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QUANERGY SYSTEMS, INC. |
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Audited Consolidated Financial Statements |
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Report of Independent Registered Public Accounting Firm |
2 | |||
Consolidated Balance Sheets |
3 | |||
Consolidated Statements of Operations |
4 | |||
Consolidated Statements of Comprehensive Loss |
5 | |||
Consolidated Statements of Stockholders’ Equity (Deficit) |
6 | |||
Consolidated Statements of Cash Flows |
7 | |||
Notes to Audited Consolidated Financial Statements |
8 |
As of December 31, |
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2021 |
2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Other long-term assets |
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Total assets |
$ | $ | ||||||
Liabilities and stockholders’ equity / (deficit) |
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Current liabilities |
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Accounts payable |
$ | $ | ||||||
Accrued expenses |
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Accrued settlement liability |
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Other current liabilities |
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Short-term debt |
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Total current liabilities |
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Long-term debt |
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Long-term debt - related party |
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Derivative liability |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 14) |
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Stockholders’ equity / (deficit): |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
( |
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Accumulated deficit |
( |
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Total stockholders’ equity / (deficit) |
( |
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Total liabilities and stockholders’ equity / (deficit) |
$ | $ | ||||||
Years Ended December 31, |
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2021 |
2020 |
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Net sales |
$ | $ | ||||||
Cost of goods sold |
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Gross profit (loss) |
( |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Operating expenses |
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Loss from operations |
( |
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Interest expense, net |
( |
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Other income (expense), net |
( |
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Loss before income taxes |
( |
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Income tax provision |
( |
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Net loss |
$ | ( |
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Net loss attributable per share to common stockholders, basic and diluted |
$ | ( |
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Weighted-average shares used to compute net loss attributable per share to common stockholders, basic and diluted |
Years Ended December 31, |
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2021 |
2020 |
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Net loss |
$ | ( |
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Other comprehensive gain (net of tax): |
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Foreign currency translation gain |
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Comprehensive loss |
$ | ( |
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Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Deficit |
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Shares |
Amount |
Shares |
Amount |
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Balance at December 31, 2019 (as previously reported) |
$ | $ | $ | $ | ( |
) | $ | ( |
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Retroactive application of recapitalization (Note 1) |
( |
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Balance at December 31, 2019, as adjusted |
— | — | ( |
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Shares issued upon exercise of options |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock warrants |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income (net of tax) |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
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Balance at December 31, 2020 |
— | — | ( |
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Shares issued upon exercise of options |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock warrants |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Exercise of common stock warrants |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
Issuance of Restricted Stock Awards (“RSA”) |
— | — | — | — | ||||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
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Balance at December 31, 2021 |
— | $ | — | ( |
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Years Ended December 31, |
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2021 |
2020 |
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Cash flows from operating activities |
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Net loss |
$ | ( |
) | $ | ( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Non-cash interest expense |
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Depreciation and amortization |
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Non-cash loss on issuance of convertible notes |
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Change in fair value of debt derivative liabilities |
( |
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Bad debt expense |
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Non-cash gain on forgiveness of PPP loan |
( |
) | ||||||
Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
( |
) | ||||||
Inventory |
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Prepaid expenses and other current assets |
( |
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Other long-term assets |
( |
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Accounts payable |
( |
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Accrued expenses |
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Accrued settlement liability |
— | |||||||
Other current liabilities |
( |
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Other long-term liabilities |
( |
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Net cash used in operating activities |
( |
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Cash flows from investing activities |
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Proceeds from sale of property and equipment |
— | |||||||
Purchase of property and equipment |
( |
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Net cash provided by (used in) investing activities |
( |
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Cash flows from financing activities |
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Proceeds from issuance of convertible notes |
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Proceeds from issuance of convertible notes to related parties |
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Payments for issuance costs of convertible notes |
( |
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Proceeds from PPP loan |
— | |||||||
Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
$ | $ | ||||||
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for interest |
$ | $ | ||||||
Supplemental schedule of noncash investing and financing activities: |
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Issuance of common stock warrants |
$ | $ | ||||||
Fair value of debt derivative liabilities related to issuance of convertible notes |
$ | $ |
(1) |
Organization |
(a) |
Description of Business |
(b) |
Business Combination |
(c) |
Reverse Recapitalization |
(d) |
Basis of Presentation |
(e) |
Liquidity |
(f) |
Going Concern |
(g) |
Impact of Covid-19 |
(2) |
Summary of Significant Accounting Policies |
(a) |
Use of Estimates |
(b) |
Significant Risks and Uncertainties |
(c) |
Concentration of Risks |
(d) |
Foreign Currency |
(e) |
Cash and Cash Equivalents and Restricted Cash |
(f) |
Accounts Receivable |
(g) |
Inventory |
(h) |
Revenue Recognition |
For the Years Ended December 31, |
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2021 |
2020 |
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Point in time |
$ | $ | ||||||
Over time |
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Total net sales |
$ | $ | ||||||
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As of December 31, |
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2021 |
2020 |
2019 |
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Deferred revenue, current |
$ | $ | $ | |||||||||
Deferred revenue, non-current |
— | |||||||||||
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Total deferred revenue |
$ | $ | $ | |||||||||
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(i) |
Property and Equipment |
Useful Lives | ||
Machinery and equipment |
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Furniture and fixtures |
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Computer equipment |
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Computer software |
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Leasehold improvements |
(j) |
Cost of Goods Sold |
(k) |
Research and Development |
(l) |
Collaborative Arrangements |
(m) |
Advertising and Promotional Expenses |
(n) |
Income Taxes |
(o) |
Impairment of Long-Lived Assets |
(p) |
Stock-Based Compensation |
(q) |
Fair Value Measurement |
• | Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. |
• | Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. |
• | Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. |
December 31, 2021 |
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Level 1 |
Level 2 |
Level 3 |
Total |
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Financial Assets |
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Cash and cash equivalents: |
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Money market funds |
$ | $ | — | $ | — | $ | ||||||||||
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Total assets |
$ | $ | — | $ | — | $ | ||||||||||
Financial Liabilities |
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Debt derivative liabilities |
$ | — | $ | $ | $ | |||||||||||
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Total liabilities |
$ | — | $ | $ | $ | |||||||||||
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December, 31, 2020 |
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Level 1 |
Level 2 |
Level 3 |
Total |
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Financial Assets |
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Cash and cash equivalents: |
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Money market funds |
$ | $ | — | $ | — | $ | ||||||||||
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Total assets |
$ | $ | — | $ | — | $ | ||||||||||
Financial Liabilities |
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Debt derivative liabilities |
$ | — | $ | $ | $ | |||||||||||
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Total liabilities |
$ | — | $ | $ | $ | |||||||||||
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(r) |
Net Loss Per Share of Common Stock |
(s) |
Derivative Liabilities |
(t) |
Recently Adopted Accounting Pronouncements |
(u) |
Accounting Pronouncements Not Yet Adopted |
(3) |
Inventory |
As of December 31, |
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2021 |
2020 |
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Raw materials |
$ | $ | ||||||
Work in progress |
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Finished goods |
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Total inventory |
$ | $ | ||||||
(4) |
Property and Equipment, net |
As of December 31, |
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2021 |
2020 |
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Machinery and equipment |
$ | $ | ||||||
Furniture and fixtures |
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Computer equipment |
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Computer software |
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Leasehold improvements |
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Total property and equipment |
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Less: accumulated depreciation and amortization |
( |
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Total property and equipment, net |
$ | $ | ||||||
(5) |
Accrued Expenses |
As of December 31, |
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2021 |
2020 |
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Accrued payroll |
$ | $ | ||||||
Accrued expenses |
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Warranty reserve |
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Other accrued expenses |
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Total accrued expenses |
$ | $ | ||||||
(6) |
Other Current Liabilities |
As of December 31, |
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2021 |
2020 |
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Deferred revenue |
$ | $ | ||||||
Customer deposits |
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Restructuring liability |
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Embedded derivative liability |
— | |||||||
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Total other current liabilities |
$ | $ | ||||||
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(7) |
Other Long-term Liabilities |
As of December 31, |
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2021 |
2020 |
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Customer deposits |
$ | $ | ||||||
Restructuring liability |
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Other long-term liabilities |
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Total other long-term liabilities |
$ | $ | ||||||
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(8) |
Employee Benefit Plan |
(9) |
Restructuring Costs |
For the Years Ended December 31, |
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2021 |
2020 |
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Balance at January 1 |
$ | $ | ||||||
Cash payments |
( |
) | ( |
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Balance at December 31 |
$ | $ | ||||||
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(10) |
Other Income (Expense), Net |
For the Years Ended December 31, |
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2021 |
2020 |
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Loss on issuance of convertible notes |
$ | $ | ( |
) | ||||
Gain on forgiveness of PPP loan |
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Remeasurement of fair value for debt derivative liability |
( |
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Other |
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Total other income (expense), net |
$ | ( |
) | $ | ||||
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(11) |
Common Stock |
As of December 31, |
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2021 |
2020 |
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Common stock warrants |
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Stock options and RSUs, issued and outstanding |
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Common stock authorized for future issuance |
( |
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Date of Issue |
Shares |
Exercise Price |
Fair Value at Issuance, Net |
Expiration |
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$ | $ | ||||||||||||||||||
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Total |
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Expected term |
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Expected volatility |
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Risk-free interest rate |
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Expected dividends |
(12) |
Borrowing Arrangements |
Embedded Derivative Liability |
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Fair value as of December 31, 2019 |
$ | |||
Change in fair value |
( |
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Fair value as of December 31, 2020 |
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Conversion of 2023 Notes |
( |
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Fair value as of December 31, 2021 |
$ | |||
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For the Years Ended December 31, |
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2021 |
2020 |
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Contractual interest expense |
$ | $ | ||||||
Accretion of debt discount |
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Accretion of debt issuance costs |
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$ | $ | |||||||
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Embedded Derivative Liability |
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Fair value as of December 31, 2019 |
$ | |||
Additions |
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Change in fair value |
( |
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Fair value as of December 31, 2020 |
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Additions |
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Change in fair value |
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Fair value as of December 31, 2021 |
$ | |||
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For the Years Ended December 31, |
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2021 |
2020 |
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Contractual interest expense |
$ | $ | ||||||
Accretion of debt discount |
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Accretion of debt issuance costs |
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$ | $ | |||||||
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As of December 31, |
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2021 |
2020 |
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2022 Notes |
$ | |||||||
2023 Notes |
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PPP Loan |
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$ | $ | |||||||
Less: Unamortized debt issuance costs and discounts |
( |
) | ( |
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Total |
$ | $ | ||||||
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(13) |
Stock-Based Compensation |
Options outstanding |
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Number of shares |
Weighted average exercise price per share |
Weighted average contractual term (in years) |
Aggregate intrinsic value (in thousands) |
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Outstanding - December 31, 2019 |
$ | $ | ||||||||||||||
Options granted |
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Options exercised |
( |
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Options cancelled |
( |
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Options expired |
( |
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Outstanding at December 31, 2020 |
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Options granted |
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Options exercised |
( |
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Options cancelled |
( |
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Options expired |
( |
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Outstanding at December 31, 2021 |
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Vested and exercisable - December 31, 2021 |
$ | $ | ||||||||||||||
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Vested and expected to vest - December 31, 2021 |
$ | $ | ||||||||||||||
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Years ended December 31, | ||||
2021 |
2020 | |||
Expected term |
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Expected volatility |
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Risk-free interest rate |
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Expected dividends |
Restricted Stock Units (“RSUs”) |
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Number of shares |
Weighted average grant date fair value |
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Outstanding as of December 31, 2019 |
$ | |||||||
Granted |
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Vested |
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Forfeited or cancelled |
( |
) | ||||||
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Outstanding as of December 31, 2020 |
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Granted |
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Vested |
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Forfeited or cancelled |
( |
) | ||||||
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Outstanding as of March 31, 2021 |
$ | |||||||
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Restricted Stock Awards (“RSAs”) |
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Number of shares |
Weighted average grant date fair value |
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Outstanding as of December 31, 2020 |
$ | |||||||
Granted |
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Vested |
( |
) | ||||||
Forfeited or cancelled |
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Outstanding as of March 31, 2021 |
$ | |||||||
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For the Years Ended December 31, |
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2021 |
2020 |
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Cost of goods sold |
$ | $ | ||||||
Research and development |
||||||||
Sales and marketing |
||||||||
General and administrative |
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Total stock-based compensation expense |
$ | $ | ||||||
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(14) |
Commitments and Contingencies |
Operating Leases |
Lease Termination Agreement |
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2022 |
$ | $ | ||||||
2023 |
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2024 and thereafter |
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Total minimum payments |
$ | $ | ||||||
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(1 5 ) |
Segment Reporting and Geographic Information |
For the Years Ended December 31, |
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2021 |
2020 |
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Americas |
$ | $ | ||||||
Asia |
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Europe, Middle East and Africa |
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Total net sales |
$ | $ | ||||||
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(1 6 ) |
Income Taxes |
Years ended December 31, |
||||||||
2021 |
2020 |
|||||||
United States |
$ | ( |
) | $ | ( |
) | ||
International |
||||||||
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$ | ( |
) | $ | ( |
) | |||
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|
Years ended December 31, |
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2021 |
2020 |
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Current tax expense: |
||||||||
Federal |
$ | $ | ||||||
State |
||||||||
International |
||||||||
|
|
|
|
|||||
Total provision for income taxes |
$ | $ | ||||||
|
|
|
|
Years ended December 31, |
||||||||
2021 |
2020 |
|||||||
Federal tax at statutory rate |
% | % | ||||||
State, net of federal benefit |
||||||||
Permanent differences |
( |
) | ||||||
Stock-based compensation |
( |
) | ( |
) | ||||
Uncertain tax positions |
( |
) | ( |
) | ||||
General business credits |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
Disqualified interest on debt |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Effective tax rate |
( |
)% | ( |
)% | ||||
|
|
|
|
Years ended December 31, |
||||||||
2021 |
2020 |
|||||||
Net operating loss carryforwards |
$ | $ | ||||||
Tax credit carry forwards |
||||||||
Accruals and reserves |
||||||||
Stock-based compensation |
||||||||
|
|
|
|
|||||
Gross deferred tax assets |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net deferred tax assets |
||||||||
Depreciation and amortization |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Gross deferred tax liabilities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total net deferred tax assets (liabilities) |
$ | $ | ||||||
|
|
|
|
Years ended December 31, |
||||||||
2021 |
2020 |
|||||||
Beginning balances |
$ | $ | ||||||
Increases (decreases) related to prior year tax positions |
( |
) | ||||||
Increases related to current year tax positions |
||||||||
|
|
|
|
|||||
Balance at December 31 |
$ | $ | ||||||
|
|
|
|
(17) |
Basic and Diluted Net Loss Per Share |
For the Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Numerator: |
||||||||
Net loss attributable to common stockholder, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
Denominator: |
||||||||
Weighted average shares of common stock outstanding, basic and diluted |
||||||||
Net loss per share attributable to common stockholder, basic and diluted |
$ | ( |
) | $ | ( |
) |
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Stock options and RSUs issued and outstanding |
||||||||
Convertible notes |
||||||||
|
|
|
|
|||||
Potential common shares excluded from diluted net loss per share |
||||||||
|
|
|
|
(18) |
Related Party Transactions |
(19) |
Subsequent Events |