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Overview
We are a blank check company incorporated on June 18, 2020 as a Delaware
corporation and formed for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses, which we refer to throughout this
Amendment as our "initial business combination". We intend to effectuate our
initial business combination using cash from the proceeds of the Initial Public
Offering and the private placement of the private placement warrants, the
proceeds of the sale of our shares in connection with our initial business
combination (pursuant to forward purchase agreements or backstop agreements we
may enter into following the consummation of the Initial Public Offering or
otherwise), shares issued to the owners of the target, debt issued to bank or
other lenders or the owners of the target, or a combination of the foregoing.
Business Combination Agreement
On December 16, 2021, the Company entered into an Agreement and Plan of Merger,
as amended on January 30, 2022 through Amendment No. 1 with Merger Sub, and
Nauticus. Pursuant to the terms of the Merger Agreement, a business combination
between CleanTech and Nauticus will be effected through the merger of Merger Sub
with and into Nauticus, with Nauticus surviving the merger as a wholly owned
subsidiary of CleanTech. The Board has unanimously (i) approved and declared
advisable the Merger Agreement, the Merger and the other transactions
contemplated thereby and (ii) resolved to recommend approval of the Merger
Agreement and related matters by the stockholders of CleanTech.
Preferred Stock. Immediately prior to the Effective Time, each share of Nauticus
Preferred Stock that is issued and outstanding immediately prior to such time
shall automatically convert into shares of Nauticus Common Stock, in accordance
with its Certificate of Incorporation. An aggregate of 15,062,524 shares of CLAQ
Common Stock will be issued to the holders of Nauticus Preferred Stock.
Convertible Notes. Immediately prior to the Effective Time, each of (i) that
certain Unsecured Convertible Promissory Note, dated June 19, 2021, by and
between Goradia Capital, LLC and Nauticus, as amended on December 16, 2021, (ii)
that certain Unsecured Convertible Promissory Note, August 3, 2021, by and
between Material Impact Fund II, L.P. and Nauticus, as amended on December 16,
2021, (iii) that certain Unsecured Convertible Promissory Note, dated October
22, 2021, by and between In-Q-Tel, Inc. and Nauticus, as amended on December 16,
2021, (iv) that certain Unsecured Convertible Promissory Note, dated July 28,
2020, by and between Schlumberger Technology Corporation and Nauticus, as
amended on December 16, 2021, and (v) that certain Unsecured Convertible
Promissory Note, dated December 7, 2020, by and between Transocean Inc. and
Nauticus, as amended on December 16, 2021 shall automatically convert into
shares of Nauticus Common Stock in accordance with the terms of each such
Nauticus Convertible Note. An aggregate of 5,299,543 shares of CLAQ Common Stock
will be issued to the holders of Nauticus Convertible Notes.
Common Stock. At the Effective Time, following the Nauticus Preferred Stock
Conversion and Nauticus Convertible Notes Conversion, each share of Nauticus
Common Stock (including shares of Nauticus Common Stock outstanding as a result
of the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes
Conversion, but excluding shares of the holders of which perfect rights of
appraisal under Delaware law) will be converted into the right to receive the
applicable Per Share Merger Consideration (as defined below) and the Earnout
Shares (as defined below). An aggregate of 9,669,216 shares of CLAQ Common Stock
will be issued to the holders of Nauticus Common Stock.
Stock Options. At the Effective Time, each outstanding Nauticus Option, whether
or not then vested and exercisable, will be assumed by CLAQ and converted
automatically (and without any required action on the part of such holder of
outstanding option) into an option to purchase shares of the CLAQ's Common Stock
equal to the number of shares determined by multiplying the number of shares of
the Nauticus Common Stock subject to such Nauticus Option immediately prior to
the Effective Time by the Exchange Ratio (as defined below), which product shall
be rounded down to the nearest whole number of shares, at a per share exercise
price determined by dividing the per share exercise price of such Nauticus
Option immediately prior to the Effective Time by the Exchange Ratio. Options to
purchase an aggregate of 4,055,704 shares of CLAQ Common Stock will be issued to
the holders of Nauticus Options.
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Earnout Shares. Following the closing of the merger, former holders of shares of
Nauticus Common Stock (including shares received as a result of the Nauticus
Preferred Stock conversion and the Nauticus Convertible Notes conversion) shall
be entitled to receive their pro rata share of up to 7,500,000 Earnout Shares
if, within a 5-year period following the signing date of the Merger Agreement,
the closing share price of the CleanTech Common Stock equals or exceeds any of
three thresholds over any 20 trading days within a 30-day trading period.
It is anticipated that upon completion of the Business Combination, CLAQ's
public stockholders (other than the PIPE Investment investors) would retain an
ownership interest of approximately 28.5% in the Combined Company, the PIPE
Investment investors will own approximately 5.6% of the Combined Company (such
that the public stockholders, including the PIPE Investment investors, would own
approximately 34.1% of the Combined Company), the Co-Sponsors, officers,
directors and other holders of founder shares will retain an ownership interest
of approximately 6.8% of the Combined Company and the Nauticus stockholders will
own approximately 59.1% (including the 7,500,000 Earnout Shares) of the Combined
Company. The ownership percentage with respect to the Combined Company does not
take into account (i) the redemption of any shares by the CLAQ's public
stockholders or (ii) the issuance of any additional shares upon the closing of
the Business Combination under the 2015 Equity Incentive Plan. If the actual
facts are different from these assumptions (which they are likely to be), the
percentage ownership retained by the CLAQ stockholders will be different.
The Merger Agreement contains customary representations and warranties of the
parties thereto with respect to, among other things, (a) entity organization,
good standing and qualification, (b) capital structure, (c) authorization to
enter into the Merger Agreement, (d) compliance with laws and permits, (e)
taxes, (f) consolidated financial statements and internal controls, (g) real and
personal property, (h) material contracts, (i) environmental matters, (j)
absence of changes, (k) employee matters, (l) litigation, and (m) brokers and
finders.
The Merger Agreement includes customary covenants of the parties with respect to
operation of their respective businesses prior to consummation of the Merger and
efforts to satisfy conditions to consummation of the Merger. The Merger
Agreement also contains additional covenants of the parties, including, among
others, covenants providing for CleanTech and Nauticus to use reasonable best
efforts to cooperate in the preparation of the Registration Statement and Proxy
Statement (as each such term is defined in the Merger Agreement) required to be
filed in connection with the Merger and to obtain all requisite approvals of
their respective stockholders including, in the case of CleanTech, approvals of
the restated certificate of incorporation, the share issuance under Nasdaq rules
and the omnibus incentive plan. CleanTech has also agreed to include in the
Proxy Statement the recommendation of its board that stockholders approve all of
the proposals to be presented at the special meeting.
CleanTech has agreed to approve and adopt a 2022 omnibus incentive plan (the
"Incentive Plan") to be effective as of the Closing and in a form mutually
acceptable to CleanTech and Nauticus. The Incentive Plan shall provide for an
initial aggregate share reserve equal to 5% of the number of shares of CleanTech
Common Stock on a fully diluted basis at the Closing. Subject to approval of the
Incentive Plan by the CleanTech's stockholders, CleanTech has agreed to file a
Form S-8 Registration Statement with the SEC following the Effective Time with
respect to the shares of CleanTech Common Stock issuable under the Incentive
Plan.
Each of CleanTech and Nauticus has agreed that from the date of the Merger
Agreement to the Effective Time or, if earlier, the valid termination of the
Merger Agreement in accordance with its terms, it will not initiate any
negotiations with any party, or provide non-public information or data
concerning it or its subsidiaries to any party relating to an Acquisition
Proposal or Alternative Transaction (as such terms are defined in the Merger
Agreement) or enter into any agreement relating to such a proposal. Each of
CleanTech and Nauticus has also agreed to use its reasonable best efforts to
prevent any of its representatives from doing the same.
The consummation of the Merger is conditioned upon, among other things, (i)
receipt of the CleanTech stockholder approval and Nauticus stockholder approval,
(ii) the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the
absence of any governmental order, statute, rule or regulation enjoining or
prohibiting the consummation of the Transactions, (iv) the effectiveness of the
Registration Statement under the Securities Act, (v) CleanTech having at least
$5,000,001 of net tangible assets (as determined in accordance with Rule
3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), (vi) solely with respect to CleanTech, (A) the representations and
warranties of Nauticus being true and correct to applicable standards applicable
and each of the covenants of Nauticus having been performed or complied with in
all material respects and (B) the approval of the conversion of the convertible
notes and (vii) solely with respect to Nauticus, (A) the representations and
warranties of CleanTech being true and correct to applicable standards
applicable and each of the covenants of CleanTech having been performed or
complied with in all material respects (B) the receipt of the approval for
listing by Nasdaq of the shares of CleanTech Common Stock to be issued in
connection with the transactions contemplated by the Merger Agreement, (C) the
effective resignations of certain directors and executive officers of CleanTech,
(D) the amount of Minimum Cash Condition (as defined in the Merger Agreement)
being equal to or exceeding $50,000,000.
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Other Agreements
The Business Combination Agreement contemplates the execution of various
additional agreements and instruments, on or before the Closing, including,
among others, the following:
Support Agreements
In connection with the execution of the Merger Agreement, the co-sponsors
entered into the Sponsor Support Agreement with Nauticus pursuant to which the
Sponsors have agreed to vote all shares of CleanTech Common Stock beneficially
owned by them in favor of the Merger.
In addition, in connection with the execution of the Merger Agreement, certain
stockholders of Nauticus owning approximately 88.8% of the voting power of
Nauticus entered into the Nauticus Support Agreement with CleanTech and Nauticus
pursuant to which the stockholders agreed to vote all shares of Nauticus
beneficially owned by them in favor of the Merger.
Subscription Agreements
In connection with the execution of the Merger Agreement, CleanTech entered into
Subscription Agreements with certain Subscribers pursuant to which the
Subscribers have agreed to purchase, and CleanTech has agreed to sell to the
Subscribers, an aggregate of 3,530,000 shares of CleanTech Common Stock, for a
purchase price of $10.00 per share and an aggregate purchase price of $35.3
million. The obligations to consummate the transactions contemplated by the
Subscription Agreements are conditioned upon, among other things, customary
closing conditions and the consummation of the transactions contemplated by the
Merger Agreement.
Securities Purchase Agreement
In connection with the execution of the Merger Agreement, CleanTech and Nauticus
entered into Securities Purchase Agreement with certain investors purchasing up
to an aggregate of $40,000,000 in Debentures and Warrants equal to 100% of the
aggregate issued amount of the Debentures divided by the then conversion price,
with an exercise price equal to $20 per share of Common Stock, subject to
adjustment. The obligations to consummate the transactions contemplated by the
Securities Purchase Agreement are conditioned upon, among other things,
customary closing conditions and all conditions precedent to the Merger set
forth in the Merger Agreement shall have been satisfied or waived.
Amended and Restated Registration Rights Agreement
In connection with the Closing, Nauticus, CleanTech and certain stockholders of
each of Nauticus and CleanTech who will receive shares of CleanTech Common Stock
pursuant to the Merger Agreement, will enter into a Registration Rights
Agreement mutually agreeable to CleanTech and Nauticus, which will become
effective upon the consummation of the Merger.
Lock-up Agreement and Arrangements
In connection with the Closing, the Sponsors and certain Nauticus stockholders
will enter into a Sponsor Lock-Up Agreement and a Company Stockholder Lock-up
Agreement with Nauticus and CleanTech, pursuant to which each will agree,
subject to certain customary exceptions, not to:
(i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any Lock-Up Shares, or enter into a transaction that would have the
same effect;
(ii) enter into transaction that would have the same effect, or enter into any
swap, hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of any of such shares, whether any of these
transactions are to be settled by delivery of such shares, in cash or otherwise;
or
(iii) publicly disclose the intention to make any offer, sale, pledge or
disposition, or to enter into any transaction, swap, hedge or other arrangement,
or engage in any "Short Sales" (as defined in the Sponsor Lock-Up Agreement and
Company Stockholder Lock-up Agreement) with respect to any security of
CleanTech;
during a "Lock-Up Period" under their respective agreements.
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Under the Sponsor Lock-up Agreement, the Lock-Up period means the period
commencing on the Closing Date and ending on the earlier of (x) the one year
anniversary of the Closing Date; (y) the date on which the volume weighted
average price of shares of common stock equals or exceeds $13.00 per share for
twenty (20) of any thirty (30) consecutive trading days commencing after the
Closing on Nasdaq, and (z) the date specified in a written waiver duly executed
by Nauticus; provided that the restrictions set forth in the Sponsor Lock-up
Agreement do not apply to (1) transfers or distributions to such stockholder's
current or former general or limited partners, managers or members,
stockholders, other equity holders or direct or indirect affiliates (within the
meaning of Rule 405 under the Securities Act of 1933, as amended) or to the
estates of any of the foregoing; (2) transfers by bona fide gift to a member of
the stockholder's immediate family or to a trust, the beneficiary of which is
the stockholder or a member of the stockholder's immediate family for estate
planning purposes; (3) by virtue of the laws of descent and distribution upon
death of the stockholder; or (4) pursuant to a qualified domestic relations
order, in each case where such transferee agrees to be bound by the terms of the
Sponsor Lock-up Agreement.
Under the Company Lock-up Agreement, the Lock-Up period means the period
commencing on the Closing Date and ending on the earlier of (x) the date that is
180 calendar days after the consummation of the Business Combination, (y) the
date on which the volume weighted average price of shares of common stock equals
or exceeds $13.00 per share for twenty (20) of any thirty (30) consecutive
trading days commencing after the Closing on Nasdaq, and (z) the date specified
in a written waiver duly executed by the Sponsors and CleanTech; provided that
the restrictions set forth in the Company Lock-up Agreement do not apply to (1)
transfers or distributions to such stockholders current or former general or
limited partners, managers or members, stockholders, other equityholders or
other direct or indirect affiliates (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) or to the estates of any of the foregoing;
(2) transfers by bona fide gift to a member of the stockholder's immediate
family or to a trust, the beneficiary of which is the stockholder or a member of
the stockholder's immediate family for estate planning purposes; (3) by virtue
of the laws of descent and distribution upon death of the stockholder; (4)
pursuant to a qualified domestic relations order, in each case where such
transferee agrees to be bound by the terms of this Agreement; (5) transfers or
distributions of, or other transactions involving, securities other than the
Lock-up Shares (including, without limitation, securities acquired in the PIPE
or in open market transactions); or (6) in the case of Angela Berka (or Reginald
Berka with respect to any community, marital or similar interest he may have in
the following shares), the transfer of up to 1,000,000 shares of Lock-up Shares
in a privately negotiated sale to another company stockholder, who shall enter
into a Lock-Up Agreement (or amend an existing Lock-Up Agreement) containing the
same terms and conditions as this Agreement with respect to such shares, or the
entry into any agreement with respect to such a sale entered into before, at or
after the Effective Time.
Director Nomination Agreement
In connection with the Closing, CleanTech, the Sponsors and Nauticus will enter
into the Director Nomination Agreement pursuant to which CleanTech will agree to
nominate an individual designated by the Sponsors to the Board of Directors of
the combined company, effective as of immediately prior to the Closing.
Director Designation Agreement
In connection with the execution of the Merger Agreement, CleanTech, Nauticus
and certain Nauticus stockholders entered into a director designation agreement
with Transocean to take all necessary action to cause a member designated by
Transocean Designee to remain on, or otherwise be appointed to, the Board, from
and after the effective time of the Merger, as a Class III member of the Board,
for an initial term expiring at the third annual meeting following the date of
the Second Amended and Restated Certificate of Incorporation to be adopted in
connection with the Merger.
Indemnification Agreements
In connection with the Closing, CleanTech has agreed to enter into customary
indemnification agreements, in form and substance reasonably acceptable to
CleanTech and Nauticus, with the individuals who will be nominated and, subject
to stockholder approval, elected to CleanTech's board of directors effective as
of the Closing.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the year ended December 31, 2021 and for the period from
June 18, 2020 (inception) through December 31, 2020 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below. We do not expect to generate any operating revenues until after
the completion of our initial business combination. We generate non-operating
income in the form of interest income on cash and cash equivalents held after
the Initial Public Offering. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as due diligence expenses.
For the year ended December 31, 2021, we had net loss of $595,442, which
resulted from the warrant issuance costs of $155,037 associated with the Initial
Public Offering, operating and formation costs of $1,201,383, the change in fair
value of the over-allotment option liability of $225,000, and franchise tax
expense of $97,200, which was partially offset by the change in fair value of
warrant liabilities of $1,077,750, and a net gain on investments held in Trust
Account in the amount of $5,428.
For the period from June 18, 2020 (inception) through December 31, 2020, we had
a net loss of $1,000, which resulted entirely from formation costs.
Liquidity and Capital Resources
As of December 31, 2021 and December 31, 2020, the Company had $518,905 and
$25,000 in cash held outside of the Trust Account, respectively, and a working
capital surplus of $259,136 and $24,000, respectively.
The Company's liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the proceeds of $25,000 from the sale of the
Founder Shares, and a loan of up to $250,000 under an unsecured and non-interest
bearing promissory note. Subsequent to the consummation of the Initial Public
Offering, the Company's liquidity has been satisfied through the net proceeds
from the private placement held outside of the Trust Account.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans"). As of December 31, 2021, there were no
amounts outstanding under any Working Capital Loan.
For the year ended December 31, 2021, net cash used in operating activities was
$1,039,814, which was due to the change in fair value of warrants of $1,077,750,
and net gain on investments in the Trust Account of $5,428 and our net loss of
$370,442, partially offset by changes in operating assets and liabilities of
$595,442, the change in fair value of the over-allotment option liability of
$225,000, and transaction costs of $155,037.
For the year ended December 31, 2021, net cash used in investing activities was
$174,225,000, which was due to the amount of net proceeds from the initial
public offering and private placement being deposited to the Trust Account.
For the year ended December 31, 2021, net cash provided by financing activities
was $175,758,719, which was comprised of $169,050,000 in proceeds from the
issuance of units in the initial public offering net of underwriter's discount
paid, $7,175,000 in proceeds from the issuance of warrants in a private
placement to our Sponsor, $16,667 in proceeds from the sale of Founder Shares,
and proceeds from issuance of Sponsor Note of $188,302, offset in part by
payment of $466,281 for offering costs associated with the initial public
offering, $16,667 for the payment to a related party for the cancellation of
Founder Shares, and repayment of the outstanding balance on the promissory note
to our Sponsor of $188,302.
For the period from June 18, 2020 (inception) through December 31, 2020, net
cash provided by operating activities was $0, which was due an increase in
accrued expenses of $1,000, and was offset by a net loss of $1,000.
For the period from June 18, 2020 (inception) through December 31, 2020, net
cash provided by financing activities was $25,000, which consisted of $25,000
from the sale of Founder Shares to the Sponsor.
We have incurred and expect to continue to incur significant costs in pursuit of
our acquisition plans. We may have insufficient funds available to operate our
business prior to our initial 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 public shares upon
completion of our business combination, in which case we may issue additional
securities or incur debt in connection with such business combination.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2021 and
December 31, 2020.
Contractual Obligations
Promissory Note - Related Party
On March 1, 2021, the Company issued an unsecured promissory note to the Sponsor
(the "Promissory Note"), pursuant to which the Company could borrow an aggregate
of up to $250,000 to cover expenses related to the Initial Public Offering. The
Promissory Note was non-interest bearing and was payable on the earlier of (i)
Promptly after the date on which the Maker consummates an initial public
offering of its securities or (ii) the completion of the Initial Public
Offering. The outstanding balance under the Promissory Note of $188,302 was
repaid on July 23, 2021. The promissory note is no longer available to the
Company.
Underwriter's Agreement
The Company granted the underwriter a 45-day option to purchase up to 2,250,000
additional Units to cover over-allotments at the Initial Public Offering price,
less the underwriting discounts and commissions. On July 28, 2021, the
Underwriters exercised the over-allotment option in full and purchased an
additional 2,250,000 Units for an aggregate purchase price of $22,500,000.
In connection with the closing of the Initial Public Offering and exercise of
the over-allotment option, the underwriter was paid a cash underwriting fee of
$0.20 per Unit, or $3,450,000 in the aggregate.
Critical Accounting Policies
The preparation of 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 consolidated 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:
Derivative 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, 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 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. For the initial valuation, the
Company utilized a Monte Carlo simulation model for the initial valuation of the
Public Warrants, and the publicly-traded value for the subsequent valuation of
the Public Warrants. Changes in the estimated fair value of the warrants are
recognized as a non-cash gain or loss on the consolidated statements of
operations. The fair value of the Private Placement Warrants was estimated using
a Black-Scholes Option Pricing Model. The subsequent measurement of the Public
Warrants as of December 31, 2021 is classified as Level 1, as such, an
observable market quote in an active market under the ticker CLAQW was used.
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, Derivatives and Hedging. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is
initially recorded at its fair value on the grant date and is then re-valued at
each reporting date, with changes in the fair value reported in the consolidated
statements of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is evaluated at the end of each reporting period. Derivative liabilities
are classified in the balance sheet as current or non-current based on whether
or not net-cash settlement or conversion of the instrument could be required
within 12 months of the balance sheet date.
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Common stock subject to possible redemption
The Company accounts for its Common Stock subject to possible redemption in
accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from
Equity. Common Stock subject to mandatory redemption (if any) is classified as
liability instruments and are 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 occurrence
of uncertain events not solely within the Company's control) are classified as
temporary equity. At all other times, Common Stock are classified as
shareholders' equity. The Company's Common Stock feature certain redemption
rights that are considered to be outside of the Company's control and subject to
the occurrence of uncertain future events. Accordingly, as of December 31, 2021,
17,250,000 Common Stock subject to possible redemption are presented as
temporary equity, outside of the shareholders' equity section of the Company's
balance sheet. Effective with the closing of the Initial Public Offering, the
Company recognized the accretion from the initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the
extent available) and accumulated deficit.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable Common Stock to equal the redemption
value at the end of each reporting period. This method would view the end of the
reporting period as if it were also the redemption date for the security.
Increases or decreases in the carrying amount of redeemable Common Stock are
affected by charges against additional paid in capital and accumulated deficit.
Net Income (Loss) Per Common Share
Net income (loss) per share of common stock is computed by dividing net earnings
by the weighted-average number of shares of common stock outstanding during the
period (for all periods during which these shares were subject to forfeiture,
the calculation of weighted average shares outstanding excludes an aggregate of
562,500 shares of common stock held by the Sponsor that were subject to
forfeiture to the extent that the underwriter's over-allotment was not exercised
in full). The Company has not considered the effect of the Warrants sold in the
Initial Public Offering and private placement to purchase an aggregate of
15,800,000 shares in the calculation of diluted income per share, since the
exercise of the Warrants are contingent upon the occurrence of future events and
the inclusion of such Warrants would be anti-dilutive.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("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.
ASU 2020-06 is effective for the Company on January 1, 2024 and should be
applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January
1, 2021 using the modified retrospective method of transition. The adoption of
ASU 2020-06 did not have a material impact on the consolidated financial
statements for the fiscal year ended December 31, 2021.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on the Company's consolidated financial statements.
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