The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed 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 of 1933, as amended (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 Form 10-Q 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 final prospectus for its Initial Public Offering filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 2, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses. 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 an initial
business combination will be successful.
Results of Operations
We classify the warrants issued in connection with our Initial Public Offering
and concurrent private placement as liabilities at their fair value and adjust
the warrant liability to fair value at each reporting period. This liability is
subject to re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statement of operations.
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through March 31, 2022 were organizational activities the
Initial Public Offering and those necessary to identify a target company for a
business combination, as described below. We do not expect to generate any
operating revenues until after the completion of our initial business
combination. We expect to generate non-operating income in the form of interest
income on marketable securities 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 for due diligence expenses.
For the three months ended March 31, 2022, we had net income of $5,923,205,
which consists of operating costs of $414,390, offset by a non-cash change in
fair value of derivative liability of $6,317,499, interest income from bank of
$18 and interest earned on investments held in Trust Account of $20,078.
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Liquidity, Capital Resources and Going Concern
On January 29, 2021, we consummated the Initial Public Offering of 24,150,000
units at a price of $10.00 per unit, which includes the full exercise by the
underwriters of their over-allotment option in the amount of 3,150,000 units,
generating gross proceeds of $241.5 million. Simultaneously with the closing of
the Initial Public Offering, we consummated the sale of 4,553,333 private
placement warrants at a price of $1.50 per private placement warrant in a
private placement to our stockholders, generating gross proceeds of $6.83
million.
Following the Initial Public Offering, the full exercise of the over-allotment
option by the underwriters and the sale of the private placement warrants, a
total of $241.5 million was placed in the Trust Account. We incurred $13.6
million in transaction costs, including $4.4 million of underwriting fees, $8.45
million of deferred underwriting fees and $0.8 million of other offering costs.
For the three months ended March 31, 2022, cash used in operating activities was
$769,160 comprised of net income of $5,923,305 and changes in fair value of
warrant liabilities of $6,317,499, interest earned on investments held in the
Trust Account of $20,078 and the changes in operating assets and liabilities of
$354,788.
For the three months ended March 31, 2021, cash used in operating activities was
$743,494 comprised of net income of $5,779,836 and changes in fair value of
warrant liabilities of $6,943,900, transaction cost related to derivative
liability of $622,106, and the changes in operating assets and liabilities,
which used $201,536 of cash for operating activities.
As of March 31, 2022, we had cash and investments held in the Trust Account of
approximately $241.5 million. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account to complete our initial business combination. We may withdraw
interest to pay taxes and pay dissolution expenses. 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.
As of March 31, 2022, we had approximately $0.3 million of cash held outside of
the Trust Account. 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 an initial
business combination.
The Sponsor, or an affiliate of the Sponsor, or certain of our officers and
directors or their affiliates may, but are not obligated to, extend us working
capital loans as may be required in order to fund working capital deficiencies
or finance transaction costs in connection with an initial business combination.
If we complete an initial business combination, we would repay the working
capital loans out of the proceeds of the Trust Account released to us.
Otherwise, the working capital loans would be repaid only out of funds held
outside the Trust Account. In the event that an initial business combination
does not close, we may use a portion of proceeds held outside the Trust Account
to repay the working capital loans but no proceeds held in the Trust Account
would be used to repay the working capital loans. The working capital loans
would either be repaid upon consummation of an initial business combination,
without interest, or, at the lender's discretion, up to $2.0 million of such
working capital loans may be convertible into warrants of the post-business
combination entity. The warrants would be identical to the private placement
warrants. Except for the foregoing, the terms of such working capital loans, if
any, have not been determined and no written agreements exist with respect to
such loans.
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 consummation of our initial
business combination, in which case we may issue additional securities or incur
debt in connection with such initial business combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the consummate of our initial business combination. If we
are unable to consummate 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.
We expect to require additional financing in order to effectively pursue an
initial business combination and to continue our operations through an orderly
wind-up on or around January 29, 2023, our deadline to complete an initial
business combination (the "Completion Deadline"). If we are unable to obtain
additional financing, we may have insufficient funds available to us in order to
operate our business prior to our initial business combination or the Completion
Deadline. Our Board of Directors has approved a plan, and related budget, with
respect to an orderly wind-up of the Company if an initial business combination
is not completed by the Completion Deadline, subject to funding as described in
the succeeding sentences. Although there is no obligation to do so, members of
the Sponsor have discussed the possibility of providing us with financing to
continue our operations until the Completion Deadline. As of the date of this
report, the material terms of any such financing, including the amount of
funding through the Completion Date, have not been finally agreed to or been
reflected in definitive, binding agreements. Consequently, there can be no
assurance that we will receive any such financing. If we do not obtain
additional financing, we 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 potential transaction, and reducing
overhead expenses.
Although the market conditions we face are challenging, prior to the Completion
Deadline, we intend to continue to search for an initial business combination.
We expect that our efforts in this regard will be led primarily by Mr. Cavalier,
our Chief Financial Officer, and that Mr. Crane, our Chief Executive Officer,
and Ms. Comstock, our Chief Commercial Officer, will instead focus their efforts
on completing an orderly wind-up on the Completion Date if we are unable to
complete an initial business combination.
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In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until January 29, 2023 to
consummate an initial business combination. It is uncertain that the Company
will be able to consummate an initial business combination by this time. If an
initial business combination is not consummated by this date and an extension is
not requested by the Sponsor, there will be a mandatory liquidation and
subsequent dissolution of the Company. Management has determined that the
liquidity condition and mandatory liquidation, should an initial business
combination not occur and an extension is not requested by the Sponsor, and
potential subsequent dissolution raises substantial doubt about the Company's
ability to continue as a going concern. The condensed financial statements
contained elsewhere in this Quarterly Report on Form 10-Q do not include any
adjustments that might result from our inability to continue as a going concern.
Related Party Transactions
Payments to an Affiliate
Commencing as of February 2021, we have been and will continue to make payments
of approximately $65,000 per month on an annualized basis to Climate Real Impact
Solutions Services LLC, an entity owned by John Cavalier, our Chief Financial
Officer, and David Crane, our Chief Executive Officer, and managed by Ms.
Frank-Shapiro, our Chief Operating Officer, for consulting services rendered to
us. Messrs. Cavalier and Crane also receive health insurance benefits from
Climate Real Impact Solutions Services LLC. Upon completion of an initial
business combination, it is expected that we would cease to make any further
payments.
Promissory Note
On December 11, 2020, we issued the promissory note to the Sponsor, pursuant to
which we borrowed $250,000 from the Sponsor in order to pay certain transaction
expenses associated with our Initial Public Offering. The promissory note was
non-interest bearing and payable on the earlier of June 30, 2021 or the
consummation of the our Initial Public Offering. Upon completion of the Initial
Public Offering on January 29, 2021, we repaid the promissory note in full. As
of March 31, 2022, the outstanding balance under the promissory note was $0.
Advance from related party
On October 20,2021, the Sponsor provided notice of a capital call to the PIMCO
private funds and Climate Real Impact Solutions II Consortium, LLC for the
follow-on additional capital in the amount of $1 million per schedule A of the
Amended and Restated Limited Liability Company Agreement of the Sponsor dated
January 8, 2021. As of March 31, 2022, Climate Real Impact Solutions II
Consortium, LLC and PIMCO private funds had advanced the Company $333,300 and
$666,700, respectively for working capital purposes. As of March 31, 2022 and
December 31, 2021, the outstanding balance under the advance amounted to
$1,000,000.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 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 did not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
The underwriters are entitled to a deferred fee of $0.35 per unit, or
approximately $8.45 million in the aggregate. The deferred fee will become
payable to the underwriters from the amounts held in the Trust Account solely in
the event that we consummate an initial business combination, subject to the
terms of the underwriting agreement.
We entered into various consulting arrangements with several service providers
for administrative services and potential target financial analysis and due
diligence services to us. These arrangements provide for aggregate monthly fees
of approximately $70,000.
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Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires our 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 condensed 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:
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption, if any,
in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities
from Equity." Shares of Class A common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of our condensed balance sheets.
Warrant Liability
We account for the warrants in accordance with the guidance contained in ASC
815-40-15-7D and 7F under which the warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Accordingly, we classify the
warrants as liabilities at their fair value and adjust the warrants to fair
value at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The fair value of the warrants issued
in the Initial Public Offering has been estimated using a Monte Carlo simulation
methodology as of the date of the Initial Public Offering and such warrants'
quoted market price as of March 31, 2022. The private placement warrants were
valued using a Modified Black Scholes Option Pricing Model.
Net Income per share of Common Stock
Net income per share of common stock is computed by dividing net income by the
weighted average number of common stock outstanding for the period. The Company
applies the two-class method in calculating net income per share. Accretion
associated with the redeemable shares of Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
Our management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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