Cayman Islands | 001-40927 | 98-1601409 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
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 | ESACU | The Nasdaq Stock Market LLC | ||
Class A ordinary shares included as part of the units | ESAC | The Nasdaq Stock Market LLC | ||
Warrants included as part of the units, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | ESACW | The Nasdaq Stock Market LLC |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
Table of Contents
ESGEN ACQUISITION CORPORATION
FORM 10-QFOR10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022MARCH 31, 2023
TABLE OF CONTENTS
| Page | ||||
| 1 | ||||
Condensed Balance Sheets as of | 1 | |||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | ||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||||
i
September 30, 2022 | December 31, 2021 | |||||||
ASSETS | ||||||||
Cash | $ | 890,273 | $ | 1,323,903 | ||||
Prepaid expenses—current | 174,257 | 550,434 | ||||||
Total current assets | 1,064,530 | 1,874,337 | ||||||
Prepaid expenses, non-current | — | 26,081 | ||||||
Marketable securities held in trust account | 283,154,827 | 281,522,137 | ||||||
Total Assets | $ | 284,219,357 | $ | 283,422,555 | ||||
Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 1,089,536 | $ | 411,416 | ||||
Due to related party | 114,193 | 24,193 | ||||||
Promissory note – related party | 171,346 | 171,346 | ||||||
Total current liabilities | 1,375,075 | 606,955 | ||||||
Warrant liabilities | 2,367,600 | 13,976,160 | ||||||
Deferred underwriter’s discount | 9,660,000 | 9,660,000 | ||||||
Total liabilities | 13,402,675 | 24,243,115 | ||||||
Commitments and Contingencies (Note 7) | ||||||||
Class A ordinary shares subject to possible redemption, 27,600,000 shares at redemption value | 283,154,827 | 281,520,000 | ||||||
Shareholders’ Deficit: | ||||||||
Preferred share, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | — | — | ||||||
Class A ordinary share, $0.0001 par value; 250,000,000 shares authorized; none issued or outstanding (excluding 27,600,000 shares subject to possible redemption) | — | — | ||||||
Class B ordinary share, $0.0001 par value; 25,000,000 shares authorized; 6,900,000 shares issued and outstanding | 690 | 690 | ||||||
Additional paid-in capital | — | — | ||||||
Accumulated deficit | (12,338,835 | ) | (22,341,250 | ) | ||||
Total shareholders’ deficit | (12,338,145 | ) | (22,340,560 | ) | ||||
Total Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | $ | 284,219,357 | $ | 283,422,555 | ||||
March 31, 2023 | December 31, 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 50,471 | $ | 614,767 | ||||
Prepaid expense | 37,025 | 31,110 | ||||||
Total current assets | 87,496 | 645,877 | ||||||
Non-current assets: | ||||||||
Marketable securities held in Trust Account | 30,919,043 | 285,506,568 | ||||||
Total assets | $ | 31,006,539 | $ | 286,152,445 | ||||
Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 3,063,779 | $ | 1,866,992 | ||||
Due to related party | 249,193 | 144,193 | ||||||
Promissory note—related party | 171,346 | 171,346 | ||||||
Total current liabilities | 3,484,318 | 2,182,531 | ||||||
Non-current liabilities: | ||||||||
Warrant liabilities | 1,670,400 | 796,224 | ||||||
| Deferred underwriters’ fee payable | 9,660,000 | 9,660,000 | ||||||
Total liabilities | $ | 14,814,718 | $ | 12,638,755 | ||||
Commitment and Contingencies | ||||||||
Class A ordinary shares subject to possible redemption, $0.0001 par value; 2,896,555 and 27,600,000 shares at redemption value | 30,919,043 | 285,506,568 | ||||||
Shareholders’ Deficit: | ||||||||
| Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | — | — | ||||||
| Class A shares, $0.0001 par value; 250,000,000 shares authorized; none issued or outstanding (excluding 2,896,555 and 27,600,000 shares subject to possible redemption) | — | — | ||||||
| Class B shares, $0.0001 par value; 25,000,000 shares authorized; 6,900,000 shares issued and outstanding | 690 | 690 | ||||||
| Accumulated deficit | (14,727,912 | ) | (11,993,568 | ) | ||||
Total shareholders’ deficit | (14,727,222 | ) | (11,992,878 | ) | ||||
Total Liabilities, Redeemable Ordinary Shares and Shareholders’ Deficit | $ | 31,006,539 | $ | 286,152,445 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | For the Period from April 19, 2021 (Inception) through September 30, | For the Three Months Ended March 31, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | |||||||||||||||||||
Legal and professional fees | $ | 145,588 | $ | — | $ | 937,110 | $ | — | $ | 1,368,841 | $ | 631,465 | ||||||||||||
Insurance | 133,302 | 395,559 | 16,530 | 130,404 | ||||||||||||||||||||
Other operating costs | 20,385 | 181,339 | 97,210 | 81,121 | ||||||||||||||||||||
Formation and operating costs | — | 1,690 | — | 15,393 | ||||||||||||||||||||
Operating cost—related party | 30,000 | — | 90,000 | — | 30,000 | 30,000 | ||||||||||||||||||
Loss from operations | (329,275 | ) | (1,690 | ) | (1,604,008 | ) | (15,393 | ) | (1,512,581 | ) | (872,990 | ) | ||||||||||||
Other income: | ||||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||
Interest income on marketable securities held in Trust Account | 1,245,745 | — | 1,632,690 | — | 940,646 | 18,171 | ||||||||||||||||||
Change in fair value of warrant liabilities | 3,345,600 | — | 11,608,560 | — | (874,176 | ) | 6,735,360 | |||||||||||||||||
Total other income | 4,591,345 | — | 13,241,250 | — | ||||||||||||||||||||
| Total other income, net | 66,470 | 6,753,531 | ||||||||||||||||||||||
Net income (loss) | $ | 4,262,070 | $ | (1,690 | ) | $ | 11,637,242 | $ | (15,393 | ) | ||||||||||||||
Net (loss) income | $ | (1,446,111 | ) | $ | 5,880,541 | |||||||||||||||||||
Basic and diluted weighted average shares outstanding of Class A ordinary shares | 27,600,000 | — | 27,600,000 | — | 8,111,727 | 27,600,000 | ||||||||||||||||||
Basic and diluted net income per share, Class A | 0.13 | — | 0.35 | — | ||||||||||||||||||||
Basic and diluted weighted average shares outstanding of Class B ordinary shares (1) | 6,900,000 | 6,900,000 | 6,900,000 | 6,900,000 | ||||||||||||||||||||
Basic and diluted net income (loss) per share, Class B | 0.09 | (0.00 | ) | 0.29 | (0.00 | ) | ||||||||||||||||||
Basic and diluted net (loss) income per share, Class A | $ | (0.02 | ) | $ | 0.17 | |||||||||||||||||||
| Basic and diluted weighted average shares outstanding of Class B ordinary shares | 6,900,000 | 6,900,000 | ||||||||||||||||||||||
Basic and diluted net (loss) income per share, Class B | $ | (0.18 | ) | $ | 0.17 | |||||||||||||||||||
Class A Ordinary share subject to possible redemption | Class B Ordinary share | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of December 31, 2022 | 27,600,000 | $ | 285,506,568 | 6,900,000 | $ | 690 | $ | — | $ | (11,993,568 | ) | $ | (11,992,878 | ) | ||||||||||||||
| Accretion of ordinary shares subject to possible redemption | — | 1,288,233 | — | — | — | (1,288,233 | ) | (1,288,233 | ) | |||||||||||||||||||
| Redemption of Class A ordinary shares subject to possible redemption | (24,703,445 | ) | (255,875,758 | ) | — | — | — | — | — | |||||||||||||||||||
| Net loss | — | — | — | — | — | (1,446,111 | ) | (1,446,111 | ) | |||||||||||||||||||
Balance as of March 31, 2023 | 2,896,555 | $ | 30,919,043 | 6,900,000 | $ | 690 | $ | — | $ | (14,727,912 | ) | $ | (14,727,222 | ) | ||||||||||||||
Class A Ordinary share subject to possible redemption | Class B Ordinary share | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||
Balance as of June 30, 2022 | 27,600,000 | $ | 281,909,082 | 6,900,000 | $ | 690 | $ | — | $ | (15,355,160 | ) | $ | (15,354,470 | ) | ||||||||||||||||
Accretion of ordinary share subject to possible redemption | — | 1,245,745 | — | — | — | (1,245,745 | ) | (1,245,745 | ) | |||||||||||||||||||||
Net income | — | — | — | — | — | 4,262,070 | 4,262,070 | |||||||||||||||||||||||
Balance as of September 30, 2022 | 27,600,000 | $ | 283,154,827 | 6,900,000 | $ | 690 | $ | — | $ | (12,338,835 | ) | $ | (12,338,145 | ) | ||||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 | ||||||||||||||||||||||||||||||
Class A Ordinary share subject to possible redemption | Class B Ordinary share | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||
Balance as of December 31, 2021 | 27,600,000 | $ | 281,520,000 | 6,900,000 | $ | 690 | $ | — | $ | (22,341,250 | ) | $ | (22,340,560 | ) | ||||||||||||||||
Accretion of ordinary share subject to possible redemption | — | 1,634,827 | — | — | — | (1,634,827 | ) | (1,634,827 | ) | |||||||||||||||||||||
Net income | — | — | — | — | — | 11,637,242 | 11,637,242 | |||||||||||||||||||||||
Balance as of September 30, 2022 | 27,600,000 | $ | 283,154,827 | 6,900,000 | $ | 690 | $ | — | $ | (12,338,835 | ) | $ | (12,338,145 | ) | ||||||||||||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 | ||||||||||||||||||||||||||||||
Class A Ordinary share subject to possible redemption | Class B Ordinary share | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||
Shares | Amount | Shares (1) | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||
Balance as of June 30, 2021 | — | $ | — | 6,900,000 | $ | 690 | $ | 24,310 | $ | (13,703 | ) | $ | 11,297 | |||||||||||||||||
Net loss | — | — | — | — | — | (1,690 | ) | (1,690 | ) | |||||||||||||||||||||
Balance as of September 30, 2021 | — | $ | — | 6,900,000 | $ | 690 | $ | 24,310 | $ | (15,393 | ) | $ | 9,607 | |||||||||||||||||
FOR THE PERIOD FROM APRIL 19, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021 | ||||||||||||||||||||||||||||||
Class A Ordinary share subject to possible redemption | Class B Ordinary share | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||
Shares | Amount | Shares (1) | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||
Balance as of April 19, 2021 (inception) | — | $ | — | 6,900,000 | $ | 690 | $ | 24,310 | $ | — | $ | 25,000 | ||||||||||||||||||
Net loss | — | — | — | — | — | (15,393 | ) | (15,393 | ) | |||||||||||||||||||||
Balance as of September 30, 2021 | — | $ | — | 6,900,000 | $ | 690 | $ | 24,310 | $ | (15,393 | ) | $ | 9,607 | |||||||||||||||||
Class A Ordinary share subject to possible redemption | Class B Ordinary share | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of December 31, 2021 | 27,600,000 | $ | 281,520,000 | 6,900,000 | $ | 690 | $ | — | $ | (22,341,250 | ) | $ | (22,340,560 | ) | ||||||||||||||
| Accretion of ordinary shares subject to possible redemption | — | 20,308 | — | — | — | (20,308 | ) | (20,308 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 5,880,541 | 5,880,541 | |||||||||||||||||||||
Balance as of March 31, 2022 | 27,600,000 | $ | 281,540,308 | 6,900,000 | $ | 690 | $ | — | $ | (16,481,017 | ) | $ | (16,480,327 | ) | ||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||
Nine Months Ended September 30, 2022 | For the Period from April 19, 2021 (Inception) through September 30, 2021 | 2023 | 2022 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 11,637,242 | $ | (15,393 | ) | |||||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||||||
Formation costs paid by Sponsor | 11,693 | |||||||||||||||
| Net (loss) income | $ | (1,446,111 | ) | $ | 5,880,541 | |||||||||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||||||||||
Interest earned on cash held in Trust Account | (1,632,690 | ) | — | — | (18,171 | ) | ||||||||||
Change in fair value of warrant liabilities | (11,608,560 | ) | — | 874,176 | (6,735,360 | ) | ||||||||||
Changes in current assets and liabilities: | ||||||||||||||||
Prepaid expenses | 402,258 | — | (5,915 | ) | 97,696 | |||||||||||
Accrued expenses | 678,120 | 3,700 | 1,196,787 | 507,475 | ||||||||||||
Due to related party | 90,000 | — | 105,000 | 30,000 | ||||||||||||
Net cash used in operating activities | (433,630 | ) | — | |||||||||||||
Net cash provided by (used in) operating activities | 723,937 | (237,819 | ) | |||||||||||||
Cash flows from investing activities: | ||||||||||||||||
| Reinvestment of marketable securities held in Trust Account | (940,646 | ) | — | |||||||||||||
| Extension funding of trust account | (347,587 | ) | — | |||||||||||||
| Cash withdrawn from Trust Account in connection with redemption | 255,875,758 | — | ||||||||||||||
Net cash provided by investing activities | 254,587,525 | — | ||||||||||||||
Cash flows from financing activities: | ||||||||||||||||
| Redemption of Class A common stock subject to possible redemption | (255,875,758 | ) | — | |||||||||||||
Net cash used in financing activities | (255,875,758 | ) | — | |||||||||||||
Net change in cash | (433,630 | ) | — | (564,296 | ) | (237,819 | ) | |||||||||
Cash, beginning of the period | 1,323,903 | — | 614,767 | 1,323,903 | ||||||||||||
Cash, end of the period | $ | 890,273 | $ | — | $ | 50,471 | $ | 1,086,084 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Change in value of Class A ordinary shares subject to possible redemption | $ | 1,634,827 | $ | — | ||||||||||||
Deferred offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | $ | — | $ | 25,000 | ||||||||||||
Deferred offering costs paid by Sponsor under the promissory note | $ | — | $ | 243,913 | ||||||||||||
Deferred offering costs included in accrued offerings costs | $ | — | $ | 462,712 | ||||||||||||
Change in value of Class A ordinary shares subject to possib l e redemption | $ | 1,288,233 | $ | — | ||||||||||||
Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | For the Period from April 19, 2021 (Inception) through September 30, 2021 | |||||||||||||
Net income (loss) | $ | 4,262,070 | $ | 11,637,242 | $ | (1,690 | ) | $ | (15,393 | ) | ||||||
Accretion of temporary equity to redemption value | (1,245,745 | ) | (1,632,690 | ) | — | — | ||||||||||
Net income (loss) including accretion of temporary equity to redemption value | $ | 3,016,325 | $ | 10,004,552 | $ | (1,690 | ) | $ | (15,393 | ) | ||||||
For the Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
| Net (loss) income | $ | (1,446,111 | ) | $ | 5,880,541 | |||
| Accretion of temporary equity to redemption value | (1,288,233 | ) | (18,171 | ) | ||||
| Net (loss) income including accretion of temporary equity to redemption value | $ | (2,734,344 | ) | $ | 5,862,370 | |||
Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net income per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income including accretion of temporary equity | $ | 2,413,060 | 603,265 | $ | 8,003,642 | $ | 2,000,910 | |||||||||
Allocation of accretion of temporary equity to redemption value | 1,245,745 | — | 1,632,690 | — | ||||||||||||
Allocation of income | $ | 3,658,805 | 603,265 | $ | 9,636,332 | $ | 2,000,910 | |||||||||
Denominator: | ||||||||||||||||
Weighted-average shares outstanding | 27,600,000 | 6,900,000 | 27,600,000 | 6,900,000 | ||||||||||||
Basic and diluted net income per share | $ | 0.13 | $ | 0.09 | $ | 0.35 | $ | 0.29 | ||||||||
For the three months ended March 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net (loss) income per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net (loss) income including accretion of temporary equity | $ | (1,476,546 | ) | $ | (1,257,798 | ) | $ | 4,689,896 | $ | 1,172,474 | ||||||
| Allocation of accretion of temporary equity to redemption value | 1,288,233 | — | 18,171 | — | ||||||||||||
| Allocation of (loss) income | $ | (188,313 | ) | $ | (1,257,798 | ) | $ | 4,708,067 | $ | 1,172,474 | ||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | 8,111,727 | 6,900,000 | 27,600,000 | 6,900,000 | ||||||||||||
| Basic and diluted net (loss) income per share | $ | (0.02 | ) | $ | (0.18 | ) | $ | 0.17 | $ | 0.17 | ||||||
Three Months Ended September 30, 2021 | For the Period from April 19, 2021 (Inception) through September 30, 2021 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
Basic and diluted net loss per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net loss including accretion of temporary equity | $ | — | (1,690 | ) | $ | — | $ | (15,393 | ) | |||||||
Allocation of accretion of temporary equity to redemption value | — | — | — | — | ||||||||||||
Allocation of loss | $ | — | (1,690 | ) | $ | — | $ | (15,393 | ) | |||||||
Denominator: | ||||||||||||||||
Weighted-average shares outstanding | — | 6,900,000 | — | 6,900,000 | ||||||||||||
Basic and diluted net loss per share | $ | — | $ | (0.00 | ) | $ | — | $ | (0.00 | ) | ||||||
Gross proceeds | $ | 276,000,000 | ||
Less: | ||||
Proceeds allocated to Public Warrants | (12,144,000 | ) | ||
Class A ordinary share issuance costs | (15,428,121 | ) | ||
Plus: | ||||
Accretion of carrying value to redemption value | 33,092,121 | |||
Class A ordinary shares subject to possible redemption as of December 31, 2021 | $ | 281,520,000 | ||
Accretion of carrying value to redemption value | 389,082 | |||
| Class A ordinary shares subject to possible redemption as of June 30, 2022 | $ | 281,909,082 | ||
Accretion of carrying value to redemption value | 1,245,745 | |||
Class A ordinary shares subject to possible redemption as of September 30, 2022 | $ | 283,154,827 | ||
September 30, 2022 | December 31, 2021 | |||||||||||
Current | Current | Non-current | ||||||||||
Prepaid Insurance | $ | 159,382 | $ | 528,861 | $ | 26,081 | ||||||
Other Prepaid Items | 14,875 | 21,573 | — | |||||||||
$ | 174,257 | $ | 550,434 | $ | 26,081 | |||||||
March 31, 2023 | December 31, 2022 | |||||||
| Prepaid insurance | $ | 9,550 | $ | 26,081 | ||||
| Other prepaid expenses | 27,475 | 5,029 | ||||||
$ | 37,025 | $ | 31,110 | |||||
September 30, 2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
March 31, 2023 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Marketable securities held in trust account | $ | 283,154,827 | $ | — | $ | — | $ | 283,154,827 | ||||||||||||||||||||||||
| Marketable securities held in Trust Account | $ | 30,919,043 | $ | — | $ | — | $ | 30,919,043 | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Public Warrants | $ | 1,104,000 | $ | — | $ | — | $ | 1,104,000 | $ | 828,000 | $ | — | $ | — | $ | 828,000 | ||||||||||||||||
Private Warrants | — | 1,263,600 | — | 1,263,600 | — | 842,400 | — | 842,400 | ||||||||||||||||||||||||
Total liabilities | $ | 1,104,000 | $ | 1,263,600 | $ | — | $ | 2,367,600 | $ | 828,000 | $ | 842,400 | $ | — | $ | 1,670,400 | ||||||||||||||||
December 31, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
December 31, 2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Marketable securities held in trust account | $ | 281,522,137 | $ | — | $ | — | $ | 281,522,137 | ||||||||||||||||||||||||
| Marketable securities held in Trust Account | $ | 285,506,568 | $ | — | $ | — | $ | 285,506,568 | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Public Warrants | $ | 6,900,000 | $ | — | $ | — | $ | 6,900,000 | $ | 394,680 | $ | — | $ | — | $ | 394,680 | ||||||||||||||||
Private Warrants | — | — | 7,076,160 | 7,076,160 | — | 401,544 | — | 401,544 | ||||||||||||||||||||||||
Total liabilities | $ | 6,900,000 | $ | — | $ | 7,076,160 | $ | 13,976,160 | $ | 394,680 | $ | 401,544 | $ | — | $ | 796,224 | ||||||||||||||||
Private Placement Warrants | Public Warrants | Warrant Liabilities | ||||||||||
Warrant liability – initial measurement | $ | 12,776,400 | $ | 12,144,000 | $ | 24,920,400 | ||||||
Change in fair value of warrant liabilities | (5,700,240 | ) | (5,244,000 | ) | (10,944,240 | ) | ||||||
Transfer to Level 1 | — | (6,900,000 | ) | (6,900,000 | ) | |||||||
Warrant liabilities at December 31, 2021 | $ | 7,076,160 | $ | — | $ | 7,076,160 | ||||||
Change in fair value of warrant liabilities | (3,285,360 | ) | — | (3,285,360 | ) | |||||||
Warrant liabilities at March 31, 2022 | $ | 3,790,800 | $ | — | $ | 3,790,800 | ||||||
Change in fair value of warrant liabilities | (561,600 | ) | — | (561,600 | ) | |||||||
Warrant liabilities at June 30, 2022 | $ | 3,229,200 | $ | — | $ | 3,229,200 | ||||||
Change in fair value of warrant liabilities (1) | (1,965,600 | ) | — | (1,965,600 | ) | |||||||
Transfer to Level 2 | (1,263,600 | ) | — | (1,263,600 | ) | |||||||
Warrant liabilities at September 30, 2022 | $ | — | $ | — | $ | — | ||||||
December 31, 2021 | ||||
Exercise price | $ | 11.50 | ||
Share price | $ | 9.92 | ||
Risk-free rate | 1.32 | % | ||
Expected volatility | 8.3 | % | ||
Term (years) | 5.81 | |||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to ESGEN Acquisition Corporation. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form Form10-Q10-Q (this “Quarterly 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 contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regardingregarding:
our ability to select an appropriate target business or businesses;
our ability to complete our initial business combination;
our expectations around the performance of a prospective target business or businesses;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;
our potential ability to obtain additional financing to complete our initial business combination;
our pool of prospective target businesses;
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the ability of our officers and directors to generate a number of potential business combination opportunities;
our public securities’ potential liquidity and trading;
the lack of a market for our securities;
the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
the trust account not being subject to claims of third parties; or
our financial performance following our initial public offering.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not take any statement regarding past trends or activities as representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.
Overview
We were incorporated as a Cayman Islands exempted company on April 19, 2021 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”). We have not selected any Business Combination target. We will not be limited to a particular industry or geographic region in our identification and acquisition of a target company.
Our sponsor is ESGEN LLC, a Delaware limited liability company (the “Sponsor”).
2018
The registration statement for our initial public offering (“initial public offering” or “Public Offering”) was declared effective on October 19, 2021. On October 22, 2021, we consummated our initial public offering of 27,600,000 units (the “Units” and, with respect to the ordinary shares included in the Units being offered, the “Public Shares”) at $10.00 per Unit (which included the full exercise of the underwriters’ over-allotment option), and the sale of 14,040,000 warrants (the “Private Placement Warrants”) each exercisable to purchase one Class A ordinary share at $11.50 per share, at a price of $1.00 per Private Placement Warrant in a private placement to our sponsor that closed simultaneously with the initial public offering.
Transaction costs amounted to $16,138,202 consisting of $5,520,000 of underwriting commissions, $9,660,000 of deferred underwriting commissions and $958,202 of other cash offering costs. Of this amount, $15,428,121 was charged to shareholder’s deficit and $710,081 was allocated to the warrants and expensed.
Following the closing of our initial public offering on October 22, 2021, $281,520,000 ($10.20 per Unit) from the net proceeds sold in our initial public offering, including proceeds of the sale of the Private Placement Warrants, was deposited in a trust account (“Trust Account”) and will only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We will havePrior to shareholder approval of the Charter Amendment (as defined below), we had 15 months (unless otherwise extended) from the closing of our initial public offering to consummate the initial Business Combination. If we have not consummated the initial Business Combination within 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 aper-sharea 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 income taxes, if any (less up to $100,000 of interest to pay winding up and 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 our remaining shareholders and 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.
On January 18, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”) to consider and vote upon, among other things, a proposal to amend the Company’s amended and restated memorandum and articles of association (the “Charter Amendment”) to (i) extend the date by which the Company must consummate its initial business combination (the “Termination Date”) from January 22, 2023 to April 22, 2023 and (ii) in the event that the Company has not consummated an initial business combination by April 22, 2023, to allow the Company, by resolution of the Company’s board of directors (the “Board”) and, without any approval of the Company’s shareholders, upon five days’ advance notice prior to each Additional Extension, to extend the Termination Date up to six times (with each such extension being upon five days’ advance notice), each by one additional month (for a total of up to six additional months to complete a business combination) (each, an “Additional Extension” and such date, an “Additional Extension Date”), provided that the Sponsor or the Sponsor’s affiliates or permitted designees will deposit into the Trust Account for each Additional Extension Date the lesser of (a) US $140,000 or (b) $0.04 for each Public Share that is then-outstanding, in exchange for one or more non-interest bearing, unsecured promissory notes issued by the Company to the Sponsor or the Sponsor’s affiliates or permitted designees (the “Lenders” and each a “Lender”). In connection with the vote to approve the Charter Amendment, the holders of 24,703,445 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.35 per share, for an aggregate redemption amount of $255,875,758. The Company’s current Additional Extension Date as of the date hereof is May 22, 2023.
21On April 19, 2023, the Company entered into a Business Combination Agreement, by and among the Company, ESGEN OpCo, LLC, a Delaware limited liability company and wholly-owned subsidiary of ESGEN (“OpCo”), Sunergy Renewables, LLC, a Nevada limited liability company (“Sunergy”), the Sunergy equityholders set forth on the signature pages thereto (collectively, “Sellers” and each, a “Seller”, and collectively with Sunergy, the “Sunergy Parties”), for limited purposes, the Sponsor, and for limited purposes, Timothy Bridgewater, an individual, in his capacity as the Sellers Representative (the “Business Combination Agreement”).
In accordance with the terms and subject to the conditions of the Business Combination Agreement, among other things: (i) prior to the consummation of the Business Combination (the “Closing”), each issued and outstanding Class B ordinary share, par value $0.0001 per share, of ESGEN will convert into one ESGEN Class A ordinary share, par value $0.0001 per share, of ESGEN (the “ESGEN Share Conversion”); and (ii) following the ESGEN Share Conversion but prior to the Closing, ESGEN will, subject to the receipt of the requisite shareholder approval, transfer by way of continuation from the Cayman Islands to the State of Delaware and domesticate as a Delaware corporation (the “Domestication”).
In connection with the Domestication, (A) each outstanding ESGEN Class A Ordinary Share will become one share of Class A common stock, par value $0.0001 per share, of ESGEN, (B) each outstanding warrant to purchase one ESGEN Class A Ordinary Share will become a warrant to purchase one share of ESGEN Class A Common Stock at an exercise price of $11.50 per share, and (C) ESGEN will file its certificate of incorporation and will adopt bylaws to serve as its governing documents upon consummation of the Domestication. In connection with the ESGEN Share Conversion and the Domestication, each issued and outstanding unit of ESGEN, each consisting of ESGEN Class A Ordinary Share and one-half of one warrant to purchase one ESGEN Class A Ordinary Share (each, an “ESGEN Unit”), that has not been previously separated into the underlying ESGEN Class A Ordinary Shares and underlying ESGEN Warrants prior to the Domestication will be cancelled and will entitle the holder thereof to (x) one share of ESGEN Class A Common Stock and (y) one-half of one warrant representing the right to purchase one share of ESGEN Class A Common Stock at an exercise price of $11.50 per share on the terms and subject to the conditions applicable to ESGEN Warrants set forth in the Warrant Agreement, dated as of October 22, 2021, between ESGEN and Continental Stock Transfer & Trust Company (the “Trustee”).
In accordance with the terms and subject to the conditions of the Business Combination Agreement, Sunergy will cause all holders of any options, warrants or rights to subscribe for or purchase any equity interests of Sunergy or its subsidiaries or securities (including debt securities) convertible into or exchangeable for, or that otherwise confer on the holder any right to acquire, any equity interests of Sunergy or any subsidiary thereof (collectively, the “Sunergy Convertible Interests”) existing immediately prior to the Closing either to exchange or convert all such holder’s Sunergy Convertible Interests into limited liability interests of Sunergy (the “Sunergy Company Interests”) in accordance with the governing documents of Sunergy or the Sunergy Convertible Interests (collectively, the “Sunergy Exchanges”).
At the Closing, ESGEN will contribute to OpCo (1) all of its assets (excluding its interests in OpCo, but including the amount of cash in the trust account established by ESGEN with the proceeds from its initial public offering (the “Trust Account”) as of immediately prior to the Closing (after giving effect to the exercise of redemption rights by any ESGEN shareholders)), and (2) a number of newly issued shares of Class V common stock of ESGEN, par value $0.0001 per share, which will generally have only voting rights (the “ESGEN Class V Common Stock”), equal to the number of Seller OpCo Units (as defined in the Business Combination Agreement) (the “Seller Class V Shares”) and (y) in exchange, OpCo shall issue to ESGEN (i) a number of common units of OpCo (the “OpCo Units”) which shall equal the number of total shares of ESGEN Class A Common Stock issued and outstanding immediately after the Closing and (ii) a number of warrants to purchase OpCo Units which shall equal the number of SPAC Warrants issued and outstanding immediately after the Closing (the transactions described above in this paragraph, the “ESGEN Contribution”). Immediately following the ESGEN Contribution, (x) the Sellers will contribute to OpCo the Sunergy Company Interests and (y) in exchange therefor, OpCo will transfer to the Sellers the Seller OpCo Units and the Seller Class V Shares.
The obligation of ESGEN, the Sunergy Parties and OpCo to consummate the Business Combination is subject to certain customary closing conditions, including, but not limited to, (i) the absence of any order, law or other legal restraint or prohibition enacted, issued or promulgated by any court of competent jurisdiction or other governmental entity of competent jurisdiction having the effect of making the Business Combination illegal or otherwise prohibiting the consummation of the Business Combination, (ii) the termination or expiration of any applicable waiting period applicable to the consummation of the Business Combination under the Hart-Scott-Rodino Act, (iii) the effectiveness of the Registration Statement on Form S-4 (the “Registration Statement”) in accordance with the provisions of the Securities Act, registering the ESGEN Class A Common Stock to be issued in connection with the Business Combination Agreement, (iv) receipt of the required approvals of ESGEN’s shareholders at a meeting of the shareholders of ESGEN in connection with the Business Combination, (v) the ESGEN Class A Common Stock to be issued in connection with the Business Combination immediately after Closing shall be listed on Nasdaq and ESGEN will be able to satisfy any continued listing requirements of Nasdaq immediately after Closing, (vi) if the ESGEN shareholders do not approve the Redemption Limitation Amendment (as defined in the Business Combination Agreement), ESGEN having at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining immediately after any holders of the ESGEN Class A Ordinary Shares exercise their redemption rights, (vii) the members of the post-Business Combination ESGEN board of directors shall have been elected or appointed in accordance with the Business Combination Agreement and (viii) the aggregate transaction proceeds, including from the Trust Account after giving effect to the exercise of redemption rights by any ESGEN shareholders pursuant to the ESGEN amended and restated memorandum and articles of association, as amended, and the proceeds resulting from the Initial PIPE Investment (as defined below) and any financing agreements executed in furtherance of the Business Combination Agreement, shall be greater or equal to $20.0 million.
Concurrently with the execution of the Business Combination Agreement, ESGEN entered into a subscription agreement (the “Initial Subscription Agreement”) with Sponsor. Pursuant to the Initial Subscription Agreement, Sponsor agreed to subscribe for and purchase, and ESGEN agreed to issue and sell to Sponsor, concurrently with the Closing, an aggregate of 1,000,000 shares of ESGEN Class A Common Stock for a purchase price of $10.00 per share, for aggregate gross proceeds of $10,000,000 (the “Initial PIPE Investment”). The closing of the Initial PIPE Investment is contingent upon, among other things, the substantially concurrent consummation of the Business Combination. The Initial Subscription Agreement provides that ESGEN will grant Sponsor certain customary registration rights. In addition to the Initial PIPE Investment, under the Business Combination Agreement, ESGEN and Sunergy have agreed to use their reasonable best efforts to identify other investors to enter into equity financing agreements (the “Additional Financing Agreements” and, together with the Initial Subscription Agreement, the “Financing Agreements”), in form and substance reasonably acceptable to ESGEN and Sunergy, to support the transaction (such equity financing under the Financing Agreements, collectively, herein referred to as the “Private Placements”).
For additional information regarding the Business Combination Agreement, see the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2023.
The Business Combination is expected to close in the fourth quarter of 2023, following the receipt of the required approvals by our shareholders and the fulfillment of other customary closing conditions.
On April 5, 2023, the Company issued an unsecured promissory note (the “Note”) in the principal amount of up to $1,500,000 to the Sponsor, which may be drawn down by the Company from time to time prior to the consummation of the Company’s Business Combination. The Note does not bear interest, matures on the date of consummation of the Business Combination and is subject to customary events of default. The Note will be repaid only to the extent that the Company has funds available to it outside of its trust account established in connection with its initial public offering. As of May 11, 2023, there was approximately $1,384,500 outstanding under the Note.
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Results of Operations
All of our activity from April 19, 2021 (inception) through September 30, 2022,March 31, 2023, was in preparation for our initial public offering, and since our initial public offering, our activity has been limited toincluding the search for a prospective initialeffectuation of the Charter Amendment and the negotiation and entry into the Business Combination.Combination Agreement. We will not generate any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended September 30, 2022,March 31, 2023, we had incomeloss of $4,262,070,$1,446,111, which consisted of a gain on change in fair value of warrant liabilities of $3,345,600,$874,176 and operating costs of $1,512,581, partially offset by interest income from marketable securities held in trust accountthe Trust Account of $1,245,745, partially offset by operating costs of $329,275.$940,646.
For the ninethree months ended September 30,March 31, 2022, we had an income of $11,637,242,$5,880,541, which consisted of a gain on change in fair value of warrant liabilities of $11,608,560,$6,735,360, interest income from marketable securities held in trust accountthe Trust Account of $1,632,690, partially$18,171, offset by formation and operating costs of $1,604,008.
For the three months ended September 30, 2021, we had net loss of $1,690, which consisted of formation and operating costs.
For the period from April 19, 2021 (inception) to September 30, 2021, we had a loss of $15,393, which consisted of formation and operating costs.$872,990.
Liquidity and Capital Resources
As of September 30, 2022, the CompanyMarch 31, 2023, we had cash of $890,273$50,471 and owes $1,089,536owe $3,063,779 in accounts payable and accrued offering costs and expenses and an additional $285,539$420,539 payable to related parties.
Prior to the completion of our initial public offering, our liquidity needs had been satisfied through a capital contribution from the Sponsorsponsor of $25,000 and a loan to us of up to $300,000 by our Sponsorsponsor under an unsecured promissory note, which had an outstanding balance of $171,346 at September 30,March 31, 2023 and December 31, 2022. The Sponsor has agreed to defer repayment of the loan until the close of the Business Combination. On April 5, 2023, we issued an unsecured promissory note (the “Note”) in the principal amount of up to $1,500,000 to our Sponsor, which may be drawn down by us from time to time prior to the consummation of the initial Business Combination. As of May 11, 2023, there was approximately $1,384,500 outstanding under the Note.
In addition, in order to finance transaction costs in connection with a Business Combination,business combination, our Sponsor, an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. As of September 30,March 31, 2023 and December 31, 2022, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will not have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’scompany’s assessment of going concern considerations in accordance with ASC Subtopic Subtopic205-40,205-40, “Presentation of Financial Statements – Going Concern”, the Companycompany has until JanuaryMay 22, 2023 (unless extended)extended as described above) to consummate a Business Combination. If a Business Combination is not consummated by this date and an extensionAdditional Extension not obtained, there will be a mandatory liquidation and subsequent dissolution of the Company. Although the Company intends to consummate a Business Combination on or before January 22, 2023, itcompany. It is uncertain whether the Company will be able to consummate a Business Combination by this time. Management has determined that the mandatory liquidation, should a Business Combination not occur, and an extension is not obtained, as well as the potential for us to have insufficient funds available to operate our business prior to a Business Combination, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. It is uncertain whether the Companycompany will be able to consummate a Business Combination or obtain an extensionAdditional Extension by this time. No adjustments have been made to the carrying amounts of assets or liabilities should the Companycompany be required to liquidate after JanuaryMay 22, 2023.2023 (unless extended as described above).
Contractual Obligations
Other than the below, we do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Underwriting Agreement
We granted the underwriters a45-dayoption to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at our initial public offering price less the underwriting discounts and commissions. The underwriters exercised the full over-allotment at the consummation of our initial public offering on October 22, 2021.
The IPO underwriters earned an underwriting discount of two percent (2%) of the gross proceeds of our initial public offering, or $5,520,000, which we paid in cash at closing of the Public Offering.
Additionally, the underwriters arewere entitled to a deferred underwriting discountcommission of 3.5% of the gross proceeds of our initial public offeringIPO upon the completion of our initial Business Combination. However, in April 2023, the IPO underwriters have waived any right to receive such deferred underwriting commissions and will therefore receive no additional underwriting commissions in connection with the Closing.
Office Space, Secretarial and Administrative Services
Commencing on the date that our securities are first listed on the NASDAQ throughThrough the earlier of consummation of ourthe initial Business Combination andor the liquidation, we are expected to pay our Sponsor a total ofthe Company incurs $10,000 per month for office space, utilities, secretarial support and administrative services provided by the Sponsor. For the three months ended March 31, 2023 and 2022, the Company incurred $30,000 and $30,000, respectively, pursuant to this agreement. No amounts have been paid for these services. As of September 30,March 31, 2023 and December 31, 2022, we had incurred $114,193the Company reported on the balance sheets $105,000 and $120,000, respectively, pursuant to this agreement, which was accrued in “Due to related party”.
2220
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration and shareholder rights agreement signed at the closing of our initial public offering.offering (the “IPO Registration Rights Agreement”). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of the initial Business Combination. However, the registration and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”) to become effective until termination of the applicable lock-up period, which occurs (i) in the case of the Founder Shares, and (ii) in the case of the Private Placement Warrants and the respective Class A ordinary shares issuable upon exercise of the Private Placement Warrants, 30 days after the completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements. The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Working Capital Loans and warrants that may be issued upon conversion of Working Capital Loans) will be entitled to registration rights pursuant to a registration and expected shareholder rights agreement signed at the closing of our initial public offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Companycompany register such securities.
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In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of its initial Business Combination. However, the registration and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period, which occurs (i) in the case of the Founder Shares, as described in the following paragraph, and (ii) in the case of the Private Placement Warrants and the respective Class A ordinary shares underlying such warrants, 30 days after the completion of the initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Except as described herein, the Sponsor and its directors and executive officers have agreed not to transfer, assign or sell any of their Founder Shares until the earliest of (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any30-tradingdayany 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of the public shareholders having the right to exchange their ordinary shares for cash, securities or other property. Any permitted transferees would be subject to the same restrictions and other agreements of the Sponsor and its directors and executive officers with respect to any founder shares. Any permitted transferees will be subject to the same restrictions and other agreements of the Sponsor with respect to any Founder Shares.
In addition, pursuant to the registration and shareholder rights agreement, the Sponsor, upon and following consummation of an initial Business Combination, will be entitled to nominate three individuals for election to the board of directors, as long as the Sponsor holds any securities covered by the registration and shareholder rights agreement.
Going ConcernA&R Registration Rights Agreement
AsThe Business Combination Agreement contemplates that, at the Closing, Sunergy, Sunergy’s underlying equityholders and the Initial Shareholders (as defined below) (collectively, the “New PubCo Holders”) and New PubCo will enter into an amended and restated IPO Registration Rights Agreement (the “A&R Registration Rights Agreement”), pursuant to which, among other things, New PubCo and the Initial Shareholders will agree to amend and restate the Registration and Shareholder Rights Agreement, dated as of SeptemberOctober 22, 2021, entered into by them in connection with ESGEN’s IPO. Pursuant to the A&R Registration Rights Agreement, New PubCo will agree that, within 30 2022,days following the Company had cash of $890,273 and owes $1,089,536 in accrued offering costs and expenses and an additional $285,539 to related parties. The Company anticipates that the cash held outsideconsummation of the Trust Account asBusiness Combination, it will use its commercially reasonable efforts to file a resale shelf registration statement on behalf of September 30, 2022 will notSunergy, Sunergy’s underlying equityholders and the Initial Shareholders (the “New PubCo Holders”) registering (i) New PubCo’s private placement warrants, (ii) any outstanding shares of Class A common stock, par value $0.0001 per share, of New PubCo (“New PubCo Class A Common Stock”) held by the New PubCo Holders, (iii) any shares of New PubCo Class A Common Stock issued or issuable upon exchange of an equivalent number of Class B units of OpCo and Class V common stock of New PubCo, par value $0.0001 per share, issued to the Sellers pursuant to the Business Combination Agreement, (iv) any shares of New PubCo Class A Common Stock issued or to be sufficientissued to allow the Company to operate for at least the next 12 months from the issuanceany of the financial statements, assuming that a Business Combination is not consummated during that time. The Company has incurred and expects to continue to incur significant costsNew PubCo Holders in pursuit of its acquisition plans. There is no assurance that the Company’s plans to consummate an initial Business Combination will be successful or successful within the Combination Period.
In connection with the Company’s assessmentBusiness Combination and (v) any other equity security of going concern considerationsNew PubCo issued or issuable with respect to any of the foregoing by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization (collectively, the “Registrable Securities”); provided, however, that as to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such Registrable Securities becomes effective under the Securities Act and such Registrable Securities shall have been sold, transferred, disposed of or exchanged in accordance with ASC Subtopic205-40, “Presentation of Financial Statements – Going Concern”,such registration statement, (B) such Registrable Securities shall have been otherwise transferred and such transferee is not entitled to the Company has until January 22, 2023 (unless extended)registration rights provided in the A&R Registration Rights Agreement, (C) such Registrable Securities shall have ceased to be outstanding, or (D) such Registrable Securities may be sold without registration pursuant to Rule 144 and Rule 145, as applicable, promulgated under the Securities Act (or any successor rule promulgated thereto) (but with no volume or other restrictions or limitations).
Additionally, the A&R Registration Rights Agreement will also provide, subject to certain underwriter cutbacks and suspension periods, (i) certain demand rights entitling the New PubCo Holders the right to require New PubCo to effect an underwritten offering and (ii) certain piggyback rights entitling the New PubCo Holders the right to include such New PubCo Holder’s Registrable Securities in any underwritten offering that New PubCo proposes to consummate a Business Combination. If afor its own account or for the account of its stockholders.
Amendment to the Letter Agreement
Concurrently with the execution of the Business Combination is not consummated by this date and an extension not obtained, there will be a mandatory liquidation and subsequent dissolutionAgreement, the Sponsor, the independent directors of the Company. Althoughboard of directors of ESGEN and one or more client accounts of Westwood Group Holdings, Inc. (successor to Salient Capital Advisors, LLC) (collectively, the Company intends“Initial Shareholders”) entered into an amendment (as amended, the “Amendment to consummate athe Letter Agreement”) to that certain Letter Agreement, dated as of October 22, 2021, by and between the Initial Shareholders, pursuant to which, among other things, each of the Initial Shareholders agreed (i) not to transfer his, her or its ESGEN Class B ordinary shares (or the ESGEN Class A Common Stock issuable in exchange for such ESGEN Class B ordinary shares pursuant to the Business Combination on or before January 22, 2023, it is uncertain whether the Company will be able to consummate a Business Combination by this time. Management has determined that the mandatory liquidation, should a Business Combination not occur, and an extension is not obtained, as well as the potential for us to have insufficient funds available to operate our businessAgreement) prior to the earlier of (A) six months after the Closing or (B) subsequent to the Closing (x) if the last sale price of the ESGEN Class A Common Stock quoted on Nasdaq is greater than or equal to $12 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a Business Combination, and potential subsequent dissolution, raises substantial doubt about30-consecutive trading day period commencing at least 90 days after Closing, or (y) the date on which ESGEN completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s abilityshareholders having the right to continue as a going concern. It is uncertain whether the Company will be ableexchange their ESGEN Class A ordinary shares (including any shares of ESGEN Class A Common Stock issuable in exchange for such ESGEN Class A ordinary shares) for cash, securities or other property and (ii) each Initial Shareholder agreed to consummate a Business Combination or obtain an extension by this time. No adjustments have been madewaive any adjustment to the carrying amountsconversion ratio set forth in the governing documents of assetsESGEN with respect to the ESGEN Class B ordinary shares prior to the earlier of the ESGEN Share Conversion or liabilities should the Company be required to liquidate after January 22, 2023.Closing.
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Critical Accounting Estimates
The preparation of these financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have not identified the followingany critical accounting estimates:
Warrant Liability
The Company accounts for the Public and Private Placement warrants issued in connection with the Public Offering in accordance with the guidance contained in ASC815-40and ASC 480, Distinguishing Liabilities from Equity. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company classified each warrant as a liability at its fair value. This liability is subject tore-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.
Offering Costs Associated with Initial Public Offering
We comply with the requirements of Accounting Standards Codification (“ASC”) 340-10-S99-1and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering”. Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are related to our initial public offering. Offering costs amounted to $16,138,202 and of this, $15,428,121 was charged to temporary equity and $710,081 was deemed allocable to the warrants and charged to expense upon the completion of our initial public offering.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including 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 our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholder’s equity. Our Class A ordinary shares sold in our initial public offering feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2022 and December 31, 2021, 27,600,000 Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholder’s (deficit) equity section of our balance sheets.
Net Income (Loss) Per Ordinary Share
We apply the two-class method in calculating earnings per share. Ordinary share subject to possible redemption which is not currently redeemable and is not redeemable at fair value, has been excluded from the calculation of basic net income (loss) per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income (loss) is adjusted for the portion of income that is attributable to ordinary share subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.estimates.
Recent Accounting Pronouncements
In August 2020, the FASB issuedRefer to Note 2 (“Significant Accounting Standards Update (“ASU”Policies”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. As a smaller reporting company, ASU 2020-06 is effective January 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. We have not adopted this guidance as of September 30, 2022.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the financial statement.statements for the recent accounting pronouncements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule Rule12b-2of12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information otherwise required under this item. As of September 30, 2022,March 31, 2023, we were not subject to any market or interest rate risk. The net proceeds of the Public Offering, including amounts in the Trust Account, were invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule2a-7underRule 2a-7 under the Investment Company Act of 1940, as amended, that invest only 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.
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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, such as this Quarterly Report, 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. Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2022,March 31, 2023, pursuant to Rule Rule13a-15(b)13a-15(b)under the Exchange Act and determined that our disclosures controls and procedures were not effective.effective as the material weakness identified as of December 31, 2022 and detailed in our Annual Report on Form 10-K continues to exist as of March 31, 2023. A material weakness, as defined in the SEC regulations, is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As previously disclosed in theour Annual Report on Form Form10-K10-K for the year ended December 31, 2021,2022, our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting. We identified material weaknesses in our internal control over financial reporting, relatingspecifically, we did not design and maintain an effective control environment to prevent or detect material misstatements to the financial statements. Specifically, we lacked a lacksufficient complement of qualified resources withinpersonnel with an appropriate level of internal controls and accounting knowledge, training and experience commensurate with our financial reporting requirements. Specifically, management did not design and maintain effective controls over the accounting department. In particular, the Company was not able to correctly calculate allocationscalculation of earnings per share and classification of the reinvestment of interest and dividend income in accordance with appropriate accounting guidelines.the Trust Account in the statement of cash flows.
In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Remediation Plan
Management plans to remediate the material weakness identified above by enhancing our processes to identify and appropriately apply applicable accounting requirements and increased communication among our personnel and third-party professionals with whom we consult regarding 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.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
Other than the material weaknessremediation plan described 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.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors.
ThereAs of the date of this Quarterly Report, except as described below, there have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form Form10-Kas10-K as filed with the SEC on April 1, 2022March 31, 2023 (the “Annual Report”).
There are no assurances that the approval of the Charter Amendment or the execution of the Business Combination Agreement will enable us to complete our proposed Business Combination.
In connection with the Charter Amendment, our Amended and Restated Memorandum and Articles of Association were amended to, among other things, (i) extend the date by which the Company must consummate its initial business combination from January 22, 2023 to the Extended Date and (ii) in the event that the Company has not consummated an initial business combination by the Extended Date, to allow the Company, by resolution of the Board and, without any approval of the Company’s shareholders, upon five days’ advance notice prior to the Extended Date, to extend the Extended Date up to six times (with each such extension being upon five days’ advance notice), each by one additional month (for a total of up to six additional months to complete a business combination), provided that the Lenders will deposit into the Trust Account for each Additional Extension Date the lesser of (a) US $140,000 or (b) $0.04 for each Public Share that is then-outstanding, in exchange for one or more non-interest bearing, unsecured promissory notes issued by the Company to the Lender. The purpose of the Charter Amendment is to allow the Company more time to complete its initial business combination and reduce the amount of funds to be deposited in the Trust Account to secure the extension.
Even though such extension was approved by our shareholders, the Company can provide no assurances that we will be able to complete our proposed Business Combination prior to the final Additional Extension Date. Our ability to consummate the Business Combination is dependent on a variety of factors, many of which are beyond our control. Additionally, we will be required to offer stockholders redemption rights again in connection with any stockholder vote to approve our proposed Business Combination. Other than in connection with a redemption offer or liquidation, our stockholders may be unable to recover their investment except through sales of our shares on the open market. The price of our shares may be volatile, and there can be no assurance that stockholders will be able to dispose of our shares at favorable prices, or at all.
We and our proposed target pursuant to the Business Combination Agreement will incur significant transaction and transition costs in connection with the proposed Business Combination.
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We and our proposed target pursuant to the Business Combination Agreement expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We and such company may also incur additional costs to retain key employees. We will incur and be responsible for the expenses and fees as set forth in, and in connection with, the Business Combination Agreement. There can be no assurance that such fees and expenses will not be greater than expected or that there will be no unexpected costs related to the Business Combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
Subsequent to the quarterly period covered by this Quarterly Report, on October 22, 2021, we consummated the Public Offering of 27,600,000 Units, including the over-allotment Units. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $276,000,000 million. The underwriters were granted a45-dayoption from the date of the final prospectus relating to the Public Offering to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at $10.00 per Unit, less underwriting discounts and commissions. Simultaneously with the closing of the Public Offering, the underwriters fully exercised the over-allotment option and, on October 22, 2021, the underwriters purchased the over-allotment Units.None
On October 22, 2021, simultaneously with the closing of the Public Offering and pursuant to a separate Private Placement Warrants Purchase Agreement, dated October 22, 2021, by and among the Company, the Sponsor and the Salient Clients, the Company completed the private sale of an aggregate of 14,040,000 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant to the Sponsor and Salient Clients, generating gross proceeds of $14,040,000.
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Barclays Capital Inc. and Citibank Global Markets Inc. served as underwriters for the Public Offering. The securities sold in the Public Offering were registered under the Securities Act on a registration statement on FormS-1 (FileNo. 333-259836). The SEC declared the registration statement effective on October 19, 2021.
From April 19, 2021 (inception) through the closing of the Public Offering, we incurred approximately $16.1 million for costs and expenses related to the Public Offering. In connection with the closing of the Public Offering, we paid a total of approximately $5.5 million in underwriting discounts and commissions. In addition, the underwriters agreed to defer approximately $9.7 million in underwriting discounts and commissions, which amount will be payable upon consummation of the initial Business Combination. There has been no material change in the planned use of proceeds from the Public Offering as described in our Annual Report.
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In connection with the Public Offering, we incurred offering costs of approximately $16.1 million, inclusive of approximately $9.7 million in deferred underwriting commissions. Other incurred offering costs consisted principally of preparation fees related to the Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amount will be payable upon consummation of the initial Business Combination, if consummated) and the Public Offering expenses, $281.5 million of the net proceeds from our Public Offering and certain of the proceeds from the private placement of the Private Placement Warrants (or $10.00 per Unit sold in the Public Offering) was placed in the Trust Account. The net proceeds of the Public Offering and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested as described elsewhere in this Quarterly Report.
There has been no material change in the planned use of the proceeds from the Public Offering and Private Placement as is described in the Company’s Annual Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
| * | Filed herewith. |
| ** |
|
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SIGNATURES
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, thereunto duly authorized.
| Date: | ESGEN Acquisition Corporation | |||||
| By: | /s/ Andrea Bernatova | |||||
| Andrea Bernatova | ||||||
| Chief Executive Officer | ||||||
| Date: | ESGEN Acquisition Corporation | |||||||||
| By: | /s/ Nader Daylami | |||||||||
| Nader Daylami | ||||||||||
| Chief Financial Officer | ||||||||||
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