NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
Note 1 — Description of Organization,
Business Operations and Basis of Presentation
Switchback Energy
Acquisition Corporation (the “Company”) was incorporated in Delaware on May 10, 2019. The Company was formed for
the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a
particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search for
a target business in the energy industry in North America. The Company is an emerging growth company and, as such, the Company
is subject to all of the risks associated with emerging growth companies.
As of September 30,
2019, the Company had not commenced any operations. All activity for the period from May 10, 2019 (inception) through September
30, 2019 relates to the Company’s formation and the initial public offering (the
“Initial Public Offering”), and, since the closing of the Initial Public Offering, the search for a prospective
initial Business Combination.
The
Company’s sponsor is NGP Switchback, LLC, a Delaware limited liability company (the “Sponsor”). The registration
statement for the Initial Public Offering was declared effective on July 25, 2019. On July 30, 2019, the Company consummated
the Initial Public Offering of 30,000,000 units (the “Units” and, with respect to the Class A common stock
included in the Units, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $300.0 million.
The underwriters were granted a 45-day option from the date of the final
prospectus relating to the Initial Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments, if any,
at $10.00 per Unit, less underwriting discounts and commissions. On September 4, 2019, the underwriters partially exercised the
over-allotment option and, on September 6, 2019, the underwriters purchased an additional 1,411,763 units (the “Over-allotment
Units”), generating gross proceeds of approximately $14.1 million, and the remaining over-allotment option subsequently expired.
The Company incurred offering costs of approximately of approximately $17.7 million, inclusive of $10.9 million
in deferred underwriting commissions (Note 5).
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale (the “Private Placement”) of 5,333,333
warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a
price of $1.50 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of approximately
$8.0 million (Note 4). Simultaneously with the closing of the sale of the Over-allotment
Units, the Sponsor purchased an additional 188,235 Private Placement Warrants at a price of $1.50 per Private Placement Warrant,
generating gross proceeds of approximately $282,000.
Approximately
$314.1 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering (including the Over-allotment Units) and certain
of the proceeds of the Private Placement was placed in a trust account (“Trust Account”) located in the
United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government
securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
“Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting the conditions of
paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under the Investment Company Act, which invest only in direct U.S.
government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account as described below.
The Company’s
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and
the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the
net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the amount
of any deferred underwriting discount held in trust) at the time of the agreement to enter into the initial Business Combination.
However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more
of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it
not to be required to register as an investment company under the Investment Company Act.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
The Company will provide
holders of the Company’s outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem
all or a portion of their Public Shares (as defined below) upon the completion of a Business Combination either (i) in connection
with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether
the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely
in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount
then held in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed
to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company
will pay to the underwriters (as discussed in Note 5). These Public Shares were recorded at a redemption value and classified as
temporary equity upon the completion of the Initial Public Offering. In such case, the Company will only proceed with a Business
Combination if, among other things, the Company has net tangible assets of at least $5,000,001 upon consummation of such Business
Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required
by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant
to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions
pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents
with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law,
or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each
public stockholder may elect to redeem its Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval in connection with a Business Combination, the Initial Stockholders (as defined below)
have agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial
Public Offering in favor of a Business Combination. In addition, the Initial Stockholders have agreed to waive their redemption
rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
Notwithstanding the
foregoing, the Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 20% of the Public Shares.
The Sponsor and the
Company’s officers and directors (the “Initial Stockholders”) have agreed not to propose an amendment to the
Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of the
Public Shares if the Company does not complete a Business Combination within the time frame described below, unless the Company
provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is
unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or July 30, 2021
(the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of interest
to pay dissolution expenses), divided by the number of then-outstanding Public Shares, which redemption will completely extinguish
Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s
remaining stockholders and its board of directors, dissolve and liquidate, subject in each case to the Company’s obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Initial Stockholders
have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, the Initial Stockholders will be entitled to liquidating distributions from the Trust Account
with respect to any Public Shares that they hold if the Company fails to complete a Business Combination within the Combination
Period. The underwriters have agreed to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust
Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such
amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public
Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for
distribution (including Trust Account assets) will be only $10.00. In order to protect the amounts held in the Trust Account, the
Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s
independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business
with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination
agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public
Share and (ii) the actual amount per Public Share held in the Trust Account due to reductions in the value of the trust assets
as of the date of the liquidation of the Trust Account, in each case including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its franchise and income taxes, less franchise and income taxes payable. This
liability will not apply with respect to any claims by a third party or Target that executed an agreement waiving claims against
and all rights to seek access to the Trust Account whether or not such agreement is enforceable or to any claims under the Company’s
indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will
have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right,
title, interest or claim of any kind in or to monies held in the Trust Account.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
Basis of Presentation
The accompanying unaudited
condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly,
they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed
financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement
of the balances and results for the periods presented. Operating results for the period from May 10, 2019 (inception) through September
30, 2019 are not necessarily indicative of the results that may be expected through December 31, 2019.
The accompanying unaudited
condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in
the final prospectus filed by the Company with the SEC on July 29, 2019 related to the Initial Public Offering and the audited
balance sheet included in the Form 8-K filed by the Company with the SEC on August 5, 2019.
Emerging Growth Company
The Company is an
“emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further, section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply
with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new
or revised standard at the time private companies adopt the new or revised standard.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
This may make comparison
of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging
growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.
Liquidity
As of September 30,
2019, the Company had approximately $820,000 in its operating bank account, approximately $1.0 million of gain on marketable securities,
dividends and interest held in Trust Account available to fund a Business Combination (less up to $100,000 of interest to pay dissolution
expenses and net of taxes payable), and a working capital of $644,000 (including approximately $272,000 in tax obligations, which
will be paid using investment income held in Trust Account). In addition, in order to finance transaction costs in connection with
a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”) (see Note 4). As
of September 30, 2019, there were no amounts outstanding under any Working Capital Loan.
Through September 30,
2019, the Company’s liquidity needs have been satisfied through receipt of a $25,000 capital contribution from the Sponsor
in exchange for the issuance of the Founder Shares (Note 4) to the Sponsor, approximately $251,000 in loans from the Sponsor (which
were fully repaid on August 12, 2019), and the net proceeds from the consummation of the Private Placement not held in the Trust
Account.
Based
on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its
needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the
Company 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.
Note 2 — Summary of Significant
Accounting Policies
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which,
at times, may exceed the Federal Deposit Insurance Corporation limit of $250,000. At September 30, 2019, the Company has not experienced
losses on these accounts, and management believes the Company is not exposed to significant risks on such accounts.
Marketable Securities Held in Trust
Account
The Company’s
portfolio of marketable securities is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, classified as trading securities. Trading securities are presented
on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value
of these securities is included in gain on marketable securities (net), dividends and interest, held in Trust Account in the accompanying
condensed statement of operations. The estimated fair values of marketable securities held in Trust Account are determined using
available market information.
Fair Value
of Financial Instruments
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
These tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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In some circumstances,
the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those
instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
As of September 30,
2019, the carrying values of cash, prepaid expenses, accounts payable, accrued expenses, and tax payable approximate their fair
values due to the short-term nature of the instruments. The Company’s portfolio of marketable securities held in Trust
Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less. The fair value for
trading securities is determined using quoted market prices in active markets.
Use of Estimates
The preparation of
the unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the
effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the
actual results could differ from those estimates.
Offering Costs Associated with the Initial
Public Offering
Offering costs consist
of legal, accounting, underwriting fees and other costs that were directly related to the Initial Public Offering were charged
to stockholders’ equity upon the completion of the Initial Public Offering in July and September 2019.
Class A
Common Stock Subject to Possible Redemption
Class A
common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally
redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’
equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the
Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2019, 29,983,863
shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet.
Net Income
(Loss) Per Share of Common Stock
Net income (loss)
per share is computed by dividing net income by the weighted-average number of common stock outstanding during the periods. The
Company has not considered the effect of the warrants sold in the Initial Public Offering (including the consummation of the over-allotment)
and Private Placement to purchase an aggregate of 15,992,155 shares of the Company’s Class A common stock in the calculation
of diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
The Company’s
condensed statements of operations include a presentation of income per share for common stock subject to redemption in a manner
similar to the two-class method of income per share. Net income per share, basic and diluted for Class A common stock is calculated
by dividing the gain on marketable securities, dividends and interest held in Trust Account, net of applicable income and franchise
tax, by the weighted average number of Class A common stock outstanding for the periods. Net loss per share, basic and diluted
for Class B common stock is calculated by dividing the net income, less income attributable to Public Shares, by the weighted average
number of Class B common stock outstanding for the periods.
Income Taxes
The Company follows
the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
For tax benefits to
be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no
unrecognized tax benefits as of September 30, 2019. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of September 30, 2019.
The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation
from its position. The Company is subject to income tax examinations by major taxing authorities since inception. During
the three months ended September 30, 2019 and for the period from May 10, 2019 (inception) through September 30, 2019, the Company
accrued approximately $194,000 in income tax in the accompanying unaudited condensed statements of operations.
Recent Accounting Pronouncements
In July 2017, the
Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2017-11, Earnings Per Share
(Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain
Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial
Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.
The ASU allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion
feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features)
with down round features may no longer be required to be classified as liabilities. A company will recognize the value of a down
round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial
instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and
a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with
embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial
conversion discount to be amortized to earnings. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15,
2018, and interim periods within those fiscal years. The Company adopted this guidance at inception. As a result, the warrants
to be issued in connection with the Initial Public Offering and the sale of the Private Placement Warrants to the Sponsor will
be equity-classified.
The Company’s
management does not believe that there are any other recently issued, but not yet effective, accounting pronouncements that, if
currently adopted, would have a material effect on the Company’s financial statements.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
Note 3 — Initial Public Offering
On July 30, 2019,
the Company sold 30,000,000 Units at a price of $10.00 per Unit in the Initial Public Offering. Each Unit consists of one share
of Class A common stock and one-third of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant
entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note
6). Certain officers and directors of the Company purchased 200,000 (the “Affiliated Units”) of the 30,000,000 Units
sold in the Initial Public Offering for an aggregate purchase price of $2.0 million.
The Company granted
the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase
up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts
and commissions. On September 4, 2019, the underwriters partially exercised the over-allotment option and, on September 6, 2019,
the underwriters purchased the Over-allotment Units, generating gross proceeds of approximately $14.1 million. The remaining over-allotment
option subsequently expired.
Note 4 — Related Party Transactions
Founder Shares
On May 16, 2019, the
Sponsor purchased 8,625,000 shares (the “Founder Shares”) of the Company’s Class B common stock, par value
$0.0001 per share, for an aggregate price of $25,000. The Initial Stockholders have agreed to forfeit up to 1,125,000 Founder Shares
to the extent that the over-allotment option is not exercised in full by the underwriters. The forfeiture will be adjusted
to the extent that the over-allotment option is not exercised in full by the underwriters so that the Founder Shares will
represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On September 6, 2019, the
underwriters partially purchased the Over-allotment Units, and the remaining over-allotment option subsequently expired. As a result,
an aggregate of 772,059 Founder Shares were forfeited accordingly.
The Initial Stockholders
agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until one year after the date
of the consummation of the initial Business Combination or earlier if, subsequent to the initial Business Combination, (i) the
last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the initial Business Combination or (ii) the Company consummates a subsequent liquidation, merger, stock
exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their
shares of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 5,333,333 Private Placement Warrants at
a price of $1.50 per Private Placement Warrant, generating gross proceeds of approximately $8.0 million in the aggregate. Simultaneously
with the closing of the sale of the Over-allotment Units, the Sponsor purchased an additional 188,235 Private Placement Warrants
at a price of $1.50 per Private Placement Warrant, generating gross proceeds of approximately $282,000.
Each whole Private
Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of
the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement
Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless
basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor and the
Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private
Placement Warrants until 30 days after the completion of the initial Business Combination.
Related Party Loans
On May 16, 2019, the
Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover organizational expenses and expenses related to the
Initial Public Offering pursuant to a promissory note (the “Note”). This loan is non-interest bearing and payable
on the completion of the Initial Public Offering. The Company borrowed approximately $251,000 under the Note, and then repaid the
Note in full to the Sponsor on August 12, 2019.
In addition, in order
to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of
the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds
held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds
held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined
and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital
Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would
be identical to the Private Placement Warrants. To date, the Company had no borrowings under the Working Capital Loans.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
Administrative Services Agreement
Commencing on
the date that the securities of the Company were first listed on the New York Stock Exchange and continuing until the earlier
of the Company’s consummation of its initial Business Combination or the Company’s liquidation, the Company
has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial support and
administrative services. The Company recorded an aggregate of $20,000 during the three months ended September 30, 2019
and for the period from May 10, 2019 (inception) through September 30, 2019 in general and administrative expenses in
connection with the related agreement in the accompanying unaudited condensed statements of operations.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of Founder
Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, (and any shares
of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion
of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration
rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. However, the
registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act
to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
Underwriting Agreement
Except for the Affiliated
Units, the underwriters were entitled to an underwriting discount of $0.20 per unit, or $5.96 million in the aggregate, paid
upon closing of the Initial Public Offering. An additional fee of approximately $282,000
in the aggregate was due in connection with the closing of the sale of the Over-allotment Units.
In addition, $0.35
per unit (but not including the Affiliated Units), or approximately $10.92 million in the aggregate will be payable to the
underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting
agreement.
Note 6 — Stockholders’ Deficit
Class A Common
Stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value
of $0.0001 per share. As of July 30, 2019, there were 30,000,000 Class A ordinary
shares issued or outstanding, including 29,983,863 Class A ordinary shares subject to possible redemption.
Class B Common
Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock. In May 2019, the Company
issued 8,625,000 shares of Class B common stock, including an aggregate of up to 1,125,000 shares of Class B common stock
that are subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriters’ over-allotment option
is not exercised in full or in part. On September 6, 2019, the underwriters partially purchased the Over-allotment Units, and the
remaining over-allotment option subsequently expired. As a result, an aggregate of 772,059 Class B common stock were forfeited
accordingly.
Prior to the initial
Business Combination, only holders of the Company’s Class B common stock will have the right to vote on the election of directors.
Holders of the Class A common stock will not be entitled to vote on the election of directors during such time. These provisions
of the Certificate of Incorporation may only be amended if approved by a majority of at least 90% of the Company’s common
stock voting at a stockholder meeting. With respect to any other matter submitted to a vote of the Company’s stockholders,
including any vote in connection with the initial Business Combination, except as required by applicable law or stock exchange
rule, holders of the Company’s Class A common stock and holders of the Company’s Class B common stock will vote together
as a single class, with each share entitling the holder to one vote.
The Class B common
stock will automatically convert into Class A common stock at the time of the initial Business Combination on a one-for-one basis,
subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the initial
Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will
be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment
with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion
of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total
number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A
common stock and equity-linked securities issued or deemed issued in connection with the Business Combination (excluding any
shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination).
Preferred Stock —
The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations,
voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of
September 30, 2019, there were no shares of preferred stock issued or outstanding.
Warrants —
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation
of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days
after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided
in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common
stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits
holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the
Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing
of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration,
under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will
use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and
a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant
agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national
securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities
Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless”
basis, and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement,
but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the
extent an exemption is not available. The Public Warrants will expire five years after the completion of a Business Combination
or earlier upon redemption or liquidation.
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
The Private Placement
Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock
issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the
completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be non-redeemable for cash so long as they are held by the Sponsor or its permitted transferees. If the Private Placement
Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable
by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company may call
the Public Warrants for redemption:
|
●
|
in whole and not in
part;
|
|
●
|
at a price of $0.01
per warrant;
|
|
●
|
upon a minimum of 30
days’ prior written notice of redemption; and
|
|
●
|
if, and only if, the
last sales price of the Class A common stock equals or exceeds $18.00 per share on each of 20 trading days within the 30-trading day
period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
|
If the Company calls
the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants
to do so on a “cashless basis,” as described in the warrant agreement.
In addition, commencing
90 days after the warrants become exercisable, the Company may redeem the outstanding warrants for shares of Class A common stock
(including both Public Warrants and Private Placement Warrants):
|
●
|
in whole and not in
part;
|
|
●
|
at a price equal to
a number of shares of Class A common stock to be determined by reference to the agreed table set forth in the warrant agreement
based on the redemption date and the “fair market value” of the Class A common stock;
|
|
●
|
upon a minimum of 30
days’ prior written notice of redemption; and
|
|
●
|
if, and only if, the
last sale price of the Class A common stock equals or exceeds $10.00 per share (as adjusted) on the trading day prior to the date
on which the Company sends the notice of redemption to the warrant holders.
|
SWITCHBACK ENERGY ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
The exercise price
and number of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event
of a stock dividend, or recapitalization, reorganization, merger or consolidation. In addition, if the Company issues additional
shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial
Business Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price
or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such
issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates,
as applicable, prior to such issuance) (the “Newly Issued Price”), the exercise price of the warrants will be adjusted
(to the nearest cent) to be equal to 115% of the Newly Issued Price.
In no event will the
Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination
Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with
respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account
with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 7 — Fair Value Measurements
The following table
presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30,
2019 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
|
|
Quoted Prices
in Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
Description
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Marketable securities held in Trust Account
|
|
$
|
315,119,213
|
|
|
|
-
|
|
|
|
-
|
|
Level 1 instruments
include investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark
yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Note 8 — Subsequent Events
There have been no
subsequent events after the balance sheet date through November 14, 2019, that require recognition or disclosure in such financial
statements.