UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, Zip Code)
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N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Class A common stock, par value $0.0001 per share |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of August 19, 2021, there were
ECP Environmental Growth Opportunity Corp.
Quarterly Report on Form 10-Q
Table of Contents
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Item 1. |
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Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020 |
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Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2021 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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27 |
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ECP Environmental Growth Opportunities Corp.
Condensed Consolidated Balance Sheets
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June 30, |
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December 31, |
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2021 |
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2020 |
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(Unaudited) |
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ASSETS |
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Cash |
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$ |
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$ |
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Prepaid expenses |
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— |
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Other current assets |
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— |
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Total current assets |
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Deferred offering costs associated with public offering |
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Marketable securities held in Trust Account |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Franchise tax payable |
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Accrued expenses |
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Total current liabilities |
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Warrant liabilities |
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Forward purchase agreement |
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Deferred underwriting commission |
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Total liabilities |
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Commitments and Contingencies (Note 5) |
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Class A common stock, $ shares at redemption value |
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Stockholders' Equity: |
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Preferred stock, $ and outstanding |
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Class A common stock, $ and - subject to possible redemption) as of June 30, 2021 and December 31, 2020, respectively |
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Class B common stock, $ issued and outstanding as of June 30, 2021 and December 31, 2020 |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
2
ECP Environmental Growth Opportunities Corp.
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended June 30, 2021 |
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Six Months Ended June 30, 2021 |
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General and administrative |
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$ |
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$ |
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Franchise tax expense |
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Loss from operations |
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Other Income (Expense) |
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Change in fair value of warrant liabilities |
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Change in fair value of forward purchase agreement |
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Offering costs on Founder Shares issued to related party |
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Offering costs allocated to derivative liabilities |
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— |
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Interest and dividends earned on marketable securities held in Trust Account |
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Net loss |
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$ |
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Weighted average shares outstanding of Class A redeemable common stock, basic and diluted |
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Basic and diluted net loss per share of redeemable common stock, Class A |
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$ |
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Weighted average shares outstanding of Class A and B non-redeemable common stock, basic and diluted |
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Basic and diluted net loss per share of non-redeemable common stock, Class A and B |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
ECP Environmental Growth Opportunities Corp.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2021
(Unaudited)
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Common Stock |
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Class A |
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Class B |
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Additional |
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Retained Earnings |
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Total |
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Paid-In |
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(Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit) |
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Equity |
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Balance as of January 1, 2021 |
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$ |
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$ |
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$ |
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$ |
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Sale of Units in initial public offering, less fair value of public warrants |
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Offering costs |
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Excess of cash received over fair value of warrants sold to Sponsor in private placement |
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Forward purchase agreement |
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Common stock subject to possible redemption |
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— |
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Reclassification of deficit to retained earnings |
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Net income |
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Balance as of March 31, 2021 |
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— |
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Offering costs |
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Share-based compensation and offering costs on Founder Shares issued to related party and directors |
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— |
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— |
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Change in value of common stock subject to possible redemption |
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— |
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Net loss |
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— |
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Balance as of June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
ECP Environmental Growth Opportunities Corp.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
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For the six months ended June 30, 2021 |
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Cash Flows from Operating Activities: |
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Net Loss |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Change in fair value of warrant liabilities and forward purchase agreement |
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Share-based compensation and offering costs on Founder Shares issued to related party and directors |
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Offering costs allocated to derivative liabilities |
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Interest and dividends earned on marketable securities held in Trust Account |
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General and administrative expenses paid by related party |
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Changes in operating assets and liabilities |
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Prepaid expenses |
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Other assets |
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Accounts payable |
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Franchise tax payable |
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Accrued expenses |
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Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Investment of cash into Trust Account |
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Net cash used in investing activities |
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Cash Flows from Financing Activities: |
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Proceeds from Initial Public Offering, net of underwriters’ fees |
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Proceeds from Private Placement Warrants |
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Repayment of Sponsor loan |
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Payments of other offering costs |
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Net cash provided by financing activities |
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Net increase in cash |
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Cash - beginning of period |
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Cash - end of period |
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$ |
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Supplemental disclosure of noncash financing activities: |
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Initial classification of Class A common stock subject to possible redemption |
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$ |
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Change in value of Class A common stock subject to possible redemption |
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$ |
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Deferred offering costs in accrued offering costs and accounts payable at December 31, 2020 |
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$ |
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Offering costs in accounts payable |
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$ |
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Offering costs in accrued expenses |
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$ |
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Deferred offering costs paid through promissory note – related party |
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$ |
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Deferred underwriting commission |
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$ |
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Deferred offering costs included in other assets and accrued expenses |
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$ |
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Offering costs associated with Founder Shares issued to related party included in APIC |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
ECP ENVIRONMENTAL GROWTH OPPORTUNITIES CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021
Note 1—Description of Organization and Business Operations
ECP Environmental Growth Opportunities Corp. (the “Company”) is a blank check company formed as a Delaware corporation on
As of June 30, 2021, the Company had not commenced any operations. All activity through June 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below. The Company has selected December 31 as its fiscal year end.
On February 11, 2021, the Company consummated its Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company completed
Offering costs consist of legal, accounting, underwriting and other costs incurred through the condensed consolidated balance sheet date that are directly related to the Initial Public Offering. Upon the completion of the Initial Public Offering in February 2021, the offering costs totaling $
Following the closing of the Initial Public Offering on February 11, 2021, an amount of $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets that together have an aggregate fair market value equal to at least
The Company will provide its holders of the public shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-
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share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
Notwithstanding the foregoing, the Company’s Amended and Restated Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Company’s Sponsor, executive officers, directors and director nominees have agreed not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to provide for the redemption of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their Class A common stock in conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering (the “Combination Period”), the Company 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 the Company to pay its taxes, if any (less up to $
In connection with the redemption of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes (less up to $100,000 of interest to pay dissolution expenses).
The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $
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Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern Consideration
As of June 30, 2021, the Company had $
Through June 30, 2021, the Company’s liquidity needs were satisfied through receipt of $
On July 30, 2021, the Company issued an unsecured promissory note (the “Note”) in the principal amount of $
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that prior to the completion of the initial public offering, the Company lacked the liquidity it needed to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. The Company has since completed its Initial Public Offering at which time capital in excess of the funds deposited in the trust and/or used to fund offering expenses was released to the Company for general working capital purposes. Accordingly, management has since reevaluated the Company’s liquidity and financial condition and determined that sufficient capital exists to sustain operations through one year from issuance of these condensed consolidated financial statements and therefore substantial doubt has been alleviated.
Risks and Uncertainties
Management 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 the Company’s financial position, results of its operations, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals and recurring adjustments) considered for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with Company’s prospectus for its Initial Public Offering as filed with the SEC on February 10, 2021 and Form 10-Q filed with the SEC on May 24, 2021.
On May 18, 2021, the Audit Committee concluded that, because of the misapplication of the accounting guidance related to the Warrants, the Company’s previously issued balance sheet as of February 11, 2021, included in the Current Report on Form 8-K filed with the SEC on February 19, 2021, should no longer be relied upon. As such, the Company restated the balance sheet as of February 11, 2021 through a disclosure in its Form 10-Q filed with the SEC on May 24, 2021.
8
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Merger Sub, as of June 30, 2021. Merger Sub had
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Warrant Liabilities and Forward Purchase Agreement
The Company accounts for the Warrants and Forward Purchase Agreement (as defined below) (collectively, the “Instruments”) in accordance with the guidance contained in ASC 815-40 under which the Instruments do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants and Forward Purchase Agreement as liabilities at their fair value and adjusts the Warrants and Forward Purchase Agreement 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 the Company’s statement of operations. See Note 6 for further discussion of the pertinent terms of the Warrants and Forward Purchase Agreement and Note 8 for further discussion of the methodology used to determine the value of the Warrants and Forward Purchase Agreement.
Cash and Marketable Securities Held in Trust Account
At June 30, 2021, the assets held in the Trust Account were invested in money market funds.
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.” Shares of common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly,
9
at June 30, 2021, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $
Financial Instruments
Except for the Warrant and Forward Purchase Agreement Liabilities as described above, the fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed consolidated balance sheets.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
As of June 30, 2021, the carrying values of cash, prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of the instruments. The Company’s portfolio of marketable securities held in the Trust Account is comprised of money market funds. The fair values of Forward Purchase Agreement and Private Placement Warrants have been estimated using the trading price of the Public Warrants. Public Warrants are valued based on quoted price in active markets. See Note 6 for further discussion of the pertinent terms of the Warrants and Forward Purchase Agreement and Note 8 for further discussion of the methodology used to determine the value of the Warrants and Forward Purchase Agreement.
Offering Costs
Offering costs consist of legal, accounting, underwriting and other costs incurred through the condensed consolidated balance sheet date that are directly related to the Initial Public Offering. Upon the completion of the Initial Public Offering in February 2021, the offering costs were allocated using the relative fair values of the company common stock and its Warrants. The costs allocated to Warrants were recognized in other expenses and those related to the Company's common stock were recognized in additional paid-in capital.
Net Loss Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net earnings or loss per share is computed by dividing net earnings or loss by the weighted-average number of shares of common stock outstanding during the periods.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Company’s initial Business Combination on a one-for-one basis, subject to adjustment.
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The Company’s unaudited condensed consolidated statements of operations includes a presentation of net earnings or loss per share for shares of common stock subject to redemption in a manner similar to the two-class method of income or loss per share. Net earnings or loss per share, basic and diluted, for the Initial Public Offering Class A redeemable shares issued on February 11, 2021, is calculated by dividing net earnings attributable to Class A redeemable shares for the three and six months ended June 30, 2021, by the weighted average number of Initial Public Offering Class A redeemable outstanding shares since issuance. Net loss per share, basic and diluted, for Class A and Class B non-redeemable shares for the three and six months ended June 30, 2021 is calculated by dividing the net loss of $
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
The Company’s provision for income taxes and deferred tax assets were deemed to be de minimis as of June 30, 2021 and December 31, 2020.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
Note 3—Initial Public Offering
Pursuant to the Initial Public Offering, the Company sold
Simultaneously with the closing of the Initial Public Offering, the Company completed
Note 4—Related Party Transactions
Founder Shares
On December 8, 2020, the Sponsor paid an aggregate of $
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accordance with SEC Staff Accounting Bulletin 5T and ASC Topic 718 Compensation – Stock Compensation. The fair value of the Founder Shares issued in this arrangement was determined using the price of the Company’s Class A common stock and the probability of the success of the Business Combination. The Company expensed approximately $
The holders of the Founder Shares agreed to forfeit up to an aggregate of
The Initial Stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (1) one year after the completion of the initial Business Combination and (2) the date on which the Company consummates a liquidation, merger, capital stock exchange, reorganization, or other similar transaction after the initial Business Combination that results in all stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “lock-up”). Notwithstanding the foregoing, if the last reported sale price of common stock shares equals or exceeds $
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). On July 30, 2021, the Company issued an unsecured promissory note in the principal amount of $
Administrative Services Agreement
The Company entered into an Administrative Services Agreement pursuant to which the Company will pay an affiliate of our Sponsor a total of $
Due to Related Party
On January 26, 2021, the Company entered into a promissory note pursuant to which Energy Capital Partners Management, LP (“ECP”) agreed to loan the Company up to $
As of June 30, 2021, there is
Note 5—Commitments & Contingencies
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Warrants, and Working Capital Warrants that may be issued upon conversion of the amounts due under the Note at the time the Company consummates a Business Combination (and any 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) will be entitled to registration rights pursuant to a registration and stockholder rights agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers 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. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
In the event of any delay in filing and/or effectiveness of the registration statement required pursuant to the registration and stockholder
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rights agreement, or after the effective date, such registration statement ceases for any reason to remain continuously effective (each, a “Registration Default”), the holders will be entitled to payments from the Company equal to
Underwriting Agreement
The Company granted the underwriters an option to cover over-allotments and for market stabilization purposes. The over-allotment option entitled the underwriters to purchase on a pro rata basis up to
Forward Purchase Agreement
On January 24, 2021, the Company entered into a Forward Purchase Agreement with GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, as amended by the First Amendment to Forward Purchase Agreement, dated as of January 31, 2021 (as so amended, the “Forward Purchase Agreement”), pursuant to which the GSAM Client Accounts committed to purchase an aggregate of up to
Concurrently with the execution of the Merger Agreement (as defined below) on July 18, 2021, the Company, the Sponsor and GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, entered into a side letter (the “Side Letter”) to the Forward Purchase Agreement, pursuant to which GSAM irrevocably consented to purchase from the Company, and the Company agreed to issue and sell to GSAM,
Note 6—Warrant Liabilities
Public Warrants may only be exercised for a whole number of shares.
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the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until
Redemption of warrants when the price per share of Class A common stock equals or exceeds $
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in whole and not in part; |
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at a price of $ |
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upon a minimum of |
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if, and only if, the last reported sale price (the “closing price”) of shares of Class A common stock equals or exceeds $ |
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the
Redemption of warrants when the price per share of Class A common stock equals or exceeds $
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in whole and not in part; |
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upon a minimum of |
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if, and only if, the last reported sale price of Class A common stock equals or exceeds $ |
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if, and only if, the Private Placement Warrants are also concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
The “fair market value” shall mean the volume-weighted average price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Forward Purchase Warrants have the same terms as the Public Warrants, except the Forward Purchase Warrants will be subject to transfer restrictions and certain registration rights.
The company accounts for the Public Warrants, Private Placement Warrants and Forward Purchase Agreement in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant and forward purchase unit that includes a warrant must be recorded as a liability.
Note 7—Stockholders’ Equity
Class A Common Stock — The Company is authorized to issue
Class B Common Stock — The Company is authorized to issue
Only holders of Class B common stock will have the right to vote on the election of directors and to remove directors prior to the initial Business Combination, and such rights may only be amended by a resolution passed by the holders of a majority of Class B common stock. On all other matters submitted to a vote of the Company’s stockholders, holders of the Class B common stock and holders of the Class A common stock will vote together as a single class, with
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination on a
Preferred Stock — The Company is authorized to issue
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Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2021 including the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
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Description |
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Level |
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Fair Value |
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June 30, 2021 |
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Marketable securities |
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1 |
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$ |
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The Warrants and Forward Purchase Agreement are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting period. Changes in the fair value of the Warrants and Forward Purchase Agreement are recorded in the statement of operations each period.
The following table presents the fair value hierarchy for liabilities measured at fair value on a recurring basis as of June 30, 2021:
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Derivative liabilities: |
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Public Warrants |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Private Placement Warrants |
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— |
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|
|
|
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|
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— |
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Forward Purchase Agreement |
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— |
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|
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— |
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Total liabilities |
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$ |
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$ |
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$ |
— |
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$ |
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On April 1, 2021, the Public Warrants surpassed the
As described above, Public Warrants were transferred to Level 1 while Private Placement Warrants and Forward Purchase Agreement were transferred to Level 2 during the three months ended June 30, 2021.
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The following table presents a summary of the changes in the fair value of the Derivative Liabilities:
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Public Warrant Liability |
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Private Placement Warrant Liability |
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Forward Purchase Agreement |
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Total Liability |
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Fair value, February 11, 2021 |
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$ |
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$ |
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$ |
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$ |
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Recognized gain on change in fair value |
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Fair value, March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Recognized loss on change in fair value |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Fair value, June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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Note 9 — Subsequent events
The Company evaluated subsequent events and transactions that occurred after the condensed consolidated balance sheet date through the date the condensed consolidated financial statements were issued. Based upon this review, except as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
On July 18, 2021, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) by and among the Company, Merger Sub, and Fast Radius, Inc., a Delaware corporation (“Fast Radius”), pursuant to which Merger Sub will merge with and into Fast Radius, with Fast Radius surviving such merger as a wholly owned subsidiary of the Company (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”). At the closing of the Merger (the “Closing”), the Company will be renamed “Fast Radius, Inc.” (the Company, following the Closing, the “Combined Company”). The Transactions are expected to be consummated in the fourth quarter of 2021, subject to the fulfillment of certain conditions.
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Subject to the terms of the Merger Agreement, the aggregate merger consideration with respect to all holders of Fast Radius securities outstanding immediately prior to the Closing, which will be issued in the form of shares or equity awards relating to shares of Class A common stock, will equal
The Aggregate Merger Consideration will be issued to holders of Fast Radius securities at the Closing in accordance with the Merger Agreement, except that the issuance to holders of Fast Radius capital stock and Vested RSUs (as defined in the Merger Agreement) of a portion of the Aggregate Merger Consideration in an amount equal to
In connection with the Closing, the shares (the “Founder Shares”) of Class B common stock issued prior to the Company’s initial public offering that are held by the Sponsor, our independent directors and GSAM will automatically convert into shares of Class A common stock on a one-for-one basis (the “Converted Shares”).
In connection with the execution of the Merger Agreement, the Company entered into subscription agreements (collectively, the “Subscription Agreements”) with certain investors, including the Sponsor (collectively, the “PIPE Investors”), pursuant to which the PIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to the PIPE Investors, an aggregate of
Concurrently with the execution of the Merger Agreement, the Company, the Sponsor and GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, entered into the Side Letter to the Forward Purchase Agreement, pursuant to which GSAM irrevocably consented to purchase from the Company, and the Company agreed to issue and sell to GSAM,
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On July 30, 2021, the Company issued an unsecured promissory note in the principal amount of $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to ECP Environmental Growth Opportunities Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to ENNV Holdings, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this 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 SEC on February 10, 2021. 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 incorporated as a Delaware corporation on October 29, 2020 and formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities. We intend to effectuate our initial Business Combination using cash from the proceeds of the Initial Public Offering, the sale of the private placement warrants and the Forward Purchase Units (as defined herein), our capital stock, debt or a combination of cash, stock and debt.
Recent Developments
Convertible Promissory Note
On July 30, 2021, the Company issued an unsecured promissory note in the principal amount of $1,500,000 to an affiliate of the Sponsor, which may be drawn down by the Company from time to time upon written notice to the lender. The Note does not bear interest and is repayable in full upon consummation of a Business Combination. If the Company does not complete a Business Combination, the Note shall not be repaid and all amounts owed under it will be forgiven. Upon the consummation of a Business Combination, the holder of the Note (or a permitted assignee) shall have the option, but not the obligation, to convert all or a portion of the unpaid principal balance of the Note into that number of Working Capital Warrants equal to the principal amount of the Note so converted divided by $1.50. The terms of the Working Capital Warrants will be identical to the terms of the warrants issued by the Company to the Sponsor in a private placement that took place simultaneously with the Company’s initial public offering. The Note is subject to customary events of default, the occurrence of which automatically trigger the unpaid principal balance of the Note and all other sums payable with regard to the Note becoming immediately due and payable. As of August 16, 2021, the Company had borrowed approximately $249,700 under the Note.
Merger Agreement
On July 18, 2021, the Company entered into the Merger Agreement by and among the Company, Merger Sub, and Fast Radius, pursuant to which Merger Sub will merge with and into Fast Radius, with Fast Radius surviving such merger as a wholly owned subsidiary of the Company (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). At the Closing, the Company will be renamed “Fast Radius, Inc.” The Business Combination is expected to be consummated in the fourth quarter of 2021, subject to the fulfillment of certain customary closing conditions.
Subject to the terms of the Merger Agreement, the aggregate merger consideration with respect to all holders of Fast Radius securities outstanding immediately prior to the Closing, which will be issued in the form of shares or equity awards relating to shares of Class A common stock, will equal 100,000,000 shares of Class A common stock at a deemed value of $10.00 per share (the “Aggregate Merger Consideration”).
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The Aggregate Merger Consideration will be issued to holders of Fast Radius securities at the Closing in accordance with the Merger Agreement, except that the issuance to holders of Fast Radius capital stock and Vested RSUs (as defined in the Merger Agreement) of a portion of the Aggregate Merger Consideration in an amount equal to 10,000,000 shares of Class A common stock (the “Fast Radius Earn Out Shares”) will be subject to the satisfaction of certain price targets set forth in the Merger Agreement during the five-year period following the Closing (the “Earn Out Period”), which price targets will be based upon (i) the daily volume-weighted average sale price of shares of Class A common stock quoted on The Nasdaq Capital Market (“NASDAQ”), or the exchange on which the shares of Class A common stock are then traded, for any 20 trading days within any 30 consecutive trading day period within the Earn Out Period or (ii) the per share consideration received in connection with the occurrence of certain change of control events of the combined company following Closing specified in the Merger Agreement (any such event, an “Acquiror Sale”). In the event of an Acquiror Sale in which the per share consideration received is less than a price target set forth in the Merger Agreement that has not previously occurred, the applicable provisions of the Merger Agreement will terminate and no Fast Radius Earn Out Shares will be issuable thereunder with respect to such price target in connection with or following completion of such Acquiror Sale. The Fast Radius Earn Out Shares will be issuable in two equal tranches of 5,000,000 shares of Class A common stock at the time that the Class A common stock reaches a value, as calculated above, of $15.00 and $20.00, respectively, and will be allocated among the applicable holders of Fast Radius capital stock and Vested RSUs on a pro rata basis in accordance with the Merger Agreement.
In connection with the Closing, the shares (the “Founder Shares”) of Class B common stock issued prior to the Company’s initial public offering that are held by the Sponsor, our independent directors and GSAM will automatically convert into shares of Class A common stock on a one-for-one basis (the “Converted Shares”). 10% of the Converted Shares held by the Sponsor (the “Sponsor Earn Out Shares”) will be subject to vesting upon the satisfaction of certain price targets set forth in the sponsor support agreement the Company entered into with the Sponsor and its independent directors concurrently with the execution of the Merger Agreement (the “Sponsor Support Agreement”) during the Earn Out Period, which price targets will be based upon the (i) the daily volume-weighted average sale price of shares of Class A common stock quoted on NASDAQ, or the exchange on which the shares of Class A common stock are then traded, for any 20 trading days within any 30 consecutive trading day period within the Earn Out Period or (ii) the per share consideration received in connection with an Acquiror Sale. In the event of an Acquiror Sale in which the per share consideration received is less than a price target set forth in the above that has not previously occurred, the applicable provisions of the Sponsor Support Agreement will terminate and no Sponsor Earn Out Shares will be issuable thereunder with respect to such price target in connection with or following completion of such Acquiror Sale. The Sponsor Earn Out Shares will vest in two equal tranches of 407,000 shares of Class A common stock at the time that the Class A common stock reaches a value, as calculated above, of $15.00 and $20.00, respectively.
Private Placements
In connection with the execution of the Merger Agreement, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to the PIPE Investors, an aggregate of 7,500,000 shares of Class A common stock (1,000,000 shares of which will be issued and sold to the Sponsor in its capacity as a PIPE Investor) for a purchase price of $10.00 per share, or an aggregate of $75,000,000, in the PIPE Investment. The closing of the PIPE Investment will occur substantially concurrently with the consummation of the Business Combination and is conditioned thereon and on other customary closing conditions. The shares of Class A common stock to be issued pursuant to the Subscription Agreements will not be registered under the Securities Act and will be issued in reliance upon the exemption provided under Section 4(a)(2) of the Securities Act.
Concurrently with the execution of the Merger Agreement, the Company, the Sponsor and GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, entered into the Side Letter to the Forward Purchase Agreement, pursuant to which GSAM irrevocably consented to purchase from the Company, and the Company agreed to issue and sell to GSAM, 2,500,000 Forward Purchase Units, each consisting of the Forward Purchase Shares and the Forward Purchase Warrants, at a price of $10.00 per Forward Purchase Unit, or an aggregate of $25,000,000, in a private placement to be consummated substantially concurrently with the consummation of the Business Combination. Each whole Forward Purchase Warrant will be exercisable to purchase one share of Class A common stock at an exercise price of $11.50 per share. The Company and the Sponsor also waived GSAM’s potential obligation to forfeit shares of Class B common stock under the circumstances contemplated by the Forward Purchase Agreement in connection with the Closing.
Results of Operations
We have neither engaged in any operations (other than searching for a Business Combination after our Initial Public Offering) nor generated any revenues to date. Our only activities from October 29, 2020 (inception) through June 30, 2021 were organizational activities and 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 expect to generate non-operating income in the form of interest income on the proceeds derived from the Initial Public Offering and placed in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
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For the three and six months ended June 30, 2021, we had a net operating loss of $1,136,718 and $1,422,261, respectively, which consists of general and administrative expenses and franchise tax expense.
Liquidity and Capital Resources
As of June 30, 2021, we had cash of $204,797 outside of the Trust Account and working capital of $18,502. Until the consummation of the Initial Public Offering, our only sources of liquidity were an initial purchase of common stock by the Sponsor and a loan from an affiliate of our Sponsor. Through June 30, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares, formation and offering costs paid by the Sponsor on the Company’s behalf in an aggregate amount of $188,149, which were repaid and the remaining net proceeds from the Initial Public Offering and Private Placement (as described in Note 3 and 4).
On February 11, 2021, we consummated the Initial Public Offering of 34,500,000 Units at a price of $10.00 per Unit, including 4,500,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional Units to cover over-allotments, generating gross proceeds of $345,000,000. Simultaneously with the closing of the Initial Public Offering, we completed two private sales of an aggregate of 6,266,667 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor and GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, generating gross proceeds of $9,400,000.
Following the Initial Public Offering and the sale of the Private Placement Warrants, a total of $345,000,000 was placed in the Trust Account and we had $1,991,625 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, available for working capital purposes. We paid a total of $6,900,000 in underwriting discounts and commissions and $631,427 for other cash offering costs related to the Initial Public Offering. Additional offering costs of $35,643 were incurred during the three months ended June 30, 2021. In addition, the underwriters agreed to defer $12,075,000 in underwriting discounts and commissions.
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 Business Combination. We may withdraw interest to pay franchise and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
On July 30, 2021, the Company issued an unsecured promissory note in the principal amount of $1,500,000 to an affiliate of the Sponsor, which may be drawn down by the Company from time to time upon written notice to the lender. The Note does not bear interest and is repayable in full upon consummation of a Business Combination. If the Company does not complete a Business Combination, the Note shall not be repaid and all amounts owed under it will be forgiven. Upon the consummation of a Business Combination, the holder of the Note (or a permitted assignee) shall have the option, but not the obligation, to convert all or a portion of the unpaid principal balance of the Note into that number of Working Capital Warrants equal to the principal amount of the Note so converted divided by $1.50. The terms of the Working Capital Warrants will be identical to the terms of the warrants issued by the Company to the Sponsor in a private placement that took place simultaneously with the Company’s initial public offering. The Note is subject to customary events of default, the occurrence of which automatically trigger the unpaid principal balance of the Note and all other sums payable with regard to the Note becoming immediately due and payable. As of August 16, 2021, the Company had borrowed approximately $249,700 under the Note.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our 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 Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $12,075,000 in the aggregate. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement.
In connection with the execution of the Merger Agreement, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to the PIPE Investors, an aggregate of 7,500,000 shares of Class A common stock (1,000,000 shares of which will be issued and sold to the Sponsor in its capacity as a PIPE Investor) for a purchase price of $10.00 per share, or an aggregate of $75,000,000, in the PIPE Investment. The closing of the PIPE Investment will occur substantially concurrently with the consummation of the Business Combination and is conditioned thereon and on other customary closing conditions. The shares of Class A common stock to be issued pursuant to the Subscription Agreements will not be registered under the Securities Act and will be issued in reliance upon the exemption provided under Section 4(a)(2) of the Securities Act.
On January 24, 2021, we entered into a Forward Purchase Agreement with GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, as amended by the First Amendment to Forward Purchase Agreement, dated as of January 31, 2021, pursuant to which the GSAM Client Accounts committed to purchase an aggregate of up to 5,000,000 Forward Purchase Units, consisting of the Forward Purchase Shares and the Forward Purchase Warrants, for $10.00 per Forward Purchase Unit, or an aggregate maximum amount of $50,000,000, in a private placement that will close simultaneously with the closing of our initial Business Combination. Each whole Forward Purchase Warrant is exercisable to purchase one share of our Class A common stock at $11.50 per share. The Forward Purchase Warrants will have the same terms as the public warrants and the Forward Purchase Shares will be identical to the shares of Class A common stock included in the units sold in the Initial Public Offering, except the Forward Purchase Shares and the Forward Purchase Warrants will be subject to transfer restrictions and certain registration rights. The funds from the sale of the Forward Purchase Units may be used to fund the purchase price of the Business Combination or for the working capital needs of the post-transaction company. The Forward Purchase Agreement is independent of the percentage of stockholders electing to redeem their public shares and may provide us with an increased minimum funding level for the initial Business Combination.
Concurrently with the execution of the Merger Agreement, the Company, the Sponsor and GSAM, in its capacity as investment adviser on behalf of the GSAM Client Accounts, entered into the Side Letter, pursuant to which GSAM irrevocably consented to purchase from the Company, and the Company agreed to issue and sell to GSAM, 2,500,000 Forward Purchase Units at a price of $10.00 per Forward Purchase Unit, or an aggregate of $25,000,000, in a private placement to be consummated substantially concurrently with the consummation of the Business Combination. The Company and the Sponsor also waived GSAM’s potential obligation to forfeit shares of Class B common stock under the circumstances contemplated by the Forward Purchase Agreement in connection with the Closing.
Critical Accounting Policies
The preparation of unaudited condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and income and expenses during the periods reported. We have identified the following critical accounting policies effecting our financial statements:
Warrant Liabilities and Forward Purchase Agreement
We account for the Warrants and Forward Purchase Agreement as either equity-classified or liability-classified instruments based on an assessment of the specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants and Forward Purchase Agreement are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the Warrants and Forward Purchase Agreement meet all of the requirements for equity classification under ASC 815, including whether the Warrants and Forward Purchase Agreement are indexed to our own shares of Class A common stock and whether the holders of Warrants and Forward Purchase Units could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the Warrants and Forward Purchase Agreement and as of each subsequent quarterly period end date while the Warrants and Forward Purchase Agreement are outstanding. For issued or modified Warrants and Forward Purchase Agreement that meet all of the criteria for equity classification, such Warrants and Forward Purchase Agreement are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified Warrants and Forward Purchase Agreement that do not meet all the criteria for equity classification, such Warrants and Forward Purchase Agreement are required to be
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recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the liability-classified Warrants and Forward Purchase Agreement are recognized as a non-cash gain or loss on the statements of operations.
We account for the Warrants and Forward Purchase Agreement in accordance with the guidance contained in ASC 815-40 under which the Warrants and Forward Purchase Agreement do not meet the criteria for equity treatment and must be recorded as liabilities.
Accordingly, we classify the Warrants and Forward Purchase Agreement as liabilities at their fair value and adjust the Warrants and Forward Purchase Agreement 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 unaudited condensed consolidated statement of operations. See Note 6 to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report for further discussion of the pertinent terms of the Warrants and Forward Purchase Agreement and Note 8 for further discussion of the methodology used to determine the value of the liabilities.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption are classified as a liability instrument 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 the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stock shares are classified as stockholders’ equity. Our Class A common stock shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A common stocks subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our unaudited condensed consolidated balance sheet.
Net Earnings (Loss) per Share
We apply the two-class method in calculating net earnings or loss per share. Net income or loss per share, basic and diluted, for the Class A redeemable common stock is calculated by dividing any interest and dividends income earned on the Trust Account, net of applicable taxes, by the weighted average number of redeemable Class A common stock outstanding for the period. Net loss per common stock share, basic and diluted, for Class A and Class B non-redeemable common stock is calculated by dividing the net income for the period, less income attributable to the shares of Class A common stock, by the weighted average number of Class A and Class B non-redeemable common stock shares outstanding for the period. Non-redeemable common stock shares include the Class B Founder Shares, as these shares do not have any redemption features and do not participate in the income earned on the funds held in the Trust Account.
Offering Costs
Offering costs consist of legal, accounting, underwriting and other costs incurred through the condensed consolidated balance sheet date that are directly related to the Initial Public Offering. Upon the completion of the Initial Public Offering in February 2021, the offering costs are allocated between stockholders’ equity and other expenses based on the fair value of warrant liabilities relative to the Initial Public Offering proceeds recognized in stockholders’ equity.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed consolidated financial statements.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2021, we were not subject to any material market or interest rate risk. The net proceeds from our Initial Public Offering held in the Trust Account have been invested only in U.S. government securities 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 that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon their evaluation, and in light of the material weakness identified in the Quarterly Report on Form 10-Q that we filed with the SEC on May 24, 2021, our management, including our principal executive officer and principal financial and accounting officer, concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) as of June 30, 2021 were not effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
In light of this material weakness, the Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. Specifically, we have expanded and improved our review process for complex securities and related accounting standards, including enhancing access to accounting literature and improving identification of third-party professionals with whom to consult regarding complex accounting applications. Other than as described herein, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus filed with the SEC on February 10, 2021 and our quarterly report on Form 10-Q filed with the SEC on May 24, 2021 (“Q1 10-Q”). As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus or Q1 10-Q filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On February 11, 2021, we consummated the Initial Public Offering of 34,500,000 Units, including 4,500,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional Units to cover over-allotments. The Units sold were sold at an offering price of $10.00 per unit, generating total gross proceeds of $345,000,000. Barclays Capital Inc., Morgan Stanley & Co. LLC and BMO Capital Markets Corp. acted as bookrunners. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-252172). The Securities and Exchange Commission declared the registration statement effective on February 8, 2021.
Simultaneous with the consummation of the Initial Public Offering and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 6,266,667 warrants at a price of $1.50 per Private Placement Warrant, generating total proceeds of $9,400,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, the full exercise of the over-allotment option and the sale of the Private Placement Warrants, $345,000,000 was placed in the Trust Account.
We paid a total of $6,900,000 in underwriting discounts and commissions and $667,070 for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $12,075,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6.Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
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Description of Exhibit |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS* |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH* |
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Inline XBRL Taxonomy Extension Schema Document |
101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
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Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
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The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101 |
* |
Filed herewith. |
** |
Furnished. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ECP ENVIRONMENTAL GROWTH OPPORTUNITIES CORP. |
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Date: August 19, 2021 |
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By: |
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/s/ Tyler Reeder |
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Name: |
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Tyler Reeder |
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Title: |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: August 19, 2021 |
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By: |
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/s/ Drew Brown |
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Name: |
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Drew Brown |
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Title: |
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Executive Vice President and Chief Financial Officer |
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(Principal Accounting and Financial Officer) |
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