PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
On
February 8, 2022, CCAC and Legacy Quanergy completed the Business Combination. Following the Business Combination, we changed the name of the combined company to Quanergy Systems, Inc.
Our Common Stock and warrants to purchase Common Stock originally began trading as units on The New York Stock Exchange on January 22,
2020. Prior to January 22, 2020, there was no public market for our securities. Following the Business Combination, beginning February 9, 2022, our Common Stock and warrants to purchase Common Stock continued trading on The New York Stock
Exchange under the symbols QNGY and QNGY WS, respectively.
Holders
As of December 31, 2021, there was one holder of record of our Units, one holder of record of our Class A ordinary shares, four
holders of record of our Class B ordinary shares and three holders of record of our warrants. The number of holders of record does not include a substantially greater number of street name holders or beneficial holders whose units,
Class A ordinary shares and warrants are held of record by banks, brokers and other financial institutions.
Securities Authorized for Issuance
Under Equity Compensation Plans
As of December 31, 2021, CCAC did not have any equity compensation plans.
Recent Sales of Unregistered Securities
Class B Ordinary Shares
On
November 14, 2019, CCAC issued an aggregate of 5,750,000 Class B ordinary shares to Sponsor for an aggregate purchase price of $25,000. On February 10, 2020, CCAC effected a share capitalization resulting in there being an aggregate
of 6,900,000 Class B ordinary shares outstanding. The issuance of Class B ordinary shares was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Private Warrants
CCAC purchased
7,520,000 private warrants at a price of $1.00 per warrant in a private placement that occurred concurrently with the closing of CCACs initial public offering and generated gross proceeds of $7,520,000. Each private warrant is exercisable for
one share of Common Stock at a price of $11.50 per share. The private warrants are non-redeemable and exercisable on a cashless basis so long as they are held by CCAC or its permitted transferees. The sale of
the private warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Subscription
Agreements
On the Closing Date, the subscribers purchased from the Company an aggregate of 3,695,000 shares of Common Stock, for a
purchase price of $10.00 per share and an aggregate purchase price of $36,950,000, pursuant to subscription agreements entered into in connection with the Business Combination. The sale of the shares of Common Stock to the subscribers was made
pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
GEM Warrant
On February 8, 2022, Quanergy issued the GEM Warrant, pursuant to the GEM Agreement, with a
36-month term to purchase 3,397,923 shares of Common Stock at a strike price per share equal to $10.00, to GEM Yield Bahamas Limited. The sale of the GEM Warrant was made pursuant to the exemption from
registration contained in Section 4(a)(2) of the Securities Act.
None of the foregoing transactions involved any underwriters,
underwriting discounts or commissions, or any public offering.
34
ITEM 6. [RESERVED].
Not applicable.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the financial statements and related notes included elsewhere in this
report.
Unless otherwise indicated, references in this section to the terms the Company, we, our and
us refer to CITIC Capital Acquisition Corp. (CCAC) prior to the Business Combination and the term Quanergy refers to Quanergy Perception Technologies, Inc., a Delaware corporation (f/k/a Quanergy Systems, Inc.)
prior to the Business Combination. The financial information included in this Managements Discussion and Analysis of Financial Condition and Results of Operations is that of CCAC prior to the Business Combination because the Business
Combination was consummated after the period covered by the financial statements included in this report on Form 10-K. Accordingly, the historical financial information included in this report on Form 10-K, unless otherwise indicated or as the context otherwise requires, is that of CCAC prior to the Business Combination.
This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and
financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those
discussed in the sections entitled Risk Factors and Forward-Looking Statements appearing elsewhere in this report.
Overview
We are a blank check company incorporated on September 9, 2019 as a Cayman Islands exempted company and incorporated for the
purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
On February 13, 2020, we sold 27,600,000 units at a price of $10.00 per unit, including 3,600,000 units issued pursuant to the exercise
in full of the underwriters over-allotment option. Each unit consists of one Class A ordinary share, par value $0.0001 per share and one-half of one redeemable warrant. Each whole public warrant
entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment. Concurrently with the closing of the IPO, our sponsor purchased an aggregate of 7,520,000 private placement warrants at a price of
$1.00 per private placement warrants. Each warrant is exercisable to purchase one Class A ordinary share at $11.50 per share. The proceeds from the private placement warrants were added to the proceeds from the IPO held in the Trust Account.
We paid an underwriting discount at the closing of the IPO of $5.52 million. An additional fee of $9.66 million was deferred
and was paid upon our completion of an initial business combination. The deferred portion of the discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event we complete our initial business
combination.
Recent Developments
On
February 8, 2022, CCAC consummated the previously announced merger pursuant to the Merger Agreement, by and among CCAC, Merger Sub and Legacy Quanergy. On January 28, 2022, Legacy Quanergy changed its corporate name to Quanergy Perception
Technologies, Inc. CCACs shareholders approved the Business Combination and the change of CCACs jurisdiction of incorporation from the Cayman Islands to the State of Delaware by deregistering as an exempted company in the Cayman Islands
and domesticating and continuing as a corporation formed under the laws of the State of Delaware an extraordinary general meeting of stockholders held on January 31, 2022. In connection with the Business Combination, holders of 26,867,796 of
CCACs Class A Ordinary Shares, or approximately 97.3% of the shares with redemption rights, exercised their right to redeem their shares for cash at a redemption price of approximately $10.07 per share, for an aggregate redemption amount
of $270,503,771. On February 8, 2022, holders of 600,000 of CCACs Class A Ordinary Shares, or approximately 2.2% of the shares with redemption rights, reversed their prior redemptions, resulting in $6,040,773 being returned to the
Trust Account established at the consummation of CCACs initial public offering prior to the Closing.
On February 7, 2022, one
business day prior to the Closing Date, CCAC effectuated the Domestication, pursuant to which each of CCACs currently issued and outstanding Class A Ordinary Shares and Class B Ordinary Shares automatically converted by operation of
law, on a one-for-one basis, into shares of the Companys Common Stock. Similarly, all of CCACs outstanding warrants became warrants to acquire shares of
Common Stock, and no other changes were made to the terms of any outstanding warrants.
35
Pursuant to the terms of the Merger Agreement, the Business Combination was effected through
the merger of Merger Sub with and into Legacy Quanergy, whereupon the separate corporate existence of Merger Sub ceased and Legacy Quanergy became the surviving company and a wholly owned subsidiary of the Company. In connection with the
Domestication, the Company changed its name from CITIC Capital Acquisition Corp. to Quanergy Systems, Inc.
On the Closing Date,
purchasers subscribed to purchase from the Company an aggregate of 3,650,000 shares of the Companys common stock (the PIPE Shares), for a purchase price of $10.00 per share and an aggregate purchase price of $36,500,000, pursuant
to separate subscription agreements (the Subscription Agreements). The sale of PIPE Shares was consummated substantially concurrently with the Closing.
In addition, as previously reported, in order to better manage working capital and liquidity needs post Business Combination, CCAC, GEM Global
Yield LLC SCS (GEM Investor) and GEM Yield Bahamas Ltd. (GYBL) entered into a Share Purchase Agreement, dated December 12, 2021 (the GEM Agreement), which allows us to fund general corporate purpose and
working capital needs. We are entitled to draw up to $125 million of gross proceeds in exchange for Common Stock, at a price equal to 90% of the average closing bid price of the shares of Common Stock on the NYSE for a 30 day period, subject to
meeting the terms and conditions of the GEM Agreement. GEM Investor is also entitled to purchase Common Stock pursuant to a warrant exercisable for up to 2.5% of our outstanding Common Stock on a fully diluted basis as of the closing of the Business
Combination for a period of 3 years (the GEM Warrant).
In January 2022, we negotiated an amendment to the GEM Agreement (the
GEM Amendment) to provide for two advance draw downs of $12.5 million each that are not limited based on trading volume.
Results of
Operations
Much of the activity from inception up to December 31, 2021 was related to our formation, the initial public offering
and business combination. Since the initial public offering, our activity has been limited to the evaluation of business combination candidates, merger activity, and we will not be generating any operating revenues until the closing and completion
of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and investments. 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 for due diligence expenses.
For the year ended December 31, 2021, we had a net income of $17,568,412, which was comprised of interest income of $27,789 from
investments in our Trust Account and $23,303,840 of unrealized gain on fair value changes of warrants, offset by operating and acquisition related costs of $5,763,217. The operating and acquisition related expenses were primarily due to fees to
professionals such as the auditors, legal counsel and consultants, insurance expenses and merger related expense.
For the year ended
December 31, 2020, we had a net loss of $10,506,796, which was comprised of operating costs of $562,220, warrant issuance costs of $1,044,453, unrealized loss on changes in fair value of warrant liabilities of $7,813,200, excess of the fair
value of the private placement warrants over the cash received of 2,932,800, interest and dividend income of $488,766 from investments in our Trust Account, and realized gain from sale of treasury securities of $1,357,111. The operating expenses
were primarily due to fees to professionals such as the auditors, legal counsel and consultants, and insurance expense.
We pay our
Sponsor $10,000 per month for office space, utilities, secretarial and administrative support services provided to members of our management team. Upon completion of our initial business combination, we ceased paying these monthly fees. For the year
ended December 31, 2021 and 2020, the Company incurred $12,000 and $105,862 expenses under this agreement, respectively.
Liquidity and Capital
Resources
Our liquidity needs have been satisfied prior to the completion of the initial public offering through receipt of a $25,000
capital contribution from our sponsor in exchange for the issuance of the founder shares to our sponsor and $300,000 in loans from our sponsor, which were repaid upon our initial public offering and not outstanding as of December 31, 2021, and
the remaining net proceeds from our offering and private placements.
As of December 31, 2021, the amount due to related parties was
$1,659,679. The amounts were unpaid reimbursements for the operating expenses, administrative support expenses, merger related expenses and deferred offering costs paid by the related parties on behalf of the Company.
36
As of December 31, 2021, we had cash outside the Trust Account of $31,344 available for
working capital needs. All cash and securities held in the Trust Account are generally unavailable for our use, prior to an initial business combination, and was restricted for use either in a business combination or to redeem ordinary shares. As of
December 31, 2021, none of the amount in the trust account was available to be withdrawn.
On June 21, 2021, we entered into the
Subscription Agreements with PIPE Investors, pursuant to which the PIPE Investors agreed to purchase, in the aggregate, 4,000,000 shares of Quanergy PubCo common shares at $10.00 per share for an aggregate commitment amount of
$40 million. The PIPE Investment Amounts will be used to pay the expenses related to the Business Combination with Quanergy. On February 8, 2022, the Business Combination with Quanergy was closed.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements.
We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any
off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any
non-financial agreements involving assets.
Contractual Obligations
Registration Rights
The holders of
Founder Shares, Private Placement Warrants, and securities that may be issued upon conversion of working capital loans, if any, will be entitled to registration rights pursuant to a registration rights agreement dated as of February 10, 2020.
These holders are 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 paid a cash underwriting discount of $5,520,000, or $0.20 per unit of the gross proceeds of the initial 27,600,000 Units (inclusive of 3,600,000 unit over-allotment option) sold in the initial public offering, in the aggregate. In addition, the
underwriters are entitled to a deferred fee of (i) $0.35 per unit of the gross proceeds of the initial 24,000,000 units sold in the initial public offering, or $8,400,000, and (ii) $0.35 per unit of the gross proceeds from the 3,600,000 units sold
pursuant to the over-allotment option, or $1,260,000, aggregating to a deferred fee of $9,660,000. The deferred fee was paid to the underwriters from the amounts held in the Trust Account after we completed the Business Combination, subject to the
terms of the underwriting agreement.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States requires our 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 income and expenses during the
periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Offering Costs
We comply with the
requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB)
Topic 5A-Expenses of Offering. Offering costs consist of legal, accounting, underwriting fees and other costs that are directly related to the Initial Public Offering. Offering costs amounting
to $1,044,453 were allocated to public warrants and expensed, offering costs amounting to $14,661,607 were charged to temporary equity upon the completion of the Initial Public Offering. Immediately upon the closing of the Initial Public
Offering, we recognized the accretion from initial book value to redemption value, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Warrant Liabilities
We account for the
warrants issued in connection with our initial public offering in accordance with ASC 815-40, Derivatives and Hedging-Contracts in Entitys Own Equity (ASC 815), under which the
warrants do not meet the criteria for equity
37
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 Statement of Operations in the period of change.
Class A Ordinary Shares Subject to Possible Redemption
We account for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480
Distinguishing Liabilities from Equity. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares
(including Class A 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 the Companys control) are classified as
temporary equity. At all other times, Class A ordinary shares are classified as shareholders equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, as of December 31, 2021 and 2020, 27,600,000 Class A ordinary shares subject to possible redemption were presented as temporary equity, outside of the shareholders deficit
section of our balance sheets respectively.
Immediately upon the closing of the Initial Public Offering, we recognized the accretion from
initial book value to redemption value, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income (Loss) per Ordinary Share
We
have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Earnings and losses are shared pro rata between the two classes of shares. The 14,891,667 potential ordinary shares for outstanding
warrants to purchase the Companys shares were excluded from diluted earnings per share for the year ended December 31, 2021 and 2020 because the warrants are contingently exercisable, and the contingencies have not yet been met as of
December 31, 2021. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the periods.
Recent
Accounting Pronouncements
In August 2020, FASB issued Accounting Standards Update (ASU)
2020-06, DebtDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and HedgingContracts in Entitys Own Equity (Subtopic 815-40) (ASU 2020-06) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models
that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entitys own equity. The
new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entitys own equity. ASU 2020-06 amends the diluted earnings per
share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be
applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its
financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on our financial statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
38
Index to Financial Statements
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders of
Quanergy Systems, Inc. (f/k/a CITIC
Capital Acquisition Corp.)
Opinion on the Financial Statements
We have audited the accompanying balance sheets of CITIC Capital Acquisition Corp. (the Company) as of December 31, 2021 and 2020,
the related statements of operations, changes in shareholders equity (deficit) and cash flows for the years then ended. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2021 and 2020, and the results of its operations and its cash flows for years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Companys auditor since 2019.
New
York, New York
March 31, 2022
PCAOB ID Number 100
F-2
CITIC CAPITAL ACQUISITION CORP.
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31 2021 |
|
|
December 31, 2020 |
|
Assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
31,344 |
|
|
$ |
981,606 |
|
Prepaid expenses |
|
|
47,048 |
|
|
|
16,589 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
78,392 |
|
|
|
998,195 |
|
Investments held in Trust Account |
|
|
277,873,665 |
|
|
|
277,845,876 |
|
Deferred offering costs |
|
|
4,000,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
281,952,216 |
|
|
$ |
278,844,071 |
|
|
|
|
|
|
|
|
|
|
Liabilities, Class A Ordinary Shares Subject To Possible Redemption And Shareholders
Deficit |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
3,268,175 |
|
|
$ |
28,509 |
|
Due to related parties |
|
|
1,659,679 |
|
|
|
55,931 |
|
Total current liabilities |
|
|
4,927,854 |
|
|
|
84,440 |
|
Deferred underwriting commissions |
|
|
9,660,000 |
|
|
|
9,660,000 |
|
Warrant liability |
|
|
17,316,319 |
|
|
|
36,620,000 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
31,904,173 |
|
|
|
46,364,440 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption, $0.0001 par value; 27,600,000 shares
(at redemption value of $10.00 per share) at December 31, 2021 and December 31, 2020 |
|
|
276,000,000 |
|
|
|
276,000,000 |
|
Shareholders deficit: |
|
|
|
|
|
|
|
|
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; no shares issued and
outstanding |
|
|
|
|
|
|
|
|
Class A ordinary shares, $0.0001 par value, 200,000,000 shares authorized, 0 shares
(excluding 27,600,000 shares subject to possible redemption) issued and outstanding at December 31, 2021 and December 31, 2020 |
|
|
|
|
|
|
|
|
Class B ordinary shares, $0.0001 par value, 20,000,000 shares authorized, 6,900,000 shares
issued and outstanding at December 31, 2021 and December 31, 2020 |
|
|
690 |
|
|
|
690 |
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
Accumulated deficit |
|
|
(25,952,647 |
) |
|
|
(43,521,059 |
) |
|
|
|
|
|
|
|
|
|
Total shareholders deficit |
|
|
(25,951,957 |
) |
|
|
(43,520,369 |
) |
|
|
|
|
|
|
|
|
|
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and
Shareholders Deficit |
|
$ |
281,952,216 |
|
|
$ |
278,844,071 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
F-3
CITIC CAPITAL ACQUISITION CORP.
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31 |
|
|
|
2021 |
|
|
2020 |
|
General and administrative expenses |
|
$ |
5,763,217 |
|
|
$ |
562,220 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(5,763,217 |
) |
|
|
(562,220 |
) |
Other income (expenses): |
|
|
|
|
|
|
|
|
Interest income and realized gain from sale from investments held in Trust Account |
|
|
27,789 |
|
|
|
1,845,877 |
|
Warrant issuance costs |
|
|
|
|
|
|
(1,044,453 |
) |
Excess of the fair value of private placement warrants over the cash received |
|
|
|
|
|
|
(2,932,800 |
) |
Unrealized gain (loss) on fair value changes of warrants |
|
|
23,303,840 |
|
|
|
(7,813,200 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
17,568,412 |
|
|
$ |
(10,506,796 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class A ordinary shares, basic and
diluted |
|
|
27,600,000 |
|
|
|
24,348,493 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per ordinary share, Class A |
|
$ |
0.51 |
|
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class B ordinary shares, basic and
diluted |
|
|
6,900,000 |
|
|
|
6,900,000 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per ordinary share, Class B |
|
$ |
0.51 |
|
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
F-4
CITIC CAPITAL ACQUISITION CORP.
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares Class B |
|
|
Additional Paid-In Capital |
|
|
Accumulated Deficit |
|
|
Shareholders Equity (Deficit) |
|
|
|
Shares |
|
|
Amount |
|
Balance as of December 31, 2019 |
|
|
6,900,000 |
|
|
$ |
690 |
|
|
$ |
24,310 |
|
|
$ |
(22,966 |
) |
|
$ |
2,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion for Class A ordinary shares to redemption amount |
|
|
|
|
|
|
|
|
|
|
(24,310 |
) |
|
|
(32,991,297 |
) |
|
|
(33,015,607 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,506,796 |
) |
|
|
(10,506,796 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020 |
|
|
6,900,000 |
|
|
$ |
690 |
|
|
$ |
|
|
|
$ |
(43,521,059 |
) |
|
$ |
(43,520,369 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,568,412 |
|
|
|
17,568,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021 |
|
|
6,900,000 |
|
|
$ |
690 |
|
|
$ |
|
|
|
$ |
(25,952,647 |
) |
|
$ |
(25,951,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
F-5
CITIC CAPITAL ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31 |
|
|
|
2021 |
|
|
2020 |
|
Cash flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
17,568,412 |
|
|
$ |
(10,506,796 |
) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Interest earned on investment held in Trust Account |
|
|
(27,789 |
) |
|
|
|
|
Excess of the fair value of private placement warrants over the cash received |
|
|
|
|
|
|
2,932,800 |
|
Warrant issuance costs |
|
|
|
|
|
|
1,044,453 |
|
Realized gain and interest earned on investment held in Trust Account |
|
|
|
|
|
|
(1,845,876 |
) |
Unrealized (gain)/loss on fair value changes of warrants |
|
|
(23,303,840 |
) |
|
|
7,813,200 |
|
Changes in current assets and current liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other expenses |
|
|
(30,459 |
) |
|
|
(16,589 |
) |
Accrued offering costs and expenses |
|
|
3,239,666 |
|
|
|
28,509 |
|
Due to related party |
|
|
1,603,748 |
|
|
|
10,080 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(950,262 |
) |
|
|
(540,219 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Cash deposited into Trust Account |
|
|
|
|
|
|
(276,000,000 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(276,000,000 |
) |
Cash flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from Initial Public Offering, net of underwriters fees |
|
|
|
|
|
|
276,000,000 |
|
Proceeds from private placement |
|
|
|
|
|
|
7,520,000 |
|
Repayment of Sponsor loan |
|
|
|
|
|
|
(300,000 |
) |
Payments of offering costs |
|
|
|
|
|
|
(5,998,175 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
277,221,825 |
|
Net Change in Cash |
|
|
(950,262 |
) |
|
|
681,606 |
|
Cash - Beginning |
|
|
981,606 |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
Cash - Ending |
|
$ |
31,344 |
|
|
$ |
981,606 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-cash Financing
Activities: |
|
|
|
|
|
|
|
|
Deferred underwriting fee payable |
|
$ |
|
|
|
$ |
9,660,000 |
|
|
|
|
|
|
|
|
|
|
Deferred offering costs GEM warrant |
|
$ |
4,000,159 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
F-6
CITIC CAPITAL ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
Note 1-Description of Organization and Business Operations
Organization and General
CITIC Capital Acquisition Corp. (the Company) was incorporated as a Cayman Islands exempted company on September 9, 2019. The Company was
incorporated 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 Business Combination). Although the Company is
not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on the energy efficiency, clean technology and sustainability sectors. The Company is an emerging growth
company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of December 31, 2021, the Company had
not commenced any operations. All activity through December 31, 2021 relates to the Companys formation, the initial public offering described below, and, since the completion of the Initial Public Offering (IPO) as defined
below, searching for a target to consummate a Business Combination and merger related expenses. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and will recognize changes in
the fair value of warrant liability as other income (expense).
The Companys sponsor is CITIC Capital Acquisition LLC, a Cayman Islands limited
liability company (the Sponsor).
Merger
On June 21, 2021, the Company entered into an Agreement and Plan of Merger (the Merger Agreement), by and among the Company, CITIC Capital
Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (Merger Sub), and Quanergy Systems, Inc., a Delaware corporation (Quanergy).
At the closing of the transactions contemplated by the Merger Agreement (the Closing), upon the terms and subject to the conditions of the Merger
Agreement, in accordance with the Delaware General Corporation Law, as amended (the DGCL), Merger Sub was merged with and into Quanergy, the separate corporate existence of Merger Sub ceased and Quanergy was the surviving corporation and
a wholly owned subsidiary of the Company (the Merger); as a result of the Merger, among other things, in the aggregate, a number of the Companys ordinary shares (or a number of the Companys common shares after its
Domestication (as defined below), the Quanergy PubCo common share) equal to the quotient obtained by dividing (x) $970,000,000 by (y) $10.00 will be issued or issuable to holders of outstanding Quanergy capital stock,
including any shares of Quanergy capital stock issued or issuable pursuant to exercise or conversion of any warrants or convertible notes, and Quanergy equity awards, calculated using the treasury stock method of accounting; and upon the effective
time of the Merger (the Effective Time), the Company immediately was renamed Quanergy Systems, Inc.
The Agreement contains
customary representations and warranties, covenants, closing conditions, termination fee provisions and other terms relating to the initial Business Combination and the other transactions contemplated thereby.
The Merger Agreement is subject to the satisfaction or waiver of certain customary closing conditions, including, among others, (i) approval of the
Business Combination and related agreements and transactions by the respective shareholders of the Company and Quanergy, (ii) effectiveness of the proxy / registration statement on Form S-4 to
be filed by the Company in connection with the Business Combination, (iii) expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and the achievement of CFIUS clearance (as contemplated by the
Merger Agreement), (iv) receipt of approval for listing on the NYSE of the Quanergy PubCo common shares to be issued in connection with the Merger, (v) that after redemption, the Companys net tangible assets shall be no less than
$5,000,001 upon Closing and (vi) the absence of certain injunctions.
Other conditions to Quanergys obligations to consummate the Merger
include, among others, that as of the Closing, (i) the Companys jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware (the Domestication), and (ii) the amount of cash available in
(x) the Trust Account, following the extraordinary general meeting, into which substantially all of the proceeds of the Companys initial public offering and private placements of its warrants have been deposited for the benefit of the
Company, certain of its public shareholders and the underwriters of the Companys initial public offering, after deducting the amount
F-7
required to satisfy the Companys obligations to its shareholders (if any) that exercise their rights to redeem their Class A Ordinary Shares pursuant to the Companies Act (as revised)
of the Cayman Islands the Companys Amended and Restated Memorandum and Articles of Association ( the Cayman Constitutional Documents) (the Trust Amount) plus (y) the PIPE Investment (as defined below), is at least
equal to $175,000,000.
The Company has entered into subscription agreements (the Subscription Agreements) with certain institutional and
accredited investors, including, among others, certain existing equityholders of Quanergy (the PIPE Investors), pursuant to which the PIPE Investors agreed to purchase, in the aggregate, 4,000,000 shares of Quanergy PubCo
common shares at $10.00 per share for an aggregate commitment amount of $40 million (the PIPE Investment Amount).
On
February 8, 2022 (the Closing Date), the Company consummated the previously announced merger (the Closing) pursuant to the Merger Agreement, by and among the Company and Quanergy Systems, Inc., a Delaware corporation
(when referred to in its pre-Business Combination (as defined below) capacity, Legacy Quanergy). On January 28, 2022, Legacy Quanergy changed its corporate name to Quanergy Perception
Technologies, Inc. The Companys shareholders approved the business combination (the Business Combination) and the change of the Companys jurisdiction of incorporation from the Cayman Islands to the State of Delaware by
deregistering as an exempted company in the Cayman Islands and domesticating and continuing as a corporation formed under the laws of the State of Delaware (the Domestication) at an extraordinary general meeting of stockholders held on
January 31, 2022 (the Special Meeting). In connection with the Special Meeting and the Business Combination, holders of 26,867,796 of the Companys Class A ordinary shares (Class A Ordinary Shares), or
approximately 97.3% of the shares with redemption rights, exercised their right to redeem their shares for cash at a redemption price of approximately $10.07 per share, for an aggregate redemption amount of $270,503,771. On February 8, 2022,
holders of 600,000 of the Companys Class A ordinary shares (Class A Ordinary Shares), or approximately 2.2% of the shares with redemption rights, reversed their prior redemptions, resulting in $6,040,773 being returned to
the trust account established at the consummation of the Companys initial public offering prior to the Closing.
On the Closing Date, purchasers
subscribed to purchase from the Company an aggregate of 3,650,000 shares of the Companys Common Stock (the PIPE Shares), for a purchase price of $10.00 per share and an aggregate purchase price of $36,500,000, pursuant to separate
subscription agreements (each, a Subscription Agreement). The sale of PIPE Shares was consummated substantially concurrently with the Closing.
Financing
The registration statement for the
Companys Initial Public Offering (as defined below) was declared effective by the U.S. Securities and Exchange Commission (the SEC) on February 10, 2020. On February 13, 2020, the Company consummated its Initial
Public Offering (the Initial Public Offering) of 27,600,000 units (each, a Unit and collectively, the Units), including 3,600,000 Units issued pursuant to the exercise in full of the
underwriters over-allotment option, at $10.00 per Unit, generating gross proceeds of $276 million, and incurring offering costs of approximately $15.70 million, inclusive of $9.66 million in deferred underwriting
commissions (Note 3). The Company intends to finance its initial Business Combination with the proceeds from the Initial Public Offering and a $7.52 million private placement of warrants (the Private Placement Warrants) (Note
4). Upon the closing of the Initial Public Offering and the Private Placement, $276 million was held in a trust account (discussed below). As of December 31, 2021, the Company had approximately $31,344 in cash held outside of the
trust account (discussed below).
Trust Account
Upon
the closing of the Initial Public Offering, $276 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering, including the proceeds of the Private Placement Warrants, was held in a trust account
(the Trust Account), located in the United States at J.P. Morgan Chase Bank, N.A., 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, of 1940, as amended (the Investment Company Act) having a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of:
(i) the completion of a Business Combination or (ii) the distribution of the Trust Account as described below.
Initial Business Combination
The Companys management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the
sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally
F-8
toward consummating a Business Combination. The Company must complete an initial Business Combination with one or more operating businesses or assets with a fair market value equal to at least
80% of the net assets held in the Trust Account (excluding the amount of any deferred underwriting discount held in the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only
complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to
register as an investment company under the Investment Company Act.
The Company provided its holders (the Public Shareholders) of its
Class A ordinary shares, par value $0.0001, sold in the Initial Public Offering (the Public Shares), with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination. In connection
with an extraordinary general meeting of stockholders held on January 31, 2022 (the Special Meeting) and the Business Combination, holders of 26,867,796 of the Companys Class A ordinary shares, or approximately 97.3% of
the shares with redemption rights, exercised their right to redeem their shares for cash at a redemption price of approximately $10.07 per share, for an aggregate redemption amount of $270,503,771. On February 8, 2022, holders of 600,000 of the
Companys Class A ordinary shares, or approximately 2.2% of the shares with redemption rights, reversed their prior redemptions, resulting in $6,040,773 being returned to the trust account established at the consummation of the
Companys IPO prior to the Closing. The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the
Company will pay to the underwriters (as discussed in Note 4). These Public Shares were classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Boards
(FASB) Accounting Standards Codification (ASC) Topic 480 Distinguishing Liabilities from Equity.
The Companys
Sponsor, officers and directors (the initial shareholders) have agreed, pursuant to a written agreement with the Company, that they will not propose any amendment to the Amended and Restated Memorandum and Articles of Association
(A) to modify the substance or timing of the Companys obligation to allow redemption in connection with the initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within
24 months from the closing of the Initial Public Offering (the Combination Period), which is February 13, 2022, or (B) with respect to any other material provisions relating to shareholders rights or pre-initial Business Combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares upon approval of any such amendment 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 the Company to
pay its taxes, divided by the number of then outstanding public shares.
The Company had 24 months (until February 13, 2022) from the closing of
the Initial Public Offering to complete its initial Business Combination. On February 8, 2022, the Business Combination with Quanergy was closed, see detail above in Note 1 Merger section.
Liquidity
As of December 31, 2021 and 2020, the
Company had cash outside the Trust Account of $31,344 and $981,606 available for working capital needs. All cash and securities held in the Trust Account are generally unavailable for the Companys use, prior to an initial Business
Combination, and are restricted for use either in a Business Combination or to redeem ordinary shares. As of December 31, 2021, none of the amount in the Trust Account was available to be withdrawn as described above.
Through December 31, 2021, the Companys liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares,
advances from the Sponsor in an aggregate amount of $300,000 which were repaid upon the Initial Public Offering (as described in Note 3), the remaining net proceeds from the Initial Public Offering and Private Placement (as described in
Note 3 and 4) and the amount due to related parties of $1,659,679(as described in Note 4).
On June 21, 2021, the Company has entered into the
Subscription Agreements with PIPE Investors, pursuant to which the PIPE Investors agreed to purchase, in the aggregate, 4,000,000 shares of Quanergy PubCo common shares at $10.00 per share for an aggregate commitment amount of
$40 million. The PIPE Investment Amounts will be used to pay the expenses related to the Business Combination with Quanergy. On February 8, 2022, the Business Combination with Quanergy was closed. Based on the foregoing, management
believes that the surviving corporation will have sufficient working capital and borrowing capacity to meet its needs through one year from this filing.
F-9
Note 2-Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial
statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (US GAAP) and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an emerging
growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the Securities Act), as modified by the Jumpstart Our Business Startups Act of 2012, (the JOBS Act), and it may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt-out of the
extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt-out is
irrevocable. The Company has elected not to opt-out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or
private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make the comparison of the Companys financial statement with another
public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of these financial
statements in conformity with U.S. GAAP requires the Companys management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant
judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change
in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to
change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Cash and Cash
Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of December 31, 2021 and December 31, 2020.
Investments Held in Trust Account
At December 31, 2021 and December 31, 2020, the assets held in the Trust Account were held in money market funds. The Companys portfolio of
investments held in the Trust Account is comprised of 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, investments in money market
funds that invest in U.S. government securities, cash, or a combination thereof. The Companys investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at
the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on Investments Held in Trust Account in the accompanying statement of operations. The estimated fair values of
investments held in the Trust Account are determined using available market information.
Offering Costs
The Company complies with the requirements of FASB
ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB)
Topic 5A-Expenses of Offering. Offering costs consist of legal, accounting, underwriting fees and other costs that are directly related to the Initial Public Offering and subsequent offerings.
Offering costs amounting to $1,044,453 were allocated to public warrants and expensed, offering costs
F-10
amounting to $14,661,607 were charged to temporary equity upon the completion of the Initial Public Offering. Immediately upon the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption value, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit. As of December 31, 2021,
$4,000,158 of deferred offering costs are presented on the balance sheet related to the fair value of the GEM Warrants (see Note 3).
Class A
Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 Distinguishing Liabilities from Equity. Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A 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 the
Companys control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders equity. The Companys Class A ordinary shares feature certain redemption rights that are
considered to be outside of the Companys control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2021 and December 31, 2020, 27,600,000 Class A ordinary shares subject to possible
redemption were presented as temporary equity, outside of the shareholders deficit section of the Companys balance sheets respectively.
Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption value, which resulted
in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net Income
(Loss) per Ordinary Share
The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary
shares. Earnings and losses are shared pro rata between the two classes of shares. The 14,891,667 potential ordinary shares for outstanding warrants to purchase the Companys shares were excluded from diluted earnings per share for the year
ended December 31, 2021 and 2020 because the warrants are contingently exercisable, and the contingencies have not yet been met as of December 31, 2021. As a result, diluted net income (loss) per ordinary share is the same as basic net
loss per ordinary share for the periods. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary share:
F-11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Year Ended December 31, 2021 |
|
|
The Year Ended December 31, 2020 |
|
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
Basic and diluted net income (loss) per ordinary share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income (loss) |
|
$ |
14,054,730 |
|
|
$ |
3,513,682 |
|
|
$ |
(8,186,784 |
) |
|
$ |
(2,320,012 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
27,600,000 |
|
|
|
6,900,000 |
|
|
|
24,348,493 |
|
|
|
6,900,000 |
|
Basic and diluted net income (loss) per ordinary share |
|
$ |
0.51 |
|
|
$ |
0.51 |
|
|
$ |
(0.34 |
) |
|
$ |
(0.34 |
) |
Income Taxes
The Company
accounts for income taxes in accordance with FASB ASC 740, Income Taxes (ASC 740). ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits
as of December 31, 2021 and December 31, 2020. The Companys management determined that the Cayman Islands is the Companys only major tax jurisdiction. The Company recognizes accrued interest and penalties related to
unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of December 31, 2021 and December 31, 2020. The Company is currently not aware of any issues that could result in
significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income
taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Companys tax provision was zero for the periods presented.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the federal depository insurance coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Companys assets and liabilities, which qualify as financial instruments under the FASB ASC 820, Fair Value Measurements and
Disclosures, approximates the carrying amounts represented in the balance sheets, other than the derivative warrant liability (see Note 6).
Fair
Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly
transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
|
|
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active
markets; |
F-12
|
|
|
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly
observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
|
|
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an
entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the
fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The Companys private warrants liability and GEM warrant liability are based on a valuation models utilizing management judgment and pricing inputs from
observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. See Note 6 for additional information on
assets and liabilities measured at fair value.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, Derivatives and Hedging. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in
the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument. FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this
guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A ordinary shares.
The warrants included in the GEM Agreement (see Note 5), which entitles the GEM Investor is to purchase Quanergy PubCo common stock pursuant to the Quanergy
PubCo warrant exercisable for up to 2.5% of the outstanding common stock of Quanergy PubCo on a fully diluted basis as of the closing of the Business Combination for a period of 3 years, are derivative warrants. These warrants will need to be fair
valued at the time of issuance and adjusted at each reporting period.
Recent Accounting Pronouncements
In August 2020, FASB issued Accounting Standards Update (ASU) 2020-06, DebtDebt with Conversion
and Other Options (Subtopic 470-20) and Derivatives and HedgingContracts in Entitys Own Equity (Subtopic 815-40)
(ASU 2020-06) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entitys own equity. The new standard also
introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entitys own equity. ASU 2020-06 amends the diluted earnings per
share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024
and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any,
that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material
effect on the Companys financial statements.
Note 3-Initial Public Offering
On February 13, 2020, the Company sold 27,600,000 Units at a price of $10.00 per Unit, including 3,600,000 Units issued pursuant to the exercise in full
of the underwriters over-allotment option. Each Unit consists of one Class A ordinary share, par value $0.0001 per share and one-half of one redeemable warrant (each, a Public Warrant).
Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment.
The
Company paid an underwriting discount at the closing of the Initial Public Offering of $5.52 million. An additional fee of $9.66 million was deferred and was paid upon the Companys completion of an initial Business Combination. The
deferred portion of the discount was paid to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
F-13
All of the 27,600,000 Class A ordinary shares sold as part of the Units in the IPO contain a redemption
feature which allows for the redemption of such public shares in connection with the Companys liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to
the Companys certificate of incorporation. In accordance with SEC guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption
provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity.
The
Class A ordinary shares are accounted for in accordance to codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the
Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of
the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption
value immediately as they occur. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges
against additional paid-in capital and accumulated deficit.
As of December 31, 2021, the Class A
ordinary shares subject to possible redemption reflected on the balance sheet are reconciled in the following table:
|
|
|
|
|
Gross proceeds from IPO |
|
$ |
276,000,000 |
|
Less: |
|
|
|
|
Proceeds allocated to Public Warrants |
|
|
(18,354,000 |
) |
Ordinary share issuance costs |
|
|
(14,661,607 |
) |
Plus: |
|
|
|
|
Accretion of carrying value to redemption value |
|
|
33,015,607 |
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption |
|
$ |
276,000,000 |
|
|
|
|
|
|
Warrants
The Public
Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective
registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from
registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). If and when the
warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. The Company is not registering the
Class A ordinary shares issuable upon exercise of the warrants at this time. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will
use its best efforts to file with the SEC and have an effective registration statement covering the Class A ordinary shares issuable upon exercise of the warrants and to maintain a current prospectus relating to those Class A ordinary
shares until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th business day after the
closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise
warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Companys Class A ordinary shares are at the time of any exercise of a warrant
not listed on a national securities exchange such that they satisfy the definition of a covered security under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise
their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement,
and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
F-14
The warrants will expire five years after February 8, 2022 or earlier upon redemption or
liquidation. If (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue
price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Companys board of directors and, in the case of any such issuance to the initial shareholders
or their affiliates, without taking into account any Founder Shares held by the initial shareholders or such affiliates, as applicable, prior to such issuance) (the Newly Issued Price), (y) the aggregate gross proceeds from such
issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination, and (z) the volume weighted average trading price of the Class A ordinary shares
during the 10 trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the Market Value) is below $9.20 per share, the exercise price of the
Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price of the Warrants will be adjusted (to the nearest cent) to be equal to
180% of the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the
Units sold in the Initial Public Offering, except that, so long as they are held by the Sponsor or its permitted transferees, the Private Placement Warrants (i) will not be redeemable by the Company, (ii) may not (including the
Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination, (iii) may be
exercised by the holders on a cashless basis and (iv) will be entitled to registration rights. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be
redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.
The Company may call the Public Warrants for
redemption (except with respect to the Private Placement Warrants):
|
|
|
in whole and not in part; |
|
|
|
at a price of $0.01 per warrant; |
|
|
|
upon a minimum of 30 days prior written notice of redemption; and |
|
|
|
if, and only if, the last reported closing price of the Class A ordinary shares equals or exceeds
$18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a cashless basis, as described in the warrant agreement. Additionally, in no event will the Company be required to net cash settle any Warrants.
GEM Warrant
On February 8, 2022, Quanergy issued the GEM
Warrant (the GEM Warrant), pursuant to the GEM Agreement, with a 36-month term to purchase 3,397,923 shares of Common Stock at a strike price per share equal to $10.00, to GEM Yield Bahamas Limited. The sale of the GEM Warrant was made
pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act (see Note 5).
None of the foregoing transactions involved
any underwriters, underwriting discounts or commissions, or any public offering.
Note 4-Related Party
Transactions
Founder Shares
On November 14,
2019, the Sponsor paid $25,000, or approximately $0.004 per share, to cover certain offering costs in consideration for 5,750,000 Class B ordinary shares, par value $0.0001 (the Founder Shares). Effective
December 10, 2019, the Sponsor transferred 718,750 Founder Shares to Henri Arif, the Companys independent director, for a purchase price of $3,125 (the same per-share price initially paid by the
Sponsor), resulting in the Sponsor holding 5,031,250 Founder Shares. On February 10, 2020, the Company effected a share capitalization of 1,150,000 Class B ordinary shares and as a result, Mr. Arif held 862,500 Founder Shares. On
February 10, 2021, the Sponsor appointed Mark B. Segall as an independent director and transferred 13,000 Founder Shares to Mr. Segall, resulting in the Sponsor holding 6,002,500 Founder Shares.
As of December 31, 2021 and December 31, 2020, the Sponsor held 6,002,500 Founder Shares. The initial shareholders had agreed to forfeit
up to 900,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The underwriter exercised its over-allotment option in full, hence, these Founder Shares were no longer subject to
forfeiture.
F-15
The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their
Founder Shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of the initial Business Combination, or (ii) the date on which the Company completes a
liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of the Companys shareholders having the right to exchange their Class A ordinary shares for cash, securities or
other property; except to certain permitted transferees and under certain circumstances (the lock-up). Notwithstanding the foregoing, if (1) the closing price of Class A
ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 150 days after the initial Business Combination or (2) if the Company consummates a transaction after the initial Business Combination which results
in the Companys shareholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the lock-up.
Private Placement Warrants
Concurrently with the closing
of the Initial Public Offering, the Sponsor purchased an aggregate of 7,520,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant. Each warrant is exercisable to purchase one Class A ordinary share at
$11.50 per share. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. On March 30, 2020, the Sponsor transferred 940,000 Private Placement
Warrants to Mr. Arif.
The Sponsor and the Companys officers and directors agreed, subject to limited exceptions, not to transfer, assign or
sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related Party Advances
As of December 31, 2021 and December 31, 2020, the amount due to related parties was $1,659,679 and $55,931, respectively. The amounts were
unpaid reimbursements for the operating expenses, administrative support expenses (as described belowAdministrative Support Agreement), merger related expenses and deferred offering costs paid by the related parties on behalf of the Company.
Sponsor Loan
On December 9, 2019, the Sponsor
loaned the Company $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the
Note). This loan was non-interest bearing and payable on the earlier of December 31, 2020 or the completion of the Initial Public Offering. The full
$300,000 was repaid on February 13, 2020 and borrowings on the Note are no longer available to the Company.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Companys officers and directors may, but are not obligated to, loan the Company funds as may be required (Working Capital Loans). The terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lenders discretion, up to $1.5 million of such Working Capital Loans may be
convertible into private placement warrants at a price of $1.00 per warrant. As of December 31, 2021 and December 31, 2020, the Company had no borrowings under the Working Capital Loans.
Administrative Support Agreement
Commencing on the date
of the final prospectus, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial and administrative support services. For the year ended December 31, 2021, the Company incurred
$120,000 of administrative services under this arrangement, respectively. For the year ended December 31 2020, the Company incurred $105,862 of administrative services under this arrangement. Upon completion of the initial Business
Combination, the Company ceased paying these monthly fees.
F-16
Note 5-Commitments & Contingencies
Risks and Uncertainties
In February 2022, the Russian
Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the
impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements and the specific impact on the Companys financial condition, results of operations, and cash flows is also not
determinable as of the date of these financial statements.
Management continues to evaluate the
impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Companys financial
position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Registration Rights
The holders of Founder Shares, Private Placement Warrants, and securities that may be issued upon conversion of Working Capital Loans, if any, will be entitled
to registration rights pursuant to a registration rights agreement dated as of February 10, 2020. These holders are entitled to certain demand and piggyback registration rights. However, the registration rights agreement provides
that the Company will not permit any registration statement filed under the Securities Act to become effective until the
termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The
underwriters were paid a cash underwriting discount of $5,520,000, or $0.20 per Unit of the gross proceeds of the initial 27,600,000 Units (inclusive of 3,600,000 unit over-allotment option) sold in the Initial Public
Offering, in the aggregate. In addition, the underwriters were entitled to a deferred fee of (i) $0.35 per Unit of the gross proceeds of the initial 24,000,000 Units sold in the Initial Public Offering, or $8,400,000, and (ii)
$0.35 per Unit of the gross proceeds from the 3,600,000 Units sold pursuant to the over-allotment option, or $1,260,000, aggregating to a deferred fee of $9,660,000. The deferred fee was paid to the underwriters from the amounts held
in the Trust Account, subject to the terms of the underwriting agreement.
GEM Agreement
In order to better manage working capital and liquidity needs post Business Combination, the Company, GEM Global Yield LLC SCS (GEM Investor) and
GEM Yield Bahamas Ltd. (GYBL) entered into a Share Purchase Agreement, dated December 12, 2021 (the GEM Agreement), which allows the Company to fund general corporate purpose and working capital needs. The Company is entitled
to draw up to $125 million of gross proceeds in exchange for shares of the Companys Common Stock, at a price equal to 90% of the average closing bid price of the shares of the Companys Common Stock on the NYSE for a 30 day period,
subject to meeting the terms and conditions of the GEM Agreement. GEM Investor is also entitled to purchase shares of the Companys Common Stock pursuant to a warrant exercisable for up to 2.5% of our outstanding shares of the Companys
Common Stock on a fully diluted basis as of the closing of the Business Combination for a period of 3 years.
In January 2022, the Company negotiated an
amendment to the GEM Agreement to provide for two advance draw downs of $12.5 million each that are not limited based on trading volume.
Note 6-Recurring Fair Value Measurements
As of December 31, 2021 and 2020, investment securities in the
Companys Trust Account consisted of a treasury securities fund in the amount of $277,873,665 and $277,845,876 which was held as money market funds, respectively. The following table presents information about the Companys
assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Quoted Prices in Active Markets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Other Unobservable Inputs (Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in Trust AccountMoney Market Fund |
|
$ |
277,873,665 |
|
|
$ |
277,873,665 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities-Public Warrants |
|
$ |
8,556,000 |
|
|
$ |
8,556,000 |
|
|
$ |
|
|
|
$ |
|
|
Warrant Liabilities-Private Warrants |
|
|
4,760,160 |
|
|
|
|
|
|
|
|
|
|
|
4,760,160 |
|
Warrant Liabilities-GEM Warrants |
|
|
4,000,159 |
|
|
|
|
|
|
|
|
|
|
|
4,000,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,316,319 |
|
|
$ |
8,556,000 |
|
|
$ |
|
|
|
$ |
8,760,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G-17
The following table presents information about the Companys assets and liabilities that were measured
at fair value on a recurring basis as of December 31, 2020, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Quoted Prices in Active Markets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Other Unobservable Inputs (Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in Trust AccountMoney Market Fund |
|
$ |
277,845,876 |
|
|
$ |
277,845,876 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities-Public Warrants |
|
$ |
23,460,000 |
|
|
$ |
23,460,000 |
|
|
$ |
|
|
|
$ |
|
|
Warrant Liabilities-Private Warrants |
|
|
13,160,000 |
|
|
|
|
|
|
|
|
|
|
|
13,160,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
36,620,000 |
|
|
$ |
23,460,000 |
|
|
$ |
|
|
|
$ |
13,160,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Warrants were accounted for as liabilities in accordance with
ASC 815-40 and are presented within warrant liabilities on the balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value
presented within change in fair value of warrant liabilities in the consolidated statement of operations. The Private Warrants were initially valued and continue to be valued using a Black Scholes Option Pricing Model.
The Private Warrants and GEM Warrants are considered to be a Level 3 fair value measurements due to the use of unobservable inputs. The Black Scholes
Option Pricing Models primary unobservable input utilized in determining the fair value of the Private Warrants and GEM Warrants is the expected volatility of the ordinary shares. The expected volatility as of the IPO date was derived from the
post-merger announced publicly traded warrants for comparable SPAC companies as of the valuation date. A Monte Carlo Simulation Method was used in estimating the fair value of the public warrants for periods where no observable traded price was
available, using the same expected volatility as was used in measuring the fair value of the Private Warrants. For periods subsequent to the detachment of the warrants from the Units, including December 31, 2021 and December 31, 2020, the
closing price of the public warrants was used as the fair value as of each relevant date.
The key inputs into the Black Scholes Option Pricing Model for
the Private Warrants were as follows at each of the following balance sheet dates:
|
|
|
|
|
|
|
|
|
Input |
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Risk-free interest rate |
|
|
1.26 |
% |
|
|
0.47 |
% |
Expected term (years) |
|
|
5.00 |
|
|
|
5.00 |
|
Expected volatility |
|
|
10.30 |
% |
|
|
22.0 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Exercise price |
|
$ |
11.50 |
|
|
$ |
11.50 |
|
Asset Price |
|
$ |
10.01 |
|
|
$ |
10.48 |
|
The key inputs into the Black Scholes Option Pricing Model for the GEM Warrants were as follows:
|
|
|
|
|
|
|
|
|
Input |
|
December 12, 2021 |
|
|
December 31, 2021 |
|
Risk-free interest rate |
|
|
0.95 |
% |
|
|
0.97 |
% |
Expected term (years) |
|
|
3.00 |
|
|
|
3.00 |
|
Expected volatility |
|
|
10.5 |
% |
|
|
10.5 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Exercise price |
|
$ |
10.00 |
|
|
$ |
10.00 |
|
Asset Price |
|
$ |
10.74 |
|
|
$ |
10.48 |
|
The primary significant unobservable input used in the fair value measurement of the Companys private warrants and GEM
Warrants is the expected volatility of the ordinary shares. Significant increases (decreases) in the expected volatility in isolation would result in a significantly higher (lower) fair value measurement.
The following table presents the changes in the fair value of warrant liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Warrants |
|
|
Public Warrants |
|
|
GEM Warrants |
|
|
Total Warrant Liabilities |
|
Fair value as of February 13, 2020 |
|
$ |
10,452,800 |
|
|
$ |
18,354,000 |
|
|
$ |
|
|
|
$ |
28,806,800 |
|
Change in valuation |
|
|
2,707,200 |
|
|
|
5,106,000 |
|
|
|
|
|
|
|
7,813,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of December 31, 2020 |
|
|
13,160,000 |
|
|
|
23,460,000 |
|
|
|
|
|
|
|
36,620,000 |
|
Change in valuation |
|
|
(8,399,840 |
) |
|
|
(14,904,000 |
) |
|
|
4,000,159 |
|
|
|
(19,303,681 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of December 31, 2021 |
|
$ |
4,760,160 |
|
|
$ |
8,556,000 |
|
|
$ |
4,000,159 |
|
|
$ |
17,316,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-18
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There
were no transfers between levels for the year ended December 31, 2021 and for the period from February 13, 2020 through December 31, 2020 other than the transfer of the Public Warrants from Level 3 to Level 1.
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the liabilities classified as Level 3:
|
|
|
|
|
|
|
Warrant |
|
Fair value at December 31, 2019 |
|
$ |
|
|
Initial value of public and private warrant liabilities at February 13, 2020 |
|
|
28,806,800 |
|
Change in fair value of private warrants |
|
|
2,707,200 |
|
Public warrants transferred to level 1 |
|
|
(18,354,000 |
) |
|
|
|
|
|
Fair value at December 31, 2020 |
|
|
13,160,000 |
|
Initial value of GEM warrants at December 12, 2021 |
|
|
4,000,159 |
|
Change in fair value of private and GEM warrants |
|
|
(8,399,840 |
) |
|
|
|
|
|
Fair Value at December 31, 2021 |
|
$ |
8,760,319 |
|
|
|
|
|
|
Note 7-Shareholders Equity (Deficit)
Preferred Shares - The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share, with such
designations, voting and other rights and preferences as may be determined from time to time by the Companys board of directors. As of December 31, 2021 and December 31, 2020, there were no preferred shares issued or
outstanding.
Class A Ordinary Shares - The Company is authorized to issue 200,000,000 Class A ordinary shares
with a par value of $0.0001 per share. As of December 31, 2021 and December 31, 2020, there were no Class A ordinary shares outstanding, excluding 27,600,000 Class A ordinary shares subject to possible
redemption.
Class B Ordinary Shares - The Company is authorized to issue 20,000,000 Class B ordinary shares with
a par value of $0.0001 per share. Holders are entitled to one vote for each share of Class B ordinary shares. As of December 31, 2021 and December 31, 2020, there were 6,900,000 Class B ordinary shares issued
and outstanding.
Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all
matters submitted to a vote of the Companys shareholders, except as required by law or stock exchange rule; provided that only holders of the Class B ordinary shares have the right to vote on the election of the Companys directors
prior to the initial Business Combination.
The Class B ordinary shares were automatically convert into Class A ordinary shares at the closing
of the initial Business Combination on a one-for-one basis (as adjusted).
Note 8-Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.
Other than as disclosed in the notes to financial statements and described below, the Company did not find any events that would require adjustment or disclosure in the financial statements.
On February 8, 2022 (the Closing Date), the Company consummated the previously announced merger (the Closing) pursuant to the
Merger Agreement, by and among the Company and Quanergy Systems, Inc., a Delaware corporation (when referred to in its pre-Business Combination (as defined below) capacity, Legacy Quanergy). On
January 28, 2022, Legacy Quanergy changed its
F-19
corporate name to Quanergy Perception Technologies, Inc. The Companys shareholders approved the business combination (the Business Combination) and the change of the
Companys jurisdiction of incorporation from the Cayman Islands to the State of Delaware by deregistering as an exempted company in the Cayman Islands and domesticating and continuing as a corporation formed under the laws of the State of
Delaware (the Domestication) at an extraordinary general meeting of stockholders held on January 31, 2022 (the Special Meeting). In connection with the Special Meeting and the Business Combination, holders of 26,867,796
of the Companys Class A ordinary shares (Class A Ordinary Shares), or approximately 97.3% of the shares with redemption rights, exercised their right to redeem their shares for cash at a redemption price of approximately
$10.07 per share, for an aggregate redemption amount of $270,503,771. On February 8, 2022, holders of 600,000 of the Companys Class A ordinary shares (Class A Ordinary Shares), or approximately 2.2% of the shares
with redemption rights, reversed their prior redemptions, resulting in $6,040,773 being returned to the trust account established at the consummation of the Companys initial public offering prior to the Closing.
On the Closing Date, purchasers subscribed to purchase from the Company an aggregate of 3,650,000 shares of the Companys Common Stock (the PIPE
Shares), for a purchase price of $10.00 per share and an aggregate purchase price of $36,500,000, pursuant to separate subscription agreements (each, a Subscription Agreement). The sale of PIPE Shares was consummated substantially
concurrently with the Closing.
F-20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
As previously reported on Form 8-K, as filed with the SEC on
February 14, 2022, our Board approved the engagement of Grant Thornton LLP (Grant Thornton) as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31,
2022. Grant Thornton served as the independent registered public accounting firm of Legacy Quanergy prior to the Business Combination. Accordingly, Withum Smith + Brown, PC (Withum), the Companys independent registered public
accounting firm prior to the Business Combination, was informed on February 8, 2022 that it would be dismissed effective following the completion of the Companys audit for the year ended December 31, 2021, which consists only of the
accounts of CCAC prior to the Business Combination, and replaced by Grant Thornton as our independent registered public accounting firm.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports
filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time period specified in the SECs rules and forms. Disclosure controls are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
were not effective as of December 31, 2021 because of a material in our internal control over financial reporting due to the material weakness in our internal control over financial reporting described below in Managements Report on
Internal Controls Over Financial Reporting. In light of this, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the
financial statements included in this report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
The Company identified a material weakness in the Companys internal control over financial reporting as of December 31, 2021.
Specifically, the Companys management has concluded that control around the interpretation and accounting for certain complex financial instruments was not effectively designed or maintained as they relate to the classification of redeemable
Class A ordinary shares.
We do not expect that our disclosure controls and procedures going forward will prevent all errors and all
instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of
disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation
of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Managements Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for
establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our
financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
|
(1) |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of our company, |
|
(2) |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
|
(3) |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements. |
59
Because of its inherent limitations, internal control over financial reporting may not
prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2021. In making these assessments, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective
internal control over financial reporting as of December 31, 2021.
This Annual Report on Form
10-K does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
Other than as described herein, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal year that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Management has identified a material weakness in our internal control over financial reporting related
to the accounting of complex financial instruments due to the errors related to the classification of our warrants and Class A ordinary shares, as described above. To respond to this material weakness, we have devoted, and plan to continue to
devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our
system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications.
The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
60