NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 1—Description
of Organization, Business Operations and Basis of Presentation
ArcLight Clean Transition
Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on July 28, 2020. The
Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses that the Company had not yet identified (“Business Combination”).
As of March 31, 2021, the
Company had not yet commenced operations. All activity for the period from July 28, 2020 (inception) through March 31, 2021 relates
to the Company’s formation and the initial public offering (the “Initial Public Offering”) and since the closing of
the initial public offering, the search for a prospective initial Business Combination. The Company has selected December 31 as its fiscal
year end.
The Company’s sponsor
is ArcLight CTC Holdings, L.P., a Delaware limited partnership (“Sponsor”). The registration statement for the
Company’s Initial Public Offering was declared effective on September 22, 2020. On September 25, 2020, the Company consummated
its Initial Public Offering of 25,000,000 units (the “Units” and, with respect to the Class A ordinary shares included
in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $250.0 million, and
incurring offering costs of approximately $14.4 million, inclusive of approximately $8.8 million in deferred underwriting commissions
(Note 6). On September 29, 2020, the Company issued an additional 2,750,000 units (the “Over-Allotment Units”) pursuant
to the partial exercise by the underwriters of their over-allotment option in connection with the Initial Public Offering (the “Over-Allotment”).
The Over-Allotment Units were priced at $10.00 per Unit, generating total gross proceeds of $27.5 million and incurring additional
offering costs of approximately $1.5 million, inclusive of approximately $1.0 million in deferred underwriting commissions.
Simultaneously with the closing
of the Initial Public Offering on September 25, 2020, the Company consummated the private placement (“Private Placement”)
of 7,000,000 private placement warrants (each, a “Private Placement Warrant” and collectively, the “Private
Placement Warrants”), at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of $7.0 million
(Note 4). Concurrently with the consummation of the Over-Allotment on September 29, 2020, the Sponsor also purchased an additional
550,000 Private Placement Warrants, generating gross proceeds of approximately $0.6 million.
Upon the closing of the Initial
Public Offering and the Private Placement on September 25, 2020, $250.0 million ($10.00 per Unit) of the net proceeds
of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust
Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government
securities” within the meaning of Section 2(a)(16) of 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, as determined by the Company, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described below. In connection with the consummation of the
Over-Allotment on September 29, 2020, an additional amount of $27.5 million ($10.00 per Unit), for a total of approximately $277.5 million,
was placed in the Trust Account.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. The Company’s initial Business Combination must be 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 (as defined below) (excluding the deferred underwriting commissions
and taxes payable on the interest earned on the Trust Account) at the time the Company signs a definitive agreement in connection with
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 1940, as amended, or the Investment
Company Act.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The Company will provide
its holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public
Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business
Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business
Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled
to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per
share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its
tax obligations). 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 6). These Public Shares were recorded at a redemption value and classified as temporary equity in accordance
with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case,
the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is
not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will,
pursuant to the amended and restated memorandum and articles of association which will be adopted by the Company upon the consummation
of the Initial Public Offering (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions
pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents
with the SEC prior to completing a Business Combination. If, however, a shareholder approval of the transactions is required by law,
or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder
may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks
shareholder approval in connection with a Business Combination, the holders of the Founder Shares prior to the Initial Public Offering
(the “Initial Shareholders”) agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during
or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Shareholders agreed to waive their
redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
In addition, the Company has agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior
consent of the Sponsor.
Notwithstanding the foregoing,
the Company’s Amended and Restated Memorandum and Articles of Association provide that a Public Shareholder, together with any
affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined
under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming
its shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering,
without the prior consent of the Company.
The Company’s Sponsor,
executive officers, directors and director nominees agreed not to propose an amendment to the Company’s Amended and Restated Memorandum
and Articles of Association that would affect the substance or timing of the Company’s obligation to provide for the redemption
of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete
a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary
shares in conjunction with any such amendment.
If the Company is unable
to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or September 25, 2022 (the
“Combination Period”), the Company will (i) cease all operations except for the purpose of winding up; (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the
Trust Account and not previously released to the Company to pay its income taxes, if any (less up to $100,000 of interest to pay dissolution
expenses) divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’
rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve,
subject in the case of clauses (ii) and (iii), to the Company’s obligations under Cayman Islands law to provide for claims
of creditors and the requirements of other applicable law.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
In connection with the redemption
of 100% of the Company’s outstanding Public Shares for a portion of the funds held in the Trust Account, each holder will receive
a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account
and not previously released to the Company to pay the Company’s taxes payable (less up to $100,000 of interest to pay dissolution
expenses).
The Initial Shareholders
agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within
the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the Initial Public Offering, they
will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete
a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commission
(see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period
and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption
of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets
remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the
extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which
the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement,
reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public
Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions
in the value of the Trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective
target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable)
nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that
an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public
accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company
waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Proposed Business Combination
On January 11, 2021, the Company entered into
an Agreement and Plan of Merger with Proterra Inc, a Delaware corporation (“Proterra”).
The Merger Agreement and the transactions contemplated
thereby were approved by the boards of directors of each of the Company and Proterra.
The Business Combination
The Merger Agreement provides for, among other
things, the following: (i) the Company will become a Delaware corporation (the “Domestication”), (ii) following the Domestication,
a subsidiary of the Company will merge with and into Proterra, with Proterra as the surviving company in the merger and continuing as
a wholly-owned subsidiary of the Company (the “Merger”) and, in connection with the Merger, (iii) the Company’s name
will be changed to Proterra Inc. The Domestication, the Merger and the other transactions contemplated by the Merger Agreement are referred
to as the “Business Combination”.
The Business Combination is expected to close
in the second quarter of 2021, following the receipt of the required approval by the Company’s stockholders and the fulfillment
of other customary closing conditions.
Business Combination Consideration
In the Merger, each share of common stock of Proterra,
other than shares to be cancelled or dissenting shares, will be converted into the right to receive 0.8925 shares of ArcLight Common
Stock. In the event that the closing sale price of ArcLight Common Stock exceeds certain price thresholds for 20 out of any 30 consecutive
trading days during the first five years following the closing of the Business Combination, up to an additional 22,809,500 shares of
ArcLight Common Stock may be issued to the parties that were holders of Proterra Common Stock immediately prior to the closing of the
Business Combination.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
PIPE Financing (Private Placement)
Concurrently with the execution of the Merger
Agreement, the Company entered into subscription agreements with certain investors, pursuant to which they agreed to subscribe for and
purchase, immediately following the closing of the Merger, an aggregate of 41,500,000 shares of the Company Common Stock for a purchase
price of $10.00 per share, for aggregate gross proceeds of $415,000,000 (the “PIPE Financing”).
The closing of the PIPE Financing
is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. The Subscription Agreements
provide that the Company will grant the investors in the PIPE Financing certain customary registration rights.
Sponsor Support Agreement
Concurrently with the execution of the Merger
Agreement, the Sponsor, and other holders of Class B ordinary shares of ArcLight entered into a Sponsor Support Agreement (the “Sponsor
Support Agreement”) with the Company and Proterra, pursuant to which the Sponsor and such holders agreed to, among other things,
(i) vote at any meeting of the shareholders of the Company all of their ordinary shares held of record or thereafter acquired in favor
of the proposals being considered in connection with the Business Combination, (ii) be bound by certain other covenants and agreements
related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to such securities, prior to the
closing of the Business Combination, in each case, on the terms and subject to the conditions set forth in the Sponsor Support Agreement.
Sponsor Letter Agreement
Concurrently with the execution of the Merger
Agreement, the Sponsor entered into the Sponsor Letter Agreement (the “Sponsor Letter Agreement”), pursuant to which the
parties agreed (i) to certain vesting and forfeiture terms with respect to 10% of the Company’s Common Stock beneficially owned
by the Sponsor immediately following the closing, (ii) to certain lock-up provisions with respect to shares of Company Common Stock following
the Merger (which provisions were subsequently amended on February 2, 2021) and (iii) to cause the Company’s designee to the ArcLight
board of directors to resign in the event the Sponsor disposes of 50% or more of the ArcLight Common Stock held beneficially by the Sponsor
as of the closing of the Business Combination.
Amended and Restated Registration Rights Agreement
At the closing of the Business
Combination, Proterra, the Sponsor and certain stockholders of Proterra will enter into an amended and restated registration rights agreement
pursuant to which, among other things, the parties thereto will be granted certain customary registrant rights with respect to shares
of Proterra Common Stock.
Basis of Presentation
The accompanying unaudited
condensed financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles
(“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered
for a fair presentation have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2021.
The accompanying unaudited
condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in Amendment
No. 1 to in the Form 10-K/A filed by the Company with the SEC on May 5, 2021.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Emerging Growth
Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of 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 of 2002, 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 stockholder 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 comparison of the Company’s 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.
Going Concern
As
of March 31, 2021, the Company had approximately $90,000 in its operating bank account and a working capital deficit of approximately
$3.7 million.
The
Company’s liquidity needs up to September 25, 2020 had been satisfied through a payment of $25,000 from the Sponsor to cover certain
expenses on behalf of the Company in exchange for the issuance of the Founder Shares (as defined below), the loan under the Note from
the Sponsor of approximately $154,000 (see Note 5) to the Company, and the net proceeds from the consummation of the Private Placement
not held in the Trust Account. The Note was repaid in full on October 1, 2020. In addition, in order to finance transaction costs in
connection with a Business Combination, the Company’s officers, directors and Initial Shareholders may, but are not obligated to,
provide the Company Working Capital Loans (see Note 5). As of March 31, 2021, there were no amounts outstanding under any Working Capital
Loans.
In
connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Basis
of Presentation – Going Concern,” management has determined that the working capital deficit raises substantial about the
Company’s ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date
the Company is required to liquidate, September 25, 2022. The financial statements do not include any adjustment that might be necessary
if the Company is unable to continue as a going concern.
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable
as of the date of the balance sheet. The financial statement does not include any adjustments that might result from the outcome of this
uncertainty.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 2—Summary
of Significant Accounting Policies
Use of Estimates
The
preparation of financial statement in conformity with U.S. GAAP requires the Company’s 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
statement. 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. 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.
Investments Held in Trust Account
The Company’s portfolio
of investments is comprised solely 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, or investments in money market funds that invest in U.S. government securities, or
a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities
are presented on the balance sheet 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 net gain on investments, dividends and interest held in Trust Account in the accompanying unaudited
condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available
market information.
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, and investments held in Trust Account. At March 31,
2021, 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
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:
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Level 1,
defined as observable inputs such as quoted prices for identical instruments in active markets;
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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
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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.
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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.
As
of March 31, 2021, the carrying values of cash, accounts payable and accrued expenses approximate their fair values due to the short-term
nature of the instruments. The Company’s portfolio of investments held in the Trust Account is comprised of investments in U.S.
Treasury securities with an original maturity of 185 days or less or investments in money market funds that invest in U.S. government
securities, or a combination thereof. The fair value for trading securities is determined using quoted market prices in active markets.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Derivative warrant liabilities
The Company does not use
derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial
instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The
Company issued an aggregate of 13,875,000 common stock warrants associated with Units issued to investors in our Initial Public Offering
and the underwriters’ exercise of their overallotment option and we issued 7,550,000 Private Placement Warrants. All of our outstanding
warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments
as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations.
The fair value of warrants issued in connection with the Initial Public Offering and Private Placement were initially measured at fair
value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement warrants have been estimated using
a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have been measured based on the listed market
price of such warrants, a Level 1 measurement, since November 2020.
Offering Costs Associated
with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting and other costs incurred that were directly related to the Initial Public Offering.
Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value
basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented
as non-operating expenses in the statement of operations. Offering costs associated with the Class A ordinary shares were charged
to shareholders’ equity upon the completion of the Initial Public Offering.
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 Company’s control) are classified as temporary equity. At all other times, Class A
ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption
rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly,
at March 31, 2021, 13,658,271 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside
of the shareholders’ equity section of the Company’s balance sheet.
Income Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. Deferred tax assets were deemed immaterial as of March 31, 2021.
FASB
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 March 31, 2021. 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 March 31, 2021. The Company is currently not aware of any issues under review 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.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Net Loss Per Ordinary
Share
The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing
net loss by the weighted average number of shares of common stock outstanding during the period excluding common stock subject to forfeiture.
An aggregate of 13,658,271 shares of Class A common stock subject to possible redemption at March 31, 2021 has been excluded from the
calculation of basic loss per share of common stock, since such shares, if redeemed, only participate in their pro rata share of the
trust earnings. The Company has not considered the effect of the warrants sold in the Initial Public Offering (including the consummation
of the Over-Allotment Units) and Private Placement to purchase an aggregate of 21,425,000 shares of the Company’s common stock
in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events.
Net loss per common share
Net income (loss) per share is computed by dividing
net income by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the
effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 21,425,000 shares in the calculation
of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of
such warrants would be anti-dilutive.
The Company’s statement of operations includes
a presentation of income (loss) per share for Redeemable Class A Common Stock in a manner similar to the two-class method of income (loss)
per share. Net income per common share, basic and diluted, for Redeemable Class A Common Stock is calculated by dividing the proportionate
share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted
average number of Common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for Non-Redeemable
Class A and Class B Common Stock is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable
to Redeemable Class A Common Stock, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-Redeemable Class A and Class B Common Stock
includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-Redeemable
Class A and Class B Common Stock participates in the income or loss on marketable securities based on non-redeemable common stock shares’
proportionate interest.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The basic and diluted loss per common share is
calculated as follows:
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|
For The Three Months Ended
March 31,
2021
|
|
|
|
|
|
Class A Common stock subject to possible redemption
|
|
|
|
Numerator: Earnings allocable to Common stock subject to possible redemption
|
|
|
|
Income from investments held in Trust Account
|
|
$
|
22,449
|
|
Less: Company’s portion available to be withdrawn to
pay taxes
|
|
|
-
|
|
Net income attributable
|
|
$
|
22,449
|
|
Denominator: Weighted average Class A common stock subject to possible redemption
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
21,274,046
|
|
Basic and diluted net income per share
|
|
$
|
0.00
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
Net loss
|
|
$
|
(77,013,454
|
)
|
Less: Net income allocable to Class A common stock subject
to possible redemption
|
|
|
22,449
|
|
Non-redeemable net loss
|
|
$
|
(77,035,904
|
)
|
Denominator: weighted average Non-redeemable common stock
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common
stock
|
|
|
13,413,455
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
$
|
(5.74
|
)
|
Recent Accounting
Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncement if currently adopted would have a material
effect on the Company’s financial statements.
Note 3—Initial
Public Offering
On September 25, 2020,
the Company consummated its Initial Public Offering of 25,000,000 Units, at $10.00 per Unit, generating gross proceeds of $250.0 million,
and incurring offering costs of approximately $14.4 million, inclusive of approximately $8.8 million in deferred underwriting
commissions. On September 29, 2020, the Company issued an additional 2,750,000 Over-Allotment Units pursuant to the partial exercise
by the underwriters of their over-allotment option in connection with the Initial Public Offering. The Over-Allotment Units were priced
at $10.00 per Unit, generating total gross proceeds of $27.5 million and incurring additional offering costs of approximately $1.5 million,
inclusive of approximately $1.0 million in deferred underwriting commissions.
Each Unit consists of one
Class A ordinary share and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant will
entitle the holder to purchase one Class A ordinary share at an exercise price of $11.50 per share, subject to adjustment (see Note
7).
Note 4—Private
Placement
Simultaneously with the closing
of the Initial Public Offering on September 25, 2020, the Company consummated the Private Placement of 7,000,000 Private Placement
Warrants, at a price of $1.00 per Private Placement Warrant with the Sponsor, generating gross proceeds of $7.0 million. Concurrently
with the consummation of the Over-Allotment on September 29, 2020, the Sponsor also purchased an additional 550,000 Private Placement
Warrants, generating gross proceeds of approximately $0.6 million.
Each whole Private Placement
Warrant is exercisable for one whole share of Class A ordinary shares at a price of $11.50 per share. A portion of the proceeds
from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering held in the
Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants
will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long
as they are held by the Sponsor or its permitted transferees.
The Sponsor and the Company’s
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.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 5—Related
Party Transactions
Founder Shares
On August 3, 2020, the
Sponsor paid an aggregate of $25,000 for certain expenses on behalf of the Company in exchange for issuance of 8,625,000 Class B
ordinary shares (the “Founder Shares”). On September 3, 2020, the Sponsor transferred 35,000 Founder Shares to each
of Arno Harris, Ja-Chin Audrey Lee, Brian Goncher and Steven Berkenfeld, the Company’s independent director nominees. On September 18,
2020, the Sponsor irrevocably surrendered to the Company for cancellation and for nil consideration 1,437,500 Class B ordinary shares,
resulting in 7,187,500 Class B ordinary shares outstanding. All shares and associated amounts have been retroactively restated to reflect
the share surrender. The Sponsor agreed to forfeit up to an aggregate of 937,500 Founder Shares to the extent that the option to purchase
additional units is not exercised in full by the underwriters, so that the Founder Shares will represent 20% of the Company’s issued
and outstanding shares after the Initial Public Offering. The underwriters partially exercised their over-allotment option on September
29, 2020, with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result,
an aggregate of 250,000 Founder Shares were forfeited by the Sponsor upon the expiration of the over-allotment option.
The Initial Shareholders
agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion
of the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if the closing price of Class A
ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, 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 (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that
results in all of the Public Shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Related Party Loans
On August 3, 2020, the
Sponsor agreed to loan the Company up to $300,000 to be used for the payment of costs related to the Initial Public Offering pursuant
to a promissory note (the “Note”). The Note is non-interest bearing, unsecured and due upon the closing of the Initial
Public Offering. During 2020, the Company borrowed approximately $154,000 under the Note. The Note was repaid in full on October 1, 2020.
In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any
of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If
the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital
Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up
to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price
of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. To date, the Company
had no borrowings under the Working Capital Loans.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Administrative Services Agreement
The Company entered into
an agreement that provides that, commencing on the date that the Company’s securities are first listed on NASDAQ through the earlier
of consummation of the initial Business Combination and the liquidation, the Company may pay the Sponsor $10,000 per month for office
space, secretarial and administrative services provided to the Company.
In addition, the Sponsor,
officers and directors, or their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection
with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable
Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made by the Company
to the Sponsor, executive officers or directors, or their affiliates. Any such payments prior to an initial Business Combination will
be made using funds held outside the Trust Account.
The Company incurred approximately
$30,000 in expenses in connection with such services during the three months ended March 31, 2021 as reflected in the accompanying statement
of operations. As of March 31, 2021, the Company had nil in accrued expenses—related party in connection with such services.
Note 6—Commitments and
Contingencies
Registration and Shareholder Rights
The holders of the Founder
Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital
Loans) are entitled to registration rights pursuant to a registration and shareholder rights agreement. The holders of these securities
are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the
holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion
of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The Company granted the underwriters
a 45-day option from the date of this prospectus to purchase up to 3,750,000 additional Units at the Initial Public Offering price
less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option on September 29, 2020
to purchase an additional 2,750,000 Over-Allotment Units. The remaining unexercised over-allotment option expired unexercised on November
6, 2020.
In connection with the consummation
of the Initial Public Offering on September 25, 2020, the underwriters were entitled to an underwriting discount of $0.20 per unit, or
$5.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $8.8
million in the aggregate will be payable to the underwriters for deferred underwriting commissions. On September 29, 2020, the underwriters
were entitled to an additional underwriting discount of approximately $0.6 million paid upon the closing of the Over-Allotment, and an
additional deferred underwriting commissions of approximately $1.0 million. The deferred fee will become payable to the underwriters
from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms
of the underwriting agreement.
Contingent Liabilities
The Company is involved in
legal proceedings, alleging that the Company their fiduciary duties by omitting allegedly material information in the Registration Statement
filed by the Company on Form S-4 on February 3, 2021 in connection with the Proposed Transaction, and that the Company aided and abetted
such alleged breaches of fiduciary duty. As relief, the complaints seek, among other things, an injunction barring the Company from proceeding
with the Proposed Transaction, or, alternatively, rescission of the Proposed Transaction in the event that it is consummated, as well
as unspecified costs and attorneys’ fees. The Company believes these lawsuits are without merit. The outcomes of these proceedings
and lawsuits cannot be predicted with certainty. The Company does not believe that any of the pending legal proceedings and lawsuits
are reasonably likely to have a material adverse effect on our financial position, results of operations or cash flows.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 7—Shareholders’
Equity
Class A Ordinary
Shares — The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per
share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. At March 31, 2021, there
were 27,500,000 Class A ordinary shares issued or outstanding, including 13,658,271 Class A ordinary shares subject to possible
redemption.
Class B Ordinary
Shares — The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per
share. On August 3, 2020, the Company issued 8,625,000 Class B ordinary shares to the Sponsor. On September 3, 2020, the Sponsor
transferred 35,000 Founder Shares to each of Arno Harris, Ja-Chin Audrey Lee, Brian Goncher and Steven Berkenfeld, the Company’s
independent director nominees. On September 18, 2020, the Sponsor irrevocably surrendered to the Company for cancellation and for
nil consideration 1,437,500 Class B ordinary shares, resulting in 7,187,500 Class B ordinary shares outstanding. All shares and
associated amounts have been retroactively restated to reflect the share surrender. Of the 7,187,500 shares outstanding, up to 937,500
Class B ordinary shares are subject to forfeiture to the Company by the Initial Shareholders for no consideration to the extent that
the underwriters’ over-allotment option is not exercised in full or in part, so that the Initial Shareholders will collectively
own 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. The underwriters partially exercised
their over-allotment option on September 29, 2020, with the remaining portion of the over-allotment option expiring at the conclusion
of the 45-day option period. As a result, an aggregate of 250,000 Founder Shares were forfeited by the Sponsor upon the expiration of
the over-allotment option.
Ordinary shareholders of
record are entitled to one vote for each share held on all matters to be voted on by shareholders. Except as described below, holders
of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted
to a vote of the shareholders except as required by law.
The Class B ordinary
shares will automatically convert into Class A ordinary shares, which such Class A ordinary shares delivered upon conversion
will not have any redemption rights or be entitled to liquidating distributions if the Company does not consummate an initial Business
Combination, at the time of the initial Business Combination or earlier at the option of the holders thereof at a ratio such that the
number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis,
20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of the Initial Public Offering,
plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any
equity-linked securities (as defined herein) or rights issued or deemed issued, by the Company in connection with or in relation
to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities
exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in the initial
Business Combination and any Private Placement Warrants issued to the Sponsor, its affiliates or any member of the management team upon
conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a
rate of less than one-to-one.
Preference Shares —
The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001 per share. At March 31, 2021, there were no
preference shares issued or outstanding.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 8—Derivative
Warrant Liabilities
As of March 31, 2021, the
Company has 13,875,000 and 7,550,000 Public Warrants and Private Placement Warrants, respectively, outstanding.
Public Warrants may only be exercised for a whole
number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade.
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 Public 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 certain circumstances).
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of the initial Business
Combination, the Company will use commercially reasonable 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 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 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” 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,
it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption
is not available.
The warrants have an exercise price of $11.50
per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption
or liquidation. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities
for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue
price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the board
of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held
by the Sponsor 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 on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the
volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day
prior to the day on which the Company consummates its 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 described under “Redemption of warrants when
the price per Class A ordinary share equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180%
of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described under the caption
“Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the
nearest cent) to be equal to 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 the Private Placement Warrants and the Class A
ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private
Placement Warrants are held by someone other than the Initial Shareholders or their permitted transferees, the Private Placement Warrants
will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of warrants when the price per Class A
ordinary share equals or exceeds $18.00: Once the warrants become exercisable, the Company may call the outstanding
warrants for redemption (except as described herein 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 to each warrant holder; and
|
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
|
●
|
if, and only if, the last reported sale price (the
“closing price”) of Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) 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.
|
The Company will not redeem the warrants as described
above unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the
warrants is then effective and a current prospectus relating to those Class A ordinary shares is available throughout the 30-day redemption
period.
Redemption of warrants when the price per Class A
ordinary share equals or exceeds $10.00: Once the warrants become exercisable, the Company may redeem the
outstanding warrants:
|
●
|
in whole and not in part;
|
|
●
|
at $0.10 per warrant upon a minimum of 30 days’
prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption
and receive that number of Class A ordinary shares to be determined by reference to an agreed table based on the redemption
date and the “fair market value” of Class A ordinary shares; and
|
|
●
|
if, and only if, the closing price of Class A
ordinary shares equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending
three trading days before the Company sends the notice of redemption to the warrant holders; and
|
|
●
|
if the closing price of the Class A ordinary shares
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 is less than $18.00 per share (as adjusted), the Private Placement Warrants
must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
The “fair market value” of Class A
ordinary shares for the above purpose shall mean the volume weighted average price of our Class A ordinary shares during the 10
trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. In no event will the
warrants be exercisable in connection with this redemption feature for more than 0.361 Class A ordinary shares per warrant (subject
to adjustment).
In no event will the
Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination
Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect
to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the
respect to such warrants. Accordingly, the warrants may expire worthless.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
Note 9—Fair
Value Measurements
The following table presents
information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2021 and December 31,
2020 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
March 31, 2021:
|
|
Quoted Prices in
Active Markets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant Other
Unobservable Inputs
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account
|
|
$
|
277,594,152
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - public
|
|
$
|
79,370,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Derivative warrant liabilities - private
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
43,190,000
|
|
December 31, 2020:
|
|
Quoted Prices in
Active Markets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant Other
Unobservable Inputs
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account
|
|
$
|
277,547,390
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - public
|
|
$
|
31,930,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Derivative warrant liabilities - private
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
17,380,000
|
|
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 three months ended March
31, 2021.
Level 1 instruments include
investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields,
quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
The fair value of the Public
Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte
Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation
model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have been measured
based on the listed market price of such warrants, a Level 1 measurement, since November 2020. For the three months ended March 31, 2021,
the Company recognized a charge to the statement of operations resulting from a decrease in the fair value of liabilities of approximately
$73.3 million presented as change in fair value of derivative warrant liabilities on the accompanying statement of operations.
The estimated fair value
of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs.
Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate
and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s
traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of
the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar
to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual
term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
ARCLIGHT CLEAN TRANSITION
CORP.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
The following table provides
quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
|
|
As of
December 31,
2020
|
|
|
As of
March 31,
2021
|
|
Stock price
|
|
$
|
10.04
|
|
|
$
|
15.67
|
|
Volatility
|
|
|
22.0
|
%
|
|
|
10.0
|
%
|
Expected life of the options to convert
|
|
|
5.73
|
|
|
|
5.25
|
|
Risk-free rate
|
|
|
0.38
|
%
|
|
|
0.98
|
%
|
Dividend yield
|
|
|
-
|
|
|
|
-
|
|
The change in the fair value of the derivative
warrant liabilities for the three months ended March 31, 2021 is summarized as follows:
Derivative warrant liabilities at December 31, 2020 (inception)
|
|
$
|
49,310,000
|
|
Change in fair value of derivative warrant liabilities
|
|
|
73,250,000
|
|
Derivative warrant liabilities at March 31, 2021
|
|
$
|
122,560,000
|
|
Note 10—Subsequent
Events
Management
has evaluated subsequent events to determine if events or transactions occurring through May 17, 2021, the date the financial statement
was available for issuance, require potential adjustment to or disclosure in the financial statement and has concluded that all such
events that would require recognition or disclosure have been recognized or disclosed.
On
April 29, 2021, the Company issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to
which the Company could borrow up to an aggregate principal amount of $1,000,000 to fulfill the Company’s outstanding financial
obligations. The Promissory Note is non-interest bearing and payable on the earlier to occur of (i) September 22, 2022 or (ii)
the completion of the Business Combination. At no time, including at maturity, is the Sponsor permitted under the terms of the Promissory
Note to convert any portion of the principal amount outstanding under the Promissory Note into warrants or other equity securities of
the Company.