UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not Applicable
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one Class A Ordinary Share, 0.0001 par value, and one-half of one redeemable warrant | SOAC.U | The New York Stock Exchange | ||
| Warrants included as part of the Units, each whole warrant exercisable for one Class A Ordinary Share at an exercise price of 11.50 | SOAC WS | The New York Stock Exchange |
As of August 16, 2021,
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Condensed CONSOLIDATED Balance Sheets
| June 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 5) | ||||||||
| Class A ordinary shares, $ | ||||||||
| Shareholders’ Equity (Deficit): | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity (deficit) | ( | ) | ||||||
| Total Liabilities and Shareholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Condensed CONSOLIDATED Statements of Operations (Unaudited)
| For the three months ended June 30, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2021 | For the six months ended June 30, 2020 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses - related party | ||||||||||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ( | ) | ( | ) | ||||||
| Other income: | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||||||||
| Net gain on investments held in Trust Account | ||||||||||||||||
| Offering costs allocated to derivative warrant liabilities | ( | ) | ( | ) | ||||||||||||
| Interest earned | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding of shares subject to redemption, basic and diluted | ||||||||||||||||
| Basic and diluted net income per share, shares subject to redemption | $ | - | $ | $ | - | $ | - | |||||||||
| Weighted average ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | ( | ) | $ | - | $ | $ | ( | ) | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Condensed CONSOLIDATED Statements of Changes in Shareholders’ Equity (DEFICIT) (Unaudited)
| For the three and six months ended June 30, 2021 | ||||||||||||||||||||||||||||
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||||
| Measurement adjustment on redeemable ordinary shares | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||
| Balance - March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Measurement adjustment on redeemable ordinary shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| For the three and six months ended June 30, 2020 | ||||||||||||||||||||||||||||
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Accumulated | Shareholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance - December 31,2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2020 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Sale of units in initial public offering, gross | - | - | - | |||||||||||||||||||||||||
| Offering costs | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Forfeiture of Class B ordinary shares | ( | ) | ( | ) | - | |||||||||||||||||||||||
| Ordinary shares subject to possible redemption | ( | ) | ( | ) | - | - | ( | ) | - | ( | ) | |||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance - June 30, 2020 | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Condensed CONSOLIDATED Statement of Cash Flows (Unaudited)
| For the six months ended June 30, 2021 | For the six months ended June 30, 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Offering costs allocated to derivative warrant liabilities | ||||||||
| General and administrative expenses paid by related party under note agreement | ||||||||
| Net gain on investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash deposited in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds received from initial public offering, gross | ||||||||
| Proceeds from private placement | ||||||||
| Offering costs paid | ( | ) | ||||||
| Repayment of note payable from related party | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash - beginning of the period | ||||||||
| Cash - end of the period | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Offering costs included in accounts payable | $ | $ | ||||||
| Offering costs included in accrued expenses | $ | $ | ||||||
| Offering costs included in note payable | $ | $ | ||||||
| Use of retainer for offering costs | $ | $ | ( | ) | ||||
| Deferred underwriting commissions in connection with the initial public offering | $ | $ | ||||||
| Forfeiture of Class B ordinary shares | $ | $ | ||||||
| Initial value of Class A ordinary shares subject to possible redemption | $ | $ | ||||||
| Measurement adjustment on redeemable ordinary shares | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Note 1 — Description of Organization and Business Operations
Sustainable Opportunities Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated as a Cayman Islands exempted company on December 18, 2019. 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 or entities (the “Business Combination”). 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 June 30, 2021, the Company had not commenced any operations. All activity for the period from December 18, 2019 (inception) through June 30, 2021 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), and, since the closing of the Initial Public Offering, a search for a business combination candidate. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash from the proceeds derived from the Initial Public Offering and interest income earned on investments held in Trust Account.
Proposed Business Combination and Related Transactions
On March 4, 2021, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”), by and among the Company, 1291924 B.C. Unlimited Liability Company, an unlimited liability company existing under the laws of British Columbia, Canada (“NewCo Sub”), and DeepGreen Metals Inc., a company existing under the laws of British Columbia, Canada (“DeepGreen”).
Pursuant to the Business Combination Agreement, the Company will migrate to and be continued as a company in British Columbia, Canada (the “SOAC Continuance”). Following the SOAC Continuance, pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia), (i) the Company will acquire all of the issued and outstanding shares in the capital of DeepGreen (the “DeepGreen Shares”) from DeepGreen shareholders in exchange for the Company’s ordinary shares (as defined below) and Company Earnout Shares (as defined below) (the “Share Exchange”), (ii) DeepGreen will become a wholly-owned subsidiary of the Company, and (iii) DeepGreen and NewCo Sub will amalgamate to continue as one unlimited liability company, in each case, on the terms and subject to the conditions set forth in the Business Combination Agreement and the Plan of Arrangement and in accordance with the provisions of applicable law.
Each option to purchase ordinary shares in the capital of the Company (the “DeepGreen Options”) will become an option to purchase SOAC ordinary shares and Company Earnout Shares on the same terms and conditions (including applicable vesting, expiration and forfeiture provisions) that applied to the corresponding DeepGreen Options immediately prior to closing of the Business Combination.
The Proposed Business Combination is expected to close in the third quarter of 2021, following the receipt of the required approval by the Company’s shareholders and the fulfillment of other conditions.
The shareholders and the optionholders of DeepGreen will be entitled to receive, in exchange for their DeepGreen Shares or DeepGreen Options, as applicable, an aggregate of (i) a number of shares in the capital of the Company or comparable equity awards that are settled or are exercisable for shares in the capital of the Company, as applicable, based on an implied DeepGreen equity value of $2.25 billion after giving effect to the SOAC Continuance (the “SOAC Ordinary shares”), (ii) 5,000,000 Class A Special Shares, (iii) 10,000,000 Class B Special Shares, (iv) 10,000,000 Class C Special Shares, (v) 20,000,000 Class D Special Shares, (vi) 20,000,000 Class E Special Shares, (vii) 20,000,000 Class F Special Shares, (viii) 25,000,000 Class G Special Shares and (ix) 25,000,000 Class H Special Shares, in each case, in the capital of the Company (collectively, the “Company Earnout Shares”), or, as applicable, options to purchase such SOAC Ordinary shares and Company Earnout Shares.
5
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Concurrently with the execution of the Business
Combination Agreement, the Company entered into subscription agreements (the “Subscription Agreements”) with certain institutional
and accredited investors, pursuant to which such investors agreed to subscribe for and purchase, and the Company agreed to issue and sell
to such investors, substantially concurrently with the Closing (as defined in the Business Combination Agreement), an aggregate of
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements which have not previously been disclosed within the financial statements.
Sponsor, Initial Public Offering and Private Placement
The Company’s sponsor is Sustainable Opportunities
Holdings LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial
Public Offering was declared effective on May 5, 2020. On May 8, 2020, the Company consummated its Initial Public Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the private placement (“Private Placement”) of
Trust Account
Upon the closing of the Initial Public Offering and the Private Placement, $300.0 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 (the “Trust Account”), located in the United States at JP 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, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, 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.
Initial Business Combination
The Company’s 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 toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully.
6
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Notwithstanding the foregoing, the 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
The Company’s Sponsor, officers and directors
(the “Initial Shareholders”) have agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of
Association that would affect the substance or timing of the Company’s obligation to provide holders of its Public Shares the right
to have their shares redeemed in connection with its initial business combination or to redeem
If the Company is unable to complete a Business Combination within 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 for its tax obligations, 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 Company’s 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.
7
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
The Initial Shareholders have 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 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 underwriter has agreed to waive its rights to its deferred underwriting commission (see Note 5) held in the
Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such
amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the 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 $
Going Concern Consideration
As of June 30, 2021, the Company had approximately
$
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through November 8, 2021. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any future interim periods.
8
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
The accompanying unaudited consolidated financial statements should be read in conjunction the financial statements and notes thereto included in with the Company’s Annual Report as amended on Form 10-K/A for the year ended December 31, 2020 as filed with the SEC on May 24, 2021.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. Activities in relation to the noncontrolling interest are not considered to be significant and are, therefore, not presented in the accompanying consolidated 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 shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (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 statements with other public companies difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the financial statements 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 the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.
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 statements, 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.
9
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
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 $
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 had no cash equivalents as of June 30, 2021 and December 31, 2020, respectively.
Investments Held in Trust Account
The Company’s portfolio of marketable securities
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 in any open-ended investment company that holds itself out as a money market fund selected by the Company
meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act. Upon the closing of the Initial
Public Offering and the Private Placement, $
Fair Value Measurement
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 for identical instruments in active markets; |
| ● | 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.
Fair Value of Financial Instruments
As of June 30, 2021 and December 31, 2020, the carrying values of cash, prepaid expenses, and accounts payable approximate their fair values due to the short-term nature of the instruments. As of June 30, 2021, the Company’s portfolio of investments held in Trust Account is comprised entirely of investments in money market funds that invest in U.S. government securities.
The Warrants are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting period. Changes in the fair value of the Warrants are recorded in the statement of operations each period.
10
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
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
Class A Ordinary Shares subject to possible redemption
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 occurrence of uncertain future events. Accordingly,
as of June 30, 2021,
Net Income (Loss) Per Ordinary Share
The Company applies the two-class method in calculating earnings per
share. Net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of ordinary shares outstanding
during the periods. An aggregate of
11
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Reconciliation of Net Income (Loss) per Ordinary Share
The Company’s net income (loss) is adjusted for the portion of income (loss) that is attributable to ordinary shares subject to redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per ordinary share is calculated as follows:
| For the three months ended June 30, 2021 | For the three months ended June 30, 2020 | For the six months ended June 30, 2021 | For the six months ended June 30, 2020 | |||||||||||||
| Class A Ordinary Shares subject to possible redemption | ||||||||||||||||
| Numerator: Earnings allocable to Ordinary Shares subject to possible redemption | ||||||||||||||||
| Income from investments held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Less: Company's portion available to be withdrawn to pay taxes | - | - | ||||||||||||||
| Net income attributable to ordinary shares subject to possible redemption | $ | $ | $ | $ | ||||||||||||
| Denominator: Weighted average Class A ordinary shares subject to possible redemption | ||||||||||||||||
| Weighted average shares outstanding subject to redemption, basic and diluted | ||||||||||||||||
| Basic and diluted net income per share, shares subject to redemption | $ | $ | $ | $ | ||||||||||||
| Non-Redeemable Ordinary Shares | ||||||||||||||||
| Numerator: Net Income (Loss) minus Net Earnings attributable to redeemable shares | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||
| Less: Income attributable to Class A ordinary shares subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Non-redeemable net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominator: weighted average Non-redeemable ordinary shares | ||||||||||||||||
| Weighted average ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income (loss) per share, Non-redeemable shares | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Income Taxes
FASB ASC Topic 740, “Income Taxes,” 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 June 30, 2021 and December 31, 2020. The Company’s management determined that the Cayman Islands is the Company’s 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 June 30, 2021 and December 31, 2020. 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.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman Islands income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Recent Accounting Standards
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Initial Public Offering
On May 8, 2020, the Company consummated its Initial
Public Offering of
Note 4 — Related Party Transactions
Founder Shares
On December 31, 2019, the Sponsor purchased
The Initial Shareholders agreed, subject to limited
exceptions, 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 or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A ordinary
shares equals or exceeds $
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 9,500,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant to the Sponsor, generating gross proceeds of $9.5 million. Each Private Placement Warrant is exercisable for one whole Class A ordinary share at a price of $11.50 per share.
A portion of the proceeds from the sale of the Private Placement Warrants 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 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.
13
SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Related Party Loans
On December 31, 2019, the Sponsor agreed to loan
the Company an aggregate of up to $
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 Company’s officers and
directors 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 the 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. 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. The
Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $
Administrative Support Agreement
The Company entered into an agreement, commencing on May 8, 2020 through
the earlier of the Company’s consummation of a Business Combination and its liquidation, to reimburse the Sponsor a total of $
Note 5 — Commitments & Contingencies
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to Class A ordinary shares) pursuant to a registration and shareholder rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder 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 Company granted the underwriter a 45-day option
from the date of the final prospectus relating to the Initial Public Offering to purchase up to
The underwriter was entitled to an underwriting
discount of $
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SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Consulting Agreement
The Company is receiving consulting services in connection with identification
of potential targets for a Business Combination and due diligence on such targets. As compensation for such services, the Company paid
a nonrefundable fixed fee of $
Note 6 — Shareholders’ Equity
Preference Shares
The Company is authorized to issue
Ordinary Shares
Class A Ordinary Shares — The
Company is authorized to issue
Class B Ordinary Shares — The
Company is authorized to issue
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 Company’s shareholders except as required by law.
The Class B ordinary shares will automatically
convert into Class A ordinary shares at the time of the initial Business Combination 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,
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SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
Note 7 — Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The following table presents our fair value hierarchy for liabilities measured at fair value on a recurring basis as of June 30, 2021:
June 30, 2021
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Warrant liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Total warrant liabilities | $ | $ | $ | $ | ||||||||||||
The Private Placement Warrants were valued
using a modified Black Scholes Model including inputs from a Monte Carlo simulation, which is considered to be a Level 3 fair value measurement.
The Monte Carlo simulation’s primary unobservable input utilized in determining the fair value of the Warrants is the probability
of consummation of the Business Combination. The probability assigned to the consummation of the Business Combination was
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| As of June 30, 2021 | As of December 31, 2020 | |||||||
| Exercise price | $ | $ | ||||||
| Implied stock price range (or underlying asset price at December 31, 2020) | $ | $ | ||||||
| Volatility | % | % | ||||||
| Term | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
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SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
The following table presents the changes in the fair value of warrant liabilities:
| Private Placement Warrants | ||||
| Fair value, December 31, 2020 | $ | |||
| Change in fair value | ( | ) | ||
| Fair value, June 30, 2021 | $ | |||
Note 8 — Warrant Liability
Warrants
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 issuance of 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 certain
circumstances). The Company has agreed that as soon as practicable, but in no event later than 20 business days, after the closing of
a Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a 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. 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. The Public Warrants will expire
Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share. 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 Company and, (i) 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, and (ii) without taking into account the transfer of Founder Shares or Private Placement Warrants (including if such transfer is effectuated as a surrender to us and subsequent reissuance by the Company) by the Sponsor in connection with 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 Company’s 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 discussed below will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
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SUSTAINABLE OPPORTUNITIES ACQUISITION CORP.
Notes to Condensed CONSOLIDATED Financial Statements
The Company may call the Public Warrants for redemption (except with respect to the Private Placement Warrants):
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.
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 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.
Additionally, in no event will the Company be required to net cash settle any Warrants. If the Company is unable to complete the initial 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.
Note 9 — Subsequent Events
The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described in these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Sustainable Opportunities Acquisition Corp.,” “our,” “us” or “we” refer to Sustainable Opportunities Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on December 18, 2019 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that we have not yet identified (“Business Combination”). Although we are not limited to a particular industry or geographic region for purposes of consummating a Business Combination, we intend to focus within industries that benefit from strong Environmental, Social and Governance (“ESG”) profiles. While investing in ESG covers a broad range of themes, we are focused on evaluating suitable targets that have existing environmental sustainability practices or that may benefit, both operationally and economically, from our management team’s commitment and expertise in executing such practices. Our sponsor is Sustainable Opportunities Holdings LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for our Initial Public Offering was declared effective on May 5, 2020. On May 8, 2020, we consummated our Initial Public Offering of 30,000,000 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 $300.0 million, and incurring offering costs of approximately $17.4 million, inclusive of $10.5 million in deferred underwriting commissions. We granted the underwriter a 45-day option to purchase up to an additional 4,500,000 Units at the Initial Public Offering price to cover over-allotments, if any. To date, the over-allotment option has not yet been exercised.
19
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 9,500,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor, generating gross proceeds of $9.5 million.
Upon the closing of the Initial Public Offering and the Private Placement, $300.0 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 (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, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. Our 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 toward consummating a Business Combination.
If we are unable to complete a Business Combination within 18 months from the closing of the Initial Public Offering, or November 8, 2021 (the “Combination Period”), we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay for our tax obligations, 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 our board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Recent Developments
Proposed Business Combination
On March 4, 2021, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with NewCo Sub and DeepGreen. Pursuant to the Business Combination Agreement, the Company will migrate to and be continued as a company in British Columbia, Canada (the “SOAC Continuance”). Following the SOAC Continuance, pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia), (i) the Company will acquire all of the issued and outstanding shares in the capital of DeepGreen (the “DeepGreen Shares”) from DeepGreen shareholders in exchange for the Company’s ordinary shares and Company Earnout Shares (as defined in the Business Combination Agreement) (the “Share Exchange”), (ii) DeepGreen will become a wholly-owned subsidiary of the Company, and (iii) DeepGreen and NewCo Sub will amalgamate to continue as one unlimited liability company, in each case, on the terms and subject to the conditions set forth in the Business Combination Agreement and the Plan of Arrangement and in accordance with the provisions of applicable law. See the Company’s Current Report on Form 8-K, filed with the SEC on March 4, 2021, for further information.
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Results of Operations
Our entire activity from December 18, 2019 (inception) through May 8, 2020, was in preparation for our Initial Public Offering, and since such offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination.
For the three and six months ended June 30, 2021, we had net (loss) income of ($17,175,554) and $14,694,066, respectively, which consisted primarily of ($13,705,000) and $21,175,000 for the three and six month periods respectively, related to the change in the fair value of the Company’s Warrants. The Company also incurred $3,475,137 and $6,490,059 of general and administrative expenses for the three and six month periods ending June 30, 2021.
For the three and six months ended June 30, 2020, we had net income (loss) of approximately $7,000 and ($52,000), for both the three and six month periods this consists primarily of $880,000 of offering costs allocated to derivative warrant liabilities and partially offset by a gain of $1,170,000 related to the change in the fair value of the Company’s Warrants. The Company also had $327,417 and $386,416 of general and administrative expenses for the three and six month periods ending June 30, 2020, respectively.
Liquidity
As of June 30, 2021, we had cash of $293,323 and working capital deficit of $6,861,921.
Subsequent to the consummation of the Initial Public Offering and the Private Placement Warrants, our liquidity has been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account of approximately $3.1 million.
Until the consummation of a Business Combination, we will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. We will need to raise additional capital through loans or additional investments from our Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs through Working Capital loans. As of June 30, 2021, there were no amounts outstanding under any Working Capital Loans.
Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
21
We continue to evaluate the impact of the COVID-19 pandemic and have concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Other Contractual Obligations
Underwriting Agreement
The underwriter was entitled to an underwriting discount of $0.20 per unit, or $6.0 million in the aggregate paid upon the closing of the initial public offering. In addition, $0.35 per unit, or $10.5 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred underwriting commissions will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Administrative Support Agreement
We entered into an agreement, commencing on May 8, 2020 through the earlier of our consummation of a Business Combination and our liquidation, to reimburse our Sponsor a total of $10,000 per month for office space, secretarial and administrative services. We incurred and paid $60,000 and $20,000 in expenses in connection with such services and recorded in general and administrative expenses in the condensed statements of operations for the six months ended June 30, 2021 and June 30, 2020, respectively.
Consulting Agreement
The Company is receiving consulting services in connection with identification of potential targets for a Business Combination and due diligence on such targets. As compensation for such services, the Company paid a nonrefundable fixed fee of $350,000 and agreed to pay the consulting firm $2,650,000 solely in the event that the Company completes a Business Combination. The consulting agreement may be terminated early by either party to the agreement provided that the Company pays a termination fee to the consulting firm determined based on a monthly increasing amount through November 2021. the Company recognized $836,800 and $0 in general and administrative expenses within the statements of operations for the six months ended June 30, 2021 and June 30, 2020, respectively. The termination fee accrued was $1,952,600 and $1,115,800 as of June 30, 2021 and December 31, 2020, respectively.
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 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. Refer the Company’s 10-K/A filed May 24, 2021 for critical accounting policies.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, were invested in U.S. government treasury bills, notes or bonds or in certain money market funds that invest solely in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. 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, is recorded, processed, summarized, and reported within the time period specified in the SEC’s 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. In connection with the restatement of our financial statements described below, our management re-evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, solely due to the Company’s restatement of its financial statements to reclassify the Company’s Public Warrants and Private Placement Warrants as described in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed with the SEC on May 24, 2021, our disclosure controls and procedures were not effective as of June 30, 2021.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. A control system, no matter how well designed and operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met. Because of these inherent limitations, management does not expect that our internal control over financial reporting will prevent all error and all fraud. Management conducted an evaluation of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 Framework”). Based on our evaluation under the 2013 Framework, management concluded that our internal control over financial reporting was not effective as of June 30, 2021.
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In connection with the restatement of our financial statements on Form 10-K/A for the year ended December 31, 2020 filed with the SEC on May 24, 2021, our management, including our principal executive and financial officers, have evaluated the effectiveness of our internal control over financial reporting and concluded that we did not maintain effective internal control over financial reporting as of June 30, 2021 because of a material weakness in our internal control over financial reporting described below related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with our Initial Public Offering. Notwithstanding the material weakness described below, our management has concluded that the financial statements included in this Annual Report are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods presented herein.
In connection with the restatement of previously issued financial statements described below, management identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the warrants we issued in connection with the Initial Public Offering. This material weakness resulted in a material misstatement of our warrant liability, change in fair value of warrant liability, additional paid-in capital and accumulated deficit as of and for the period from December 18, 2019 (inception) through December 31, 2019 and for the year ended December 31, 2020.
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 these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among 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.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, with the exception of the below.
We have commenced our remediation efforts in connection with the identification of the material weakness discussed above and have taken the following steps during the quarter ended June 30, 2021:
● We have expanded and improved our review process for complex securities and related accounting standards.
● We have engaged additional third-party professionals with additional expertise in complex accounting applications to support preparations of our financial reporting.
● We have also retained the services of a valuation expert to assist in valuation analysis of the Warrants on a quarterly basis.
While we took considerable action to remediate the material weakness, such remediation has not been fully evidenced. Additionally, there can be no assurance that our material weakness will be remediated during the third quarter of 2021.
The Company performed additional analysis and procedures with respect to accounts impacted by the material weakness in order to conclude that its unaudited financial statements in this Form 10-Q as of and for the six months ended June 30, 2021, are fairly presented, in all material respects, in accordance with GAAP.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report, as amended, on Form 10-K/A for the year ended December 31, 2020 filed with the SEC on May 24, 2021, except for the below risk factor. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.00 per share.
The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association, our public shareholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of income taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.00 per share.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
None.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
| (1) | Incorporated by reference to the registrant’s Current Report on Form 8-K, filed with the SEC on March 4, 2021. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: August 16, 2021 | ||
| By: | /s/ Scott Leonard | |
| Name: | Scott Leonard | |
| Title: | Chief Executive Officer |
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Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14(a)
AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Leonard, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 of Sustainable Opportunities Acquisition Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | [Paragraph intentionally omitted in accordance with SEC Release Nos. 34-47986 and 34-54942]; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: August 16, 2021
| By: | /s/ Scott Leonard | |
| Scott Leonard | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
exhibit 31.2
CERTIFICATION PURSUANT TO RULES 13a-14(a)
AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Quiram, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 of Sustainable Opportunities Acquisition Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | [Paragraph intentionally omitted in accordance with SEC Release Nos. 34-47986 and 34-54942]; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: August 16, 2021
| By: | /s/ David Quiram | |
| David Quiram | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sustainable Opportunities Acquisition Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Leonard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 16, 2021
| /s/ Scott Leonard | ||
| Name: | Scott Leonard | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sustainable Opportunities Acquisition Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Quiram, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 16, 2021
| /s/ David Quiram | ||
| Name: | David Quiram | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||