UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| | ||
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including
area code:
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, 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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| 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
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
| Units, each consisting of one share of Class A common stock, $0.0001 par value, and one-third of one redeemable warrant | TETCU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Redeemable warrants included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 | TETCWS | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
As of November 21, 2021, there were
TECH AND ENERGY TRANSITION CORPORATION
Quarterly Report on Form 10-Q
Table of Contents
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
TECH AND ENERGY TRANSITION CORPORATION
CONDENSED BALANCE SHEETS
| September 30, 2021 |
March 31, 2021 |
|||||||
| (Unaudited) | (As restated)(1) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expense | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Prepaid expenses - non-current | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Redeemable Shares and Stockholder’s Equity | ||||||||
| Current liabilities: | ||||||||
| Accrued offering costs and expenses | ||||||||
| Due to related party | ||||||||
| Total current liabilities | ||||||||
| Derivative warrant liabilities | ||||||||
| Deferred Underwriters' Discount | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A Common Stock subject to possible redemption, |
||||||||
| Stockholders’ Equity | ||||||||
| Common stock, Class B $ |
||||||||
| Additional paid-in-capital | ||||||||
| Accumulated Deficit | ( |
( |
||||||
| Total stockholders’ deficit | ( |
( |
||||||
| Total Liabilities, Redeemable Shares, and Stockholders’ Equity | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
TECH AND ENERGY TRANSITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the three months ended September 30, | For the six months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Income/(Expense) | ||||||||||||||||
| Formation and operating expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations before income tax benefit | ( | ) | ( | ) | ||||||||||||
| Change in fair value of warrant liabilities | ||||||||||||||||
| Interest Income | ||||||||||||||||
| Total other income/(expenses) | ||||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding of Class A common stock | — | — | ||||||||||||||
| Basic and diluted net income per share, Class A common stock | $ | — | $ | — | ||||||||||||
| Weighted average shares outstanding of Class B common stock | ||||||||||||||||
| Basic and diluted net income per share, Class B common stock | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
TECH AND ENERGY TRANSITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Class A Common Stock | Class B Common Stock | Additional Paid-In- | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances, March 31, 2021 (As Restated) (1) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Class B Common Stock forfeiture | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | — | $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balances, June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Class A Common stock subject to possible redemption | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Class B Common Stock forfeiture | $ | $ | $ | $ | ||||||||||||||||||||||||
| Net Income | — | $ | — | $ | $ | $ | $ | |||||||||||||||||||||
| Balances, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| (1) | As restated to reflect reclassification of class A common stocks public shares subject to redemption (see Note 2). |
TECH AND ENERGY TRANSITION CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Class A Common Stock | Class B Common Stock | Additional Paid-In- | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances, March 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | — | — | ||||||||||||||||||||||||||
| Balances, June 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | — | — | ||||||||||||||||||||||||||
| Balances, September 30, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
TECH AND ENERGY TRANSITION CORPORATION
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2021
| For the six months ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income | $ | $ | ||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Interest earned from investments held in Trust Account | ( | ) | ||||||
| Change in operating assets and liabilities | ||||||||
| Prepaid expense - current and non-current | ||||||||
| Accrued offering costs and accounts payable | ||||||||
| Net cash provided by operating activities | $ | ( | ) | $ | ||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
TECH AND ENERGY TRANSITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Description of Organization, Business Operations and Basis of Presentation
Tech and Energy Transition Corporation (formerly known as M Acquisition Company IV Corporation) (the “Company”) was incorporated in Delaware on December 4, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
Although the Company is not limited to a particular industry or sector for the purpose of consummating a Business Combination, the Company intends to focus its search on companies in end markets – communications, internetworking, clean energy, digital technology and services and software applications that enable or support digital transformation. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not yet commenced operations. All activity through September 30, 2021 relates to the Company’s formation and initial public offering (“IPO”), and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected March 31st as its fiscal year end.
The Company’s sponsor is Tech and Energy Transition Sponsor LLC (the “Sponsor”), a Delaware limited liability company.
The registration statement for the Company’s
IPO was declared effective on March 16, 2021 (the “Effective Date”). On March 19, 2021, the Company consummated the IPO of
The underwriters had a 45-day option from the
date of the IPO to purchase up to an additional
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Following the closing of the IPO on March 19,
2021, $
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the IPO 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. There is no assurance that the
Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations
having an aggregate fair market value of at least
The Company will provide its holders of the outstanding
Public Shares of its Class A common stock, par value $
These Public Shares are recorded at a redemption
value and classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will
proceed with a Business Combination if the Company has net tangible assets of at least $
5
If the Company is unable to complete a Business
Combination within 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 (10) business days thereafter, redeem the Public Shares, at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay franchise and income taxes (less up to $
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 acquire Public Shares in or after the IPO, 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. 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 $
Liquidity and Capital Resources
The accompanying financial statements have been
prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and
satisfaction of liabilities in the normal course of business. As of September 30, 2021, the Company had approximately $
The Company’s liquidity needs prior to the
completion of the Initial Public Offering were satisfied through a payment from the Sponsor of $
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 6). As of September 30, 2021, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Note 2 — Restatement of Previously Issued Financial Statements
In connection with the preparation of the
Company's financial statements as of September 30, 2021, management determined it should restate its previously reported financial
statements included in the Form 8-K filed on March 25, 2021, the Form 10-K for the year ended March 31, 2021 and the Form 10-Q for
the quarter ended June 30, 2021. The Company previously determined that the Public Shares subject to possible redemption were equal
to their redemption value of $
There has been no change in the Company's total assets, liabilities or operating results.
6
The impact of the restatement on the Company's financial statements is reflected in the following table.
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Balance sheet as of March 19, 2021 | ||||||||||||
| Class A Common Stock subject to possible redemption | ( | ) | ||||||||||
| Common stock, Class A | ( | ) | ||||||||||
| Additional paid-in-capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Balance Sheet as of March 31, 2021 | ||||||||||||
| Class A Common Stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock, Class A | ( | ) | ||||||||||
| Additional paid-in-capital | ( | ) | ||||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||||||
| Balance Sheet as of June 30, 2021 | ||||||||||||
| Class A Common Stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock Class A - $ | ( | ) | ||||||||||
| Additional paid-in-capital | ( | ) | ||||||||||
| Accumulated Deficit | ( | ) | ( | ) | ( | ) | ||||||
| Statement of Operations for the year ended March 31, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ( | ) | ||||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Class B common stock | ( | ) | ||||||||||
| Basic and diluted net income per share, Class B common stock | $ | $ | ( | ) | $ | |||||||
| Statement of Operations for the three months ended June 30, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, Class B common stock | ( | ) | ||||||||||
| Basic and diluted net income per share, Class B common stock | $ | ( | ) | $ | $ | ( | ) | |||||
| Statements of Changes in Stockholders’ Equity for the year ended March 31, 2021 | ||||||||||||
| Sale of Units in public offering, less fair value of public warrants | ( | ) | ||||||||||
| Offering costs less, costs allocated to public warrants | ( | ) | ||||||||||
| Class A Common stock subject to possible redemption | ( | ) | ||||||||||
| Remeasurement adjustment on redeemable common stock | ( | ) | ( | ) | ||||||||
| Statements of Changes in Stockholders’ Equity for the three months ended June 30, 2021 | ||||||||||||
| Class A Common Stock subject to possible redemption | ( | ) | ||||||||||
| Remeasurement adjustment on redeemable common stock | ( | ) | ( | ) | ||||||||
| Statements of Cash Flows for the year ended March 31, 2021 | ||||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||
| Initial classification of common stock subject to possible redemption | ( | ) | ||||||||||
| Change in value of Class A common stock subject to possible redemption | ( | ) | ||||||||||
| Statements of Cash Flows for the three months ended June 30, 2021 | ||||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||
| Change in value of Class A common stock subject to possible redemption | ( | ) | ||||||||||
7
Note 3— Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed interim financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed interim financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ended March 31, 2022, or any future period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on July 1, 2021.
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, 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 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 financial statements in conformity with U.S. GAAP requires the Company’s 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 balance sheet. 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 balance sheet, 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 did not have any cash equivalents as of September 30, 2021 and March 31, 2021.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Realized and unrealized gains and losses resulting from the change in fair value of these securities is included in investment income on Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal depository insurance coverage
of $
8
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s 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 financial statements.
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 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.
Fair Value of Financial Instruments
Fair value measurements are based on the premise that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value (see Note 9):
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities on the reporting date. |
| ● | Level 2 – Pricing inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 – Pricing inputs are generally unobservable and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require management’s judgment or estimation of assumptions that market participants would use in pricing the assets or liabilities. The fair values are therefore determined using factors that involve considerable judgment and interpretations, including but not limited to private and public comparables, third-party appraisals, discounted cash flow models, and fund manager estimates. |
As of September 30, 2021, the recorded values of cash and investments held in the Trust Account, prepaid expenses, accounts payable, accrued expenses and expenses due– a related party approximate the fair values, due to the short-term nature of the instruments. The Company’s portfolio of investments held in the Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments in money market funds that invest in U.S. government securities, or a combination thereof. The fair value for trading securities is determined using quoted market prices in active market, other than for investments in open-ended money market funds with published daily NAV, in which case the Company uses NAV as a practical expedient to fair value.
Derivative warrant liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480 “Distinguishing Liabilities from Equity” 480 and ASC Subtopic 815-15 “Derivatives and Hedging — Embedded Derivatives.” The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period as presented (see note 10).
The
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering.” Offering costs
consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering
costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement
of operations. Offering costs associated with the Public Shares were charged to stockholders’ equity upon the completion of the
Initial Public Offering. Of the total offering costs of the IPO, approximately $
9
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.
Conditionally redeemable common stock (including
common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock
is classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject
to possible redemption are classified as temporary equity, outside of the stockholders’ equity section of the Company’s balance
sheet. Accordingly, as of September 30, 2021,
The Class A common stock subject to possible redemption are subject
to the subsequent measurement guidance in ASC Topic 480-10-S99. Under such guidance, the Company must subsequently measure the shares
to their redemption amount because, as a result of the allocation of net proceeds to transaction costs, the initial carrying amount of
the common stock is less than $
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statement and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction.
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
10
Net Income (Loss) per Common Share
The Company’s net income is adjusted for the portion of loss income that is attributable to common stock subject to redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted income per share of common stock is calculated as follows:
| For the three months ended September 30, 2021 | For the six months ended September 30, 2021 | |||||||
| Common stock subject to possible redemption | ||||||||
| Numerator: | ||||||||
| Allocation of net income, as adjusted | $ | $ | ||||||
| Denominator: | ||||||||
| Weighted average shares outstanding of Class A common stock | ||||||||
| Basic and diluted net income per share, Class A common stock | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, common stock | ||||||||
| Basic and diluted net income per share, common stock | $ | $ | ||||||
| Proportionate class shares outstanding | ||||||||
| Class A | ||||||||
| Class B | ||||||||
| Weight by class of share | ||||||||
| Class A | % | % | ||||||
| Class B | % | % | ||||||
| % | % | |||||||
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt —debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity' Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity' Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company's financial position, results of operations or cash flows.
The Company's management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 4 — Initial Public Offering
On March 19, 2021, the Company consummated the
IPO of
The Company also granted the IPO underwriters
a 45-day option to purchase up to an additional
11
Note 5 — Private Placement
Concurrent with the closing of the IPO, the Company
consummated the Private Placement of
Each whole Private Placement Warrant is exercisable
to purchase one share of Class A common stock at $
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Note 6 — Related Party Transactions
Founder Shares
On December 4, 2017, the Company issued
On January 22, 2021, the Company effectuated
a recapitalization in the form of a
On January 22, 2021, the Company issued to Dan
Hesse
On January 22, 2021,
On March 16, 2021,
The Founder Shares will automatically convert into shares of Class A common stock on a one-for-one basis, subject to adjustment, at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions (see Note 8).
Holders of Founder Shares may also elect to convert
their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment, at any time. The initial
stockholders agreed to forfeit up to
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The initial stockholders have agreed, subject
to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the
completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price
of the Class A common stock equals or exceeds $
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, lend the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Promissory Note- Related Party
On December 16, 2020, the Sponsor made available
to the Company, under a promissory note, up to $
Note 7 — Commitments & Contingencies
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement to be signed on or before the date of the prospectus for the IPO. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option
to purchase up to
On March 19, 2021, the Company paid an underwriting commission of $
The underwriters are entitled to a deferred fee
of $
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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 these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 8 — Stockholders’ Equity
Class B common stock —
The Company is authorized to issue
Prior to the initial Business Combination, holders
of Class B common stock have the exclusive right to elect, remove and replace any director, and the holders of Class A Common Stock have
no right to vote on the election, removal or replacement of any director. This provisions of the certificate of incorporation may only
be amended by a resolution passed by a majority of holders of at least
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 one-for-one basis, subject to adjustment.
In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the
amounts sold in the IPO and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock
shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class
B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class
A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
Note 9 — Derivative Warrant Liabilities
As of September 30, 2021, the Company has
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the IPO; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available.
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The Company has agreed that as soon as practicable,
but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file
with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon
exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness
of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with
the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common
stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of Business
Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company
shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided
by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available,
holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire
The Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the warrants included in the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The Private Placement Warrants are not subject to redemption.
Redemption of warrants for cash when the price per share of Class A common stock equals or exceeds $18.00:
Once the warrants become exercisable,
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the last reported sale price of Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like). |
If and when the warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants for Class A common stock when the price per share of Class A common stock equals or exceeds $10.00:
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares; |
| ● | if, and only if, Reference Value exceeds $10.00 per share (as adjusted); and |
| ● | if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
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In addition, if (x) the Company issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the board of directors and, (i) in the case of any such issuance to the Sponsor or any of its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance, and (ii) to the extent that such issuance is made to the Sponsor or any of its affiliates, without taking into account the transfer of Founder Shares or private placement warrants (including if such transfer is effectuated as a surrender to us and subsequent reissuance by the Company) by the Sponsor in connection with such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of an initial Business Combination on the date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates an initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. 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.
Note 10 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and March 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
September 30, 2021:
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account | $ | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities – Public Warrants | $ | $ | $ | |||||||||
| Derivative warrant liabilities – Private Placement Warrants | $ | $ | $ | |||||||||
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March 31, 2021:
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account | $ | $ | $ | |||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities – Public Warrants | $ | $ | $ | |||||||||
| Derivative warrant liabilities – Private Placement Warrants | $ | $ | $ | |||||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in May 2021, when the Public Warrants were separately listed and traded.
The fair value of the Warrants issued in connection
with the Public Offering and Private Placement Warrants were initially measured at fair value using a binomial lattice model, which is
considered to be a Level 3 fair value measurement. Subsequently, the fair value of the Public Warrants has been based on public market
quoted prices, a Level 1 measurement, which was $
The estimated fair value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in a binomial lattice model are assumptions related to expected stock-price volatility. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
Following significant inputs to value the Private Placement Warrants:
| As of September 30, 2021 | ||||
| Risk-free interest rate | % | |||
| Trading days per year | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Stock Price | $ | |||
The change in the fair value of the level 3 derivative warrant liabilities for the six months ended September 30, 2021 is summarized as follows:
| Level 3 derivative warrant liabilities at March 31, 2021 | $ | |||
| Transfer of Public Warrants to Level 1 | ( | |||
| Change in fair value of derivative warrant liabilities | ( | |||
| Level 3 derivative warrant liabilities at September 30, 2021 | $ |
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through, the date that the unaudited condensed financial statements were issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to “we”, “us”, “our” or the “Company” are to Tech and Energy Transition Corporation, except where the context requires otherwise. The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended March 31, 2021 filed with the SEC on July 1, 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 in Delaware on December 4, 2017 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). While we may pursue an initial Business Combination target in any industry or geographic location, we intend to focus our search for a target business operating in end markets – communications, internetworking, clean energy, digital technology and services and software applications that enable or support digital transformation. Our sponsor is Tech and Energy Transition Sponsor LLC (the “Sponsor”), a Delaware limited liability company.
Our registration statement for our initial public offering (the “Initial Public Offering”) was declared effective on March 16, 2021. On March 19, 2021, we consummated our Initial Public Offering of 38,500,000 units (the “Units” and, with respect to the Class A common stock included in the Units offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $385.00 million and incurring offering costs of approximately $22.23 million, consisting of $7.70 million of underwriting commission, $13.47 million of deferred underwriting commission, and $1.06 million of other offering costs. The Company also granted the underwriters in the IPO a 45-day option to purchase up to an additional 5,775,000 units to cover over-allotments, if any. On April 30, 2021, the over-allotment option expired unexercised.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (the “Private Placement”) of 7,366,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant to our Sponsor, generating gross proceeds of $11.05 million.
Upon the closing of the Initial Public Offering and the Private Placement, an aggregate of $385.00 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. Except with respect to interest earned on the funds held in the Trust Account that may be released to us to pay franchise and income tax obligations (less up to $100,000 of interest to pay dissolution expenses), the proceeds from the Initial Public Offering and the sale of the Private Placement Warrants will not be released from the Trust Account until the earlier of (i) the completion of the Company’s initial Business Combination or (ii) the redemption of 100% of the Company’s public shares if the Company is unable to complete the Company’s initial Business Combination within 24 months from the closing of the Initial Public Offering (the “Combination Period”). The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
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If we are unable to complete a Business Combination within the Combination Period, as such period may be extended, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten (10) business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our only activities from inception through September 30, 2021 were those related to our formation, the preparation for our Initial Public Offering and, since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any operating revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination, at the earliest. We incurred expenses as a result of being a public company (including for legal, financial reporting, accounting and auditing compliance), as well as for expenses in connection with searching for a prospective initial Business Combination.
For the three months ended September 30, 2021, we had a net income of approximately $6.42 million, which consists of changes in the derivative warrant liabilities of approximately $6.74 million and unrealized gain on investments held in the Trust Account of $5,814, partially offset by $325,640 in general and administrative costs.
For the six months ended September 30, 2021, we had a net income of approximately $3.71 million, which consists of changes in the derivative warrant liabilities of approximately $4.44 million and unrealized gain on investments held in the Trust Account of $11,565, partially offset by $744,958 in general and administrative costs.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $0.922 million in our operating bank account and working capital of approximately $1.08 million.
Prior to the completion of the Initial Public Offering, our liquidity needs were satisfied through a payment from the Sponsor of $27,467 (see Note 6) for the Founder Shares, borrowings under the Promissory Note of $275,000 (see Note 6), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Promissory Note was fully repaid upon the consummation of the IPO on March 19, 2021, has expired and no further borrowing are allowed. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied from the proceeds from the Initial Public Offering and Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or our officers and directors may, but are not obligated to, provide us working capital loans (“Working Capital Loans”). As of September 30, 2021, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
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Related Party Transactions
Founder Shares
On December 4, 2017, the Company issued 100 shares of common stock, par value $0.01 per share, for an aggregate consideration of $25,000. As of December 31, 2020, March 31, 2020 and March 31, 2019, the Company recorded a stock subscription receivable of $25,000. The proceeds were received on January 11, 2021.
On January 22, 2021, the Company effectuated a recapitalization in the form of a 90,562.5 for 1 stock split, and as a result, the Sponsor held 9,056,250 shares of our Class B common stock (up to 1,181,250 of which were subject to forfeiture depending on the extent to which the underwriters’ option to purchase additional units was exercised, if at all).
On January 22, 2021, the Company issued to Dan Hesse 1,006,250 shares of our Class B common stock (up to 131,250 of which were subject to forfeiture depending on the extent to which the underwriters’ option to purchase additional units was exercised, if at all) in exchange for an initial investment of $2,467. As of January 22, 2021, the Founder Shares outstanding were 10,062,500, of which the Sponsor held 9,056,250 and Dan Hesse held 1,006,250.
On January 22, 2021, the Company filed an amended and restated certificate of incorporation to change its par value of its Class A and B common stock from $0.01 to $0.0001. Information contained in the financial statements has been adjusted for this split.
On March 16, 2021, the Company effectuated an 11-for-10 stock split of the Class B common stock, resulting in an aggregate outstanding amount of 11,068,750 shares of the Class B common stock (up to 1,443,750 shares of which are subject to forfeiture depending on the extent to which the underwriters’ option to purchase additional units is exercised, if at all), of which the Sponsor holds 9,961,875 shares and Dan Hesse holds 1,106,875 shares. All shares and associated amounts have been retroactively restated to reflect the split (see Note 8)
The Founder Shares will automatically convert into shares of Class A common stock on a one-for-one basis, subject to adjustment, at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions (see Note 8).
Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment, at any time. The initial stockholders have agreed to forfeit up to 1,443,750 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriter. The forfeiture will be adjusted to the extent that the over-allotment option is not exercised in full by the underwriter so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the IPO (not including the placement shares).
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20-trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the warrants included in the Private Placement Warrants. As of September 30, 2021, there were no amounts outstanding under any Working Capital Loans.
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Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations other than obligations disclosed herein.
Contractual Obligations
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 5,775,000 additional Units at a purchase price of $9.80 per Unit. The over-allotment option expired unexercised on April 30, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $7,700,000 in the aggregate, paid upon the closing of our Initial Public Offering. In addition, $0.35 per unit, or approximately $13,475,000 in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The company has identified the following as its critical accounting policies:
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
We issued an aggregate of 12,833,333 common stock warrants associated with Units issued to investors in our Initial Public Offering and the underwriters’ exercise of their overallotment option and we issued 7,366,667 Private Placement Warrants. All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued in connection with the Initial Public Offering and Private Placement were initially measured at fair value using a binomial lattice model. The fair value of Warrants issued in connection with our Initial Public Offering have subsequently been measured based on the listed market price of such warrants, and the fair value of the Private Placement Warrants have been estimated using a binomial lattice model each measurement date.
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Investments Held in Trust Account
The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in net gain on investments held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information, other than for investments in open-ended money market funds with published daily net asset values (“NAV”), in which case the Company uses NAV as a practical expedient to fair value. The NAV on these investments is typically held constant at $1.00 per unit.
Fair Value of Financial Instruments
Fair value measurements are based on the premise that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value:
| Level 1 | – | Quoted prices in active markets for identical assets or liabilities on the reporting date. | ||
| Level 2 | – | Pricing inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||
| Level 3 | – | Pricing inputs are generally unobservable and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require management’s judgment or estimation of assumptions that market participants would use in pricing the assets or liabilities. The fair values are therefore determined using factors that involve considerable judgment and interpretations, including, but not limited to, private and public comparable, third-party appraisals, discounted cash flow models, and fund manager estimates. | ||
As of September 30, 2021, the recorded values of cash and investments held in the Trust Account, prepaid expenses, accounts payable, accrued expenses and accrued expenses – related party approximate the fair values due to the short-term nature of the instruments.
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2021 and March 31, 2021, 38,500,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
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Net Earnings (Loss) Per Ordinary Share
Our statement of operations includes a presentation of earnings (loss) per share for Class A common stock subject to redemption in a manner similar to the two-class method of earnings (loss) per share. Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of common stocks outstanding for the period. The Company applies the two-class method in calculating earnings per share.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. 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 a 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 an election to opt out is irrevocable. We have elected to irrevocably 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, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. This may make comparison of our financial statements with another emerging growth company that has not opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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 on this evaluation, our chief executive officer and chief financial officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective, due solely to the material weaknesses in our internal control over financial reporting relating to the accounting of complex financial instruments.
Reclassification of Class A Common Stock
Recently, the Staff of the Division of Corporation Finance of the SEC issued comment letters to several special purpose acquisition companies addressing certain accounting and reporting considerations related to redeemable equity instruments of a kind similar to those issued by the Company under ASC 480-10-99. In light of these recent comment letters, the Company’s management, re-evaluated the Company’s application of ASC 480-10-99 to its accounting classification of the Public Shares. Upon re-evaluation, the Company’s management determined that the Public Shares can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control under ASC 480-10-S99. Therefore, the Company’s management concluded that all of the Public Shares should be classified as temporary equity in their entirety.
This resulted in the restatement of the Company's balance sheet as of March 19, 2021, its annual financial statements for period ended March 31, 2021 and its interim financial statements for the quarter ended June 30, 2021 which led to a material weakness for all periods subsequent to March 19, 2021. Additionally, this material weakness could result in a misstatement of the warrant liability, Class A common stock, other complex financial instruments and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis. 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 on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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.
Reclassification of Warrants
As previously reported in Part I, Item 4 of our Quarterly Report on Form 10-Q for the period ended June 30, 2021, management identified a material weakness in our internal controls related to the accounting for warrants issued in connection with our Initial Public Offering. On April 12, 2021, the staff at the Securities and Exchange Commission (the “SEC”) issued a statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). In the SEC Statement, the SEC staff noted that certain provisions in the typical SPAC warrant agreement may require that the warrants be classified as a liability measured at fair value, with changes in fair value reported each period in earnings. As a result of the Staff Statement, the Company re-evaluated the accounting for the Public Warrants and the Private Placement Warrants (collectively, “Warrants”) under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified as equity. Since the Warrants meet the definition of a derivative under ASC 815-40, the Company has reclassified the Warrants as liabilities on the balance sheet at fair value, with subsequent changes in their respective fair values recognized in the statement of operations at each reporting date.
Changes in Internal Control Over Financial Reporting
Other than as noted above, there was no change in our internal control over financial reporting that occurred during the quarterly period ended September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Remediation Plan
Management has implemented remediation steps to address the material weaknesses and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications.
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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 Quarterly Report are any of the risks previously disclosed in our Annual Report on Form 10-K filed with the SEC on July 1, 2021. Any of those factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on July 1, 2021, except as set forth below.
We identified a material weakness in our internal control over financial reporting relating to our complex financial instruments. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. 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 on a timely basis.
As described elsewhere in this report, in connection with the preparation of our financial statements as of September 30, 2021, management identified errors made in our historical financial statements where we improperly classified some of our common stock subject to possible redemption. We previously determined the common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of common stock while also taking into consideration that a redemption cannot result in net tangible assets being less than $5,000,001 pursuant to our amended and restated certificate of incorporation. Management determined that the common stock issued during our initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside our control. Therefore, management concluded that temporary equity should include all shares of common stock subject to possible redemption. As a result, management has noted a classification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock. Management concluded that the foregoing constituted a material weakness as of September 30, 2021.
As a result, 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 Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented. However, we cannot assure you that the foregoing will not result in any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
On December 4, 2017, the Company issued 100 shares of common stock, par value $0.01 per share, for an aggregate consideration of $25,000. As of March 31, 2021, the Company recorded a stock subscription receivable of $25,000. The proceeds were received on January 11, 2021.
On January 22, 2021, the Company (i) effectuated a recapitalization, and as a result, the Sponsor held 9,056,250 shares of our Class B common stock, (ii) issued to Dan Hesse 1,006,250 shares of our Class B common stock in exchange for an initial investment of $2,467 and (iii) filed an amended and restated certificate of incorporation to change its par value of its Class A and B common stock from $0.01 to $0.0001. As of January 22, 2021, there were 10,062,500 Founder Shares outstanding.
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On March 16, 2021, the Company effectuated an 11-for-10 stock split of the Class B common stock, resulting in an aggregate outstanding amount of 11,068,750 shares of the Class B common stock, of which the Sponsor holds 9,961,875 shares and Dan Hesse holds 1,106,875 shares. Of these Founder Shares, 1,443,750 shares were subject to forfeiture by the Sponsor and Mr. Hesse depending on the extent to which the underwriter’s over-allotment option is exercised. On April 30, 2021, upon the expiration of the 45-day period and underwriters not exercising the over-allotment option, 1,443,750 shares of Class B common stock were forfeited by the Sponsor and Mr. Hesse, in the aggregate.
The Founder Shares will automatically convert into shares of Class A common stock on a one-for-one basis, subject to adjustment, at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions.
Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment, at any time. The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20-trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Our Sponsor purchased 7,366,667 Private Placement Warrants, each exercisable to purchase one ordinary share at $11.50 per share, at a price of $1.50 per warrant ($11.05 million in the aggregate), in a private placement that closed substantially concurrently with the closing of the Initial Public Offering.
This issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No underwriting discounts or commissions were paid with respect to such sales.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Tech and Energy Transition Corporation | ||
| Date: November 22, 2021 |
/s/ John Spirtos | |
| Name: | John Spirtos | |
| Title: | Chief Executive Officer and President | |
| (Principal Executive Officer) | ||
| Date: November 22, 2021 |
/s/ Andrew Ancone | |
| Name: | Andrew Ancone | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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