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 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.
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 "initial 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, 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 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, 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. On December 28,
2022, we liquidated our portfolio of investments held in the Trust Account and
converted it into cash held in the Trust Account.
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
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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 by April 1, 2023 (as such
period may be extended to August 1, 2023), 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.
Trust Account Redemptions and Extension of Combination Period
On December 19, 2022, we held a special meeting of stockholders at which such
time our stockholders approved the proposal to amend our amended and restated
certificate of incorporation giving the Company the right to extend the business
combination deadline on a monthly basis up to six times from February 1, 2023 to
August 1, 2023 by depositing into the Trust Account the lesser of (i) an
aggregate of $600,000 or (ii) $0.06 for each issued and outstanding Public Share
that has not been redeemed for each one-month extension (the "Extension"). On
both January 30, 2023 and February 24, 2023, the Company deposited $476,904 into
the Trust Account in order to extend the business combination deadline to
March 1, 2023 and April 1, 2023, respectively.
In connection with such vote, the holders of an aggregate of 32,051,595 Public
Shares exercised their right to redeem their shares for an aggregate of
approximately $324.4 million in cash held in the Trust Account. Additionally,
upon shareholder approval of the Extension, our Sponsors agreed that they would
forfeit for no consideration 5,000,000 shares of Class F common stock in
connection with the Extension, which shares of Class F common stock will be
cancelled (the "Forfeiture"). The Forfeiture occurred on January 30, 2023.
Proposed Business Combination
On November 13, 2022, the Company and Eagle Merger Corp., a Delaware corporation
and wholly-owned subsidiary of the Company ("Merger Sub"), entered into a Merger
Agreement, as amended on December 23, 2022 and as may be further amended (the
"Merger Agreement") with Electriq Power, Inc., a Delaware corporation
("Electriq"). If the transactions contemplated by the Merger Agreement (the
"Transactions") are completed, Merger Sub will merge with and into Electriq,
with Electriq surviving 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 (together with the Merger, the "Proposed Business
Combination"), the separate corporate existence of Electriq will cease to exist
and the holders of Electriq common stock, preferred stock, options, warrants and
other convertible securities (collectively, the "Electriq equityholders") will
become equityholders of the Company, which will change its name to "Electriq
Power Holdings, Inc." in connection with the Business Combination ( "New
Electriq").
As part of the Merger, Electriq equityholders will receive aggregate merger
consideration (the "Merger Consideration") of $495 million, consisting of up to
49,500,000 shares of the Company's Class A common stock, valued at $10.00 per
share, and the right to elect to receive up to $25.0 million in cash with a
corresponding reduction in the number of shares of the Company's Class A common
stock. At the closing of the Merger (the "Closing"), 2,000,000 shares of the
Company's Class A common stock from the Merger Consideration (the "Merger
Consideration Incentive Shares") will be placed into an escrow account to be
used as Merger Consideration Incentive Shares. As part of the Merger
Consideration, holders of Electriq's warrants and options not exercised prior to
the Merger will receive replacement warrants and options, respectively, to
purchase shares of the Company's Class A Common Stock based on the value of the
Merger Consideration per share of Electriq common stock.
Pursuant to the Merger Agreement, the Company has agreed to use its reasonable
best efforts to enter into subscription agreements, non-redemption agreements,
backstop agreements or similar financing agreements (the "Financing Agreements")
with one or more persons to provide at least the level of cash required to
provide adequate operating liquidity for New Electriq through December 31, 2023
(such transactions, the "Financings").
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In connection with the Financings, 7,000,000 shares of the Company's Class A
common stock (the "Incentive Shares") will be placed in escrow at Closing,
consisting of 5,000,000 newly issued shares of The Company's Class A common
stock (the "New Incentive Shares") and the 2,000,000 Merger Consideration
Incentive Shares. The New Incentive Shares will be paid out as incentives in the
Financings first, followed by the Merger Consideration Incentive Shares. At the
termination of the escrow, any New Incentive Shares not paid out in the
Financing will be transferred 50% to the Sponsor (defined in the Merger
Agreement) and 50% to the Electriq equityholders, and any Merger Consideration
Incentive Shares not paid out in the Financing will be returned to the Electriq
equityholders.
The Merger Agreement includes covenants of Electriq with respect to operation of
its business prior to consummation of the Merger. The Merger Agreement also
contains additional covenants of the parties, including, among others, a
covenant to make any required filings pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), and the preparation and
filing of a registration statement on Form S-4 relating to the Merger and
containing a proxy statement of the Company (the "Registration Statement / Proxy
Statement"). The Merger Agreement also contains exclusivity provisions
prohibiting Electriq and its subsidiaries from soliciting, initiating, knowingly
facilitating, participating in, entering into, continuing discussions,
negotiations or transactions with, or knowingly encouraging or responding to any
inquiries or proposals by, or providing any information to any person relating
to or that could reasonably be expect to lead to, or enter into or consummate
any transaction relating to a Competing Company Transaction (as defined in the
Merger Agreement), subject to limited exceptions specified therein.
The Merger Agreement contains customary representations and warranties of the
parties thereto with respect to the parties, the Business Combination
contemplated by the Merger Agreement and their respective business operations
and activities. The representations and warranties of the parties generally do
not survive the Closing.
Consummation of the Business Combination is generally subject to customary
conditions, including (a) expiration or termination of all applicable waiting
periods under HSR, (b) the absence of any law or governmental order prohibiting
the consummation of the Merger, (c) the effectiveness of the Registration
Statement / Proxy Statement, (d) the Company's Class A common stock to be issued
in the Merger having been listed on The New York Stock Exchange ("NYSE") upon
the Closing, and otherwise satisfying the applicable listing requirements of
NYSE, (e) receipt of stockholder approval from stockholders of each of the
Company and Electriq for consummation of the Merger and other related necessary
matters and (f) the Company having net tangible assets following the redemptions
of at least $5,000,001.
The Merger Agreement may be terminated under certain customary and limited
circumstances at any time prior to the Closing, including by mutual written
consent or if the Business Combination has not been consummated on or prior to
April 1, 2023 (subject to extensions until as late as June 1, 2023).
In connection with the execution of the Merger Agreement, certain security
holders of Electriq (the "Electriq Holders") entered into lock-up agreements
(each, a "Lock-up Agreement") with Electriq and the Company. Pursuant to the
Lock-up Agreements, the Electriq Holders agreed, among other things, that their
shares of the Company's Class A common stock received as Merger Consideration
may not be transferred until the earlier to occur of (i) six months following
Closing and (ii) the date after the Closing on which New Electriq completes a
liquidation, merger, capital stock exchange, reorganization or other similar
transaction that results in all of New Electriq stockholders having the right to
exchange their equity holdings in New Electriq for cash, securities or other
property (the "Lock-up"). Notwithstanding the foregoing, if, after the Closing,
(i) the volume weighted average price per share of the Company's Class A common
stock equals or exceeds $12.50 per share (as adjusted for share splits, share
dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-day trading period, 10% of the Restricted Securities (as
defined in the Lock-up Agreement) of each Electriq Holder is released from the
Lock-up and (ii) the volume weighted average price per share of the Company's
Class A common stock equals or exceeds $15.00 per share (as adjusted for share
splits, share dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-day trading period, an additional 10% of the
Restricted Securities of each Electriq Holder will be released from the Lock-up.
In connection with the execution of the Merger Agreement, the Company entered
into an agreement (the "Sponsor Agreement") with Electriq, the Sponsor, an
affiliate of the Sponsor and the Company's independent directors, whereby the
Sponsor and holders of the Company's Class F common stock have agreed to waive
certain of their anti-dilution and conversion rights with respect to the Class F
common stock.
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The Sponsor also agreed to subject its holdings of the Company's Class F common
stock, and the other holders of the Company's Class F common stock agreed to
subject their Class F common stock, to certain transfer restrictions as follows:
(i) with respect to 500,000 shares of Class F common stock, the Sponsor will not
transfer such shares until the earliest to occur of (x) the fifth anniversary of
the Closing, (y) such time as the closing volume weighted average price of a
share of the Company's Class A common stock equals or exceeds $12.50 for any 20
trading days within any 30-day trading period and (z) the date after the Closing
on which New Electriq completes a liquidation, merger, capital stock exchange,
reorganization or other similar transaction that results in all of New Electriq
stockholders having the right to exchange their the Company's Class A common
stock for cash, securities or other property; (ii) with respect to an additional
500,000 shares of Class F common stock, the Sponsor will not transfer such
shares until the earliest to occur of (x) the fifth anniversary of the Closing,
(y) such time as the closing volume weighted average price of a share of the
Company's Class A common stock equals or exceeds $15.00 for any 20 trading days
within any 30-day trading period or (z) the date after the Closing on which New
Electriq completes a liquidation, merger, capital stock exchange, reorganization
or other similar transaction that results in all of New Electriq stockholders
having the right to exchange their the Company's Class A common stock for cash,
securities or other property; and (iii) with respect to all of the shares of
Class F common stock (including those covered in (i) and (ii)), the Sponsor and
the other holders will not transfer such shares until the earliest to occur of
(x) the six-month anniversary of the Closing or (y) the date after the Closing
on which New Electriq completes a liquidation, merger, capital stock exchange,
reorganization or other similar transaction that results in all of New Electriq
stockholders having the right to exchange their the Company's Class A common
stock for cash, securities or other property; provided that (i) 10% of such
shares of Class F common stock will be released at such time as the closing
volume weighted average price of a share of the Company's Class A common stock
equals or exceeds $12.50 for any 20 trading days within any 30-day trading
period and (ii) an additional 10% of such shares of Class F common stock will be
released at such time as the closing volume weighted average price of a share of
the Company's Class A common stock equals or exceeds $15.00 for any 20 trading
days within any 30-day trading period.
In connection with the execution of the Merger Agreement, certain stockholders
of Electriq (each, a "Supporting Electriq Stockholder"), Electriq and the
Company entered into a Support Agreement (the "Support Agreement"). Under the
Support Agreement, each Supporting Electriq Stockholder agreed to, among other
things, (i) vote at any meeting of the stockholders of Electriq or by written
consent all of its Electriq common stock and/or Electriq preferred stock, as
applicable, held of record or thereafter acquired in favor of the Merger and the
Transactions contemplated by the Merger Agreement and (ii) be bound by certain
transfer restrictions with respect to Electriq securities, in each case, on the
terms and subject to the conditions set forth in the Support Agreement.
The Merger Agreement contemplates that, at the Closing, New Electriq, the
Sponsor and certain former Electriq equityholders will enter into a
stockholders' agreement (the "Stockholders' Agreement"), pursuant to which
(i) the Sponsor will be entitled to nominate one (1) director until the date
upon which the Sponsor's and its affiliates' aggregate initial ownership
interest of the issued and outstanding common stock of New Electriq ("Sponsor
Initial Ownership Interest") decreases to one-half of Sponsor Initial Ownership
Interest and (ii) Greensoil Building Innovation Fund Co-Investment I, L.P.
("Greensoil") will be entitled to nominate one (1) director until the date upon
which Greensoil's and its affiliates' aggregate initial ownership interest of
the issued and outstanding common stock of New Electriq ("Greensoil Initial
Ownership Interest") decreases to one-half of the Greensoil Initial Ownership
Interest. The Sponsor and Greensoil will also each be entitled to designate one
non-voting board observer until the date upon which each of the Sponsor and
Greensoil, respectively, holds less than 1% of the issued and outstanding common
stock of New Electriq.
The Merger Agreement contemplates that, at the Closing, New Electriq, the
Sponsor, certain of its affiliates, RBC and certain former stockholders of
Electriq will enter into an amended and restated registration rights agreement
(the "Registration Rights Agreement"), pursuant to which, among other things,
New Electriq will agree to register for resale, pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), certain shares of the
Company's Class A common stock that are held by, or issuable pursuant to other
securities held by, the parties thereto from time to time.
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Liquidity and Going Concern
As of December 31, 2022, we had approximately $20,000 in our operating bank
account and a working capital deficit of approximately $7.0 million, not
including taxes payable of approximately $1.0 million.
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
$3.0 million under such loans as of December 31, 2022.
In connection with our assessment of going concern considerations in accordance
with the Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification ("ASC") Topic 205-40, "Presentation of Financial Statements - Going
Concern," we have determined that the liquidity issue, 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 April 1, 2023 (as such
period may be extended to August 1, 2023). The consolidated financial statements
do not include any adjustment that might be necessary if we are unable to
continue as a going concern.
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 consolidated financial statements.
The 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 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.
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Results of Operations
Our entire activity since inception up to December 31, 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 year ended December 31, 2022, we had net income of approximately
$10.4 million, which consisted of approximately $5.7 million in interest income
from investments held in the trust account and non-operating income of
approximately $9.8 million resulting from changes in fair value of derivative
warrant liabilities, approximately $690,000 resulting from changes in fair value
of the Working Capital Loan, partially offset by approximately $4.4 million in
general and administrative expenses, approximately $239,000 in franchise tax
expense and approximately $1.1 million in income tax expense.
For the year ended December 31, 2021, we had net income of approximately $17.9
million, due largely to a noncash gain resulting from changes in fair value of
derivative warrant liabilities of approximately $23.9 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
$4.6 million. Operating expenses consisted of approximately $4.3 million in
general and administrative expenses, $78,000 in general and administrative
expenses with related parties and $210,000 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 Business
Combination or the liquidation, we will cease paying these monthly fees. We
incurred approximately $84,000 and $78,000 in general and administrative
expenses in the accompanying consolidated statements of operations in the year
ended December 31, 2022 and for the period from October 2, 2020 (inception)
through December 31, 2020, respectively, related to the administrative support
agreement.
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.
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Critical Accounting Estimates
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate 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 the FASB
ASC Topic 480 "Distinguishing Liabilities from Equity" ("ASC 480") and FASB ASC
Topic 815, "Derivatives and Hedging" ("ASC 815"). 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.
The warrants issued in connection with the Initial Public Offering (the "Public
Warrants") and the Private Placement Warrants are recognized as derivative
liabilities in accordance with ASC 815. Accordingly, we recognized the warrant
instruments as liabilities at fair value and adjust the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in the Company's consolidated statements of operations. The initial
fair value of the Public Warrants and Private Placement Warrants have each been
measured at fair value using a modified Black-Scholes option pricing model. The
fair value of the Public Warrants and Private Placement Warrants has
subsequently been determined using listed prices in an active market for such
warrants. Derivative warrant liabilities are classified as non-current
liabilities as their liquidation is not reasonably expected to require the use
of current assets or require the creation of current liabilities. Derivative
warrant liabilities are classified as non-current liabilities as their
liquidation is not reasonably expected to require the use of current assets or
require the creation of current liabilities.
Working Capital Loan-Related Party
We have elected the fair value option to account for borrowings under the
Working Capital Loan with its affiliates. As a result of applying the fair value
option, we recognize each borrowing, when drawn, at fair value with a gain or
loss recognized at issuance, and subsequent changes in fair value are recognized
as change in the fair value of Working Capital Loan-related party in the
consolidated statements of operations. The fair value is based on prices or
valuation techniques that require inputs that are both unobservable and
significant to the overall fair value measurement. These inputs reflect
management's own estimates about the assumptions a market participant would use
in pricing the liability.
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Off-Balance Sheet Arrangements
As of December 31, 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
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 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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