References in this report (this "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.
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 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 Annual Report on Form 10-K 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.
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. On August 12, 2022, the Merger Agreement was
terminated (the "Termination").
As a result of the Termination, the Merger Agreement is of no further force and
effect and the agreements entered into in connection with the Merger Agreement,
including, but not limited to, (i) the Sponsor Side Letter dated as of November
30, 2021, between the Company, the Sponsor and Voltus, and (ii) the Subscription
Agreements dated as of November 30, 2021, by and among the Company and certain
institutional and private investors, have also been terminated and are no longer
effective, as applicable, in accordance with their respective terms.
19
Recent Developments
On November 8, 2022, we filed a Proxy Statement on Schedule 14A (the "Proxy
Statement") relating to a special meeting of stockholders that is anticipated to
be held on December 6, 2022 to approve an amendment to our amended and restated
certificate of incorporation (the "Charter Amendment") which would, if
implemented, allow us to unwind and redeem all of our outstanding public shares
in advance of the mandatory liquidation date of February 17, 2023. If
implemented, the Charter Amendment would also allow us to reduce the Redemption
Limitation (as defined in the amended and restated certificate of incorporation)
to allow us to redeem public shares notwithstanding the fact that such
redemption would result in the Company having net tangible assets of less than
$5,000,001.
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,
2022, were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination, at the earliest. 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, 2022, we had net income of $3,080,070,
which consists of a change in fair value of warrant liabilities of $2,632,847
and interest earned on investments held in the Trust Account of $1,555,414,
partially offset by general and administrative expenses of $792,054 and
provision for income taxes of $316,137.
For the nine months ended September 30, 2022, we had net income of $11,100,786,
which consists of a change in fair value of warrant liabilities of $13,000,425
and interest earned on investments held in the Trust Account of $1,978,166,
partially offset by general and administrative expenses of $3,532,928 and
provision for income taxes of $344,877.
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 earned on investments held in the Trust Account of $8,697,
partially 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 earned on investments 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, 2022, cash used in operating activities
was $1,070,412. Net income of $11,100,786 was affected by the change in fair
value of warrant liabilities of $13,000,425 and interest earned on investments
held in the Trust Account of $1,978,166. Changes in operating assets and
liabilities provided $2,807,393 of cash for operating activities.
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, interest earned on marketable
securities held in the Trust Account of $22,554 and transaction costs allocable
to warrant liabilities of $882,336. Changes in operating assets and liabilities
used $1,173,461 of cash for operating activities.
20
As of September 30, 2022, we had investments held in the Trust Account of
$346,630,623. Interest income on the balance in the Trust Account may be used by
us to pay taxes. Through September 30, 2022, we have withdrawn $367,127 of
interest earned from the Trust Account to pay our 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
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, 2022, we had cash held outside of the Trust Account of $146.
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
warrants would be identical to the Private Placement Warrants.
On April 18, 2022, the Company issued an unsecured convertible promissory note
(the "Sponsor Convertible Note") to the Sponsor, pursuant to which the Company
may borrow up to $400,000 from the Sponsor for ongoing expenses reasonably
related to the business of the Company and the consummation of the Business
Combination. All unpaid principal under the Sponsor Convertible Note will be due
and payable in full upon the consummation of a Business Combination (the
"Maturity Date"). The Sponsor will have the option, at any time on or prior to
the Maturity Date, to convert any amounts outstanding under the Sponsor
Convertible Note into warrants to purchase shares of the Company's Class A
common stock, at a conversion price of $1.50 per warrant. The warrants would be
identical to the Private Placement Warrants. As of September 30, 2022, there was
$190,000 in borrowings outstanding under the Sponsor Convertible Note.
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
The Company will need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors, or third
parties. If the Company is unable to raise additional capital, it may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit
of a Business Combination, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all. These conditions raise substantial doubt about the
Company's ability to continue as a going concern for a reasonable period of
time, which is considered to be one year from the issuance date of the condensed
consolidated financial statements. These condensed consolidated 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.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that if the Company is unable to raise additional
funds to alleviate liquidity needs as well as complete a Business Combination by
February 17, 2023, then the Company will cease all operations except for the
purpose of liquidating. The liquidity condition and date for mandatory
liquidation and subsequent dissolution raise substantial doubt about the
Company's ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after February 17, 2023.
21
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. 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. For
the three and nine months ended September 30, 2022, the Company incurred and
paid $60,000 and $180,000 in fees for these services, respectively. For the
three and nine months ended September 30, 2021, the Company incurred and paid
$60,000 and $160,000 in fees for these services, respectively.
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 consolidated 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 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 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.
22
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 condensed consolidated 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 9 to the condensed
consolidated 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 also 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 features redemption rights that are
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' deficit section of
our condensed consolidated balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share. Accretion
associated with the redeemable 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 Accounting Standards Update ("ASU") 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) ("ASU 2020-06")
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash
conversion features from convertible instruments and simplifies the derivative
scope exception guidance pertaining to equity classification of contracts in an
entity's own equity. The new standard also introduces additional disclosures for
convertible debt and freestanding instruments that are indexed to and settled in
an entity's own equity. ASU 2020-06 amends the diluted earnings per share
guidance, including the requirement to use the if-converted method for all
convertible instruments. As a smaller reporting company, ASU 2020-06 is
effective January 1, 2024 for fiscal years beginning after December 15, 2023 and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. We are currently assessing the impact,
if any, that ASU 2020-06 would have on our financial position, results of
operations or cash flows. We have not adopted this guidance as of September 30,
2022.
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 consolidated financial statements.
23© Edgar Online, source Glimpses
BROADSCALE ACQUISITION CORP. 
