The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto included in Item 8. Financial Statements and
Supplementary Data" of this Annual Report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
All statements other than statements of historical fact included in this Annual
Report including, without limitation, statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. When used in
this Annual Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of many factors, including those set forth under
"Cautionary Note Regarding Forward-Looking Statements," "Item 1A. Risk Factors"
and elsewhere in this Annual Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on
November 5, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination").We intend
to effectuate our Business Combination using cash from the proceeds of the
Initial Public Offering and the sale of the Private Placement Warrants, our
capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Recent Developments
On November 30, 2021, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Voltus, Inc., a Delaware corporation ("Voltus"),
and Velocity Merger Sub Inc., a Delaware corporation and a direct, wholly owned
subsidiary of the Company ("Merger Sub").
The Merger Agreement provides that, among other things and upon the terms and
subject to the conditions thereof, the following transactions will occur
(together with the other agreements and transactions contemplated by the Merger
Agreement, the "Business Combination"): (i) at the closing of the transactions
contemplated by the Merger Agreement (the "Closing"), upon the terms and subject
to the conditions of the Merger Agreement, in accordance with the General
Corporation Law of the State of Delaware, as amended, Merger Sub will merge with
and into Voltus, the separate corporate existence of Merger Sub will cease and
Voltus will be the surviving corporation and a wholly owned subsidiary of the
Company (the "Merger"); (ii) at the Closing, the Company will be renamed "Voltus
Technologies, Inc." (post-Merger Company is referred to herein as "Voltus
Technologies, Inc."); (iii) as a result of the Merger, among other things, all
shares of capital stock of Voltus outstanding as of immediately prior to the
effective time of the Merger will be canceled in exchange for the right to
receive shares of Class A common stock, par value $0.0001 per share, of the
Company ("Broadscale Common Stock"); (iv) as a result of the Merger, all Voltus
equity awards outstanding as of immediately prior to the effective time of the
Merger will be converted into awards based on Broadscale Common Stock, upon
substantially the same terms and conditions as are in effect with respect to
such option immediately prior to the effective time of the Merger; (v) at the
Closing, the total number of shares of Broadscale Common Stock issuable to
existing holders of Voltus capital stock or pursuant to the aforementioned
converted equity awards shall be equal to the quotient obtained by dividing (x)
$750,000,000 (subject to increase by an amount equal to the aggregate exercise
prices of all converted equity awards) by (y) $10.00; and (vi) upon the Closing,
existing holders of Voltus capital stock and equity awards will have the right
to receive up to an aggregate of 10,000,000 additional shares of Broadscale
Common Stock in three substantially equal tranches which are issuable upon the
achievement of share price thresholds for Broadscale Common Stock of $12.50,
$15.00 and $17.50, respectively, as set forth in the Merger Agreement.
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Simultaneously with the execution of the Merger Agreement, the Company entered
into subscription agreements (the "Subscription Agreements") with certain
investors (collectively, the "PIPE Investors"), pursuant to, and on the terms
and subject to the conditions of which, the PIPE Investors have collectively
subscribed at a purchase price of $10.00 per share and $100 million in the
aggregate for (i) 10 million shares of Broadscale Common Stock and (ii) in the
case of certain PIPE Investors purchasing in excess of a specified number of
shares of Broadscale Common Stock, an aggregate of 6,200,000 warrants
exercisable for shares of Broadscale Common Stock (the "PIPE Investment"). The
PIPE Investment will be consummated substantially concurrently with the Closing.
The Subscription Agreements will terminate with no further force and effect upon
the earliest to occur of: (i) such date and time as the Merger Agreement is
terminated in accordance with its terms, (ii) the mutual written agreement of
the parties to such Subscription Agreement, and (iii) September 30, 2022, if the
Closing has not occurred on or before such date.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from November 5, 2020 (inception) through December 31, 2021
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination at the earliest. We do not expect to generate any operating
revenues until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities
held in the Trust Account. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the year ended December 31, 2021, we had net income of $6,339,281, which
consists of a change in fair value of warrant liabilities of $10,944,826 and
interest income on marketable securities held in the Trust Account of $31,251,
partially offset by general and administrative expenses of $4,636,796.
For the period from November 5, 2020 (inception) through December 31, 2020, we
had net loss of $1,000, which consists of operation and formation costs.
Liquidity and Capital Resources
On February 17, 2021, we consummated the Initial Public Offering of 34,500,000
Units, which includes the full exercise by the underwriter of its over-allotment
option in the amount of 4,500,000 Units, at $10.00 per Unit, generating gross
proceeds of $345,000,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 6,266,667 Private Placement Warrants at a
price of $1.50 per Private Placement Warrant in a private placement to the
Sponsor, generating gross proceeds of $9,400,000.
For the year ended December 31, 2021, cash used in operating activities was
$1,581,772. Net income of $6,339,281 was affected by the change in fair value of
warrant liabilities of $10,944,826, transaction costs allocable to warrant
liabilities of $882,336 and interest earned on marketable securities held in the
Trust Account of $31,251. Changes in operating assets and liabilities provided
$2,172,688 of cash for operating activities.
As of December 31, 2021, we had investment held in the Trust Account of
$345,019,584. Interest income on the balance in the Trust Account may be used by
us to pay taxes. Through December 31, 2021, $11,667 was withdrawn from the Trust
Account to pay for taxes.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of December 31, 2021, we had $513,431 of cash held outside of the Trust
Account. We intend to use the funds held outside the Trust Account primarily to
identify and evaluate target businesses, perform business due diligence on
prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners,
review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination.
54
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $2,000,000 of such loans may be convertible into warrants
of the post-Business Combination entity at a price of $1.50 per warrant. The
units would be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate 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, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Going Concern
We have until February 17, 2023 to consummate a Business Combination. It is
uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. Management has determined that
the mandatory liquidation, should a Business Combination not occur, and
potential subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after
February 17, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $20,000 for office space, utilities,
secretarial support and administrative services. We began incurring these fees
on February 12, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
In addition, we have an agreement to pay the underwriter a deferred fee of
$12,075,000 in the aggregate. The deferred fee will become payable to the
underwriter 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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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. 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 Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 480,
Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and
Hedging ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own common shares, among other conditions
for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the warrants was initially estimated
using a binomial lattice model (see Note 10 to the financial statements). For
periods subsequent to the detachment of the Public Warrants from the Units, the
closing price of the Public Warrants was used as the fair value of the Public
Warrants as of each relevant date. The subsequent measurements and fair value of
the Private Placement Warrants after the detachment of the Public Warrants was
based on the closing price of the Public Warrants.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A 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 feature redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders' equity. Our Class A common stock features certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events. Accordingly, Class A common stock subject
to possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period. We
apply the two-class method in calculating earnings per share. Accretion
associated with the redeemable shares of Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, "Debt-Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. We adopted ASU 2020-06 effective as of January 1,
2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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