References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Broadscale Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Sponsor" refer to Nokomis ESG Sponsor, LLC. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations gives effect to the restatement of our financial statements for the
periods ended March 31, 2021, June 30, 2021 and September 30, 2021. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly recorded our Class A
common stock subject to possible redemption. We previously determined the Class
A common stock subject to possible redemption to be equal to the redemption
value of $10.00 per share of Class A common stock while also taking into
consideration a redemption cannot result in net tangible assets being less than
$5,000,001. Management determined that the Class A common stock issued during
the Initial Public Offering can be redeemed or become redeemable subject to the
occurrence of future events considered outside of the Company's control.
Therefore, management concluded that the redemption value should include all
Class A common stock subject to possible redemption, resulting in the Class A
common stock subject to possible redemption being equal to their redemption
value. As a result, management has noted a reclassification error related to
temporary equity and permanent equity and earnings per share. This resulted in a
restatement to the initial carrying value of the Class A common stock subject to
possible redemption with the offset recorded to additional paid-in capital (to
the extent available), accumulated deficit and Class A common stock. In
addition, in connection with the change in presentation for the Class A common
stock subject to possible redemption, the Company has determined it should
restate its earnings per share calculation to allocate income and losses shared
pro rata between the two classes of shares. This presentation contemplates a
Business Combination as the most likely outcome, in which case, both classes of
common stock share pro rata in the income and losses of the Company.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
are not historical facts and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Quarterly
Report including, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the completion of the Proposed Business Combination (as defined
below), the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek"
and variations and similar words and expressions are intended to identify such
forward-looking statements. Such forward-looking statements relate to future
events or future performance, but reflect management's current beliefs, based on
information currently available. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
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.
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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 Broadscale ("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.
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 September 30, 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 three months ended September 30, 2021, we had net income of $4,199,798,
which consists of a change in fair value of warrant liabilities of $6,019,334
and interest income on marketable securities held in the Trust Account of $8,697
offset by general and administrative expenses of $1,828,233 .
For the nine months ended September 30, 2021, we had net income of $10,342,048,
which consists of a change in fair value of warrant liabilities of $13,670,001
and interest income on marketable securities held in the Trust Account of
$22,554, partially offset by general and administrative expenses of $3,350,507.
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 nine months ended September 30, 2021, cash used in operating activities
was $1,294,710. Net income of $10,342,048 was affected by the change in fair
value of warrant liabilities of $13,670,001, transaction costs allocable to
warrant liabilities of $882,336 and interest earned on marketable securities
held in the Trust Account of $22,554. Changes in operating assets and
liabilities provided $1,173,461 of cash for operating activities.
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As of September 30, 2021, we had investment held in the Trust Account of
$345,010,887. Interest income on the balance in the Trust Account may be used by
us to pay taxes. Through September 30, 2021, we have not withdrawn any interest
earned from the Trust Account.
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 September 30, 2021, we had cash held outside of the Trust Account of
$800,493. 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.
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.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 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 our 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.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $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 the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of condensed 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.
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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 condensed unaudited financial
statement). For periods subsequent to the detachment of the Public Warrants from
the Units, the close price of the Public Warrant price was used as the fair
value of the 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 Warrant.
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." Shares of 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 is 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, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of our balance sheets.
Net Income (Loss) Per Common Share
Net loss per common share is computed by dividing net 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 shares 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 adoption of ASU 2020-06 did not have an impact on our financial
statements. 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 condensed financial statements.
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