Electriq Power (ELIQ) - 2022 Q4 - Annual Report

Part I Business The company is a SPAC that raised $400 million and has entered into a merger agreement with Electriq Power, Inc - The company is a blank check company, or SPAC, whose purpose is to merge with an operating business and is considered a "shell company"[18] - On November 13, 2022, the company entered into a merger agreement with Electriq Power, Inc, which will become a wholly-owned subsidiary and the combined company will be renamed "Electriq Power Holdings, Inc"[27] Proposed Merger Consideration for Electriq | Consideration Component | Value/Amount | | :--- | :--- | | Total Merger Consideration | $495 million | | Stock Consideration | Up to 49,500,000 shares of Class A common stock (valued at $10.00/share) | | Optional Cash Consideration | Up to $25.0 million (with a corresponding reduction in shares) | | Escrowed Incentive Shares | 2,000,000 shares of Class A common stock placed in escrow | - The company's acquisition criteria targets businesses with an equity valuation between $500 million and $2.0 billion in sectors like technology, healthcare, and business services[53] - Following a stockholder vote, the deadline to complete a business combination was extended to August 1, 2023, which led to the redemption of 32,051,595 shares of Class A common stock[63] Risk Factors The company faces significant risks including failure to complete its business combination, shareholder redemptions, and regulatory challenges - There is a risk of failing to complete an initial business combination by the deadline of August 1, 2023, which would lead to the company's liquidation and worthless warrants[89][91] - The ability of public stockholders to redeem a large number of shares may make the company's financial condition unattractive to targets and could prevent completing a business combination[85][87] - A significant conflict of interest exists as the sponsor, officers, and directors will lose their entire investment if a business combination is not completed[226] - The company faces the risk of being deemed an investment company, which was mitigated by liquidating its trust account's securities into cash, resulting in minimal interest income[181][187][188] - The Inflation Reduction Act of 2022 imposes a 1% excise tax on stock repurchases, which may apply to redemptions and reduce cash available for a business combination[238] - The proposed business combination with Electriq may be subject to review by the Committee on Foreign Investment in the United States (CFIUS), which could delay or block the transaction[171] - The company's independent registered public accounting firm has expressed substantial doubt about its ability to continue as a "going concern"[109] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[245] Properties The company maintains its executive offices in West Palm Beach, Florida - The company's executive offices are located in West Palm Beach, Florida[246] Legal Proceedings The company is not a party to any material pending legal proceedings - The company is not involved in any material legal proceedings[247] Mine Safety Disclosures This item is not applicable to the company - Not applicable[248] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on the NYSE, its warrants were delisted, and it has not paid dividends - The company's units (TLGA.U) and Class A Common Stock (TLGA) are traded on the NYSE, while the Public Warrants were delisted on November 21, 2022[250] - No cash dividends have been paid to date, and none are intended prior to the completion of the initial business combination[252] - The sponsor and RBC purchased 6,666,667 private placement warrants at $1.50 per warrant in a private placement exempt from registration[255] Selected Financial Data This item is not applicable as the company is a smaller reporting company - Not applicable[259] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported net income of $10.4 million in 2022, driven by non-operating items, but faces a going concern warning due to a working capital deficit - In connection with extending the business combination deadline, holders of 32,051,595 public shares redeemed them for approximately $324.4 million[269] - As of December 31, 2022, the company had a working capital deficit of approximately $7.0 million and only $20,000 in its operating bank account[286] - Management has determined that liquidity issues and the mandatory liquidation deadline raise substantial doubt about the company's ability to continue as a going concern[288] Results of Operations (Year Ended Dec 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $10.4 million | $17.9 million | | Income from investments in Trust Account | $5.7 million | $23,684 | | Change in fair value of derivative warrant liabilities | $9.8 million (gain) | $23.9 million (gain) | | General and administrative expenses | ($4.4 million) | ($4.3 million) | - The company has a deferred underwriting commission of $14.0 million, payable only upon completion of a Business Combination[298] Quantitative and Qualitative Disclosures About Market Risk This item is not required as the company is a smaller reporting company - The company is a smaller reporting company and is not required to provide this information[307] Financial Statements and Supplementary Data This section refers to the consolidated financial statements at the end of the report - The financial statements are located following Item 16 of the Annual Report[308] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None[310] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - Management concluded that disclosure controls and procedures were effective as of December 31, 2022[311] - Management determined that the company maintained effective internal control over financial reporting as of December 31, 2022[313] - No material changes were made to the internal control over financial reporting during the fourth quarter of 2022[315] Other Information The company reports no other information - None[316] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[317] Part III Directors, Executive Officers and Corporate Governance The section details company leadership, board structure, and significant potential conflicts of interest for management - The executive team includes John Michael Lawrie as CEO and David Johnson as CFO[318] - The board has three standing committees (Audit, Compensation, Nominating) all composed of independent directors[328] - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees[335] - Significant conflicts of interest exist, as officers and directors are not required to commit their full time to the company and have fiduciary duties to other entities[339][340] Executive Compensation Officers and directors have not received cash compensation, only founder shares and expense reimbursements - No officers or directors have received any cash compensation for services rendered to the company[348] - In January 2021, each independent director received 40,000 founder shares as compensation[348] - The sponsor, officers, and directors will be reimbursed for reasonable out-of-pocket expenses related to company activities[348] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The sponsor and management hold significant voting control through their ownership of Class F founder shares Beneficial Ownership as of March 17, 2023 | Beneficial Owner | Class F Shares Owned | % of Class F | Total Voting Control | | :--- | :--- | :--- | :--- | | TLG Acquisition Founder LLC | 4,360,869 | 87.2% | 33.7% | | John Michael Lawrie (CEO) | 4,860,869 | 97.2% | 37.5% | | All officers and directors as a group (6 individuals) | 4,976,812 | 99.5% | 38.4% | - Several institutional investors, including Meteora Capital, LLC (8.9%) and Sculptor Capital LP (8.0%), are beneficial owners of more than 5% of the Class A common stock[352] Certain Relationships and Related Transactions, and Director Independence The company has multiple related-party transactions with its sponsor, including loans, warrants, and service agreements - The sponsor purchased founder shares for $25,000 and private placement warrants for $7.0 million[356][357] - The company pays an affiliate of the sponsor $7,000 per month for office space, administrative, and support services[360] - The sponsor has provided a working capital loan facility of up to $8,000,000, of which approximately $3.0 million was outstanding as of December 31, 2022[362] - The board of directors has determined that three of its members are "independent directors" under NYSE listing standards[368] Principal Accounting Fees and Services This section details audit and tax fees paid to the company's independent accounting firm for 2022 and 2021 Accounting Fees Paid to WithumSmith+Brown, PC | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $135,720 | $108,150 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $9,100 | $8,570 | | All Other Fees | $0 | $0 | Part IV Exhibits, Financial Statement Schedules This section lists all filed exhibits, including the merger agreement with Electriq and various sponsor agreements - Key exhibits filed include the Merger Agreement with Electriq Power, Inc. and its first amendment[379] - Other significant exhibits include the Warrant Agreement, Registration Rights Agreement, and the Amended and Restated Promissory Note for the working capital loan[379][381] Form 10-K Summary This item is not applicable - Not applicable[383] Financial Statements Report of Independent Registered Public Accounting Firm The auditor issued a standard opinion but included a 'Going Concern' paragraph due to liquidity risks - The auditor's report contains a "Going Concern" paragraph, citing the company's liquidity needs and mandatory liquidation date as raising substantial doubt about its ability to continue[394] Consolidated Balance Sheets The balance sheet shows total assets of $81.1 million as of year-end 2022, significantly reduced by shareholder redemptions Consolidated Balance Sheet Data (as of Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Cash and investments held in Trust Account | $80,945,242 | $400,023,684 | | Total Assets | $81,073,148 | $400,177,829 | | Total Liabilities | $22,935,278 | $28,119,206 | | Class A common stock subject to possible redemption | $79,739,786 | $400,000,000 | Consolidated Statements of Operations The company reported net income of $10.4 million for 2022, driven by investment income and fair value changes of warrants Consolidated Statement of Operations Data (Year Ended Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Loss from operations | ($4,676,313) | ($4,620,942) | | Change in fair value of derivative warrant liabilities | $9,800,000 | $23,933,330 | | Income from investments held in Trust Account | $5,683,750 | $23,684 | | Net Income | $10,441,388 | $17,922,732 | Consolidated Statements of Cash Flows Cash flows were dominated by financing activities, showing $324.4 million paid for stock redemptions Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,528,791) | ($2,211,797) | | Net cash provided by (used in) investing activities | $324,762,191 | ($400,000,000) | | Net cash provided by (used in) financing activities | ($322,262,141) | $402,259,788 | Notes to Consolidated Financial Statements The notes detail the proposed Electriq merger, shareholder redemptions, related-party transactions, and fair value measurements - Note 1 details the proposed business combination with Electriq and the extension of the combination period to August 1, 2023, accompanied by the redemption of 32,051,595 public shares for ~$324.4 million[427][428][431] - Note 4 describes related party transactions, including the founder shares, private placement warrants, and a working capital loan facility from the sponsor for up to $8 million[492][497][501] - Note 9 explains that derivative warrant liabilities are measured at fair value using market prices (Level 1), observable inputs (Level 2), and model-based inputs (Level 3)[537][543][545]