References to the "Company," "our," "us" or "we" refer to Decarbonization Plus
Acquisition Corporation II. The following discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the unaudited financial statements and the notes thereto
contained in Item 1. of this report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of many
factors.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses (the "initial business combination"). Our Sponsor is
Decarbonization Plus Acquisition Sponsor II LLC, a Delaware limited liability
company ("Sponsor") and an affiliate of Riverstone Investment Group LLC, a
Delaware limited liability company, and its affiliates ("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 initial public offering was declared
effective on February 3, 2021 (the "Public Offering"). On February 8, 2021, we
consummated the Public Offering of 40,250,000 units (the "Units"), including
Over-Allotment Units ( as defined below) at $10.00 per Unit, generating gross
proceeds of $402.5 million, and incurring transaction costs of approximately
$22.8 million, consisting of $8.05 million of underwriting fees, $14.1 million
of deferred underwriting fees and approximately $0.65 million of other offering
costs.
In connection with the Public Offering, the underwriters of the Public Offering
were granted an option to purchase up to an additional 5,250,000 Units (the
"Over-Allotment Units"). On February 4, 2021, the underwriters exercised their
over-allotment option and purchased 5,250,000 Over-Allotment Units at an
offering price of $10.00 per unit, generating gross proceeds of approximately
$52.5 million.
Simultaneously with the closing of the Public Offering, we consummated the sale
of 7,366,667 private placement warrants (the "Private Placement Warrants") at a
price of $1.50 per Private Placement Warrant in a private placement to our
Sponsor and our independent directors (the "Private Placement"), generating
gross proceeds of $11.05 million.
Approximately $402.5 million of the net proceeds of the Public Offering
(including Over-Allotment Units) were deposited into a U.S.-based trust account
(the "Trust Account"), with Continental Stock Transfer & Trust Company acting as
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
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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 24 months
from the closing of the Public Offering, or February 8, 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, 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 stockholders'
rights as stockholders (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 stockholders and our 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.
Proposed Business Combination
Business Combination Agreement
On May 25, 2021, the Company, Tritium Holdings Pty Ltd, an Australian
proprietary company limited by shares ("Tritium"), Tritium DCFC Limited, an
Australian public company limited by shares ("NewCo") and Hulk Merger Sub, Inc.,
a Delaware corporation and wholly owned subsidiary of NewCo ("Merger Sub"),
entered into a Business Combination Agreement (the "Business Combination
Agreement," and the transactions contemplated thereby, the "Business
Combination"), pursuant to which, among other things and subject to the terms
and conditions contained therein, (i) the Company, NewCo, Tritium and all
existing shareholders of Tritium will enter into a share transfer agreement (the
"Share Transfer Agreement") pursuant to which the holders of all of the shares
in the capital of Tritium ("Tritium Shares") will transfer their Tritium Shares
to NewCo in exchange for an aggregate of 120,000,000 fully paid ordinary shares
in the capital of NewCo valued at $10.00 per share ("NewCo Ordinary Shares") to
be issued simultaneously with the issuance of NewCo Ordinary Shares in
connection with the Merger (as defined below) (the "Share Transfer") and
(ii) Merger Sub will merge with and into the Company, with the Company surviving
as a wholly owned subsidiary of NewCo (the "Merger"). In connection with the
Merger, (i) each holder of warrants to purchase shares of the Company's Class A
common stock, par value $0.0001 per share ("Class A Common Stock"), will receive
in exchange an equal number of warrants to purchase NewCo Ordinary Shares and
(ii) each holder of Class A Common Stock will receive in exchange an equal
number of NewCo Ordinary Shares.
On July 27, 2021, the Company, Tritium, NewCo and Merger Sub entered into the
First Amendment to the Business Combination Agreement (the "Amendment"). The
Amendment provides that (i) the obligations of Tritium, NewCo and Merger Sub to
consummate the Business Combination are subject to the condition that the sum of
(A) the amount of cash in the Company's Trust Account and (B) the amount of cash
proceeds to NewCo resulting from any private placements of New Ordinary Shares
be not less than $200,000,000 and (ii) the parties will use reasonable best
efforts to consummate any private placements of NewCo Ordinary Shares.
Amended and Restated Registration Rights Agreement
Concurrently with the closing of the Business Combination (the "Closing"), the
Company will amend and restate its registration rights agreement, dated
February 3, 2021 (as amended and restated, the "Registration Rights Agreement"),
pursuant to which NewCo will agree that, within 30 calendar days after the
Closing, NewCo will file with the SEC (at NewCo's sole cost and expense) a
registration statement registering the resale of certain securities held by or
issuable to certain existing shareholders of the Company and Tritium (the
"Resale Registration Statement"), and NewCo will use its commercially reasonable
efforts to have the Resale Registration Statement declared effective as soon as
reasonably practicable after the filing thereof. In certain circumstances, the
holders can demand NewCo's assistance with underwritten offerings and block
trades. The holders will be entitled to customary piggyback registration rights.
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Lock-Up Agreements
Concurrently with the Closing, all existing shareholders of Tritium, or
their attorney-in-fact, will enter into a lock-up agreement (the
"Lock-Up Agreement") with NewCo, Tritium and the Company pursuant to which they
will agree, subject to certain customary exceptions, not to (i) effect any sale
of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of
any option to purchase or otherwise dispose of or agreement to dispose of,
directly or indirectly, or establishment or increase of a put equivalent
position or liquidation with respect to or decrease of a call equivalent
position within the meaning of Section 16 of the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder with respect to, any securities of
NewCo, (ii) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of any
securities of NewCo, whether any such transaction is to be settled by delivery
of such securities, in cash or otherwise or (iii) make any public announcement
of any intention to effect any transaction specified in clause (i) or (ii), for
six months after the Closing of the Business Combination.
Sponsor Support Agreement
In connection with the execution of the Business Combination Agreement, the
Sponsor entered into a letter agreement with the Company, NewCo and Tritium (the
"Sponsor Support Agreement"), pursuant to which, among other things, the Sponsor
agreed to (i) waive the anti-dilution rights set forth in the Company's amended
and restated certificate of incorporation with respect to shares of the
Company's Class B common stock, par value $0.0001 per share (the "Founder
Shares") held by it, (ii) vote all the Class A Common Stock and Founder Shares
held by it in favor of the adoption and approval of the Business Combination
Agreement and the Business Combination, (iii) not transfer the Founder Shares
(or NewCo Ordinary Shares issuable upon conversion thereof in the Merger) until
the earlier of (a) one year after the Closing or (b) subsequent to the Closing,
(x) if the last sale price of the NewCo Ordinary Shares equals or exceeds $12.00
per share (as adjusted for share splits, share dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 150 days after the Closing or
(y) the date on which NewCo completes a liquidation, merger, capital stock
exchange, reorganization or other similar transaction that results in all of
NewCo's shareholders having the right to exchange their NewCo Ordinary Shares
for cash, securities or other property and (iv) not transfer any warrants (or
NewCo Ordinary Shares issued or issuable upon the exercise of the warrants)
until 30 days after the Closing.
Commitment Agreement
In connection with the execution of the Business Combination Agreement, each of
St Baker Energy Holdings Pty Ltd, as trustee for the St Baker Energy Innovation
Trust, Ilwella Pty Ltd, Varley Holdings Pt. Limited and Finnmax Pty Ltd, as
trustee for The Finn Family Trust (collectively, the "Committed Shareholders")
entered into a commitment agreement (the "Commitment Agreement") with NewCo and
the Company pursuant to which, among other things, the Committed Shareholders
agreed to execute and deliver the Share Transfer Agreement to the Company.
Termination Fee Side Letter
In connection with the execution of the Business Combination Agreement, the
Committed Shareholders and the Company entered into a letter agreement (the
"Termination Fee Side Letter") pursuant to which the Committed Shareholders
agreed to pay, and cause certain other existing shareholders of Tritium to pay,
to the Company a termination fee of $50,000,000 if the Business Combination
Agreement is terminated by the Company or Tritium as a result of a certain
shareholder of Tritium's acquisition of securities of Tritium (other than the
acquisition of securities (a) not in accordance with the shareholders' deed from
another Tritium shareholder, (b) of a de minimis amount from another Tritium
shareholder or (c) newly issued securities directly from Tritium and without
violation of the Business Combination Agreement) pursuant to the Shareholders'
Deed.
PIPE Financing
On July 27, 2021, the Company, NewCo and Palantir Technologies Inc. (the
"Investor") entered into a subscription agreement (the "Subscription
Agreement"), pursuant to which, among other things, the Investor agreed to
subscribe for and purchase, and NewCo agreed to issue and sell to the Investor,
immediately prior to or substantially concurrently with the Closing, 1,500,000
NewCo Ordinary Shares (the "PIPE Shares") at a purchase price of $10.00 per
share, for gross proceeds of $15,000,000 (the "PIPE Financing"). The PIPE
Financing is contingent upon, among other things, the consummation of the
Business Combination.
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The PIPE Shares to be issued pursuant to the Subscription Agreement will not be
registered under the Securities Act, in reliance upon the exemption provided in
Section 4(a)(2) of the Securities Act. Pursuant to the Subscription Agreement,
NewCo agreed that, within 30 calendar days after the closing of the PIPE
Financing, NewCo will file with the SEC (at NewCo's sole cost and expense) a
registration statement registering the resale of the PIPE Shares (the "PIPE
Resale Registration Statement"), and NewCo will use its commercially reasonable
efforts to have the PIPE Resale Registration Statement declared effective as
soon as practicable after the filing thereof.
Results of Operations
Our only activities from inception through September 30, 2021 related to our
formation and the Public Offering, as well as due diligence costs incurred to
identify a target company for a potential initial business combination. We
expect to incur increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as
costs in the pursuit of our acquisition plans.
For the three months ended September 30, 2021, we had a net income of
approximately $4.3 million, which consisted of approximately $800,000 in general
and administrative expenses, including due diligence costs incurred in the
pursuit of our acquisition plans, and approximately $5.1 million in gains due to
the change in the fair value of warrant liabilities, offset by interest earned
on marketable securities held in the Trust Account of $6,078.
For the nine months ended September 30, 2021, we had a net loss of approximately
$3.5 million, which consisted of approximately $6.0 million in general and
administrative expenses, including due diligence costs incurred in the pursuit
of our acquisition plans, $1 million of offering costs allocated to warrant
liabilities and approximately $3.5 million due to the change in the fair value
of warrant liabilities, offset by interest earned on marketable securities held
in the Trust Account of $15,460.
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
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 a promissory note (the "Note"). On December 22,
2020, we drew down $300,000 on the Note. We repaid the Note in full to our
Sponsor on February 4, 2021. Subsequent to the consummation of the Public
Offering, our liquidity needs have been satisfied through the net proceeds of
approximately $1.1 million from the Private Placement held outside of the Trust
Account.
The Company does not have sufficient liquidity to meet its anticipated
obligations over the next year from the date of issuance of these financial
statements. In connection with the Company's assessment of going concern
considerations in accordance with Accounting Standards Update ("ASU") 2014-15,
"Disclosures of Uncertainties about an Entity's Ability to Continue as a Going
Concern," management has determined that the Company has access to funds from
the Sponsor, which is described in Note 5, 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 initial
business combination and one year from the date of issuance of these financial
statements.
As of September 30, 2021, there were no amounts outstanding under any working
capital loans.
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 shares
of Class A Common Stock 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 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.
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Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$8.05 million in the aggregate, paid upon closing of the Public Offering.
In addition, $0.35 per Unit, or approximately $14.1 million 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 services. We recorded an
aggregate of $78,571 for the nine months ended September 30, 2021, in general
and administrative expenses in connection with the related agreement in the
accompanying statement of operations.
As of September 30, 2021, we recorded an aggregate of approximately $78,571 in
related party expenses which remain outstanding.
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.
Common stock subject to possible redemption
We account for the Class A Common Stock subject to possible redemption in
accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity.
Class A common stock subject to mandatory redemption are classified as a
liability instrument and are measured at fair value. Conditionally redeemable
common stock (including common stock 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 the Company's control) are
classified as temporary equity. At all other times, common stock are classified
as stockholders' equity. The Company's common stock features certain redemption
rights that are considered to be outside of the Company's control and subject to
occurrence of uncertain future events.
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
balance date.
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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 the date of this Quarterly Report, 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 Jumpstart Our Business Startups Act of 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 years following the completion of our Public Offering or until we
otherwise no longer qualify as an "emerging growth company."
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