The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the audited financial
statements and the notes related thereto which are included in "Part II, Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Cautionary Note Regarding
Forward-Looking Statements," "Part I, Item 1A. Risk Factors" and elsewhere in
this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. Our Sponsor is an affiliate of a private investment fund
management by Zimmer, a Delaware limited partnership that manages several
investment vehicles. Although we may pursue an acquisition opportunity in any
business or industry, we intend to capitalize on the Zimmer platform to
identify, acquire and operate a business in industries that may provide
opportunities for attractive risk-adjusted returns in the energy value chain in
North America, with a focus on energy transition and sustainability. This
broadly includes environmental, social and governance growth-focused companies
in the energy, industrial, and infrastructure sectors.
The Registration Statement for our Public Offering was declared effective on
June 15, 2021. On June 18, 2021, we consummated our Public Offering of
34,500,000 Units, which includes the exercise in full of the underwriters'
option to purchase an additional 4,500,000 Units, at a price of $10.00 per Unit,
generating gross proceeds to us of $345,000,000. Transaction costs for the
Public Offering amounted to $18,426,851, consisting of $6,200,000 of
underwriting discounts and commissions, $10,850,000 of deferred underwriting
discounts and commissions, and $1,376,851 of other offering costs.
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Simultaneously with the consummation of the Public Offering, we completed the
private sale (the "Private Placement") of 10,550,000 Private Placement Warrants
at a purchase price of $1.00 per warrant, generating gross proceeds to us of
$10,550,000.
$345,000,000 of the gross proceeds ($10.00 per Unit) of the Public Offering and
the Private Placement (including the Over-allotment Units) were deposited into
the Trust Account with the Trustee, and invested only in U.S. "government
securities," within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 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.
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 24 months
from the closing of the Public Offering, or June 18, 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 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 franchise
and income 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 stockholders' rights
as stockholders (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 stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Results of Operations
As of December 31, 2021, we had not commenced any operations. All activity for
the period from February 25, 2021 (inception) through December 31, 2021 relates
to our formation and Public Offering, and, since the completion of the Public
Offering, our search for a target to consummate an initial business combination.
We will not generate any operating revenues until after the completion of an
initial business combination, at the earliest. We will generate non-operating
income in the form of interest income from the proceeds derived from the Public
Offering and placed in the Trust Account.
For the period from February 25, 2021 (inception) through December 31, 2021, we
had net loss of $9,827,847 consisting of formation and operating costs of
$14,388, general and administrative costs of $988,190, financing expense of
$3,196,156 and offering costs allocated to Warrants of $794,474, as well as
change in fair value of Warrants and Forward Purchase Units of $4,849,830,
offset by income on marketable securities (net), dividends and interest on
investment held in the Trust Account of $15,191.
Liquidity and Capital Resources
Our liquidity needs have been satisfied prior to the completion of our Public
Offering through a capital contribution of our Sponsor of $25,000 for Founder
Shares, and the Note.
On June 18, 2021, we consummated our Public Offering of 34,500,000 Units, which
includes the exercise in full of the underwriters' option to purchase an
additional 4,500,000 Units at the initial public offering price to cover
over-allotments. Each Unit consists of one share of Class A common stock,
$0.0001 par value per share, and one-third of one redeemable warrant. Each whole
Warrant entitles the holder thereof to purchase one share of our Class A common
stock at a price of $11.50 per share, subject to adjustment, and only whole
Warrants are exercisable. The Units were sold at an offering price of $10.00 per
Unit, generating gross proceeds of $345,000,000. Since August 6, 2021, holders
of the Units may elect to separately trade the Units sold in the Public Offering
and Warrants included in the Units. No fractional Warrants are issued upon
separation of the Units and only whole Warrants trade. Simultaneously with the
consummation of the Public Offering and the issuance and sale of the Units on
June 18, 2021, we consummated the Private Placement of 10,550,000 Private
Placement Warrants at a price of $1.00 per Private Placement Warrant, generating
total proceeds of $10,550,000.
Transaction costs for the Public Offering amounted to $18,426,851, consisting of
$6,200,000 of underwriting discounts and commissions, $10,850,000 of deferred
underwriting discounts and commissions, and $1,376,851 of other offering costs.
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Upon closing of the Public Offering and the Private Placement, a total of
$345,000,000 ($10.00 per Unit) was placed in the Trust Account. The proceeds
held in the Trust Account have been invested only in U.S. government treasury
obligations with a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company Act, which
invest only in direct U.S. government treasury obligations.
As of December 31, 2021, we had cash outside our Trust Account of $1,634,576 and
had working capital of $1,776,113. All remaining cash from the Public Offering
is held in the Trust Account and is generally unavailable for use prior to an
initial business combination. We believe the cash outside of our Trust Account
is sufficient to meet the expenditures required for operating our business prior
to our initial business combination.
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 and deferred underwriting discounts and commissions) and the
proceeds from the sale of the Forward Purchase Units to complete our initial
business combination. We may withdraw interest to pay our franchise and income
taxes. We estimate our annual franchise tax obligations for the taxable years
beginning after the completion of our Public Offering, based on the number of
shares of our common stock authorized and outstanding after the completion of
our Public Offering, to be $200,000, which is the maximum amount of annual
franchise taxes payable by us as a Delaware corporation per annum, and which we
may pay from funds from the Public Offering held outside of the Trust Account or
from interest earned on the funds held in the Trust Account and released to us
for this purpose. Our 2021 franchise tax was calculated using a partial year
proration and amounted to $169,913. Our annual income tax obligations will
depend on the amount of interest and other income earned on the amounts held in
the Trust Account reduced by our operating expense and franchise taxes. We
expect the interest earned on the amount in the Trust Account will be sufficient
to pay our income taxes. To the extent that our capital stock or debt is used,
in whole or in part, as consideration to complete our initial 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.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial business
combination. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial 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 initial
business combination. Moreover, we may need to obtain additional financing
either to complete our initial business combination or because we become
obligated to redeem a significant number of our public shares upon completion of
our initial business combination, in which case we may issue additional
securities or incur debt in connection with such initial business combination,
which may include a specified future issuance. Subject to compliance with
applicable securities laws, we would only complete such financing simultaneously
with the completion of our initial business combination. If we are unable to
complete our initial business combination because we do not have sufficient
funds available to us, we will be forced to cease operations and liquidate the
Trust Account. In addition, following our initial business combination, if cash
on hand is insufficient, we may need to obtain additional financing in order to
meet our obligations.
Contractual Obligations
Registration Rights
The holders of the (i) Founder Shares, (ii) Private Placement Warrants and
(iii) private placement warrants that may be issued upon conversion of working
capital loans (and any shares of Class A common stock 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)
are entitled to registration rights pursuant to a registration rights agreement
dated as of June 15, 2021. The holders of at least 20% in interest of the
then-outstanding number of these securities are entitled to demand that we file
a registration statement covering such securities subsequent to the completion
of the initial business combination and to require us to effect up to an
aggregate of three underwritten offerings of such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the completion of the initial
business combination. In addition, the shares of Class A common stock and
Warrants (and underlying shares of Class A common stock) purchased by the Zimmer
Entity as part of the Units in the Public Offering are entitled to registration
rights under the registration rights agreement. The Zimmer Entity is not subject
to any lock-up period with respect to any securities it purchased in the Public
Offering. We will bear the expenses incurred in connection with the filing of
any such registration statements.
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Pursuant to the Forward Purchase Agreements, we agreed to use reasonable best
efforts (i) to file within 30 days after the closing of the initial business
combination a registration statement with the SEC for a secondary offering of
the Forward Purchase Shares and the Forward Purchase Warrants (and underlying
shares of Class A common stock), (ii) to cause such registration statement to be
declared effective promptly thereafter but in no event later than 60 days after
the initial filing, (iii) to maintain the effectiveness of such registration
statement until the earliest of (A) the date on which the Forward Purchasers or
their respective assignees cease to hold the securities covered thereby, and
(B) the date all of the securities covered thereby can be sold publicly without
restriction or limitation under Rule 144 under the Securities Act and (iv) after
such registration statement is declared effective, cause us to conduct firm
commitment underwritten offerings, subject to certain limitations. In addition,
the Forward Purchase Agreements provide for certain "piggy-back" registration
rights to the holders of Forward Purchase Securities to include their securities
in other registration statements filed by us.
Administrative Services Agreement
Pursuant to an administrative services agreement, dated June 15, 2021, we have
agreed to pay Zimmer a total of $10,000 per month from funds held outside the
Trust Account for office space, utilities and secretarial and administrative
support. Upon the earlier of the consummation by the Company of an initial
business combination or the Company's liquidation, the Company will cease paying
these monthly fees. As of December 31, 2021, the Company had accrued $64,000
pursuant to this agreement, which was included in the amount of $65,705 due to
the related party as of December 31, 2021.
Forward Purchase Agreements
On June 11, 2021, we entered into Forward Purchase Agreements with the Zimmer
Entity and Bluescape Resources. Pursuant to the Forward Purchase Agreements, the
Zimmer Entity agreed to purchase 10,000,000 Forward Purchase Units and Bluescape
Resources agreed to purchase up to 10,000,000 Forward Purchase Units, with each
Forward Purchase Unit consisting of one share of Class A common stock and
one-third of one warrant to purchase one share of Class A common stock, at
$11.50 per share, subject to adjustment, for a purchase price of $10.00 per
Forward Purchase Unit. The obligation of Bluescape Resources to purchase the
Forward Purchase Units pursuant to its Forward Purchase Agreement is subject to
the approval of its investment committee. The purchase of the Forward Purchase
Units will take place in one or more private placements to occur concurrently
and only in connection with the closing of the initial business combination. The
proceeds from the sale of Forward Purchase Units may be used as part of the
consideration to the sellers in the initial business combination, expenses in
connection with the initial business combination or for working capital in the
post-business combination company.
Underwriting Agreement
The underwriters in the Public Offering are entitled to deferred underwriting
discounts and commissions of $10,850,000, which will be 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.
Critical Accounting Policies
The preparation of unaudited 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 not identified any critical accounting
policies other than the following.
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Warrant Liabilities and Forward Purchase Units
The Company accounts for the warrants issued as part of the Units in the Public
Offering and Private Placement Warrants as 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 and ASC 815, Derivatives and Hedging. 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 and whether
the warrant holders could potentially require "net cash settlement" in a
circumstance outside of the Company's control, 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
reporting period while the Warrants are outstanding. Because the Company does
not control the occurrence of events, such as a tender offer or exchange, that
may trigger cash settlement of the Warrants where not all of the stockholders
also receive cash, the Warrants do not meet the criteria for equity treatment
thereunder, as such, the Warrants must be recorded as a derivative liability.
The Company accounts for the Forward Purchase Agreements in accordance with ASC
815-40 and accounts for such agreements as a derivative liability. These
liabilities are subject to re-measurement at each balance sheet date, with
changes in fair value recognized in the statements of operations.
The Warrants are publicly traded and as such are classified as Level 1 and no
longer require a valuation. The estimated fair value of the Private Placement
Warrants and Forward Purchase Units are determined using a Black-Scholes model
with Level 3 inputs. Inherent in a Black-Scholes model are assumptions related
to expected stock-price volatility (pre-merger and post-merger, expected term,
dividend yield and risk-free interest rate). The Company estimates the
volatility of its Class A common stock based on management's understanding of
the volatility associated with instruments of other similar entities. The
risk-free interest rate is based on the U.S. Treasury Constant Maturity similar
to the expected remaining life of the warrants. The expected life of the
warrants is estimated based on management assumptions regarding the timing and
likelihood of completing an initial business combination. The dividend rate is
based on the historical rate, which the Company anticipates to remain at zero.
The estimated fair value of the public warrants is determined using the publicly
traded price of the public warrants, which is classified as a Level 1 input in
the fair value hierarchy.
The following table presents information about the assumptions used to value the
Company's liabilities that are classified as Level 3 in the fair value hierarchy
that are measured at fair value on a recurring basis as of December 31, 2021.
Private Placement Forward Purchase
Inputs Warrants Units
Exercise price $ 11.50 $ 10.00
5.0%
5.0% pre-merger/ pre-merger/
20.5% 20.5%
Volatility post-merger post-merger
0.73 year (5
years exercise
period after
close of
business
Expected term to business combination combination) 0.73 year
Risk-free rate 1.33 % 0.28 %
Dividend yield 0 % 0 %
Stock price $ 9.69 $ 9.69
Recent Accounting Pronouncements
See Note 2 to the financial statements required by Item 8 of this Annual Report
on Form 10-K.
JOBS Act
On April 5, 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
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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.
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