References to the "Company," "TLG Acquisition One Corp.," "our," "us" or "we"
refer to TLG Acquisition One Corp. The following discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the unaudited interim condensed consolidated financial
statements and the notes thereto contained elsewhere in this report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in "Risk
Factors," "Cautionary Note Regarding Forward-Looking Statements," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in our Annual Report on Form 10-K for the year ended
December 31, 2021, our Quarterly Reports on Form 10-Q for the periods ending
March 31, 2022 and June 30, 2022 and our other SEC filings. Any of those factors
could result in a significant 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.
Overview
We are a blank check company incorporated in Delaware on October 2, 2020. We
were formed 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"). We are an emerging growth
company and, as such, we are subject to all of the risks associated with
emerging growth companies.
Our sponsor is TLG Acquisition Founder LLC, a Delaware limited liability company
(the "Sponsor"). The registration statement for our Initial Public Offering was
declared effective on January 27, 2021. On February 1, 2021, we consummated our
Initial Public Offering of 40,000,000 units (the "Units" and, with respect to
the Class A common stock included in the Units being offered, the "Public
Shares"), including 5,000,000 additional Units to cover over-allotments (the
"Over-Allotment Units"), at $10.00 per Unit, generating gross proceeds of
$400.0 million, and incurring offering costs of approximately $22.7 million, of
which $14.0 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 4,666,667 and 2,000,000 warrants
(each, a "Private Placement Warrant" and collectively, the "Private Placement
Warrants") to the Sponsor and RBC Capital Markets, LLC, in its capacity as a
purchaser of Private Placement Warrants ("RBC"), respectively, at a price of
$1.50 per Private Placement Warrant, generating total proceeds of $10.0 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$400.0 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 (the "Trust Account"), and will be invested only in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"), 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 us, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
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Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the 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 we will be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(net of amounts disbursed to management for working capital purposes, if any,
and excluding the amount of any deferred underwriting discount held in trust) at
the time of the agreement to enter into the initial Business Combination.
However, we will only complete a Business Combination if the post-business
combination company owns or acquires 50% or more of the voting securities of the
target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment
Company Act.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or February 1, 2023, (as such period may
be extended pursuant to a stockholder vote, the "Combination Period"), we will
(i) cease all operations except for the purpose of winding up; (ii) as promptly
as reasonably possible but not more than ten business days thereafter, subject
to lawfully available funds therefor, redeem 100% of the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account, including interest earned on the funds held in the Trust
Account and not previously released to us to pay our 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); and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders
and the board of directors, dissolve and liquidate, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Proposed Business Combination
On November 13, 2022, we entered into a Merger Agreement (as amended,
supplemented or otherwise modified from time to time in accordance with its
terms, the "Merger Agreement") with Electriq Power, Inc., a Delaware Corporation
("Electriq"), as disclosed in a Current Report on Form 8-K as filed with the
U.S. Securities and Exchange Commission (the "SEC") by the Company on November
14, 2022
If the transactions contemplated by the Merger Agreement are completed (the
"Transactions"), Electriq will survive such merger as a wholly owned subsidiary
of the Company (the "Merger"). As a result of the Merger, and upon consummation
of the Merger and the other Transactions contemplated by the Merger Agreement
(together with the Merger, the "Proposed Business Combination"), the separate
corporate existence of Electriq will cease and the holders of Electriq common
stock, preferred stock, options and warrants will become equityholders of the
Company, which will change its name to
"Electriq Power Holdings, Inc." in connection with the Proposed Business
Combination.
For additional information regarding the Merger Agreement and the Transactions
contemplated therein, see the Current Report on Form 8-K as filed with the SEC
by the Company on November 14, 2022.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $242,000 in our operating bank
account and a working capital deficit of approximately $5.1 million (excluding
income and franchise taxes).
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the payment of $25,000 from our Sponsor to cover certain
of our offering costs in exchange for issuance of Class F common stock, and a
loan from our Sponsor of approximately $192,000 under a promissory note. We
repaid the promissory note in full upon consummation of the Private Placement.
Subsequent to the consummation of the Initial Public Offering, our liquidity has
been satisfied through the net proceeds from the consummation of the Initial
Public Offering and the Private Placement held outside of the Trust Account. In
addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us working capital
loans as may be required. The Sponsor and the Company executed a
non-interest-bearing promissory note in May 2021, providing the Company the
ability to borrow up to $2,000,000 (the "Original Note"). In March 2022, the
Sponsor and the Company amended and restated the Original Note, providing the
Company the ability to borrow up to $5,000,000. On September 29, 2022, the
Sponsor and the Company amended the Working Capital Loan, providing the Company
the ability to borrow up to $8,000,000. The Company has drawn approximately
$2.8 million under such loans as of September 30, 2022.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, "Presentation of Financial Statements-Going
Concern," we have determined that the liquidity condition, mandatory liquidation
and subsequent dissolution raises substantial doubt about our ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should we be required to liquidate after
February 1, 2023 (as such period may be extended pursuant to a stockholder
vote). The condensed consolidated financial statements do not include any
adjustment that might be necessary if we are unable to continue as a going
concern.
We intend to seek an extension of the date by which we must consummate a
Business Combination as our Board currently believes that there will not be
sufficient time before February 1, 2023 to complete a Business Combination. On
November 3, 2022, we filed a preliminary proxy statement on Schedule 14A with
the SEC for the purposes of seeking stockholder approval to extend the
Combination Period from February 1, 2023 to May 1, 2023 (the date that is 27
months from the closing date of the IPO) (the "Amended Date") and on a monthly
basis up to three times from the Amended Date to August 1, 2023 (the date that
is 30 months from the closing date of the IPO).
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the condensed consolidated financial
statements. The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded
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U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly
traded foreign corporations occurring on or after January 1, 2023. The excise
tax is imposed on the repurchasing corporation itself, not its shareholders from
which shares are repurchased. The amount of the excise tax is generally 1% of
the fair market value of the shares repurchased at the time of the repurchase.
However, for purposes of calculating the excise tax, repurchasing corporations
are permitted to net the fair market value of certain new stock issuances
against the fair market value of stock repurchases during the same taxable year.
In addition, certain exceptions apply to the excise tax. The U.S. Department of
the Treasury (the "Treasury") has been given authority to provide regulations
and other guidance to carry out and prevent the abuse or avoidance of the excise
tax. Any share redemption or other share repurchase that occurs after
December 31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent we would
be subject to the excise tax in connection with a Business Combination,
extension vote or otherwise will depend on a number of factors, including
(i) the fair market value of the redemptions and repurchases in connection with
the Business Combination, extension or otherwise, (ii) the structure of a
Business Combination, (iii) the nature and amount of any "PIPE" or other equity
issuances in connection with a Business Combination (or otherwise issued not in
connection with a Business Combination but issued within the same taxable year
of a Business Combination) and (iv) the content of regulations and other
guidance from the Treasury. In addition, because the excise tax would be payable
by us and not by the redeeming holder, the mechanics of any required payment of
the excise tax have not been determined. The foregoing could cause a reduction
in the cash available on hand to complete a Business Combination and in our
ability to complete a Business Combination.
Results of Operations
Our entire activity from inception up to September 30, 2022 was in preparation
for our formation and the Initial Public Offering and, after the Initial Public
Offering, identifying a target company for a Business Combination. We do not
expect to be generating any operating revenues until the closing and completion
of our initial Business Combination.
For the three months ended September 30, 2022, we had net income of
approximately $291,000, which consisted of approximately $1.8 million in
interest income from investments held in the trust account and non-operating
income of approximately $600,000 resulting from changes in fair value of
derivative warrant liabilities, partially offset by approximately $1.7 million
in general and administrative expenses, $50,000 in franchise tax expense and
approximately $369,000 in income tax expense.
For the three months ended September 30, 2021, we had net income of
approximately $4.7 million, due largely to a noncash gain resulting from changes
in fair value of derivative warrant liabilities of approximately $4.9 million,
partially offset by operating expenses of approximately $236,000. Operating
expenses consisted of approximately $161,000 in general and administrative
expenses, $22,000 in general and administrative expenses with related parties
and approximately $60,000 in franchise tax expenses.
For the nine months ended September 30, 2022, we had net income of approximately
$9.5 million, which consisted of approximately $2.4 million in interest income
from investments held in the trust account and non-operating income of
approximately $9.6 million resulting from changes in fair value of derivative
warrant liabilities, partially offset by approximately $1.9 million in general
and administrative expenses, approximately $189,000 in franchise tax expense and
approximately $427,000 in income tax expense.
For the nine months ended September 30, 2021, we had net income of approximately
$15.8 million, due largely to a noncash gain resulting from changes in fair
value of derivative warrant liabilities of approximately $20.8 million,
partially offset by a non-operating expense of approximately $1.4 million
related to offering costs for derivative warrant liabilities and operating
expenses of approximately $3.6 million. Operating expenses consisted of
approximately $3.3 million in general and administrative expenses, $57,000 in
general and administrative expenses with related parties and approximately
$207,000 in franchise tax expenses.
Contractual Obligations
Administrative Support Agreement
We entered into an agreement with an affiliate of the Sponsor, pursuant to which
we agreed to pay a total of $7,000 per month for office space, administrative
and support services to such affiliate. Upon completion of the initial
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Business Combination or the liquidation, we will cease paying these monthly
fees. We incurred $21,000 and $21,000 in general and administrative expenses
related to the agreement, which is recognized in the accompanying condensed
consolidated statements of operations for the three months ended September 30,
2022 and 2021, respectively. We incurred $62,500 and $56,000 in general and
administrative expenses related to the agreement, which is recognized in the
accompanying condensed consolidated statements of operations for the nine months
ended September 30, 2022 and 2021, respectively. As of September 30, 2022 and
December, 2021, there was $0 and $35,000 in accounts payable related to this
agreement, respectively.
The Sponsor, officers and directors, or any of their respective affiliates, will
be reimbursed for any reasonable out-of-pocket expenses incurred in connection
with activities on our behalf such as identifying potential target businesses
and performing due diligence on suitable Business Combinations. Our audit
committee will review on a quarterly basis all payments that were made by us to
the Sponsor, officers, directors or any of their affiliates and will determine
which expenses and the amount of expenses that will be reimbursed. There is no
cap or ceiling on the reimbursement of reasonable out-of-pocket expenses
incurred by such persons in connection with activities on our behalf.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of Initial Public
Offering to purchase up to 5,000,000 additional Units to cover over-allotments,
if any, at the Initial Public Offering price less the underwriting discounts and
commissions. The underwriter exercised its over-allotment option in full on
February 1, 2021.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$8.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, the underwriters were entitled to a deferred fee of $0.35
per Unit, or $14.0 million in the aggregate. The deferred fee will become
payable to the underwriters from the amounts held in the Trust Account solely in
the event that we complete a Business Combination, subject to the terms of the
underwriting agreement.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. A summary of our significant accounting policies is
included in Note 2 to our condensed consolidated financial statements in Part I,
Item 1 of this Quarterly Report. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our condensed consolidated financial statements and require significant,
difficult or complex judgments, often employing the use of estimates about the
effects of matters that are inherently uncertain. Such policies are summarized
in the Management's Discussion and Analysis of Financial Condition and Results
of Operations section in our Annual Report on Form 10-K filed with the SEC on
March 25, 2022. There have been no significant changes in the application of our
critical accounting policies during the nine months ended September 30, 2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited condensed consolidated financial statements included
in Part I, Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
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standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the condensed consolidated
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
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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