UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
c/o Graubard Miller
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The | ||||
| The |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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, a smaller reporting company or an emerging growth company. See 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
As of April 1, 2024,
CLEAN ENERGY SPECIAL SITUATIONS CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
CLEAN ENERGY SPECIAL SITUATIONS CORP.
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Restricted cash | ||||||||
| Deferred financing agreement – related party | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Income taxes payable | ||||||||
| Advance from related parties | ||||||||
| Promissory notes – related party, net of debt discount | ||||||||
| Deemed Dividend Liability | ||||||||
| Excise Tax Payable | ||||||||
| Total Liabilities | ||||||||
| Commitments | ||||||||
| Common stock subject to possible redemption, | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ||||||
| Total Stockholders’ Deficit | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
CLEAN ENERGY SPECIAL SITUATIONS CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating and formation costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest income – bank | ||||||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||||||
| Interest expenses – debt discount | ( | ) | ( | ) | ||||||||||||
| Unrealized gain on marketable securities held in Trust Account | ||||||||||||||||
| Total Other income, net | ||||||||||||||||
| (Loss) income before provision for income taxes | ( | ) | ||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income | $ | ( | ) | $ | $ | $ | ||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
CLEAN ENERGY SPECIAL SITUATIONS CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| Common Stock | Additional Paid in | Accumulated | Total Stockholder’s Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Accretion for common stock to redemption amount | — | ( | ) | ( | ) | |||||||||||||||
| Additional shares at Fair Value March 2, 2023 | — | ( | ) | ( | ) | |||||||||||||||
| Excise Tax Payable | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Accretion for common stock to redemption amount | — | ( | ) | ( | ) | |||||||||||||||
| Fair value of Founder Shares transferred in connection with Deferred Financing Agreement - Related Party | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Accretion for common stock to redemption amount | — | ( | ) | ( | ) | |||||||||||||||
| Excise Tax Payable | — | ( | ) | ( | ) | |||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Common Stock | Additional Paid in | Accumulated | Total Stockholder’s | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – March 31, 2022 | ( | ) | ||||||||||||||||||
| Accretion for common stock to redemption amount | — | ( | ) | ( | ) | |||||||||||||||
| Net loss | — | |||||||||||||||||||
| Balance – June 30, 2022 | ( | ) | ||||||||||||||||||
| Accretion for common stock to redemption amount | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
CLEAN ENERGY SPECIAL SITUATIONS CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Unrealized gain on marketable securities held in Trust Account | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash into Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account to pay franchise and income taxes | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Advances from related party | ||||||||
| Proceeds from promissory notes – related party, net of debt discount | ||||||||
| Repayment of promissory notes - related party | ( | ) | ||||||
| Redemption of common stock | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net Change in Cash and restricted cash | ( | ) | ||||||
| Cash and restricted cash – Beginning of period | ||||||||
| Cash and restricted cash – End of period | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Cash paid for franchise and income taxes (1) | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Accretion for common stock to redemption amount | $ | $ | ||||||
| Additional shares issued at fair value on March 2, 2023 | $ | $ | ||||||
| Fair value of Founder Shares transferred in connection with Deferred Financing Agreement - Related Party | $ | $ | ||||||
| Excise Tax Payable | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND LIQUIDITY
Clean Energy Special Situations Corp. (the “Company”), formerly known as Springwater Special Situations Corp., is a blank check company incorporated as a Delaware company on October 2, 2020. The Company was formed 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 (a “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2023, the Company had not commenced any operations. All activity for the period from October 2, 2020 (inception) through September 30, 2023 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering seeking to identify a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on August 25, 2021. On August 30, 2021,
the Company consummated the Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
On
September 3, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and would
forfeit the remaining balance. On September 7, 2021, the Company consummated the sale of an additional
Transaction
costs amounted to $
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 the Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more businesses or
entities with a fair market value equal to at least
5
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
The Company will provide the holders of the Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Business Combination, either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes paid and payable), divided by the number of then issued and outstanding Public shares, subject to certain limitations as described in the prospectus. Additionally, each Public Stockholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against the proposed Business Combination. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants or Rights (defined below).
If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other 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. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Founder Shares have agreed to vote such Founder Shares, shares included in the Private Placement Units and any Public Shares they hold in favor of approving a Business Combination.
The
holders of the Founder Shares have agreed (a) to waive redemption rights with respect to the Founder Shares and any Public Shares held
by them in connection with the completion of a Business Combination, (b) to waive liquidation rights with respect to the Founder Shares
if the Company fails to complete a Business Combination within the time period required by the Certificate of Incorporation and (c) not
to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to
allow redemptions in connection with a Business Combination or to redeem
The
Company currently has until April 28, 2024 with the ability to further extend such date up to six times by one month each (so a maximum
of through May 28, 2024), to complete a Business Combination (the “Combination Period”). If the Company has not completed
a Business Combination within the Combination Period and such time period is not extended by stockholders, 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 pay taxes (less up to $
On
February 27, 2023, the Company held a special meeting of its stockholders to consider a proposal, among others, to extend the date the
Company had to consummate an initial business combination from February 28, 2023 to August 28, 2023. Stockholders approved the proposals
and in connection therewith, holders of an aggregate of
The
Deemed Dividend Liability was recorded at the fair value on the declaration date on March 2, 2023.
| Stock Price as of Measurement Date | $ | |||
| Probability of Acquisition | % |
6
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
The holders of the Founder Shares have agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if they acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit.
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to 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 discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
Effective May 15, 2023, each of Alexander Hamilton and Hans Brandl resigned from the Company’s Board of Directors. Such individuals’ resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
Additionally, effective May 15, 2023, the Company’s Board of Directors appointed Candice Beaumont, Nicholas Parker, Raghunath Kilambi and Greg A. Nuttall to the Board of Directors.
Effective August 2, 2023, each of Martin Gruschka, Ignacio Casanova, Angel Pendas and Eduardo Montes resigned from the Board of Directors of the Company and from each officer position they may have held with the Company – Mr. Gruschka from the office of Chief Executive Officer, Mr. Casanova from the office of Chief Financial Officer, and Mr. Pendas from the office of Secretary. Such individuals’ resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
At the same time as and in connection with the resignations described above, Raghunath Kilambi was elected Chief Executive Officer and Chief Financial Officer of the Company
On August 2, 2023, the Company filed an amendment to its Certificate of Incorporation changing the name of the Company from “Springwater Special Situations Corp.” to “Clean Energy Special Situations Corp.” A copy of such amendment was included in the Company’s Current Report on Form 8-K as filed with the SEC on August 2, 2023.
On November 29, 2023, the Company received a notification letter (the “Letter”) from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with Nasdaq’s continued listing standards (the “Rules”) because the Company did not timely file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the “Q3 10-Q”).
As the Company reported in its Current Report on Form 8-K filed with the SEC August 30, 2023, the Company previously received written notice (the “Initial Notice”) from Nasdaq indicating that the Company was not in compliance with the Rules because the Company did not timely file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Q2 10-Q”). In response to the Initial Notice, the Company timely submitted a plan to regain compliance with the Rules with respect to the Q2 10-Q, which plan was approved by Nasdaq. The Company filed the Q2 10-Q on June 30, 2023. The Company now has until February 12, 2024 to file the Q3 10-Q and regain compliance with the Rules.
Extension Amendment Proposal
On
August 28, 2023, the Company held a special meeting of its stockholders (the “August 2023 Special Meeting”) whereby the Company’s
stockholders approved a proposal to amend the Certificate of Incorporation to extend the date by which the Company has to consummate
an initial Business Combination from August 28, 2023 to November 28, 2023 with the ability to further extend such date up to six times
by one month each (so a maximum of through May 28, 2024) (the “Extension Amendment Proposal”), at the discretion of the Company’s
board of directors, upon the payment of certain amounts (the “Extension”). The Company’s Sponsor, officers, directors
and their affiliates agreed that if the Extension Amendment Proposal were to be approved and the Extension implemented, they or their
affiliates would lend to the Company to be deposited into the Trust Account $
7
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
On August 28, 2023, the Company filed an amendment to the Certificate of Incorporation to effectuate the Extension. A copy of such amendment was included in the Company’s Current Report on Form 8-K as filed with the SEC on September 1, 2023.
Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the world. As of the date the condensed financial statement was issued, there was considerable uncertainty around the expected duration of this pandemic. The Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of this condensed financial statement. The condensed financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal
On
February 27, 2023 and August 28, 2023, the Company’s stockholders redeemed
Any redemption or other repurchase in connection with a Business Combination, extension vote or otherwise may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. As a result, the above-referenced excise tax liability recorded as of September 30, 2023 may be more or less than such amount depending on factors that occurred after such date and in the future. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination. Notwithstanding the foregoing, the Company has agreed that the per share price payable to stockholders exercising their redemption rights, whether in connection with the vote on an extension or an initial Business Combination, will not be reduced by payments required to be made by the Company under the IR Act.
Liquidity and Going Concern
As of September 30, 2023, the Company had $
8
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
On February 27, 2023, the Company held a special meeting of its stockholders whereby the Company’s stockholders approved a proposal to extend the date the Company had to consummate an initial business combination from February 28, 2023 to August 28, 2023.
On August 28, 2023, the Company held a special meeting of its stockholders (the “August 2023 Special Meeting”) whereby the Company’s stockholders approved a proposal to amend the Certificate of Incorporation to extend the date by which the Company has to consummate an initial Business Combination from August 28, 2023 to November 28, 2023 with the ability to further extend such date up to six times by one month each (so a maximum of through May 28, 2024) (the “Extension Amendment Proposal”), at the discretion of the Company’s board of directors, upon the payment of certain amounts (the “Extension”).
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB’s”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete a Business Combination within the Combination Period and such period is not extended by stockholders, then the Company will cease all operations except for the purpose of liquidating.
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” management has determined that the liquidity conditions raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date these financial statements are issued. The 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 financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2022, as filed with the SEC on April 10, 2023. The interim results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future periods.
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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and 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 a 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 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 condensed financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
9
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Use of Estimates
The preparation of the condensed 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial 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.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2023, and December 31, 2022.
Marketable Securities Held in Trust Account
At September 30, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury Bills. All of 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 investments held in the Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Deferred Financing Agreement
In connection with the Transaction, the Sponsor agreed to pay for obligations of the Company. The Company deferred the full amount of the fair value of the shares on May 15, 2023. When advances are received under the loan, the Company records a debt discount and amortizes the debt discount as interest expense over the life of the loan.
Common Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. In connection with the special meeting of stockholders held on February
27, 2023 and August 28, 2023, holders of an aggregate of
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
| Common stock subject to possible redemption, December 31, 2022 | $ | |||
| Less: | ||||
| Share Redemption — March 8, 2023 | ( | ) | ||
| Plus | ||||
| Accretion of carrying value to redemption value | ||||
| Common stock subject to possible redemption, September 30, 2023 | $ |
10
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Warrant Classification
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company’s has analyzed the warrants issued in the Initial Public Offering (“Public Warrants”) and warrants included in the Private Placement Units (the “Private Warrants”) and determined they are considered to be freestanding instruments and do not exhibit any of the characteristics in ASC 480 and therefore are not classified as liabilities under ASC 480. The warrants meet all of the requirements for equity classification under ASC 815 and therefore are classified in equity.
Income Taxes
The
Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred
tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis
of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740
additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets
will not be realized. As of September 30, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance
recorded against it. The Company’s effective tax rate was (
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net (Loss) Income per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net (loss) income per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. Accretion associated with the redeemable shares of common stock is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted (loss) income per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, (ii) the private placement, and (iii) the shares under the Rights Agreement since the exercise of the warrants is contingent upon the occurrence of future events. As of September 30, 2023 and 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net (loss) income per common stock is the same as basic net (loss) income per common stock for the periods presented.
11
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
| Three
Months Ended September 30, 2023 | Three
Months Ended September 30, 2022 | Nine
months Ended September 30, 2023 | Nine
months Ended September 30, 2022 | |||||||||||||||||||||||||||||
| Redeemable | Non- redeemable | Redeemable | Non- redeemable | Redeemable | Non- redeemable | Redeemable | Non- redeemable | |||||||||||||||||||||||||
| Basic and diluted net (loss) income per common stock | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net (loss) income, as adjusted | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
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 $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements and disclosures.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold
On
September 3, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and forfeited
the remaining balance. On September 7, 2021, the Company consummated the sale of an additional
12
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
NOTE 4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering on August 30, 2021, the Sponsor and EarlyBirdCapital, Inc. purchased an aggregate of
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In
October 2020, the Sponsor paid $
In
connection with the Initial Public Offering, each anchor investor acquired from the Sponsor an indirect economic interest in the Founder
Shares a total of
On
May 15, 2023, the Sponsor and certain other holders of Founder Shares (hereinafter the “Transferors”) entered into an agreement
to transfer an aggregate of
Administrative Services Agreement
The Company entered into an agreement with its counsel, Graubard Miller, commencing on August 30, 2021. Until completion of the Business Combination or the Company’s liquidation, Graubard Miller shall make available to the Company certain office space and administrative and support services as may be required by the Company from time to time, situated at 405 Lexington Avenue, New York, New York 10174 (or any successor location) free of charge.
13
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
Deferred Financing Agreement — Related Party
On
May 15, 2023, in connection with the Deferred Financing Agreement, the Company deferred the full amount of the fair value of the Founders
Shares transferred as part of the Transaction as an asset, with an offsetting charge to accumulated deficit. The initial draw under the
Deferred Financing Agreement was under a promissory note for an aggregate of $
Promissory Notes — Related Party
On
December 17, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company could borrow up to an
aggregate principal amount of $
During
the nine months ended September 30, 2023, the Company issued two promissory notes to IME Spain General Partner S.L., pursuant to which
the Company can borrow up to an aggregate principal amount of $
On
May 15, 2023, in connection with the Deferred Financing Agreement, the Share Recipients agreed to advance to the Company an aggregate
of $
The Company’s working capital needs in excess of the Initial Loan Amount until the consummation of an initial Business Combination by the Company are expected to be financed by the Share Recipients and their designees, in such amounts among the Share Recipients and at such times as determined by them in their discretion but ensuring that liabilities of the Company are paid as they become due. Any additional amounts loaned will be evidenced by promissory notes.
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or the Company’s
officers and directors or 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.
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 $
Advance from Related Party
Through
September 30, 2023, the Sponsor advanced a total of $
14
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
NOTE 6. COMMITMENTS
Registration Rights
The holders of the Founder Shares, EBC founder shares, Private Placement Units and underlying securities and any securities issued upon conversion of Working Capital Loans are entitled to registration rights pursuant to an agreement signed on the effective date of the Initial Public Offering (“Effective Date”). The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founders’ Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the EBC founder shares, Private Placement Units and units issued to the Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the consummation of a Business Combination. Notwithstanding anything to the contrary, the holders of the EBC founder shares may only make a demand on one occasion and only during the five-year period beginning on the Effective Date. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided, however, that the holders of the EBC founder shares may participate in a “piggy-back” registration only during the seven-year period beginning on the Effective Date. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. 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 to purchase up to
The
underwriters were entitled to a cash underwriting discount of $
Business Combination Marketing Agreement
The
Company engaged EarlyBirdCapital as an advisor in connection with its Business Combination to assist in holding meetings with the shareholders
to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors
that are interested in purchasing securities in connection with the Initial Business Combination and assist the Company with press releases
and public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon
the consummation a Business Combination in an aggregate amount equal to
EBC founder shares
In
December 2020 and July 2021, the Company issued to the designees of EarlyBirdCapital
15
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
NOTE 7. STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred
Stock — The Company is authorized to issue
Common
Stock — The Company is authorized to issue
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Public Warrants. The Public Warrants will become exercisable 30 days after the completion of a Business Combination. The Public
Warrants will expire
The Company will not be obligated to deliver any shares of common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of common stock issuable upon exercise of the warrants is then effective and a current prospectus relating thereto is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
The Company has agreed that as soon as practicable after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the shares of common stock issuable upon exercise of the warrants, and the Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement.
Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per Public Warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder and |
| ● | if, and only if, the last reported sale price of the common stock 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 warrant holders equals or exceeds $18.00 per share (as adjusted for dividends, share capitalizations, reorganizations, recapitalizations and the like). |
The exercise price and number of common shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. 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 Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering. Management concluded that the Public Warrants and Private Warrants to be issued pursuant to the warrant agreement qualify for equity accounting.
16
CLEAN ENERGY SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(UNAUDITED)
NOTE 8. 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 fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
| Description | Level | September 30, 2023 | December 31, 2022 | |||||||||
| Assets: | ||||||||||||
| Marketable securities held in Trust Account | 1 | $ | $ | |||||||||
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than as disclosed above, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
As of the date of these financial
statements, the Sponsor and Sponsor investors advanced the Company an aggregate of $
On February 14, 2024, the Company received a formal notice (the “Formal Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) that, based upon the Company’s non-compliance with the Exception, the Company’s securities were subject to delisting unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Plan”). The Company plans to timely request a hearing before the Plan, which will stay the suspension of the Company’s securities only for a period of 15 days from the date of the request. When the Company requests a hearing, it also plans on requesting a stay of the suspension, pending the hearing.
The Company is considering all options available to it to ensure compliance with all applicable criteria for continued listing on Nasdaq. There can be no assurance, however, that the Panel will grant the Company’s request for continued listing or that the Company will evidence compliance within any extension period that may be granted by the Panel. There can be no assurance that the appeal will be successful.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Clean Energy Special Situations Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Springwater Promote LLC The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on October 2, 2020 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. We intend to effectuate our business combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Units, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from October 2, 2020 (inception) through September 30, 2023 were organizational activities, those necessary to prepare for the Initial Public Offering and seeking to identify a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2023, we had a net loss of $206,783, which consists of an operating and formation costs of $234,940, interest expense of $174,285 associated with the debt discount on the related party promissory note and a provision for income taxes of $51,314, offset by interest income on marketable securities held in the Trust Account of $253,439 and interest income from bank of $317.
For the nine months ended September 30, 2023, we had a net income of $269,771, which consists of an interest income from bank of $788 and interest income on marketable securities held in the Trust Account of $1,892,635, offset by operating and formation costs of $929,098, interest expense of $305,000 associated with the debt discount on the related party promissory note and a provision for income taxes of $389,554.
For the three months ended September 30, 2022, we had a net income of $380,472, which consists of an unrealized gain on marketable securities held in our Trust Account of $412,051, interest income from bank of $263 and interest income on marketable securities held in the Trust Account of $386,841, offset by operating and formation costs of $244,280 and provision for income taxes of $174,403.
For the nine months ended September 30, 2022, we had a net income of $187,978, which consists of an unrealized gain on marketable securities held in our Trust Account of $325,565, interest income from bank of $310 and interest income on marketable securities held in the Trust Account of $763,389, offset by operating and formation costs of $726,883 and provision for income taxes of $174,403.
18
Liquidity and Capital Resources
On August 30, 2021, we consummated the Initial Public Offering of 15,000,000 Units, at $10.00 per Unit, generating gross proceeds of $150,000,000. Simultaneously with the consummation of the Initial Public Offering, we consummated the sale of 645,000 Units at a price of $10.00 per Private Unit in a private placement to the Sponsor, generating gross proceeds of $6,450,000.
On September 7, 2021, the Company consummated the sale of an additional 2,118,624 Units pursuant to the partial exercise of the underwriters’ over-allotment option and the sale of an additional 63,559 Private Units.
Of the gross proceeds of the IPO and Private Placement, an aggregate of $172,898,105 ($10.10 per unit sold in the Initial Public Offering, including the over-allotment option) was deposited into the Trust Account with Continental Stock Transfer & Trust Company acting as trustee.
For the nine months ended September 30, 2023, cash used in operating activities was $927,140. Net income of $269,771 was affected by interest earned on marketable securities held in the Trust Account of $1,892,635 and amortization of the debt discount of $305,000. Changes in operating assets and liabilities provided $390,724 of cash for operating activities.
For the nine months ended September 30, 2022, cash used in operating activities was $601,810. Net income of $187,978 was affected by interest earned on marketable securities held in the Trust Account of $763,389 and unrealized gain on marketable securities held in Trust Account of $325,565. Changes in operating assets and liabilities provided $299,166 of cash for operating activities.
As of September 30, 2023, we had marketable securities held in the Trust Account of $17,210,132 (including $519,817 of interest income) consisting of U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. From inception through September 30, 2023, we have withdrawn $850,335 of interest earned from the Trust Account to pay taxes and $159,294,201 in connection with redemption.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account not previously released to us (less income taxes payable), to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2023, we had cash of $38,813. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
During the nine months ended September 30, 2023, the Company issued two promissory notes to IME Spain General Partner S.L., pursuant to which the Company can borrow up to an aggregate principal amount of $91,121. These promissory notes were non-interest bearing and were fully repaid during the nine months ended September 30, 2023. As of September 30, 2023, the balance due is $0.
On May 15, 2023, certain members of the Sponsor agreed to advance us an aggregate of $400,000 (the “Initial Loan Amount”). On May 15, 2023, our Sponsor issued us a $305,000 promissory note to pay for our existing liabilities at issuance. This promissory note is non-interest bearing and due upon completion of our initial Business Combination. As of September 30, 2023, there was $0 outstanding under the “Initial Loan Amount”, net of a debt-discount of $305,000 recognized for the three and nine months ended September 30, 2023.
Through September 30, 2023, the Sponsor advanced a total of $90,160 of which was used for working capital purposes. As of September 30, 2023 and December 31, 2022, the total amount of advances owed by the Company was $90,160 and $0, respectively.
Our working capital needs in excess of the Initial Loan Amount until the consummation of an initial Business Combination by the Company are expected to be financed by certain members of the Sponsor, in such amounts among these parties and at such times as determined by them in their discretion but ensuring that our liabilities are paid as they become due. Any additional amounts loaned will be evidenced by promissory notes.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, the Sponsor, our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would repay such loaned amounts provided that up to $1,500,000 of such loans may be convertible into units of the post-business combination entity at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Units. In the event that a business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment.
As of the date of these financial statements, the Sponsor advanced to us an aggregate of approximately $128,000 for working capital and payments for the monthly extensions.
We will need to raise additional funds in order to meet the expenditures required for operating our business. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
19
Liquidity and Going Concern
As of September 30, 2023, the Company had $38,813 in its operating bank account and working capital deficit of $2,880,612. If the estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing or loans either to complete a business combination or because it becomes obligated to redeem a significant number of the Public Shares upon consummation of a business combination, in which case the Company may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of our business combination. If the Company does not have sufficient funds available, the Company may be forced to cease operations and liquidate the Trust Account. In addition, following the business combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company may not have sufficient funds available to complete a business combination. Management has determined that the liquidity condition, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters were entitled to a cash underwriting discount of $0.20 per Unit, or $3,000,000 in the aggregate, paid upon the closing of the Initial Public Offering.
The Company engaged EarlyBirdCapital, the representative of underwriters in the Initial Public Offering, as an advisor in connection with its Business Combination to assist in holding meetings with the shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing securities in connection with the Initial Business Combination and assist the Company with press releases and public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation a Business Combination in an aggregate amount equal to 3.5% of the gross proceeds of the Initial Public Offering. Additionally, the Company will pay EarlyBirdCapital a cash fee equal to 1.0% of the total consideration payable in the Business Combination if it introduces the Company to the target business with which it completes a Business Combination.
Critical Accounting Estimates
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Such estimates may be subject to change as more current information becomes available and, accordingly, actual results may differ from these estimates under different assumptions or conditions.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statement that require estimation but are not deemed critical, as defined above.
As of the end of the reporting period, we have not identified any critical accounting estimates.
20
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements and disclosures.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of 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.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments, accruals and the proper safeguarding of trust assets, reporting of appropriate disclosure and monitoring process over the use of trust funds. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations, and cash flows for the period presented.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards as well as improved our review of material agreements to ensure adherence to various stipulations in the agreement, specifically the Trust Agreement where we improved our monitoring process on the use of funds from the Trust Account to be paid for taxes. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
Changes in Internal Control over Financial Reporting
Other than mentioned above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
21
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On August 30, 2021, the Company consummated the Initial Public Offering of 15,000,000 units, at $10.00 per Unit, generating gross proceeds of $150,000,000, which is described in Note 3. EarlyBirdCapital, Inc. acted as sole book-running manager and JonesTrading acted as co-manager, of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-254088). The Securities and Exchange Commission declared the registration statement effective on August 25, 2021.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 645,000 Private Units at a price of $10.00 per Private Unit in a private placement to Springwater Promote LLC (the “Sponsor”), generating gross proceeds of $6,450,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On September 3, 2021, the underwriters notified the Company of their intention to partially exercise their over-allotment option and forfeited the remaining balance. On September 7, 2021, the Company consummated the sale of an additional 2,118,624 Units, at $10.00 per Unit, and the sale of an additional 63,559 Private Units, at $10.00 per Private Unit, generating total gross proceeds of $21,821,830. A total of $21,398,105 was deposited into the Trust Account.
Of the gross proceeds of the IPO and Private Placement, an aggregate of $172,898,105 ($10.10 per unit sold in the offering, including the over-allotment option) was deposited into a trust account with Continental Stock Transfer & Trust Company acting as trustee.
We paid a total of $3,423,725 in underwriting discounts and commissions related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
22
Item 5. Other Information
During the three and nine months ended September 30, 2023, no director or officer adopted or terminated any (i) “Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K intending to satisfy the affirmative defense conditions of Rule 10b5–1(c) or (ii) “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.
During the three months ended September 30, 2023, the Company did not adopt or terminate any Rule 10b5-1 trading arrangement.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| No. | Description of Exhibit | |
| 31.1* | Certification of Principal Executive & Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Principal Executive & Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CLEAN ENERGY SPECIAL SITUATIONS CORP. | ||
| Date: April 1, 2024 | By: | /s/ Raghu Kilambi |
| Name: | Raghu Kilambi | |
| Title: | Chief Executive Officer & Chief Financial Officer | |
| (Principal Executive Officer
and Principal Financial and Accounting Officer) and Director | ||
24