References to "DCRD," "our," "us" or "we" refer to Decarbonization Plus
Acquisition Corporation IV. The following discussion and analysis of DCRD's
financial condition and results of operations should be read in conjunction with
the unaudited financial statements and the notes thereto contained in Item 1. of
this report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
and formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (the "initial business combination").
Our Sponsor is Decarbonization Plus Acquisition Sponsor IV LLC, a Cayman Islands
limited liability company ("Sponsor") and an affiliate of Riverstone Investment
Group LLC, a Delaware limited liability company, and its affiliates
("Riverstone"). Although we may pursue an acquisition opportunity in any
business or industry, we intend to capitalize on the Riverstone platform to
identify, acquire and operate a business in industries that may provide
opportunities for attractive risk-adjusted returns in one of the multiple
sectors that may advance the objectives of global decarbonization. This includes
the energy and agriculture, industrials, transportation and commercial and
residential sectors.
The Registration Statement for our initial public offering was declared
effective on August 10, 2021 (the "Public Offering"). On August 13, 2021, we
consummated the Public Offering of 31,625,000 units (the "Units") at $10.00 per
Unit, generating gross proceeds of $316,250,000, and incurring transaction costs
of approximately $19.4 million, consisting of $6.3 million of underwriting fees,
$11.07 million of deferred underwriting fees and approximately $2 million of
other offering costs. The underwriters were granted a 45-day over-allotment
option to purchase up to 4,125,000 units (the "Over-Allotment Units") at the
Public Offering price, less the underwriting discounts and commissions. The
underwriters exercised the over-allotment option in full and purchased the
Over-Allotment Units at the closing of the Public Offering.
Simultaneously with the consummation of the Public Offering, we consummated the
sale of 12,737,500 private placement warrants (the "Private Placement Warrants")
at a price of $1.00 per Private Placement Warrant in a private placement to our
Sponsor and independent directors, generating gross proceeds of $12,737,500 (the
"Private Placement").
Approximately $319,412,500 ($10.10 per Unit) of the net proceeds of the Public
Offering (including the Over-Allotment Units and $11.07 million of the
underwriters' deferred discount) and certain of the proceeds of the Private
Placement were placed in a trust account (the "Trust Account") located in the
United States with the Continental Stock Transfer & Trust Company, and invested
only in U.S. "government securities," within the meaning set forth in Section
2(a)(16) of the Investment Company Act of 1940 (the "Investment Company Act"),
with a maturity of one hundred eighty-five (185) days or less, or in money
market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and
(d)(4) of Rule 2a-7 under the Investment Company Act, which invest only in
direct U.S.
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government treasury obligations, as determined by the Company, until the earlier
of: (i) the completion of our initial business combination and (ii) the
distribution of the Trust Account as otherwise permitted under our amended and
restated certificate of incorporation.
If we are unable to complete an initial business combination within eighteen
(18) months from the closing of the Public Offering, or February 13, 2023, we
will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten (10) business days
thereafter, redeem the public shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously
released to us to pay our taxes (less up to $100,000 of interest to pay
dissolution expenses and net of taxes payable), divided by the number of
then-outstanding public shares, which redemption will completely extinguish
public shareholders' rights as shareholders (including the right to receive
further liquidating distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the
approval of our remaining shareholders and our board of directors, dissolve and
liquidate, subject in each case to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from February 22, 2021 (inception) through June 30, 2022
were organizational activities, those necessary to prepare for the Public
Offering, described below, the Company's search for a target business with which
to complete an initial business combination and activities in connection with
the proposed transactions. We do not expect to generate any operating revenues
until after the completion of our initial business combination, at the earliest.
We generate non-operating income in the form of interest income on marketable
securities. We are incurring expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses in connection with completing an initial business
combination.
For the three months ended June 30, 2022, we had net income of $8,872,402, which
consists of formation and operating costs of $2,549,267, interest income of
$453,664 and gain on fair value of derivative warrant liabilities of
$10,968,005.
For the three months ended June 30, 2021, we had a net loss of $507,522, which
consists solely of formation and operating costs.
For the six months ended June 30, 2022, we had net income of $18,605,362, which
consists of formation and operating costs of $3,504,284, interest income of
$479,734 and gain on fair value of derivative warrant liabilities of
$21,629,912.
For the period from February 22, 2021 (inception) through June 30, 2021, we had
a net loss of $527,515, which consists solely of formation and operating costs.
Liquidity and Going Concern
Our liquidity needs up to the Public Offering were satisfied through receipt of
a $25,000 capital contribution from our Sponsor in exchange for the issuance of
our Class B ordinary shares (the "Founder Shares") to our Sponsor and a loan
from our Sponsor for an aggregate amount of $300,000 to cover organizational
expenses and expenses related to the Public Offering pursuant to a promissory
note (the "Note"). The Note was paid off in full on August 19, 2021. As of June
30, 2022, there was no outstanding balance under the Note and it was no longer
available to the Company. As of June 30, 2022 there was no cash held outside of
the Trust Account and a resulting working capital deficit of $8,505,606.
In addition, in the short term and long term, in connection with an initial
business combination, our Sponsor or an affiliate of our Sponsor, or certain of
our officers and directors may, but are not obligated to, loan us funds as may
be required. The Sponsor had paid $948,801 of our expenses on our behalf as of
June 30, 2022. In addition, in order to finance transaction costs in connection
with an initial business combination, our officers, directors and initial
shareholders may, but are not obligated to, provide us with loans up to
$1,500,000 as the Company may require ("Working Capital Loans"). As of June 30,
2022, there was no outstanding balance under the Working Capital Loans.
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The Company has incurred and expects to incur additional significant costs in
pursuit of its financing and acquisition plans, including the proposed business
combination. In connection with the Company's assessment of going concern
considerations in accordance with FASB ASC Topic 205-40, "Presentation of
Financial Statements- Going Concern," management has determined that the Company
has access to funds from the Sponsor, and the Sponsor has the financial ability
to provide such funds, that are sufficient to fund the working capital needs of
the Company until the earlier of the consummation of the business combination
and one year from the date of issuance of these financial statements. However,
management has determined that if the Company is unable to complete a business
combination by February 13, 2023, then the Company will cease all operations
except for the purpose of liquidating. The date for the 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 this date. The Company intends to complete a business combination before
the mandatory liquidation date.
Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of working capital loans, if any, and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants and
warrants that may be issued upon conversion of working capital loans and upon
conversion of the Founder Shares will be entitled to registration rights
pursuant to a registration rights agreement. These holders will be entitled to
certain demand and "piggyback" registration rights. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$6,325,000 in the aggregate, paid upon closing of the Public Offering.
In addition, $0.35 per unit, or approximately $11,068,750 in the aggregate, will
be payable to the underwriters for deferred underwriting commissions. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete an initial business
combination, subject to the terms of the underwriting agreement.
Administrative Services Agreement
Commencing on the date that our securities were first listed on the NASDAQ
Capital Market and continuing until the earlier of our consummation of an
initial business combination or our liquidation, we have agreed to pay an
affiliate of our Sponsor a total of $10,000 per month for office space,
utilities, secretarial support and administrative support made available to the
Company. We recorded an aggregate of $30,000 and $56,129 for the three and six
months ended June 30, 2022, in general and administrative expenses in connection
with the related agreement in the accompanying statement of operations. Upon
completion of our initial business combination or liquidation, we will cease
paying these monthly fees. There was $50,000 and $106,129 outstanding as of
December 31, 2021 and June 30, 2022, respectively.
Related Party Loans
The Sponsor has agreed to pay for certain of our expenses in the form of
non-interest bearing advances. Approximately $948,801 was due to the Sponsor as
of June 30, 2022.
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 expenses during the
periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
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Derivative Warrant Liabilities
We account for the warrants issued in connection with our Public Offering in
accordance with Accounting Standards Codification ("ASC") 815-40, Derivatives
and Hedging-Contracts in Entity's Own Equity ("ASC 815"), under which the
warrants do not meet the criteria for equity classification and must be recorded
as liabilities. As the warrants meet the definition of a derivative as
contemplated in ASC 815, the warrants are measured at fair value at inception
and at each reporting date in accordance with ASC 820, Fair Value Measurement,
with changes in fair value recognized in the Statements of Operations in the
period of change.
Ordinary shares subject to possible redemption
We account for the Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity.
Class A ordinary shares subject to mandatory redemption are classified as a
liability instrument and are measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares 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 DCRD's control) are classified
as temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. Our Class A ordinary shares feature certain redemption
rights that are considered to be outside of our control and subject to
occurrence of uncertain future events.
Net income (loss) per share
Net income (loss) per share is computed by dividing net income (loss) applicable
to shareholders by the weighted average number of ordinary shares outstanding
during the period, plus, to the extent dilutive, the incremental number of
shares of ordinary shares to settle warrants, as calculated using the treasury
stock method.
As of June 30, 2022, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company under the treasury stock
method. Since the exercise of Warrants is contingent upon the occurrence of
future events, diluted loss per ordinary share is the same as basic loss per
ordinary share.
The Company has two classes of shares, which are referred to as Class A and
Class B ordinary shares. Earnings are shared pro rata between the two classes of
shares which assumes a business combination as the most likely outcome.
Accretion associated with the redeemable shares of Class A ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
Impact of COVID-19 and Russia/Ukraine Conflict
Our Sponsor continues to evaluate the impact of the COVID-19 pandemic and has
concluded that while it is reasonably possible that the virus could have a
negative effect on our financial position, results of operations and/or search
for a target company, the specific impact is not readily determinable as of the
balance sheet date.
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material impact on our
financial statements.
Off-Balance Sheet Arrangements
As of the date of this Quarterly Report, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies, (iii) comply with any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five (5) years following the completion of our Public Offering or
until we otherwise no longer qualify as an "emerging growth company."
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