The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the audited financial
statements and the notes related thereto which are included in "Part II, Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Part I, Item 1A. Risk Factors" and elsewhere in this Annual Report
on Form 10-K.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, amalgamation, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses. Our Sponsor is Decarbonization Plus Acquisition Sponsor
IV LLC, a Cayman Islands limited liability company and an affiliate of
Riverstone. Although we may pursue an acquisition opportunity in any business or
industry, we intend to capitalize on the Riverstone platform to identify,
acquire and operate a business in industries that may provide opportunities for
attractive risk-adjusted returns in one of the multiple sectors that may advance
the objectives of global decarbonization. This includes the energy and
agriculture, industrials, transportation and commercial and residential sectors.
The Registration Statement for our Public Offering was declared effective on
August 10, 2021. On August 13, 2021, we consummated the Public Offering of
31,625,000 Units at $10.00 per Unit, generating gross proceeds of $316.25
million, and incurring transaction costs of approximately $19.4 million,
consisting of approximately $6.3 million of underwriting fees, approximately
$11.07 million of deferred underwriting fees and approximately $2,000,000 of
other offering costs. The underwriters were granted a 45-day over-allotment
option to purchase up to 4,125,000 Over-Allotment Units at the Public Offering
price, less the underwriting discounts and commissions. The underwriters
exercised the over-allotment option in full and purchased an additional
4,125,000 Over-Allotment Units at the closing of the Public Offering.
Simultaneously with the closing of the Public Offering, we consummated the sale
of 12,737,500 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement to our Sponsor and our independent
directors, generating gross proceeds of $12,737,500. This amount includes the
exercise in full of the underwriters' option to purchase an additional 1,237,500
warrants to cover over-allotments.
Approximately $319.4 million ($10.10 per Unit) of the net proceeds of the Public
Offering (including the Over-Allotment Units and $11.07 million of the
underwriters' deferred discount) and certain of the proceeds from the sale of
the Private Placement Warrants was placed in a Trust Account located in the
United States with the Trustee, and invested only in U.S. "government
securities," within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less, or in money market funds
meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule
2a-7 under the Investment Company Act, which invest only in direct U.S.
government treasury obligations, as determined by the Company, until the earlier
of: (i) the completion of our initial business combination and (ii) the
distribution of the Trust Account as otherwise permitted under our amended and
restated certificate of incorporation.
If we are unable to complete an initial business combination within 18 months
from the closing of the Public Offering, 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, redeem 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 franchise and income taxes (less up
to $100,000 of interest to pay dissolution expenses and net of taxes payable),
divided by the number of then-outstanding public shares, which redemption will
completely extinguish public shareholders' rights as shareholders (including the
right to receive further liquidating distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining shareholders and our board
of directors, dissolve and liquidate, subject in each case to our obligations
under Cayman Islands law to provide for claims of creditors and the requirements
of other applicable law.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through December 31, 2021 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, the Company's search for a target business with which to
complete a business combination and activities in connection with the proposed
Transactions. We do not expect to generate any operating revenues until after
the completion of our initial business combination, at the earliest. We generate
non-operating income in the form of interest income on marketable securities. We
are incurring expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses in connection with completing a business combination.
For the period from February 22, 2021 (inception) through December 31, 2021, we
had a net income of $131,724, which consists of formation and operating costs of
$7,588,970, unrealized gain on marketable securities held in the Trust Account
of $8,510, transaction costs allocated to derivative warrant liability of
$1,382,307, and a change in fair value of derivative warrant liabilities of
$9,094,491.
Liquidity and Capital Resources
Our liquidity needs up to the Public Offering were satisfied through receipt of
a $25,000 capital contribution from our Sponsor in exchange for the issuance of
our Founder Shares to our Sponsor and a loan from our Sponsor for an aggregate
amount of $300,000 to cover organizational expenses and expenses related to the
Public Offering pursuant to the Note. The Note was paid off in full on August
19, 2021, and as of December 31, 2021, there was no outstanding balance under
the Note and it was no longer available to the Company. Subsequent to the
consummation of the Public Offering, our liquidity needs were satisfied through
the cash proceeds of approximately $55,752 held outside of the Trust Account and
a resulting working capital deficit of $5,337,870.
In addition, in the short term and long term, in connection with an initial
business combination, our Sponsor or an affiliate of our Sponsor, or certain of
our officers and directors may, but are not obligated to, loan us funds as may
be required. As of December 31, 2021, the Sponsor had paid $283,657 of our
expenses on our behalf. In addition, in order to finance transaction costs in
connection with an initial business combination, our officers, directors and
initial shareholders may, but are not obligated to, provide us with loans up to
$1,500,000 as the Company may require ("Working Capital Loans"). As of December
31, 2021, there was no outstanding balance under the Working Capital Loans.
The Company has incurred and expects to incur additional significant costs in
pursuit of its financing and acquisition plans, including the proposed business
combination. In connection with the Company's assessment of going concern
considerations in accordance with FASB ASC Topic 205-40, "Presentation of
Financial Statements- Going Concern," management has determined that the Company
has access to funds from the Sponsor, and the Sponsor has the financial ability
to provide such funds, that are sufficient to fund the working capital needs of
the Company until the earlier of the consummation of the business combination
and one year from the date of issuance of these financial statements. However,
management has determined that if the Company is unable to complete a business
combination by February 13, 2023, then the Company will cease all operations
except for the purpose of liquidating. The date for the mandatory liquidation
and subsequent dissolution raise substantial doubt about the Company's ability
to continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should the Company be required to liquidate
after this date. The Company intends to complete a business combination before
the mandatory liquidation date.
Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of working capital loans, if any, and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants and
warrants that may be issued upon conversion of working capital loans and upon
conversion of the Founder Shares will be entitled to registration rights
pursuant to a registration rights agreement. These holders
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will be entitled to certain demand and "piggyback" registration rights. We will
bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$6,325,000 in the aggregate, paid upon closing of the Public Offering.
In addition, $0.35 per unit, or approximately $11,068,750 in the aggregate, will
be payable to the underwriters for deferred underwriting commissions. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete an initial business
combination, subject to the terms of the underwriting agreement.
Administrative Services Agreement
Commencing on the date that our securities were first listed on the NASDAQ
Capital Market and continuing until the earlier of our consummation of an
initial business combination or our liquidation, we have agreed to pay an
affiliate of our Sponsor a total of $10,000 per month for office space,
utilities, secretarial support and administrative support made available to the
Company. We recorded an aggregate of $50,000 for the period ended December 31,
2021, in general and administrative expenses in connection with the related
agreement in the accompanying statement of operations. Upon completion of our
initial business combination or liquidation, we will cease paying these monthly
fees.
Related Party Transactions
As of December 31, 2021, we recorded an aggregate of approximately $720,683 in
related party expenses which have been paid in full.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and expenses during the
periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
Warrant Liabilities
We account for the warrants issued in connection with our Public Offering in
accordance with Accounting Standards Codification ("ASC") 815-40, Derivatives
and Hedging-Contracts in Entity's Own Equity ("ASC 815"), under which the
warrants do not meet the criteria for equity classification and must be recorded
as liabilities. As the warrants meet the definition of a derivative as
contemplated in ASC 815, the warrants are measured at fair value at inception
and at each reporting date in accordance with ASC 820, Fair Value Measurement,
with changes in fair value recognized in the Statements of Operations in the
period of change.
Ordinary shares subject to possible redemption
We account for the Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity.
Class A ordinary shares subject to mandatory redemption are classified as a
liability instrument and are measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that
are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within DCRD's control) are classified
as temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. Our ordinary shares feature certain redemption rights that
are considered to be outside of our control and subject to occurrence of
uncertain future events and are recorded in temporary equity.
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Net Income per share
Net income per share is computed by dividing net income applicable to
shareholders by the weighted average number of ordinary shares outstanding
during the period, plus, to the extent dilutive, the incremental number of
shares of ordinary shares to settle warrants, as calculated using the treasury
stock method.
As of December 31, 2021, the Company did not have any dilutive securities and
other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company under the treasury stock
method. Since the exercise of Warrants is contingent upon the occurrence of
future events, diluted loss per ordinary share is the same as basic loss per
ordinary share.
The Company has two classes of shares, which are referred to as Class A ordinary
shares and Founder Shares. Earnings are shared pro rata between the two classes
of shares which assumes a business combination as the most likely outcome.
Accretion associated with the redeemable shares of Class A ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
Impact of COVID-19
Our Sponsor continues to evaluate the impact of the COVID-19 pandemic and has
concluded that while it is reasonably possible that the virus could have a
negative effect on our financial position, results of operations and/or search
for a target company, the specific impact is not readily determinable as of the
date of the balance sheet.
Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material impact on our
financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected 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, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies, (iii) comply with any
requirement that may be adopted by the Public Company Accounting Oversight Board
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 comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five (5) years following the completion of our Public Offering or
until we otherwise no longer qualify as an "emerging growth company."
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