Hyzon Motors (HYZN) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details the company's financial performance, condition, and operational controls, including the proposed business combination with Hyzon Motors Financial Statements The company's Q1 2021 financial statements show a $1.1 million net loss and $226.6 million in assets, largely held in a trust account Condensed Consolidated Balance Sheets Total assets were $226.6 million as of March 31, 2021, primarily trust account investments, with total liabilities at $47.5 million Condensed Consolidated Balance Sheet Summary | Balance Sheet Item | March 31, 2021 (unaudited) ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Assets | | | | Investment held in Trust Account | $225,731,056 | $225,727,721 | | Total assets | $226,647,577 | $226,789,721 | | Liabilities & Equity | | | | Warrant liabilities | $33,938,854 | $33,600,270 | | Total liabilities | $47,542,066 | $46,572,838 | | Class A common stock subject to possible redemption | $174,105,510 | $175,216,880 | | Total stockholders' equity | $5,000,001 | $5,000,003 | Unaudited Condensed Consolidated Statements of Operations For Q1 2021, the company reported a $1.1 million net loss, mainly from general and administrative expenses and non-cash warrant liability fair value changes Statement of Operations Summary | Item | For the Period Ended March 31, 2021 ($) | For the Period Ended March 31, 2020 ($) | | :--- | :--- | :--- | | General and administrative expenses | $776,122 | $859 | | Loss from operations | ($776,122) | ($859) | | Interest earned on marketable securities | $3,334 | $ - | | Change in fair value of warrant liabilities | ($338,584) | $ - | | Net loss | ($1,111,372) | ($859) | | Basic and diluted net loss per non-redeemable common share | ($0.20) | ($0.00) | Notes to Financial Statements Notes detail the company's SPAC formation, IPO, Hyzon Motors business combination, warrant accounting, and a going concern uncertainty - The company is a SPAC formed to effect an Initial Business Combination and has 24 months from its October 2020 IPO to do so[13][19] - On February 8, 2021, the Company entered into a definitive business combination agreement with Hyzon Motors, Inc., with the transaction expected to close in the second quarter of 2021[76] - A going concern uncertainty exists due to a working capital deficit of $5.7 million as of March 31, 2021, but management believes it has sufficient access to funds from its Sponsor to meet obligations for the next year[26][29] - Warrants are accounted for as liabilities on the balance sheet, with changes in fair value recognized in the statement of operations, resulting in a non-cash loss of $338,584 for the period ended March 31, 2021[42][94] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, $1.1 million net loss, and liquidity, highlighting its blank check status and the Hyzon Motors business combination - The company is a blank check company focused on the global decarbonization sector, having raised approximately $225.7 million in its IPO and over-allotment[105][106][109] - The company has a 24-month deadline from October 22, 2020, to complete an initial business combination or it will be required to liquidate and return funds from the Trust Account to public shareholders[110] Proposed Business Combination A definitive business combination agreement with Hyzon Motors Inc. was signed on February 8, 2021, supported by a $400 million PIPE investment and related agreements - A definitive business combination agreement was signed with Hyzon Motors Inc. on February 8, 2021, with an expected closing in Q2 2021[111] - The transaction is supported by a private placement (PIPE) of $400 million from the sale of 40.5 million shares of Class A common stock at $10.00 per share[116] - Key Hyzon stockholders, representing ~90% of outstanding shares, have entered into a six-month lock-up agreement for their shares post-merger[112] Results of Operations Q1 2021 net loss was approximately $1.1 million, primarily due to general and administrative expenses and non-cash warrant liability fair value changes Quarterly Net Loss Comparison | Period | Net Loss ($) | Key Components | | :--- | :--- | :--- | | Q1 2021 | ~$1.1 million | $0.8M G&A expenses, $0.3M change in warrant liability fair value, $3.3k interest income | | Q1 2020 | ~$0.9 thousand | $0.9k G&A expenses | Liquidity and Capital Resources Liquidity is supported by initial Sponsor contributions and private placement proceeds, with potential for additional working capital loans from the Sponsor - Initial liquidity was provided by the Sponsor through a $25,000 capital contribution and a $300,000 loan, which was fully repaid in October 2020[125] - Post-IPO liquidity is satisfied by proceeds from the Private Placement held outside the Trust Account, and the Sponsor may provide additional working capital loans if needed[125][126] Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company - The company is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[142] Controls and Procedures Disclosure controls and procedures were ineffective as of March 31, 2021, due to a material weakness in warrant accounting, requiring a remediation plan - Management concluded that disclosure controls and procedures were not effective as of March 31, 2021[144] - A material weakness was identified in internal controls related to the accounting for warrants issued in connection with the IPO, which required a restatement of financial statements[147][148] - A remediation plan is being implemented, which includes enhanced access to accounting literature and increased communication with third-party professionals[147] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other relevant information not included in Part I Legal Proceedings No legal proceedings were reported for the period - There were no legal proceedings to report[151] Risk Factors No material changes to previously disclosed risk factors were reported - No material changes have occurred in the risk factors previously disclosed in the Form 10-K/A[152] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or changes in the use of proceeds were reported - None reported[153] Other Information No other information was reported for the period - None reported[156] Exhibits This section lists all exhibits filed with the Form 10-Q, including the Hyzon Business Combination Agreement and related documents - Key exhibits filed include the Business Combination Agreement, Lock-Up Agreement, Founder Warrant Agreement, and forms of Subscription Agreements related to the proposed merger with Hyzon[158]