NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
CleanTech Acquisition Corp. (the “Company”)
is a blank check company incorporated in Delaware on June 18, 2020. The Company was formed for the purpose of entering into a merger,
share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities
(a “Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating
a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks
associated with early stage and emerging growth companies.
As of December 31, 2021, the Company had not commenced any operations.
All activity through December 31, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”),
which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at
the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public
Offering.
The registration statement for the Company’s Initial
Public Offering was declared effective on July 14, 2021. On July 19, 2021, the Company consummated the Initial Public Offering
of 15,000,000 units (the “Units” and, with respect to the shares of Common Stock included in the Units sold, the “Public
Shares”), at $10.00 per unit, generating gross proceeds of $150,000,000, which is discussed in Note 3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 4,333,333 warrants at a price of $1.00 per Private Placement Warrant in a private
placement to CleanTech Sponsor (the “Sponsor”), and 2,166,667 warrants (together, the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to CleanTech Investments, an affiliate of the Sponsor (the “Co-sponsor”),
generating gross proceeds of 6,500,000, which is described in Note 4.
The Company granted the underwriters in the Initial
Public Offering (the “Underwriters”) a 45-day option to purchase up to 2,250,000 additional Units to cover over-allotments,
if any. On July 28, 2021, the Underwriters exercised the over-allotment option in full and purchased an additional 2,250,000 units (the
“Over-Allotment Units”), generating gross proceeds of $22,500,000.
Simultaneously with the closing of the exercise
of the over-allotment option, the Company consummated the sale of 675,000 warrants (the “Over-Allotment Warrants”) at a purchase
price of $1.00 per warrant in a private placement to the Sponsor, generating gross proceeds of $675,000.
Following the closing of the Initial Public Offering
and the over-allotment, an amount of $174,225,000 from the net proceeds of the sale of the Public Units in the Initial Public Offering
and the sale of the Private Warrants was placed in a trust account (the “Trust Account”), and was invested only in U.S. government
treasury obligations with maturities of 183 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act of 1940, as amended (the “Investment Company Act”) which invest only in direct U.S. government treasury
obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust
Account, as described below.
Transaction costs related to the issuances described
above amounted to $3,916,281, consisting of $3,450,000 of underwriting fees and $466,281 of other costs.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private 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 a Business Combination
with one or more target businesses that together have an aggregate fair market value of at least 80% of the value of the Trust Account
(as defined below) (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time
of the agreement to enter into an initial Business Combination. 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.
The Company, after signing a definitive agreement
for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called
for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against
the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account
as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable, or (ii)
provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the
need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust
Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable.
The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to
sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors
such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder
approval, unless a vote is required by law or under NASDAQ rules. If the Company seeks stockholder approval, it will complete its Initial
Business Combination only if a majority of the outstanding shares of Common Stock voted are voted in favor of the Initial Business Combination.
However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001
either immediately prior to or upon consummation of the Initial Business Combination. In such case, the Company would not proceed with
the redemption of its Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business
Combination.
If the Company seeks stockholder approval of the
initial Business Combination and the Company does not conduct redemptions in connection with the Business Combination pursuant to the
tender offer rules, the certificate of incorporation provides that a public stockholder, individually or 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 Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 20% of the shares
sold in the initial public offering. Furthermore, in order for a public stockholder to have his, her or its shares redeemed for cash in
connection with any proposed Business Combination, the Company may require that the public stockholders vote either in favor of or against
a proposed Business Combination. If required to vote pursuant to the procedures specified in the proxy statement to stockholders relating
to the Business Combination, and a public stockholder fails to vote in favor of or against the proposed Business Combination, whether
that stockholder abstains from the vote or simply does not vote, that stockholder would not be able to have his, her or its shares of
Common Stock redeemed to cash in connection with such Business Combination.
The initial stockholders have agreed to waive
their redemption rights with respect to any shares they own in connection with the consummation of the initial Business Combination, including
their founder shares and public shares that they have purchased during or after the offering, if any. In addition, the initial stockholders
have agreed to waive their rights to liquidating distributions with respect to its founder shares if the Company fails to consummate the
initial Business Combination within 12 months (or up to 18 months, as applicable) from the closing of the offering. However, if the initial
stockholders acquire public shares in or after the Initial Public Offering, they will be entitled to receive liquidating distributions
with respect to such public shares if the Company fails to consummate the initial Business Combination within the required time period.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
If the Company does not complete a business combination
within 12 months (or up to 18 months, as applicable) from the closing this offering (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 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject (in the case of (ii)
and (iii) above) to the obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if the Company
fails to complete the Business Combination within the time period.
In order to protect the amounts in the Trust Account,
the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or
products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (i) $10.10 per Public Share or (ii) the actual amount per Public Share held in
the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.10 per Public Share due to reductions in the
value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective
target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable)
nor will it apply 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 (except the Company’s independent registered public accounting firm), 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.
Business Combination Agreement
On December 16, 2021, the Company entered into
an Agreement and Plan of Merger, as amended on January 30, 2022 through Amendment No. 1 (the “Merger Agreement,” and together
with the other agreements and transactions contemplated by the Merger Agreement, the “Business Combination”) with CleanTech
Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CleanTech (“Merger Sub”), and Nauticus Robotics,
Inc., a Texas corporation (“Nauticus”). Pursuant to the terms of the Merger Agreement, a business combination between CleanTech
and Nauticus will be effected through the merger of Merger Sub with and into Nauticus, with Nauticus surviving the merger as a wholly
owned subsidiary of CleanTech (the “Merger”). The Board of Directors of CleanTech (the “Board”) has unanimously
(i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved
to recommend approval of the Merger Agreement and related matters by the stockholders of CleanTech.
Preferred Stock. Immediately prior to the
effective time of the Merger (the “Effective Time”), each share of Nauticus Preferred Stock that is issued and outstanding
immediately prior to such time shall automatically convert into shares of Nauticus Common Stock, par value $0.01 per share (the “Nauticus
Common Stock”), in accordance with its Certificate of Incorporation (collectively, the “Nauticus Preferred Stock Conversion”).
An aggregate of 15,062,524 shares of CLAQ Common Stock will be issued to the holders of Nauticus Preferred Stock.
Convertible Notes. Immediately prior to
the Effective Time, each of (i) that certain Unsecured Convertible Promissory Note, dated June 19, 2021, by and between Goradia Capital,
LLC and Nauticus, as amended on December 16, 2021, (ii) that certain Unsecured Convertible Promissory Note, August 3, 2021, by and between
Material Impact Fund II, L.P. and Nauticus, as amended on December 16, 2021, (iii) that certain Unsecured Convertible Promissory Note,
dated October 22, 2021, by and between In-Q-Tel, Inc. and Nauticus, as amended on December 16, 2021, (iv) that certain Unsecured Convertible
Promissory Note, dated July 28, 2020, by and between Schlumberger Technology Corporation and Nauticus, as amended on December 16, 2021,
and (v) that certain Unsecured Convertible Promissory Note, dated December 7, 2020, by and between Transocean Inc. and Nauticus, as amended
on December 16, 2021 (each, a “Nauticus Convertible Note” and collectively, the “Nauticus Convertible Notes”)
shall automatically convert into shares of Nauticus Common Stock in accordance with the terms of each such Nauticus Convertible Note (collectively,
the “Nauticus Convertible Notes Conversion”). An aggregate of 5,299,543 shares of CLAQ Common Stock will be issued to the
holders of Nauticus Convertible Notes.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
Common Stock. At the Effective Time, following
the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion, each share of Nauticus Common Stock (including shares
of Nauticus Common Stock outstanding as a result of the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion,
but excluding shares of the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive
the applicable Per Share Merger Consideration (as defined below) and the Earnout Shares (as defined below). An aggregate of 9,669,216
shares of CLAQ Common Stock will be issued to the holders of Nauticus Common Stock.
Stock Options. At the Effective Time, each
outstanding option to purchase shares of Nauticus Common Stock (a “Nauticus Option”), whether or not then vested and exercisable,
will be assumed by CLAQ and converted automatically (and without any required action on the part of such holder of outstanding option)
into an option to purchase shares of the CLAQ’s Common Stock equal to the number of shares determined by multiplying the number
of shares of the Nauticus Common Stock subject to such Nauticus Option immediately prior to the Effective Time by the Exchange Ratio (as
defined below), which product shall be rounded down to the nearest whole number of shares, at a per share exercise price determined by
dividing the per share exercise price of such Nauticus Option immediately prior to the Effective Time by the Exchange Ratio. Options to
purchase an aggregate of 4,055,704 shares of CLAQ Common Stock will be issued to the holders of Nauticus Options.
Earnout Shares. Following the closing
of the merger, former holders of shares of Nauticus Common Stock (including shares received as a result of the Nauticus Preferred Stock
conversion and the Nauticus Convertible Notes conversion) shall be entitled to receive their pro rata share of up to 7,500,000 additional
shares of CleanTech Common Stock (the “Earnout Shares”) if, within a 5-year period following the signing date of the Merger
Agreement, the closing share price of the CleanTech Common Stock equals or exceeds any of three thresholds over any 20 trading days within
a 30-day trading period (each, a “Triggering Event”).
It is anticipated that upon completion of the Business Combination,
CLAQ’s public stockholders (other than the PIPE Investment investors) would retain an ownership interest of approximately 28.5%
in the Combined Company, the PIPE Investment investors will own approximately 5.6% of the Combined Company (such that the public stockholders,
including the PIPE Investment investors, would own approximately 34.1% of the Combined Company), the Co-Sponsors, officers, directors
and other holders of founder shares will retain an ownership interest of approximately 6.8% of the Combined Company and the Nauticus stockholders
will own approximately 59.1% (including the 7,500,000 Earnout Shares) of the Combined Company. The ownership percentage with respect to
the Combined Company does not take into account (i) the redemption of any shares by the CLAQ’s public stockholders or (ii) the issuance
of any additional shares upon the closing of the Business Combination under the 2015 Equity Incentive Plan. If the actual facts are different
from these assumptions (which they are likely to be), the percentage ownership retained by the CLAQ stockholders will be different.
The Merger Agreement contains customary
representations and warranties of the parties thereto with respect to, among other things, (a) entity organization, good standing
and qualification, (b) capital structure, (c) authorization to enter into the Merger Agreement, (d) compliance with laws and
permits, (e) taxes, (f) consolidated financial statements and internal controls, (g) real and personal property, (h) material
contracts, (i) environmental matters, (j) absence of changes, (k) employee matters, (l) litigation, and (m) brokers and finders.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
The Merger Agreement includes customary covenants
of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions
to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, covenants
providing for CleanTech and Nauticus to use reasonable best efforts to cooperate in the preparation of the Registration Statement and
Proxy Statement (as each such term is defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain
all requisite approvals of their respective stockholders including, in the case of CleanTech, approvals of the restated certificate of
incorporation, the share issuance under Nasdaq rules and the omnibus incentive plan. CleanTech has also agreed to include in the Proxy
Statement the recommendation of its board that stockholders approve all of the proposals to be presented at the special meeting.
CleanTech has agreed to approve and adopt a 2022
omnibus incentive plan (the “Incentive Plan”) to be effective as of the closing and in a form mutually acceptable to CleanTech
and Nauticus. The Incentive Plan shall provide for an initial aggregate share reserve equal to 5% of the number of shares of CleanTech
Common Stock on a fully diluted basis at the closing. Subject to approval of the Incentive Plan by CleanTech’s stockholders, CleanTech
has agreed to file a Form S-8 Registration Statement with the SEC following the Effective Time with respect to the shares of CleanTech
Common Stock issuable under the Incentive Plan.
Each of CleanTech and Nauticus has agreed that
from the date of the Merger Agreement to the Effective Time or, if earlier, the valid termination of the Merger Agreement in accordance
with its terms, it will not initiate any negotiations with any party, or provide non-public information or data concerning it or its subsidiaries
to any party relating to an Acquisition Proposal or Alternative Transaction (as such terms are defined in the Merger Agreement) or enter
into any agreement relating to such a proposal. Each of CleanTech and Nauticus has also agreed to use its reasonable best efforts to prevent
any of its representatives from doing the same.
The consummation of the Merger is conditioned
upon, among other things, (i) receipt of the CleanTech stockholder approval and Nauticus stockholder approval, (ii) the expiration or
termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any
governmental order, statute, rule or regulation enjoining or prohibiting the consummation of the Transactions, (iv) the effectiveness
of the Registration Statement under the Securities Act, (v) CleanTech having at least $5,000,001 of net tangible assets (as determined
in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), (vi) solely
with respect to CleanTech, (A) the representations and warranties of Nauticus being true and correct to applicable standards applicable
and each of the covenants of Nauticus having been performed or complied with in all material respects and (B) the approval of the conversion
of the convertible notes and (vii) solely with respect to Nauticus, (A) the representations and warranties of CleanTech being true and
correct to applicable standards applicable and each of the covenants of CleanTech having been performed or complied with in all material
respects (B) the receipt of the approval for listing by Nasdaq of the shares of CleanTech Common Stock to be issued in connection with
the transactions contemplated by the Merger Agreement, (C) the effective resignations of certain directors and executive officers of CleanTech,
(D) the amount of Minimum Cash Condition (as defined in the Merger Agreement) being equal to or exceeding $50,000,000.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
Other Agreements
The Business Combination Agreement contemplates
the execution of various additional agreements and instruments, on or before the Closing, including, among others, the following:
Support Agreements
In connection with the execution of the Merger
Agreement, CleanTech Sponsor I LLC and CleanTech Investments, LLC (each, a “Sponsor,” and collectively, the “Co-Sponsors”)
entered into a support agreement (the “Sponsor Support Agreement”) with Nauticus pursuant to which the Sponsors have agreed
to vote all shares of CleanTech Common Stock beneficially owned by them in favor of the Merger.
In addition, in connection with the execution of the Merger Agreement,
certain stockholders of Nauticus owning approximately 88.8% of the voting power of Nauticus entered into a support agreement (the “Nauticus
Support Agreement”) with CleanTech and Nauticus pursuant to which the stockholders agreed to vote all shares of Nauticus beneficially
owned by them in favor of the Merger.
Subscription Agreements
In connection with the execution of the Merger
Agreement, CleanTech entered into subscription agreements (collectively, the “Subscription Agreements”) with certain parties
subscribing for shares of CleanTech Common Stock (the “Subscribers”) pursuant to which the Subscribers have agreed to purchase,
and CleanTech has agreed to sell to the Subscribers, an aggregate of 3,530,000 shares of CleanTech Common Stock, for a purchase price
of $10.00 per share and an aggregate purchase price of $35.3 million. The obligations to consummate the transactions contemplated by the
Subscription Agreements are conditioned upon, among other things, customary closing conditions and the consummation of the transactions
contemplated by the Merger Agreement.
Securities Purchase Agreement
In connection with the execution of the Merger
Agreement, CleanTech and Nauticus entered into Securities Purchase Agreement with certain investors purchasing up to an aggregate of $40,000,000
in principal amount of secured debentures (the “Debentures”) and warrants (the “Warrants”) equal to 100% of the
aggregate issued amount of the Debentures divided by the then conversion price, with an exercise price equal to $20 per share of Common
Stock, subject to adjustment (“Debt Financing”). The obligations to consummate the transactions contemplated by the Securities
Purchase Agreement are conditioned upon, among other things, customary closing conditions and all conditions precedent to the Merger set
forth in the Merger Agreement shall have been satisfied or waived.
Amended and Restated Registration Rights Agreement
In connection with the Closing, Nauticus, CleanTech
and certain stockholders of each of Nauticus and CleanTech who will receive shares of CleanTech Common Stock pursuant to the Merger Agreement,
will enter into an amended and restated registration rights agreement (“Registration Rights Agreement”) mutually agreeable
to CleanTech and Nauticus, which will become effective upon the consummation of the Merger.
Lock-up Agreement and Arrangements
In connection with the Closing, the Sponsors and
certain Nauticus stockholders will enter into a lock-up agreement (the “Sponsor Lock-Up Agreement” and “Company Stockholder
Lock-up Agreement) with Nauticus and CleanTech, pursuant to which each will agree, subject to certain customary exceptions, not to:
(i) offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any shares of CleanTech Common Stock received as merger consideration and held by it immediately after
the Effective Time (the “Lock-Up Shares”), or enter into a transaction that would have the same effect;
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
(ii) enter into transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences
of ownership of any of such shares, whether any of these transactions are to be settled by delivery of such shares, in cash or otherwise;
or
(iii) publicly disclose the intention to make
any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, or engage in any “Short
Sales” (as defined in the Sponsor Lock-Up Agreement and Company Stockholder Lock-up Agreement) with respect to any security of
CleanTech; during a “Lock-Up Period” under their respective agreements.
Under the Sponsor Lock-up Agreement, the Lock-Up period means the period
commencing on the Closing Date and ending on the earlier of (x) the one year anniversary of the Closing Date; (y) the date on which the
volume weighted average price of shares of Common Stock equals or exceeds $13.00 per share for twenty (20) of any thirty (30) consecutive
trading days commencing after the Closing on Nasdaq, and (z) the date specified in a written waiver duly executed by Nauticus; provided
that the restrictions set forth in the Sponsor Lock-up Agreement do not apply to (1) transfers or distributions to such stockholder’s
current or former general or limited partners, managers or members, stockholders, other equity holders or direct or indirect affiliates
(within the meaning of Rule 405 under the Securities Act of 1933, as amended) or to the estates of any of the foregoing; (2) transfers
by bona fide gift to a member of the stockholder’s immediate family or to a trust, the beneficiary of which is the stockholder or
a member of the stockholder’s immediate family for estate planning purposes; (3) by virtue of the laws of descent and distribution
upon death of the stockholder; or (4) pursuant to a qualified domestic relations order, in each case where such transferee agrees to be
bound by the terms of the Sponsor Lock-up Agreement.
Under the Company Lock-up Agreement, the Lock-Up
period means the period commencing on the Closing Date and ending on the earlier of (x) the date that is 180 calendar days after the consummation
of the Business Combination, (y) the date on which the volume weighted average price of shares of Common Stock equals or exceeds $13.00
per share for twenty (20) of any thirty (30) consecutive trading days commencing after the Closing on Nasdaq, and (z) the date specified
in a written waiver duly executed by the Sponsors and CleanTech; provided that the restrictions set forth in the Company Lock-up Agreement
do not apply to (1) transfers or distributions to such stockholders current or former general or limited partners, managers or members,
stockholders, other equityholders or other direct or indirect affiliates (within the meaning of Rule 405 under the Securities Act of 1933,
as amended) or to the estates of any of the foregoing; (2) transfers by bona fide gift to a member of the stockholder’s immediate
family or to a trust, the beneficiary of which is the stockholder or a member of the stockholder’s immediate family for estate planning
purposes; (3) by virtue of the laws of descent and distribution upon death of the stockholder; (4) pursuant to a qualified domestic relations
order, in each case where such transferee agrees to be bound by the terms of this Agreement; (5) transfers or distributions of, or other
transactions involving, securities other than the Lock-up Shares (including, without limitation, securities acquired in the PIPE or in
open market transactions); or (6) in the case of Angela Berka (or Reginald Berka with respect to any community, marital or similar interest
he may have in the following shares), the transfer of up to 1,000,000 shares of Lock-up Shares in a privately negotiated sale to another
company stockholder, who shall enter into a Lock-Up Agreement (or amend an existing Lock-Up Agreement) containing the same terms and conditions
as this Agreement with respect to such shares, or the entry into any agreement with respect to such a sale entered into before, at or
after the Effective Time.
Director Nomination Agreement
In connection with the Closing, CleanTech, the
Sponsors and Nauticus will enter into a Director Nomination Agreement (the “Director Nomination Agreement”) pursuant to which
CleanTech will agree to nominate an individual designated by the Sponsors to the Board of Directors of the combined company, effective
as of immediately prior to the Closing.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
Director Designation Agreement
In connection with the execution of the Merger
Agreement, CleanTech, Nauticus and certain Nauticus stockholders entered into a director designation agreement with Transocean, Inc. (“Transocean”)
to take all necessary action to cause a member designated by Transocean (the “Transocean Designee”) to remain on, or otherwise
be appointed to, the Board, from and after the effective time of the Merger, as a Class III member of the Board, for an initial term expiring
at the third annual meeting following the date of the Second Amended and Restated Certificate of Incorporation to be adopted in connection
with the Merger.
Indemnification Agreements
In connection with the Closing, CleanTech has
agreed to enter into customary indemnification agreements, in form and substance reasonably acceptable to CleanTech and Nauticus, with
the individuals who will be nominated and, subject to stockholder approval, elected to CleanTech’s board of directors effective
as of the Closing.
Going Concern Consideration
As of December 31, 2021, the Company had
$518,905 in cash held outside of the Trust Account and working capital of $259,136. As a result of the above, in connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting
Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the liquidity condition and date for mandatory liquidation and dissolution raise substantial
doubt about the Company’s ability to continue as a going concern through July 19, 2022, the scheduled liquidation date of the Company
if it does not complete a Business Combination prior to such date. Management plans to address this uncertainty through the Business Combination
as discussed above. There is no assurance that the Company's plans to consummate the Business Combination will be successful or successful
within the Combination Period. These consolidated financial statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been
eliminated in consolidation.
Risks and Uncertainties
Management continues to evaluate the impact
of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative
effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact
is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial
statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and
proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
Use of Estimates
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of expenses during the reporting periods.
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 consolidated financial statements, which management considered in formulating its
estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting
estimates included in these consolidated financial statements is the determination of the fair value of the warrant liabilities.
Accordingly, the actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of December 31, 2021 and 2020.
Investments Held in Trust Account
At December 31, 2021, the assets held in
the Trust Account were held in money market funds, which are invested in U.S. Treasury securities. Trading securities are presented on
the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these
securities is included in unrealized gains (losses) on investments held in Trust Account in the accompanying consolidated statements of
operations. Interest and dividend income on these securities is included in net gain on investments held in Trust Account in the accompanying
consolidated statements of operations.
Common
Stock Subject to Possible Redemption
The Company accounts for its Common Stock subject
to possible redemption in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity. Common Stock subject
to mandatory redemption (if any) is classified as liability instruments and are measured at fair value. Conditionally redeemable Common
Stock (including Common Stock that feature redemption rights that are either within the control of the holder or subject to redemption
upon occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Common
Stock are classified as shareholders’ equity. The Company’s 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, as of December 31, 2021, 17,250,000 Common
Stock subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance
sheet. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from the initial book value to
redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable Common Stock to equal the redemption value at the end of each reporting
period. This method would view the end of the reporting period as if it were also the redemption date for the security. Increases or decreases
in the carrying amount of redeemable Common Stock are affected by charges against additional paid in capital and accumulated deficit.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
As of December 31, 2021, the Common Stock
reflected in the balance sheet is reconciled in the following table:
Gross proceeds | |
$ | 172,500,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (6,037,500 | ) |
Proceeds allocated to Public Rights | |
| (3,934,879 | ) |
Issuance costs allocated to common stock | |
| (3,672,335 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 15,369,714 | |
Common stock subject to possible redemption | |
$ | 174,225,000 | |
Offering Costs associated with the Initial
Public Offering
The Company complies with the requirements of
ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A - Expenses of Offering. Offering costs consist principally of professional
and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly
attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for
equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting
to $3,916,281 as a result of the Initial Public Offering (consisting of a $3,450,000 underwriting discount and $466,281 of other offering
costs). The Company recorded $3,672,335 of offering costs as a reduction of equity in connection with the redeemable Common Stock included
in the Units. The Company recorded $88,910 of offering costs as a reduction of permanent equity in connection with the Rights classified
as equity instruments. The Company immediately expensed $155,037 of offering costs in connection with the Public Warrants and Private
Placement Warrants that were classified as liabilities.
Derivative Warrant Liabilities
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC
815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition
of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including
whether the warrants are indexed to the Company’s own Common Stock, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period
end date while the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the
time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required
to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. For the initial valuation,
the Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants, and the publicly-traded value for
the subsequent valuation of the Public Warrants. Changes in the estimated fair value of the warrants are recognized as a non-cash gain
or loss on the consolidated statements of operations. The fair value of the Private Placement Warrants was estimated using a Black-Scholes
Option Pricing Model (see Note 10). The subsequent measurement of the Public Warrants as of December 31, 2021 is classified as Level 1,
as such, an observable market quote in an active market under the ticker CLAQW was used.
The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic
815, Derivatives and Hedging. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value
reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified
in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required
within 12 months of the balance sheet date.
Income Taxes
The Company complies with the accounting and reporting requirements
of ASC Topic 740, Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets
and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of December 31, 2021 and December 31, 2020. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The
Company is subject to income tax examinations by major taxing authorities since inception. The Company has no expectation of a change
in the above for a period of time within one year after the date that the consolidated financial statements are issued.
Net Loss Per Share of Common Stock
Net loss per share of Common Stock is computed
by dividing net earnings by the weighted-average number of shares of Common Stock outstanding during the period (for all periods during
which these shares were subject to forfeiture, the calculation of weighted average shares outstanding excludes an aggregate of 562,500
shares of Common Stock held by the Sponsor that were subject to forfeiture to the extent that the underwriter’s over-allotment was not
exercised in full). The Company has not considered the effect of the Warrants sold in the Initial Public Offering and private placement
to purchase an aggregate of 15,800,000 shares in the calculation of diluted income per share, since the exercise of the Warrants are contingent
upon the occurrence of future events and the inclusion of such Warrants would be anti-dilutive.
The following table reflects the calculation of
basic and diluted net loss per share of Common Stock (in dollars, except per share amounts):
| |
For the year ended December 31, 2021 | | |
For the period from June 18, 2020 (inception) through December 31, 2020 | |
Basic and diluted net loss per share: | |
| | |
| |
Numerator: | |
| | |
| |
Net loss | |
$ | (595,442 | ) | |
$ | (1,000 | ) |
Denominator: | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 11,781,678 | | |
| 3,750,000 | |
Basic and diluted net loss per share of Common Stock | |
$ | (0.05 | ) | |
$ | (0.00 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on these accounts and management believes
the Company is not exposed to significant risks on such account.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
Fair Value of Financial Instruments
The Company applies ASC Topic 820, Fair Value
Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value
within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to
transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants
on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants
would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting
entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the
assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information
available in the circumstances.
The carrying amounts reflected in the balance sheet for cash, prepaid
expenses and accrued offering costs approximate fair value due to their short-term nature.
Level 1 — Assets and liabilities with unadjusted, quoted prices
listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets
for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined
using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs,
such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable
inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Recent Accounting Standards
In August 2020, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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. ASU 2020-06 is effective for the Company on January 1, 2024 and should be applied
on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU
2020-06 effective January 1, 2021 using the modified retrospective method of transition. The adoption of ASU 2020-06 did not have a
material impact on the consolidated financial statements for the fiscal year ended December 31, 2021.
Management does not believe that any other
recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the
Company’s consolidated financial statements.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering which
was consummated on July 19, 2021, the Company sold 15,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of
one share of the Company’s Common Stock, $0.0001 par value, one right entitling the holder thereof to receive one-twentieth (1/20) of
one share Common Stock upon the consummation of an initial business combination (the “Rights”), and one-half of one redeemable
warrant (“Redeemable Warrant”). Each whole Redeemable Warrant is exercisable to purchase one share of Common Stock and only
whole warrants are exercisable. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade.
The Redeemable Warrants will become exercisable on the later of 30 days after the completion of the Initial Business Combination or 12
months from the closing of the Initial Public Offering. Each whole Redeemable Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $11.50 (see Note 7).
On July 26, 2021, the underwriters fully exercised
the over-allotment option and purchased an additional 2,250,000 Units (the “Over-Allotment Units”), generating gross proceeds
of $22,500,000 on July 28, 2021.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor and Co-Sponsor purchased an aggregate of 6,500,000 Private Warrants at a price of $1.00 per Private Placement
Warrant ($6,500,000 in the aggregate). Each Private Placement Warrant is exercisable to purchase one share of Common Stock at a price
of $11.50 per share. Simultaneously with the sale of Over-Allotment Units, the Company consummated a private sale of an additional 675,000
Private Warrants at a purchase price of $1.00 per Private Warrant, generating gross proceeds of $675,000. The proceeds from the sale of
the Private Warrants were added to the net 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 proceeds from the sale of the Private Warrants will be used to fund
the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In July 2020, the Sponsor was issued 5,000,000
shares of Common Stock (the “Founder Shares”) for an aggregate price of $25,000. In February 2021, the Company effected a
1.4375-for-1 stock split of its issued and outstanding shares of Common Stock, resulting in an aggregate of 4,312,500 Founder Shares issued
and outstanding. The Founder Shares include an aggregate of up to 562,500 shares of Common Stock subject to forfeiture by the Sponsor
to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the Sponsor will own, on
an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering.
On February 16, 2021, CleanTech Sponsor paid $16,667
to the Company, which amount was paid to CleanTech Investments LLC to cancel 4,791,667 of its Founder Shares that it previously held and
immediately thereafter the Company issued 4,791,667 Founders Shares to CleanTech Sponsor. As a result, CleanTech Sponsor owns 4,791,667
Founders Shares and CleanTech Investments LLC owns 2,395,833 Founder Shares. CleanTech Sponsor and CleanTech Investments LLC will both
participate in the purchase of the Private Warrants based their pro rata ownership of Founder Shares.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
In June 2021, CleanTech Sponsor and CleanTech
Investments forfeited for no consideration 1,916,667 founder shares and 958,333 founder shares, respectively, which the Company cancelled,
resulting in a decrease in the total number of founder shares outstanding from 7,187,500 shares to 4,312,500 shares. As a result, CleanTech
Sponsor owns 2,875,000 founder shares and CleanTech Investments owns 1,437,500 founder shares. The founder shares include an aggregate
of up to 562,500 shares that are subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in
full or in part. All share and per-share amounts have been retroactively restated to reflect the share forfeiture.
The underwriter exercised the over-allotment option
on in full July 28, 2021; thus, no Founders Shares are subject to forfeiture.
Administrative Services Agreement
The Company entered into an agreement, commencing on the July 14, 2021,
to pay Chardan Capital Markets, LLC up to $10,000 per month for office space, administrative and support services. The total amounts of
administrative service fees incurred and outstanding for the year ended December 31, 2021 were $53,333. Upon completion of the Business
Combination or the Company’s liquidation, the Company will cease paying these monthly fees.
Promissory Note - Related Party
On March 1, 2021, the Company issued an unsecured
promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company could borrow an aggregate of up to $250,000
to cover expenses related to the Initial Public Offering. The Promissory Note was non-interest bearing and is payable on the earlier of
Promptly after the date on which the Maker consummates an initial public offering of its securities or (ii) the completion of the Initial
Public Offering. The outstanding balance under the Promissory Note of $188,302 was repaid on July 23, 2021. The promissory note is no
longer available to the Company.
Related Party Loans
In addition, in order to finance transaction costs
in connection with an intended initial Business Combination, the Company’s Sponsor, Co-Sponsor, or an affiliate of the Sponsor or the
officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company consummates the initial
Business Combination, it would repay such loaned amounts. The notes would either be paid upon consummation of the Company’s initial Business
Combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of
the Business Combination into additional private warrants to purchase shares of Common Stock at a conversion price of $1.00 per private
warrant (which, for example, would result in the holders being issued private warrants to purchase 500,000 shares of Common Stock if $500,000
of notes were so converted). Such private warrants will be identical to the private warrants to be issued at the closing of the initial
public offering. Loans made by Chardan Capital Markets, LLC or any of its related persons will not be convertible into private warrants,
and Chardan Capital Markets, LLC and its related persons will have no recourse with respect to their ability to convert their loans into
private warrants. As of December 31, 2021 and December 31, 2020, there were no borrowings under these loans.
Related Party Extension Loans
The Company may extend the period of time to consummate
a Business Combination up to two times, each by an additional three months (for a total of 18 months to complete a Business Combination).
In order to extend the time available for the Company to consummate a Business Combination, without the need for a separate stockholder
vote, is for the Company’s initial stockholders or their affiliates or designees, upon five days’ advance notice prior to
the application deadline, to deposit into the trust account $1,500,000 or $1,725,000 if the underwriters’ over-allotment option
is exercised in full ($0.10 per public share, or an aggregate of $3,000,000 (or $3,450,000 if the over-allotment option is exercised in
full) if extended for each of the full three months), on or prior to the date of the application deadline. In the event that the stockholders,
or affiliates or designees, elect to extend the time to complete the Company’s initial business combination and deposit the applicable
amount of money into trust, the initial stockholders will receive a non-interest bearing, unsecured promissory note equal to the amount
of any such deposit that will not be repaid in the event that the Company is unable to close a business combination unless there are funds
available outside the trust account to do so. Such note would be paid upon consummation of the Company’s initial Business Combination.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
NOTE 6. COMMITMENTS
Registration and Stockholder Rights Agreement
Pursuit to a registration rights agreement entered
into on July 14, 2021, the holders of insider shares issued and outstanding, as well as the holders of the private warrants (and all underlying
securities), will be entitled to registration and stockholder rights pursuant to an agreement to be signed prior to or on the effective
date of the initial public offering. The holders of a majority of these securities are entitled to make up to two demands that the Company
registers such securities. The holders of the majority of the insider shares can elect to exercise these registration rights at any time
commencing three months prior to the date on which these shares of Common Stock are to be released from escrow. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation
of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriter’s Agreement
The Company granted the underwriter a 45-day option
to purchase up to 2,250,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts
and commissions. On July 28, 2021, the Underwriters exercised the over-allotment option in full and purchased an additional 2,250,000
Units for an aggregate purchase price of $22,500,000.
In connection with the closing of the Initial
Public Offering and subsequent exercise of the over-allotment option, the underwriter was paid a cash underwriting fee of $0.20 per Unit,
or $3,450,000 in the aggregate.
Business Combination Marketing Agreement
The Company engaged Chardan Capital Markets, LLC as an advisor in connection
with the initial Business Combination to assist the Company in holding meetings with the stockholders to discuss the potential Business
Combination and the target business’s attributes, introduce the Company to potential investors that are interested in purchasing
the securities in connection with the potential Business Combination, assist the Company in obtaining stockholder approval for the Business
Combination and assist the Company with press releases and public filings in connection with the Business Combination. The Company will
pay Chardan Capital Markets, LLC a marketing fee for such services upon the consummation of the initial Business Combination in an amount
equal to, in the aggregate, 3.5% of the gross proceeds of the initial public offering, including any proceeds from the full or partial
exercise of the underwriters’ over-allotment option. As a result, Chardan Capital Markets, LLC will not be entitled to such fee
unless the Company consummates the initial Business Combination. A copy of the form of Business Combination marketing agreement has been
filed as an exhibit to the registration statement of which the Company’s prospectus forms a part.
NOTE 7. WARRANTS
As of December 31, 2021 and December 31,
2020, there were 15,800,000 (including 8,625,000 Public Warrants and 7,175,000 Private Placement Warrants) and no warrants outstanding,
respectively.
Each whole public warrant entitles the registered
holder to purchase one share of Common Stock at a price of $11.50 per whole share, subject to adjustment as described below, at any time
commencing on the later of one year after the closing of the initial public offering or the consummation of an initial Business Combination.
However, no public warrants will be exercisable for cash unless the Company has an effective and current registration statement covering
the shares of Common Stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Common Stock. Notwithstanding
the foregoing, if a registration statement covering the shares of Common Stock issuable upon exercise of the public warrants is not effective
within 120 days from the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to an available exemption from registration under the Securities Act. The warrants will expire five years
from the closing of the initial Business Combination at 5:00 p.m., New York City time.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
The private warrants will be identical to the
public warrants underlying the units being offered by the Company’s prospectus except that (i) each private warrant is exercisable for
one share of Common Stock at an exercise price of $11.50 per share, and (ii) such private warrants will be exercisable for cash (even
if a registration statement covering the shares of Common Stock issuable upon exercise of such warrants is not effective) or on a cashless
basis, at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the initial purchasers
or their affiliates. The private warrants purchased by CleanTech Investments will not be exercisable more than five years from the effective
date of the registration statement, of which the Company’s prospectus forms a part, in accordance with FINRA Rule 5110(g)(8), as long
as Chardan Capital Markets, LLC or any of its related persons beneficially own these private warrants.
The Company may call the outstanding warrants for redemption (excluding
the private warrants but including any warrants already issued upon exercise of the unit purchase option), in whole and not in part, at
a price of $0.01 per warrant:
| ● | at
any time while the warrants are exercisable, |
| ● | upon
not less than 30 days’ prior written notice of redemption to each warrant holder, |
| ● | if, and only if, the reported last sale price of the shares of Common Stock equals or exceeds $16.50 per
share, for any 20 trading days within a 30-day trading period ending on the third business day prior to the notice of redemption to warrant
holders, and |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of Common
Stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each
day thereafter until the date of redemption. |
The right to exercise will be forfeited unless
the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder
of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such
warrant.
If the Company calls the warrants for redemption
as described above, the Company’s management will have the option to require all holders that wish to exercise warrants to do so on a
“cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of
shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the
warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” by (y) the fair
market value. The “fair market value” shall mean the average reported last sale price of the Company’s Common Stock for the
10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Whether the Company will exercise the option to require all holders to exercise their warrants on a “cashless basis” will
depend on a variety of factors including the price of the common shares at the time the warrants are called for redemption, the Company’s
cash needs at such time and concerns regarding dilutive share issuances.
The exercise price and number of shares of Common
Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary
dividend or the Company’s 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 a newly issued 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 board of directors and, in the case of any such issuance to the Company’s initial stockholders or their affiliates,
without taking into account any founder shares or private warrants held by them, as applicable, prior to such issuance), the exercise
price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the newly issued price and the $16.50 per share redemption
trigger price described below under will be adjusted (to the nearest cent) to be equal to 165% of the market value (the volume weighted
average trading price of the Common Stock during the 20 trading day period starting on the trading day prior to the consummation of an
initial Business Combination).
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
The warrants may be exercised upon surrender of
the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse
side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or
official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges
of holders of shares of Common Stock and any voting rights until they exercise their warrants and receive shares of Common Stock. After
the issuance of shares of Common Stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of
record on all matters to be voted on by stockholders.
Except as described above, no public warrants
will be exercisable for cash, and the Company will not be obligated to issue shares of Common Stock unless at the time a holder seeks
to exercise such warrant, a prospectus relating to the shares of Common Stock issuable upon exercise of the warrants is current and the
shares of Common Stock have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of
the holder of the warrants. Under the terms of the warrant agreement, the Company has agreed to use best efforts to meet these conditions
and to maintain a current prospectus relating to the shares of Common Stock issuable upon exercise of the warrants until the expiration
of the warrants. However, the Company cannot assure you that it will be able to do so and, if the Company does not maintain a current
prospectus relating to the shares of Common Stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants,
and the Company will not be required to settle any such warrant exercise. If the prospectus relating to the shares of Common Stock issuable
upon the exercise of the warrants is not current or if the Common Stock is not qualified or exempt from qualification in the jurisdictions
in which the holders of the warrants reside, the Company will not be required to net cash settle or cash settle the warrant exercise,
the warrants may have no value, the market for the warrants may be limited, and the warrants may expire worthless.
No fractional shares will be issued upon exercise
of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company
will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the warrant holder.
The Company accounts for the 15,800,000 warrants
issued in connection with the Initial Public Offering in accordance with the guidance contained in ASC 815-40. Such guidance provides
that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability.
The accounting treatment of derivative financial
instruments required that the Company record the warrants as derivative liabilities at fair value upon the closing of the Initial Public
Offering. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. This warrant
liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted
to its current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess
the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will
be reclassified as of the date of the event that causes the reclassification.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock — The Company
is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. As of December 31, 2021 and December 31, 2020,
there were no shares of preferred stock issued or outstanding.
Common Stock — On July 16,
2021, the Company amended its Amended and Restated Certificate of Incorporation such that the Company is authorized to issue 200,000,000
shares of Common Stock with a par value of $0.0001 per share. As of December 31, 2021, there were 21,562,500 shares of Common Stock
outstanding, including 17,250,000 Common Stock subject to possible redemption. Of the 21,562,500 shares of Common Stock outstanding, up
to 562,500 shares were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriters’
over-allotment option was not exercised in full or in part, so that the initial stockholders will collectively own 20% of the Company’s
issued and outstanding Common Stock after the initial public offering. The underwriters exercised the over-allotment option in full on
July 28, 2021; thus, no shares of Common Stock remain subject to forfeiture.
Holders of record of Common Stock are entitled
to one vote for each share held on all matters to be voted on by stockholders. In connection with any vote held to approve the initial
Business Combination, insiders, officers and directors, have agreed to vote their respective shares of Common Stock owned by them immediately
prior to the initial public offering, including both the insider shares and any shares acquired in the initial public offering or following
the initial public offering in the open market, in favor of the proposed Business Combination.
Rights — Except in cases where
the Company is not the surviving company in a Business Combination, each holder of a right will automatically receive one-twentieth (1/20)
of a share of Common Stock upon consummation of the Business Combination, even if the holder of a right converted all shares held by him,
her or it in connection with the Business Combination or an amendment to the Company’s Certificate of Incorporation with respect
to its pre-business combination activities. In the event that the Company will not be the surviving company upon completion of the Business
Combination, each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the one-twentieth
(1/20) of a share of Common Stock underlying each right upon consummation of the Business Combination. No additional consideration will
be required to be paid by a holder of rights in order to receive his, her or its additional share of Common Stock upon consummation of
the Business Combination. The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates
of the Company). If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving
entity, the definitive agreement will provide for the holders of rights to receive the same per share consideration the holders of shares
of Common Stock will receive in the transaction on an as-converted into Common Stock basis.
The Company will not issue fractional shares in
connection with an exchange of rights. As a result, the holders of the rights must hold rights in multiples of 20 in order to receive
shares for all of the holders’ rights upon closing of a Business Combination. If the Company is unable to complete an initial Business
Combination within the required time period and the Company liquidates the funds held in the Trust Account, holders of rights will not
receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside
of the Trust Account with respect to such rights, and the rights will expire worthless. Additionally, in no event will the Company be
required to net cash settle the rights. Accordingly, the rights may expire worthless.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
NOTE 9. INCOME TAX
The Company’s net deferred tax assets (liabilities)
as of December 31, 2021 is as follows:
Deferred tax assets: | |
| |
Start-up costs | |
$ | 252,290 | |
Net operating loss carryforwards | |
| 20,412 | |
Total deferred tax assets | |
| 272,702 | |
Valuation allowance | |
| (271,562 | ) |
Deferred tax liabilities: | |
| | |
Unrealized gain on investments | |
| (1,140 | ) |
Total deferred tax liabilities | |
| (1,140 | ) |
Deferred tax assets, net of allowance | |
$ | — | |
The income tax provision for the year ended December
31, 2021 consists of the following:
Federal | |
| |
Current | |
$ | — | |
Deferred | |
| (271,562 | ) |
| |
| | |
State | |
| | |
Current | |
| — | |
Deferred | |
| — | |
Change in valuation allowance | |
| 271,562 | |
Income tax provision | |
$ | — | |
As of December 31, 2021, the Company has
available U.S. federal operating loss carry forwards of approximately $990,823 that may be carried forward indefinitely.
In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary
differences representing future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets,
projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available,
management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore
established a full valuation allowance. For the year ended December 31, 2021, the valuation allowance was $271,562.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
A reconciliation of the federal income tax rate
to the Company’s effective tax rate at December 31, 2021 is as follows:
Statutory federal income tax rate | |
| 21.0 | % |
State taxes, net of federal tax benefit | |
| 0.0 | % |
Change in fair value of derivative warrant liabilities | |
| 61.1 | % |
Non-deductible transaction costs | |
| (8.8 | )% |
Change in valuation allowance | |
| (73.3 | )% |
Income tax provision | |
| 0.0 | % |
Deferred tax assets were deemed to be de minimis
as of December 31, 2020.
NOTE 10. FAIR VALUE MEASUREMENTS
The following table presents information about
the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021
and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description | |
Amount at
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
December 31, 2021 | |
| | |
| | |
| | |
| |
Assets | |
| | |
| | |
| | |
| |
Investments held in Trust Account: | |
| | |
| | |
| | |
| |
Money Market investments | |
$ | 174,230,428 | | |
$ | 174,230,428 | | |
$ | — | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Warrant liabilities – Public Warrants | |
$ | 5,175,000 | | |
$ | 5,175,000 | | |
$ | — | | |
$ | — | |
Warrant liabilities – Private Placement Warrants | |
$ | 2,798,250 | | |
$ | — | | |
$ | — | | |
$ | 2,798,250 | |
The Company did not have any assets or liabilities
measured at fair value as of December 31, 2020.
The Company utilized a Monte Carlo simulation model for the initial
valuation of the Public Warrants, and the publicly-traded value for the subsequent valuation of the Public Warrants. The measurement of
the Public Warrants as of December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market
under the ticker CLAQW. The quoted price of the Public Warrants was $0.60 per warrant as of December 31, 2021.
The Company utilizes a Black-Scholes Option Pricing
Model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations.
The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Black-Scholes Option Pricing Model
are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. For the initial
valuation, the Company estimated volatility based on research on comparable companies with the same type of warrants along with the implied
volatilities shortly after they start trading. Significant increases (decreases) in the expected volatility in isolation would result
in a significantly higher (lower) fair value measurement. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield
curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed
to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates
to remain at zero.
CLEANTECH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2021
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level
1 fair value measurement in September 2021 after the Public Warrants were separately listed and traded.
The following table provides the significant inputs
to the Black-Scholes Option Pricing Model fair value of the Private Placement Warrants:
| |
As of
December 31,
2021 | |
Stock price | |
$ | 9.96 | |
Strike price | |
$ | 11.50 | |
Probability of completing a Business Combination | |
| 100.0 | % |
Dividend yield | |
| — | % |
Term (in years) | |
| 4.6 | |
Volatility | |
| 8.7 | % |
Risk-free rate | |
| 1.2 | % |
Fair value of warrants | |
$ | 0.39 | |
The following table provides a summary of the changes in the fair value
of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:
Fair value as of December 31, 2020 | |
$ | — | |
Initial measurement of Public Warrants and Private Placement Warrants at July 19, 2021 | |
| 7,980,000 | |
Initial measurement of over-allotment warrants | |
| 1,071,000 | |
Transfer of Public Warrants to Level 1 measurement | |
| (5,175,000 | ) |
Change in fair value | |
| (1,077,750 | ) |
Fair value as of December 31, 2021 | |
$ | 2,798,250 | |
The Company recognized gains in connection with
the change in the fair value of warrant liabilities of $1,077,750 in the consolidated financial consolidated statements of operations
during the year ended December 31, 2021.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and
transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Based
upon this review, other than Amendment No. 1 to the Merger Agreement, as described in Note 1, and those items disclosed below, the
Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial
statements.
On February 11, 2022, the Company entered into an agreement with an investment bank (the “A Capital Markets Advisor”) for advisory services
such as analyzing, structuring, negotiating, and effecting the potential Business Combination. In exchange for such services, the Company
will pay the A Capital Markets Advisor a cash advisory fee of $350,000 which is payable upon the closing of the potential Business Combination,
or six months following the termination of the agreement.
On February 28, 2022, the Company entered into an agreement with an investment bank (the “B Capital Markets Advisor”) for advisory services
such as capital raising strategies and alternatives, review of business model and financial conditions, and non-deal investor roadshow
services related to the potential Business Combination. In exchange for such services, the Company will pay the B Capital Markets Advisor
a non-refundable retainer $350,000 which is due within ten days following the closing of the potential Business Combination.
On March 23, 2022, the Company entered into a
Promissory Note with the Sponsor (the “Promissory Note”) to which the Company could borrow up to an aggregate of $267,000.
The Promissory Note is non-interest bearing and payable upon the earlier of (i) completion of the initial Business Combination or (ii)
the date on which the Company determines that it is unable to effect a Business Combination. On March 23, 2022, the Company drew down
$267,000 under the Promissory Note.
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