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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(Registrant’s telephone number, including area code)
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 November 22, 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 September 30, 2021 (Unaudited) and December 31, 2020 |
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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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1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ECP Environmental Growth Opportunities Corp.
Condensed Consolidated Balance Sheets
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September 30, 2021 |
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December 31, 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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Total current assets |
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Deferred offering costs associated with public offering |
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— |
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Marketable securities held in Trust Account |
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— |
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Other assets |
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— |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) 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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Due to related party |
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— |
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Accrued expenses |
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Franchise tax payable |
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— |
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Total current liabilities |
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Warrant liabilities |
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— |
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Forward purchase agreement |
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— |
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Deferred underwriting commission |
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— |
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Total liabilities |
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Commitments and Contingencies (Note 6) |
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Class A common stock, $ shares at $ |
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— |
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Stockholders' (Deficit) Equity: |
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Preferred stock, $ and outstanding |
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Class A common stock, $ issued and outstanding (excluding |
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— |
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Class B common stock, $ shares issued and outstanding |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders' (deficit) equity |
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( |
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Total liabilities and stockholders' (deficit) 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 September 30, 2021 |
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Nine Months Ended September 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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( |
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( |
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Other Income (Expense) |
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Offering costs allocated to derivative liabilities |
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— |
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( |
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Offering costs on Founder Shares issued to related party |
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— |
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( |
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Interest and dividends earned on marketable securities held in Trust Account |
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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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Net income |
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$ |
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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 earnings per share of redeemable common stock, Class A |
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$ |
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$ |
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Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted |
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Basic and diluted net earnings per share of non-redeemable common stock, Class B |
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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
3
ECP Environmental Growth Opportunities Corp.
Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity
For the three and nine months ended September 30, 2021
(Unaudited)
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Common Stock |
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Additional Paid-In Capital |
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Accumulated Deficit |
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Total Stockholders' Equity (Deficit) |
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Class B |
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Shares |
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Amount |
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Balance as of January 1, 2021 |
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$ |
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$ 24,137 |
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$ ( |
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Excess cash received over fair value of Private Placement Warrants |
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— |
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41,360 |
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Accretion of Class A Common Stock to redemption value (as restated) |
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— |
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(65,497) |
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( |
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Net income |
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— |
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— |
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— |
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Balance as of March 31, 2021 (as restated) |
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$ |
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$ — |
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$ ( |
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$ ( |
Share-based compensation, cash offering costs, and offering costs on Founder Shares issued to related party and directors (as restated) |
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2,647,500 |
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Accretion of Class A Common Stock to redemption value (as restated) |
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— |
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(1,285,400) |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
Balance as of June 30, 2021 (as restated) |
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$ |
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$ 1,362,100 |
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$ ( |
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$ ( |
Net income |
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— |
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— |
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— |
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Balance as of September 30, 2021 |
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$ |
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$ 1,362,100 |
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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
For the nine months ended September 30, 2021
(Unaudited)
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Cash Flows from Operating Activities: |
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Net Income |
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$ |
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Adjustments to reconcile net income 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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( |
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Interest and dividends earned on marketable securities held in Trust Account |
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( |
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Offering costs allocated to derivative warrant liabilities |
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Share-based compensation and offering costs on Founder Shares issued to related party and directors |
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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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( |
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Other assets |
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( |
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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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( |
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Cash Flows from Investing Activities: |
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Investment of cash into Trust Account |
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( |
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Net cash used in investing activities |
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( |
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Cash Flows from Financing Activities: |
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Repayment of Sponsor loan |
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( |
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Working capital loan from related party |
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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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Payment of other offering costs |
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( |
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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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Deferred underwriting fees payable |
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$ |
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Deferred offering costs included in accounts payable |
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$ |
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Deferred offering costs included 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 offering costs in accrued offering costs and accounts payable at December 31, 2020 |
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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 SEPTEMBER 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 September 30, 2021, the Company had not commenced any operations. All activity through September 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 $
On July 18, 2021, the Company entered into an Agreement and Plan of Merger (the “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 “Business Combination”). At the closing of the Merger (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
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
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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
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
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-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 6). 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.” The Company will proceed with a Business Combination if the Company has net tangible assets of at least $
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Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the transaction. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Founder Shares prior to this Initial Public Offering (the “Initial Stockholders”) have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
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
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 6) 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 $
Going Concern Consideration
As of September 30, 2021, the Company had $
On July 30, 2021, the Company issued an unsecured promissory note (the “Note”) in the principal amount of $
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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 warrants to purchase
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity condition and date for mandatory liquidation and dissolution raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date these consolidated financial statements were issued. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
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—Restatement of Previously Issued Consolidated Financial Statements
In connection with the preparation of the Company’s condensed consolidated financial statements as of and for the period ended September 30, 2021, management determined it should restate its previously reported financial statements. The Company determined, at the closing of the Company’s Initial Public Offering and when shares were sold pursuant to the exercise of the underwriters’ overallotment, it had improperly classified its Class A common stock subject to possible redemption. The Company previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $
There has been
The impact of the restatement on the Company’s consolidated financial statements included in its Form 10-Q for the period ending June 30, 2021 as filed with the SEC on August 20, 2021, and Form 10-Q for the period ending March 31, 2021 as filed with the SEC on May 24, 2021 is reflected in the following table:
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As of June 30, 2021 |
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As Previously |
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Condensed Consolidated Balance Sheet |
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Reported |
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Adjustment |
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As Restated |
Common stock subject to possible redemption |
$ |
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$ |
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$ |
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Stockholders' equity (deficit) |
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Class A common stock - $ |
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( |
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— |
Additional paid-in capital |
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( |
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Accumulated deficit |
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( |
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( |
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( |
Total Stockholders' equity (deficit) |
$ |
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$ |
( |
$ |
( |
9
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Three Months Ended June 30, 2021 |
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As Previously |
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Condensed Consolidated Statement of Operations |
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Reported |
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Adjustment |
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As Restated |
Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted |
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Weighted average shares outstanding of Class A and B non-redeemable common stock, basic and diluted |
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( |
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— |
Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted |
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— |
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Basic and diluted earnings (net loss) per share, Class A common stock subject to possible redemption |
$ |
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$ |
( |
$ |
( |
Basic and diluted earnings (net loss) per share of non-redeemable common stock, Class A and B |
$ |
( |
$ |
|
$ |
|
Basic and diluted earnings (net loss) per share, Class B non-redeemable common stock |
$ |
|
$ |
( |
$ |
( |
|
|
Six Months Ended June 30, 2021 |
||||
|
|
As Previously |
|
|
|
|
Condensed Consolidated Statement of Operations |
|
Reported |
|
Adjustment |
|
As Restated |
Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted |
|
|
|
( |
|
|
Weighted average shares outstanding of Class A and B non-redeemable common stock, basic and diluted |
|
|
|
( |
|
— |
Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted |
|
— |
|
|
|
|
Basic and diluted earnings (net loss) per share, Class A common stock subject to possible redemption |
$ |
|
$ |
( |
$ |
( |
Basic and diluted earnings (net loss) per share of non-redeemable common stock, Class A and B |
$ |
( |
$ |
|
$ |
|
Basic and diluted earnings (net loss) per share, Class B non-redeemable common stock |
$ |
|
$ |
( |
$ |
( |
|
Three Months Ended June 30, 2021 |
||||
Condensed Consolidated Statement of Changes in Stockholders' Deficit |
As Previously Reported |
|
Adjustment |
|
As Restated |
Offering costs |
$ ( |
|
$ |
|
$ — |
Share-based compensation and offering costs on Founder Shares issued to related party and directors |
|
|
|
|
|
Change in value of common stock subject to possible redemption |
|
|
( |
|
— |
Accretion of Class A Common Stock to redemption value |
— |
|
( |
|
( |
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
||||
Condensed Consolidated Statement of Changes in Stockholders' Deficit |
As Previously Reported |
|
Adjustment |
|
As Restated |
Sale of Units in initial public offering, less fair value of public warrants |
$ |
$ |
( |
$ |
— |
Offering costs |
( |
|
|
|
— |
Forward purchase agreement |
( |
|
|
|
— |
Common stock subject to possible redemption |
( |
|
|
|
— |
Share-based compensation and offering costs on Founder Shares issued to related party and directors |
|
|
|
|
|
Change in value of common stock subject to possible redemption |
|
|
( |
|
— |
Accretion of Class A Common Stock to redemption value |
— |
|
( |
|
( |
|
|
|
|
|
|
10
|
|
As of March 31, 2021 |
||||||||||
|
|
As Previously |
|
|
|
|
||||||
Condensed Balance Sheet |
|
Reported |
|
Adjustment |
|
As Restated |
||||||
Common stock subject to possible redemption |
$ |
|
$ |
|
$ |
|
||||||
Stockholders' equity (deficit) |
|
|
|
|
|
|
||||||
Class A common stock - $ |
|
|
|
( |
|
— |
||||||
Retained earnings (Accumulated deficit) |
|
|
|
( |
|
( |
||||||
Total Stockholders' equity (deficit) |
$ |
|
$ |
( |
$ |
( |
||||||
|
|
Three Months Ended March 31, 2021 |
||||||||||
|
|
As Previously |
|
|
|
|
||||||
Condensed Statement of Operations |
|
Reported |
|
Adjustment |
|
As Restated |
||||||
Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted |
|
|
|
( |
|
|
||||||
Weighted average shares outstanding of Class A and B non-redeemable common stock, basic and diluted |
|
|
|
( |
|
— |
||||||
Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted |
|
— |
|
|
|
|
||||||
Basic and diluted earnings (net loss) per share, Class A common stock subject to possible redemption |
$ |
|
$ |
|
$ |
|
||||||
Basic and diluted earnings (net loss) per share of non-redeemable common stock, Class A and B |
$ |
|
$ |
( |
$ |
|
||||||
Basic and diluted earnings (net loss) per share, Class B non-redeemable common stock |
$ |
|
$ |
|
$ |
|
|
Three Months Ended March 31, 2021 |
||||
Condensed Statement of Changes in Stockholders' Deficit |
As Previously Reported |
|
Adjustment |
|
As Restated |
Sale of Units in initial public offering, less fair value of public warrants |
$ |
$ |
( |
$ |
— |
Offering costs |
( |
|
|
|
— |
Forward purchase agreement |
( |
|
|
|
— |
Common stock subject to possible redemption |
( |
|
|
|
— |
Accretion of Class A Common Stock to redemption value |
— |
|
( |
|
( |
|
|
|
|
|
|
|
|
As of February 11, 2021 |
||||
|
|
As Previously |
|
|
|
|
Condensed Balance Sheet |
|
Reported |
|
Adjustment |
|
As Restated |
Common stock subject to possible redemption |
$ |
|
$ |
|
$ |
|
Stockholders' equity (deficit) |
|
|
|
|
|
|
Class A common stock - $ |
|
|
|
( |
|
— |
Additional paid-in capital |
|
|
|
( |
|
— |
Retained earnings (Accumulated deficit) |
|
( |
|
( |
|
( |
Total Stockholders' equity (deficit) |
$ |
|
$ |
( |
$ |
( |
Note 3 — 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”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X 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 nine months ended September 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.
11
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Merger Sub, as of September 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 $
Derivative Financial Instruments
The Company accounts for the Warrants, Forward Purchase Agreement (as defined below), and Working Capital Loan conversion option (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. The conversion feature within the Working Capital Loan gives the Sponsor an option to convert the loan to warrants of the Company’s Class A common stock. This bifurcated feature is assessed at the end of each reporting period to conclude whether additional liability should be recorded. The Instruments are subjected 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 and 7 for further discussion of the pertinent terms of the Warrants and Forward Purchase Agreement and Note 9 for further discussion of the methodology used to determine the value of the Warrants, Forward Purchase Agreement, and Working Capital Loan conversion option.
Cash and Marketable Securities Held in Trust Account
At September 30, 2021, the assets held in the Trust Account were invested in money market funds.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption 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
12
temporary equity. At all other times, common stock is classified as shareholders’ equity. The Company’s Class A 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, at September 30, 2021,
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. From the period beginning January 1, 2021 through September 30, 2021, the Company recorded accretion of Class A common stock to the redemption value in the amount of $
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, Forward Purchase Agreement, and Working Capital Loan Liabilities as described above, the fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (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:
|
• |
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
|
• |
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 |
|
• |
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 September 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 and 7 for further discussion of the pertinent terms of the Warrants and Forward Purchase Agreement and Note 9 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 charged to temporary equity.
Earnings Per Share of Common Stock
Earnings per share of common stock is computed by dividing net earnings (or loss) by the weighted average number of shares issued and outstanding during the period. The Company has not considered the effect of their Forward Purchase Agreement, warrants sold in the Initial
13
Public Offering, private placement to purchase Class A common stock, and Working Capital Loan warrants in the calculation of diluted income per share, since the instruments are not dilutive.
At September 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted income per share is the same as basic income per share for the periods presented.
The Company has
A reconciliation of the earnings per share is below:
|
|
For the Three Months Ended September 30, 2021 |
|
|
For the Nine Months Ended September 30, 2021 |
|
||
Numerator: Earnings allocable to Redeemable Class A Common Stock |
|
|
|
|
|
|
|
|
Net Earnings allocable to Redeemable Class A Common Stock |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average Share Outstanding, Redeemable Class A Common Stock |
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Redeemable Class A |
|
|
|
|
|
|
|
|
Basic and diluted net earnings per share, Redeemable Class A |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Class B Common Stock |
|
|
|
|
|
|
|
|
Numerator: Net Income allocable to Non-Redeemable Net Earnings |
|
|
|
|
|
|
|
|
Net Income allocable to Non-Redeemable Class B Common Stock |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average Non-Redeemable Class B Common Stock |
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-Redeemable Class B |
|
|
|
|
|
|
|
|
Basic and diluted net earnings per share, Non-Redeemable Class B |
|
$ |
|
|
|
$ |
|
|
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 September 30, 2021 and December 31, 2020.
14
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require only separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
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 4—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 5—Related Party Transactions
Founder Shares
On December 8, 2020, the Sponsor paid an aggregate of $
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
15
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” or “Note”). On July 30, 2021, the Company issued an unsecured promissory note in the principal amount of $
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 September 30, 2021, there was a balance 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 $
Note 6—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 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
16
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 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 7—Warrant Liabilities
Public Warrants may only be exercised for a whole number of shares.
The warrants have an exercise price of $
17
or effective issue price of less than $
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 $
|
• |
in whole and not in part; |
|
• |
at a price of $ |
|
• |
upon a minimum of |
|
• |
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 $
|
• |
in whole and not in part; |
|
• |
upon a minimum of |
|
• |
if, and only if, the last reported sale price of Class A common stock equals or exceeds $ |
|
• |
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
18
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 8—Stockholders’ Deficit
Preferred Stock — The Company is authorized to issue
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
Note 9—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 September 30, 2021 including the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
|
|
Description |
|
Level |
|
|
Fair Value |
|
||
September 30, 2021 |
|
Marketable securities |
|
|
1 |
|
|
$ |
|
|
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 September 30, 2021:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Warrants |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Private Placement Warrants |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Forward Purchase Agreement |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
On April 1, 2021, the Public Warrants surpassed the
19
Prospectus filed February 10, 2021. Once publicly traded, the observable input qualifies the liability for treatment as a Level 1 liability. As such, as of September 30, 2021, the Company classified the Public Warrants as Level 1. The Private Warrants were valued based on the trading price of Public Warrants, which is considered to be a Level 2 fair value measurement. To estimate the value of the Private Placement Warrants, the Company used the public trading price of the Public Warrants. This value was adjusted to reflect the value of the issuer call provision of the Public Warrants, as this right is not applicable to the Private Placement Warrants unless they are sold by the initial holders. At September 30, 2021, Forward Purchase Units were valued equal to the difference between the current public trading price and the purchase price, as the Forward Purchase Agreement requires the purchase of units for $
Outside of the transfer of the Forward Purchase Agreement from Level 2 to Level 3, there were
The following table presents a summary of the changes in the fair value of the Derivative Liabilities:
|
|
Public Warrant |
|
|
Private Warrant |
|
|
Forward purchase |
|
|
|
|
|
|||
|
|
Liability |
|
|
Liability |
|
|
Agreement |
|
|
Total |
|
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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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|
|
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|
|
|
|
|
|
|
|
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Fair value, March 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Recognized loss on change in fair value |
|
|
( |
|
|
|
( |
|
|
|
( |
|
|
|
( |
|
Fair value, June 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Recognized gain on change in fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
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Note 10—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, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
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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 completion of the Business Combination (as defined below), 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, including that the conditions of the Business Combination are not satisfied. 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.
Proposed Business Combination
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”).
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
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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.
Amended and Restated Registration Rights Agreement
Concurrently with the execution of the Merger Agreement, the Company, the Sponsor, and certain stockholders of the Company and Fast Radius named therein entered into an Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”), which became effective upon the execution of the Merger Agreement. Pursuant to the Registration Rights Agreement, the Company agreed to file a shelf registration statement with respect to the registrable securities thereunder within 30 days of the Closing. The Company will thereafter be required to maintain a registration statement that is continuously effective and to cause the registration statement to regain effectiveness in the event that it ceases to be effective. At any time that the registration statement is effective, any holder signatory to the Registration Rights Agreement may request to sell all or a portion of its securities that are registrable in an underwritten offering pursuant to the registration statement. In addition, the holders have certain “piggyback” registration rights with respect to registrations initiated by the Company. The Company will bear the expenses incurred in connection with the filing of any registration statements pursuant to the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Sponsor, the Company’s directors and officers and certain stockholders of Fast Radius have, subject to limited exceptions, agreed to a lock-up on their respective shares of Class A common stock following consummation of the Business Combination, pursuant to which such parties will not transfer shares of Class A common stock held by such parties for 180 days following the Closing. The Sponsor has also agreed to a lock-up on the warrants to purchase shares of Class A common stock at a price of $11.50 per share that it acquired in a private placement in connection with the Company’s Initial Public Offering, pursuant to which the Sponsor will not transfer such warrants for 30 days following the Closing.
Company Support Agreement
Concurrently with the execution of the Merger Agreement, certain stockholders of Fast Radius who, in the aggregate hold a majority of the outstanding shares of capital stock of Fast Radius on a fully diluted basis, entered into a company support agreement (the
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“Company Support Agreement”) with Fast Radius and the Company pursuant to which such stockholders agreed to, on (or effective as of) the second business day following the date on which a registration statement on Form S-4 (the “Registration Statement”) is declared effective under the Securities Act, execute and deliver a written consent to adopt the Merger Agreement, the documents contemplated by the Merger Agreement and the transactions contemplated by the Merger Agreement and to waive appraisal rights in connection with the Merger. In addition, such stockholders agreed, in the event of an annual or special meeting of Fast Radius stockholders for purposes of approving the Business Combination, to (i) appear or cause their shares to be counted present for quorum purposes, (ii) vote in favor of or consent to the Merger and any other matter included on the agenda for such meeting of Fast Radius’ stockholders relating to the Business Combination, (iii) vote (or execute an action by written consent with respect thereto) against any proposal that would reasonably be expected to impede the Business Combination and (iv) vote in favor of or consent to the Business Combination in any other circumstance so required for completion of the Business Combination. Each such stockholder also granted an irrevocable proxy to the Company’s Chief Executive Officer to act for and on such stockholder’s behalf, and in such stockholder’s name, place and stead, in the event that such stockholder fails to comply in any material respect with his, her or its obligations under the Company Support Agreement in a timely manner, to vote such stockholder’s shares and grant all written consents with respect thereto and to represent such shareholder in any stockholder meeting held for the purpose of voting on the Business Combination.
Sponsor Support Agreement
Concurrently with the execution of the Merger Agreement, the Sponsor and the Company’s directors and officers entered into the Sponsor Support Agreement with the Company and Fast Radius, pursuant to which the Sponsor and the Company’s directors and officers agreed, at any special meeting of the Company’s stockholders for purposes of approving the Business Combination, to (i) appear or cause their shares to be counted present for quorum purposes, (ii) vote in favor of or consent to the Merger and any other matter included on the agenda for the special meeting of the Company’s stockholders relating to the Business Combination, (iii) vote (or execute an action by written consent with respect thereto) against any proposal that would reasonably be expected to impede the Business Combination and (iv) vote in favor of or consent to the Business Combination in any other circumstance so required for completion of the Business Combination. The Sponsor and the Company’s directors and officers also agreed not to redeem any shares of Class A common stock owned by such persons in connection with the approval of the Business Combination by the Company’s stockholders.
At the Closing, all of the Founder Shares will convert into shares of Class A common stock in accordance with the terms of the Company’s amended and restated certificate of incorporation. Pursuant to the Sponsor Support Agreement, at the Closing, 90% of such Converted Shares will automatically vest. The Sponsor Earn Out Shares will be subject to vesting, for the duration of the Earn Out Period, in two equal tranches, upon the satisfaction of certain price targets set forth in the Sponsor Support Agreement, which price targets will be based upon the (i) 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 Merger Agreement 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. Upon the expiration of the Earn Out Period, any unvested Sponsor Earn Out Shares will be forfeited to the Company without consideration.
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 September 30, 2021 were organizational activities and those necessary to prepare for the Initial Public Offering and the Business Combination, 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.
For the three and nine months ended September 30, 2021, we had a net operating loss of $1,534,290 and $2,956,551, respectively, which consists of general and administrative expenses and franchise tax expense.
Liquidity and Capital Resources
As of September 30, 2021, we had cash of $133,154 outside of the Trust Account and working capital deficiency of $1,211,058. 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 September 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 from the remaining net proceeds from the Initial Public Offering and Private Placement, and proceeds of $399,702 against the Working Capital Loan.
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
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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 $667,070 for other cash offering costs related to the Initial Public Offering. There were no additional offering costs incurred during the three months ended September 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 September 30, 2021, the Company had borrowed approximately $399,702 under the Note.
If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity. 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.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 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.
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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 FASB 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 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 7 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 6 for further discussion of the methodology used to determine the value of the liabilities.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” 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 shareholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and
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subject to occurrence of uncertain future events. Accordingly, at September 30, 2021, 34,500,000 shares of Class A common stock subject to possible redemption are presented as temporary equity outside of the shareholders’ equity section of the Company’s condensed balance sheets. From the period beginning January 1, 2021 through September 30, 2021, the Company recorded accretion of Class A common stock to the redemption value in the amount of $34,530,121.
Earnings per Share
Net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of common stock outstanding during the period, plus, to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method.
At September 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted income per share is the same as basic income per share for the periods presented.
The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock (the “Founder Shares”). Earnings are shared pro rata between the two classes of shares as long as an Initial Business Combination is consummated. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
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 a reduction to temporary equity.
Recent accounting standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require only separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
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 September 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 September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon their evaluation, 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) were not effective as of September 30, 2021, due to ability to apply the nuances of the complex accounting standards relating to financial instruments that apply to our financial statements and preparation of financial statements in accordance with GAAP, which resulted in the material weakness in our internal control over financial reporting described below in “Changes in Internal Control Over Financial Reporting.” In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cashflows for the period presented.
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”). Except as set forth below, 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.
In connection with the recent restatements of our financial statements, our management has concluded that our disclosure controls and procedures were not effective as of September 30, 2021 due to a material weakness in internal control over financial reporting related to our ability to apply the nuances of the complex accounting standards that apply to our financial statements and preparation of financial statements in accordance with GAAP. If we are unable to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and financial results.
After consultation with our management team, our management and our audit committee concluded that it was appropriate to restate our previously issued consolidated financial statements as described in Note 2 to the financial statements included in this report. As part of such process, we identified a material weakness in our internal control over financial reporting, related to our ability to apply the nuances of the complex accounting standards that apply to our financial statements and preparation of financial statements in accordance with GAAP.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We expect to take steps to remediate the material weakness, but there is no assurance that any remediation efforts will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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.
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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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2.1+ |
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Agreement and Plan of Merger, dated as of July 18, 2021, by and among ECP Environmental Growth Opportunities Corp., ENNV Merger Sub, Inc. and Fast Radius, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on July 19, 2021). |
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10.1 |
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Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on July 19, 2021). |
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10.2 |
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Side Letter to Forward Purchase Agreement, dated as of July 18, 2021, by and among ECP Environmental Growth Opportunities Corp., ENNV Holdings, LLC and Goldman Sachs Asset Management, L.P. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on July 19, 2021). |
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10.3 |
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Amended and Restated Registration Rights Agreement, dated as of July 18, 2021, by and among ECP Environmental Growth Opportunities Corp., ENNV Holdings, LLC and certain stockholders of ECP Environmental Growth Opportunities Corp. and Fast Radius, Inc. named therein (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on July 19, 2021). |
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10.4+ |
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Company Support Agreement, dated as of July 18, 2021, by and among ECP Environmental Growth Opportunities Corp., Fast Radius, Inc. and certain stockholders of Fast Radius, Inc. named therein (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on July 19, 2021). |
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10.5+ |
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Sponsor Support Agreement, dated as of July 18, 2021, by and among ECP Environmental Growth Opportunities Corp., its officers and directors and ENNV Holdings, LLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on July 19, 2021). |
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10.6 |
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Promissory Note, dated July 30, 2021, issued by ECP Environmental Growth Opportunities Corp. to Energy Capital Partners Management, LP (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-40032) filed on August 2, 2021). |
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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. |
+ |
Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). ENNV agrees to furnish, on a supplemental basis, a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request. |
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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: November 22, 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: November 22, 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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