Company Overview - The company was incorporated in October 2020 as a blank check company and has not generated any revenue to date[20]. - The Initial Public Offering (IPO) was completed on February 1, 2021, raising gross proceeds of $400 million from the sale of 40 million units at $10.00 per unit[22]. - A total of $400 million from the IPO and private placement was placed in a trust account, with transaction costs amounting to approximately $22.7 million[24]. Acquisition Strategy - The company aims to identify acquisition targets with an equity valuation between $500 million to $2 billion[34]. - Target sectors include technology, healthcare, financial services, and business services, focusing on companies that can benefit from scale and synergies[34]. - The management team plans to leverage their extensive industry networks to arrange synergistic business combinations[32]. - The company intends to utilize a proprietary Value Creation Model to drive long-term operational success, focusing on strategy, asset allocation, financial model, management team, and culture[31]. - The management team has experience in navigating financial and operational challenges, particularly in sectors impacted by technological disruption[29]. Due Diligence and Business Combination - The company will conduct thorough due diligence on prospective target businesses, including meetings with management and document reviews[38]. - The initial business combination must involve operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account[43]. - The company anticipates structuring its initial business combination to acquire 100% of the target business's equity interests or assets, but may acquire less than 100% to meet specific objectives[44]. - The deadline to complete the initial business combination is set for February 1, 2023[45]. Stockholder Rights and Redemption - Public stockholders will have the opportunity to redeem shares at a per-share price initially anticipated to be $10.00, based on the Trust Account balance[51]. - Redemption rights are limited to ensure net tangible assets remain above $5,000,001, preventing the company from being classified as a "penny stock"[52]. - If the initial business combination is not completed within 24 months, the company will redeem 100% of public shares at the Trust Account balance, leading to liquidation[54]. - The company requires 15,000,001 public shares, approximately 37.5%, or 2,500,001 shares, approximately 6.25%, to be voted in favor of an initial business combination for approval[65]. - If stockholder approval is not sought, public stockholders may only redeem shares for cash, limiting their ability to evaluate specific merits or risks of target businesses[66][67]. Financial Risks and Concerns - The company faces competition from other entities with similar business objectives, which may limit its ability to acquire larger target businesses[57]. - The company has substantial doubt about its ability to continue as a going concern if it cannot raise additional funds or complete a business combination by February 1, 2023[105]. - The funds in the Trust Account may be reduced below $10.00 per public share due to third-party claims or other liabilities[104]. - The company may face bankruptcy risks if it distributes proceeds from the Trust Account to public stockholders before addressing creditor claims, potentially leading to recovery actions by a bankruptcy court[113]. - If the company does not complete its initial business combination within the required timeframe, public stockholders may receive approximately $10.00 per share upon liquidation of the Trust Account[94]. Operational Challenges - The company may face challenges in negotiating business combinations due to the time constraint imposed by the 24-month deadline[75][76]. - The company may need to reserve cash in the Trust Account for closing conditions, which could limit its ability to complete desirable business combinations[72]. - The company may incur substantial debt to complete a business combination, which could adversely affect its leverage and financial condition[153]. - The company may face challenges in completing multiple business combinations simultaneously, leading to increased costs and operational risks[160]. Compliance and Regulatory Issues - The company must maintain specific financial metrics to ensure continued listing on the NYSE, including a minimum share price of $4.00 and a total market capitalization of at least $200 million[198]. - If the NYSE delists the company's securities, it could lead to reduced liquidity and increased trading restrictions, impacting the ability to raise additional capital[199]. - The company is classified as a "blank check" company under U.S. securities laws, with net tangible assets exceeding $5 million, exempting it from certain SEC rules[204]. - The company must ensure that investment securities do not constitute more than 40% of total assets to avoid being regulated as an investment company under the Investment Company Act[209]. Internal Controls and Governance - The company concluded that its disclosure controls and procedures were not effective as of December 31, 2021, which may adversely affect investor confidence and business results[142]. - The company has acknowledged that remediation measures for internal control improvements may be time-consuming and costly, with no assurance of achieving the intended effects[145]. - The initial stockholders may exert significant influence over corporate actions, including amendments to the certificate of incorporation, due to their substantial ownership[216]. Market and Investment Considerations - The public warrants have an exercise price of $11.50 per share, which is higher than typical offerings, making them more likely to expire worthless[213]. - The company may pursue acquisition opportunities in industries or sectors outside of its management's expertise, which could lead to inadequate risk assessment and potential value reduction for securityholders[134]. - The company has not yet selected a specific target business for its initial business combination, making it difficult to evaluate the associated risks and merits[131].
Electriq Power (ELIQ) - 2021 Q4 - Annual Report