As a result, the reverse merger is being accounted for as a reverse recapitalization, similar to a reverse acquisition between an operating company and a shell company. We further performed a voting model evaluation under the provisions of ASC 810, “Consolidations,” and have concluded that Electriq demonstrates voting interest control as determined under the voting model subsections of ASC 810 and is the accounting acquirer. The Electriq stockholders maintained ownership and voting rights of more the 50% in the combined company; therefore, Electriq will consolidate TLG. The Merger Transaction is accounted for as the equivalent of a capital transaction in which Electriq, the accounting acquirer, is issuing stock for the net assets of TLG, and is considered to be the equivalent of the operating company, Electriq, issuing shares for the net monetary assets of TLG, followed by a recapitalization. The net assets of TLG are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination reflect those of Legacy Electriq. As part of the Business Combination, Legacy Electriq equity holders received aggregate merger consideration, consisting of 27,500,000 shares of TLG’s common stock, par value $0.0001 per share, at an assumed value of $10.00 per share or $275,000,000, plus 3,528,750 additional shares of TLG common stock, being equal to the quotient obtained by dividing (x) the amount of equity raised by Legacy Electriq in any equity, debt or similar investments obtained by Legacy Electriq prior to closing of the Merger in connection with a private capital raise, by (y) $8.00. In addition, holders of Legacy Electriq’s Series B Cumulative Redeemable Preferred Stock, par value $0.0001 per share received 1,411,500 shares of TLG’s Series A Cumulative Redeemable Preferred Stock, par value $0.0001 per share, being equal to the number of shares of Legacy Electriq Cumulative Redeemable Series B preferred stock outstanding immediately prior to the closing of the Merger multiplied by the Exchange Ratio. The TLG preferred stock has a cumulative dividend, payable in kind, of 15% per share, plus any accrued and unpaid dividends on each such share, and is subject to mandatory redemption on the third anniversary of the original issue date of such shares, payable either in cash or in TLG common stock, at the option of the holder. As part of the merger consideration, holders of Legacy Electriq’s options not exercised prior to the Business Combination received replacement options to purchase shares of TLG common stock based on the value of the merger consideration per share of Legacy Electriq common stock. In June 2023, certain investors entered into subscription agreements with Legacy Electriq to purchase shares of Electriq common stock for $18.1 million, including (i) $10.0 million from John Michael Lawrie, the Chief Executive Officer of TLG and Chairman of the TLG board of directors, (ii) $4.5 million from an affiliate of an existing Legacy Electriq stockholder, (iii) $2.5 million in the aggregate from funds managed by GBIF Management Ltd. and another Legacy Electriq stockholder, and (iv) $1.1 million from new Legacy Electriq investors (“Pre-Closing Financings”). In addition, on June 8, 2023, certain noteholders of Legacy Electriq entered into subscription agreements with Legacy Electriq pursuant to which such investors converted approximately $10.1 million of Legacy Electriq notes, including accrued interest (excluding the Lawrie notes (as defined below)), into shares of Legacy Electriq common stock plus additional shares of Legacy Electriq common stock and Legacy Electriq cumulative preferred stock as an incentive (“Pre-Closing Loan Conversions”). In connection with the Pre-Closing Financings and Pre-Closing Loan Conversions, Mr. Lawrie, the Additional Investor, the Pre-Closing Electriq Investors and the Electriq noteholders received shares of Electriq common stock and shares of Electriq cumulative mandatorily redeemable Series B preferred stock as an incentive for their investment. Upon conversion in the Merger, the shares of Electriq common stock and Electriq cumulative mandatorily redeemable Series B preferred stock received in the Electriq Incentive converted into shares of TLG common stock and shares of TLG cumulative mandatorily redeemable Series A preferred stock. In June and July 2023, certain investors entered into subscription agreements with TLG to purchase 650,000 shares of TLG common stock for $6.5 million, including (i) $5.0 million from Mr. Lawrie for 500,000 shares of TLG common stock and (ii) $1.5 million from other Electriq investors to purchase 150,000 shares of TLG common stock. In connection with the Closing Financings, Mr. Lawrie and the other Electriq investors received, as an incentive for their investment, 250,000 shares and 75,000 shares, respectively, of TLG preferred stock at Closing. On June 8, 2023, Mr. Lawrie signed an agreement pursuant to which Mr. Lawrie’s two secured convertible promissory notes (the “Lawrie notes”) in the aggregate amount of $8.5 million were converted into 1,062,500 shares of TLG common stock and 425,000 shares of TLG preferred stock. In addition, pursuant to an amendment to the Sponsor Agreement signed on June 8, 2023, at the Closing, the Sponsor (i) relinquished and cancelled, for no consideration, an additional 3,270,652 shares of its TLG Class F common stock and all of the 4,666,667 private placement warrants that it received in connection with TLG’s initial public offering. Immediately prior to the Closing Date of the merger, TLG had 5,000,000 shares of its TLG Class F common stock issued and outstanding. Upon completion of the Business Combination, 1,729,348 former shares of Class F Common Stock were recapitalized as Class A common stock in New Electriq. Further, the non-redemption of 211,797 shares of TLG common stock also resulted in an increase in shares of New Electriq common stock immediately after the Closing Date. The Sponsor Amendment also provided that Sponsor would convert all Working Capital Loans into shares of TLG common stock, TLG preferred stock and warrants at Closing. At Closing, all TLG Operating Expenses totaling $9.1 million, including approximately $7.2 million of Working Capital Loans, were converted into 756,635 shares of TLG common stock, 378,318 of TLG preferred stock and 1,000,000 warrants with terms identical to the terms of the Sponsor IPO Private Placement Warrants. On September 21, 2023, the Company and Sponsor acknowledged and agreed (the “Acknowledgment”) that the Sponsor Amendment was intended to provide for the conversion into TLG Common Stock and TLG Preferred Stock of all TLG Operating Expenses and not solely the Working Capital Loans. Given that the full amount of the TLG Operating Expenses was so converted at Closing, no adjustments to the TLG securities issued at Closing to Sponsor were required as a result of the Acknowledgment. TLG’s public units were separated into their component securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted from NYSE. At the Closing Date, pursuant to the terms of the Merger Agreement and after giving effect to the redemptions of TLG Class A common stock by public stockholders of TLG: • each share of Legacy Electriq common stock issued and outstanding immediately prior to the Closing (excluding shares owned by Legacy Electriq or any of its direct or indirect wholly-owned subsidiaries as treasury stock or by TLG) was cancelled and converted into the right to receive a number of shares of TLG Class A common stock equal to one (1) multiplied by the Exchange Ratio of $0.007583541 per share; total shares of TLG Class A common issued on conversion at the Exchange Ratio on the Closing Date were 5,409,014 shares. • each share of Legacy Electriq cumulative mandatorily redeemable Series B preferred stock issued and outstanding immediately prior to the Closing was cancelled and converted into the right to receive a number of shares of TLG’s cumulative mandatorily redeemable Series A preferred stock, par value $0.0001 per share (“TLG preferred stock”), equal to one (1) multiplied by the Exchange Ratio; • Legacy Electriq pre-2023 preferred stock was converted into 20,064,970 shares of TLG common stock on the Closing Date, including additional shares issued as a result of applying an anti-dilution factor and the conversion of accumulated dividends on pre-2023 seed preferred stock. Such securities were considered fully exercised; • all outstanding SAFE notes were converted into 4,090,384 shares of Class A common stock in TLG at a fair value of approximately $6.06 per share at the Closing Date; • outstanding Legacy Electriq warrants immediately prior to the Closing Date with a fair value of $2,185,254 were exchanged into 360,603 shares of Class A common stock in TLG. The warrants were exchanged on a cashless basis; • each outstanding vested and unvested Legacy Electriq stock option was assumed by TLG, cancelled and converted into an option to purchase a number of shares of Class A common stock equal to (a) the product of the number of shares of Legacy Electriq common stock underlying such Legacy Electriq stock option immediately prior to the Closing multiplied by the Exchange Ratio at an exercise price per share equal to the quotient obtained by dividing (A) the exercise price per share of Legacy Electriq common stock underlying such Legacy Electriq stock option immediately prior to the Closing by (B) the Exchange Ratio; and • the $8.5 million Notes with the SPAC Executive (“SPAC Executive Notes”) converted into equity securities of TLG in accordance with the terms of the Notes Conversion Agreement. See Note 5. On August 1, 2023, the Company’s Class A common stock and warrants to purchase Class A common stock of the Company began trading on the NYSE and NYSE American, respectively, under the symbols “ELIQ” and “ELIQ WS,” respectively. The source and total number of shares of Class A common stock outstanding immediately after the completion of the Business Combination as of the July 31, 2023 Closing Date is as follows: Conversions of pre-2023 preferred stock 20,064,970 Conversions of SAFE notes 4,090,384 Conversions of Legacy Electriq warrants 360,603 Conversions of Legacy Electriq common stock, including common stock issued in pre-closing financings executed prior to the completion of the Business Combination 5,409,014 Common stock issued in the conversion of the Working Capital Loan at the Closing Date 756,635 Common stock issued in the conversion of the Lawrie notes at the Closing Date 1,712,500 Contingently redeemable shares of common stock purchased by Meteora pursuant to Forward Purchase Agreement 3,534,492 Additional contingently redeemable shares of common stock issued to Meteora pursuant to subscription agreement 251,194 Common stock issued from non-redemptions 211,797 Recapitalization of Class F shares of TLG into shares of Class A common stock 1,729,348 Total shares of Class A common stock outstanding as of Closing Date 38,120,937 On July 31, 2023, 29,924,971 shares of common stock and 1,411,500 shares of TLG preferred stock were issued to Electriq stockholders, and 2,720,329 shares of common stock and 1,178,318 shares of TLG preferred stock were issued in connection with the Closing Financings. After giving effect to the foregoing issuances, 38,120,937 shares of Class A common stock and 2,589,818 shares of TLG preferred stock were outstanding. Stockholders holding 7,736,608 of TLG’s public shares exercised their right to redeem such shares for a pro rata portion of the funds in TLG’s Trust Account. Forward Purchase Agreement On July 23, 2023, TLG and Electriq entered into an agreement (the “Forward Purchase Agreement”) with (i) Meteora Special Opportunity Fund I, LP (“MSOF”), Meteora Capital Partners, LP (“MCP”) and Meteora Select Trading Opportunities Master, LP (“MSTO” and together with MSOF, MCP, and MSTO, the “Seller”) pursuant to which the Seller purchased 3,534,492 shares of TLG common stock from third parties through a broker in the open market (“Recycled Shares”). The Forward Purchase Agreement provided that $3,000,000 (the “Prepayment Shortfall”) would be paid by Seller to TLG one The Forward Purchase Agreement provided that Seller would be paid directly an aggregate cash amount (the “Prepayment Amount”) equal to (x) the product of (i) the number of shares as set forth in a Pricing Date Notice (as defined in the Forward Purchase Agreement) and (ii) the redemption price per share as defined in Section 9.2(a) of the Amended and Restated Certificate of Incorporation of TLG in effect prior to consummation of the Business Combination, as amended, less (y) the Prepayment Shortfall. TLG paid to Seller separately the Prepayment Amount required under the Forward Purchase Agreement directly from TLG’s Trust Account maintained by Continental Stock Transfer and Trust Company, except that to the extent the Prepayment Amount payable to Seller is to be paid from the purchase of additional shares by Seller pursuant to the terms of its FPA Funding Amount PIPE Subscription Agreement, such amount will be netted against such proceeds, with Seller being able to reduce the purchase price for the additional shares by the Prepayment Amount. For the avoidance of doubt, any additional shares purchased by Seller will be included in the number of shares for its Forward Purchase Agreement for all purposes, including for determining the Prepayment Amount. Seller agreed to waive any redemption rights that it had under TLG’s Amended and Restated Certificate of Incorporation with respect to any TLG common stock purchased through the FPA Funding Amount PIPE Subscription Agreement and any Recycled Shares in connection with the Business Combination, that would require redemption by TLG of the shares of TLG common stock. Such waiver may have reduced the number of shares of TLG common stock redeemed in connection with the Business Combination. The Company accounts for the Forward Purchase Agreement as a derivative instrument in accordance with the guidance in ASC 480-10. The instrument is subject to remeasurement at each balance sheet date, with changes in fair value (“FV”) recognized in the statements of operations. See Note 12. The ability of the Company to receive any of the proceeds from the Forward Purchase Agreement is dependent upon factors outside the control of the Company. The initial fair value of the forward purchase contract asset at the Closing Date was $18,475,421, net, which includes a forward purchase contract asset related to the payment of the $37,261,790 (including $189,684 in transaction costs) to Meteora at the Closing Date, offset by the change in the fair value of the forward purchase contract asset of $18,596,685, which has been recorded as a charge to unrealized fair value adjustments in the Company’s condensed consolidated statements of operations. The forward purchase contract asset was classified as a current asset, as its liquidation is reasonably expected to use or require current assets or the creation of current liabilities. See also Note 14. FPA Funding Amount PIPE Subscription Agreement On July 23, 2023, TLG entered into a subscription agreement (the “FPA Funding Amount PIPE Subscription Agreement”) with Meteora. Pursuant to the FPA Funding Amount PIPE Subscription Agreement and in connection with the Forward Purchase Agreement, Meteora purchased on the Closing Date, an aggregate of a number of shares of TLG common stock up to the Maximum Number of Shares as set forth in the Forward Purchase Agreement (the “Subscribed Shares”) less the number of Recycled Shares, as defined in the Forward Purchase Agreement, provided, however, that Meteora shall not be required to purchase an amount of shares of TLG common stock, such that following the issuance of the Subscribed Shares, its ownership would not exceed 9.9% ownership of the total shares of TLG common stock outstanding immediately after giving effect to such issuance unless Meteora at its sole discretion waives such 9.9% ownership limitation. As described in Note 9, on July 31, 2023, 251,194 additional shares of Electriq common stock were issued to Seller at approximately $10.00 per share pursuant to the terms of a subscription agreement entered into at Closing in connection with the FPA Funding Amount PIPE Subscription Agreement. Upon the completion of the Business Combination, the remaining $1.5 million of working capital loans were converted into 1,000,000 warrants at $1.50 per share with terms identical to the terms of the Sponsor IPO Private Placement Warrants. In addition, the Company issued 50,000 shares of cumulative redeemable Series A preferred stock to certain stockholders subject to the Non-Redemption Agreement and 378,318 shares of cumulative redeemable Series A preferred stock to reflect the Working Capital Loan Conversion. The shares of Electriq preferred stock issued in connection with the Financing Transactions have been reflected in the condensed consolidated balance sheet as liabilities at fair value pursuant to ASC 480. The carrying value of the Electriq preferred stock is accreted to its redemption value over the three-year period ending in the redemption date. The Company utilized a third-party valuation specialist to determine the fair value of the preferred stock. The fair value calculation was based on a variety of assumptions, including the use of a market yield to discount the future payout to present value and applying a discount related to the lack of marketability. The preferred stock qualifies as a mandatorily redeemable financial instrument as it embodies an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event that is certain to occur. In addition, an additional $40,072,106 of Electriq Class A common stock subject to forward purchase contract (and classified as mezzanine equity) was recorded at the Closing Date of the Business Combination to reflect Meteora’s purchase of 3,534,492 shares of TLG Common Stock at approximately $10.63 per share and 251,194 additional shares of TLG at approximately $10.00 per share to reverse previously submitted redemption requests pursuant to the terms of the Forward Purchase Agreement. These shares are classified as mezzanine equity on the balance sheet, as they are contingently redeemable upon the occurrence of certain events not solely within the control of the Company that allow for the effective redemption of such shares in cash at the option of Meteora. The following table reflects the preliminary accounting of the net assets acquired and liabilities assumed in exchange for common stock in connection with the Business Combination: TLG cash balance at Closing Date of Business Combination, including reclassification of TLG cash held in trust, prior to merger related transactions $ 84,471,539 Plus: Proceeds from Meteora’s purchase of 3,534,492 TLG common stock at approximately $10.63 per share and 251,194 additional shares at approximately $10.00 per share to reverse previously submitted redemption requests pursuant to the terms of the forward purchase contract asset 40,072,106 Less: Redemption of approximately 97.3% or 7,736,608 shares of TLG common stock at approximately $10.63 per share (82,220,659) Less: Net cash payment to Meteora at Closing Date (including $0.2 million of equity issuance costs associated with the Forward purchase contract asset) (37,261,790) Less: TLG pre-close transaction costs paid at Closing Date (5,059,376) Net cash acquired in business combination 1,820 Less: Assumed liabilities at Closing Date (6,646,468) Less: Cumulative mandatorily redeemable preferred stock incentive shares issued on redemptions and conversion of working capital loan (4,186,797) Less: Adjustment of acquired private placement warrants to FV at Closing Date, plus new private placement warrants issued on conversion of working capital loan (10,160,000) Less: Prepayment Shortfall (Contingently redeemable common shares purchased by Meteora to reverse previously submitted redemption requests pursuant to terms of Forward Purchase Agreement and additional common shares issued pursuant to terms of FPA Funding Amount PIPE Subscription Agreement, net of prepayment to Meteora at Closing Date) (3,000,000) Less: Equity issuance costs on Forward purchase contract asset (594,040) Less: Equity classified public warrants post-Business Combination (1,600,000) Net charge to Additional paid-in-capital as a result of the Business Combination reported in Stockholders' deficit $ (26,185,485) The Company continues to assess its acquired assets and assumed liabilities as of the filing date. The Company’s fiscal year begins on January 1 and ends on December 31. |
