Business Combination

12 Months Ended

Dec. 31, 2021

Note 4. Business Combination

As described in Note 1, on November 25, 2020, the Company consummated the Business Combination Agreement dated September 2, 2020, with Legacy QuantumScape surviving the merger as a wholly owned subsidiary of the Company.

At the effective time of the Merger (the “Effective Time”), and subject to the terms and conditions of the Business Combination Agreement, each share of Legacy QuantumScape Class A common stock, par value $0.0001 per share, and each share of the Legacy QuantumScape Preferred Stock that was convertible into a share of Legacy QuantumScape Class A Common Stock, was canceled and converted into the right to receive the number of shares of the Company’s Class A Common Stock, $0.0001 par value per share (the “Class A Common Stock”) equal to 4.02175014920 (the “Exchange Ratio”), and each share of Legacy QuantumScape Class B Common Stock, par value $0.0001 per share, and each share of the Legacy QuantumScape Preferred Stock that was convertible into a share of Legacy QuantumScape Class B Common Stock was canceled and converted into the right to receive the number of shares of the Company’s Class B Common Stock, $0.0001 par value per share equal to the Exchange Ratio.

Upon the closing of the Business Combination (the "Closing"), the Company's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 1,350,000,000 shares, $0.0001 par value per share, of which, 1,000,000,000 shares are designated as Class A Common Stock, 250,000,000 shares are designated as Class B Common Stock, and 100,000,000 shares are designated as Preferred Stock. The holder of each share of Class A Common Stock is entitled to one vote, and the holder of each share of Class B Common Stock is entitled to ten votes.

In connection with the Business Combination, a number of subscribers (each, a “Subscriber”) purchased from the Company an aggregate of 50,000,000 shares of Class A Common Stock (the “PIPE”), for a purchase price of $10.00 per share and an aggregate purchase price of $500.0 million (the “PIPE Shares”), pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of September 2, 2020.

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Kensington was treated as the “acquired” company and Legacy QuantumScape is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy QuantumScape issuing stock for the net assets of Kensington, accompanied by a recapitalization. The net assets of Kensington were stated at historical cost, with no goodwill or other intangible assets recorded.

The following table reconciles the elements of the Business Combination to the Consolidated Statement of Cash Flows and the Consolidated Statement of Redeemable Non-Controlling Interest and Stockholders’ Equity for the year ended December 31, 2020 (amounts in thousands):


	Recapitalization
Cash- Kensington trust and cash, net of redemptions	$	230,128
Cash- PIPE Financing		500,000
Non-cash net assets assumed from Kensington		592
Less: Fair value of assumed common stock warrants		109,081
Less: transaction costs and advisory fees for QuantumScape allocated to equity		41,664
Less: transaction costs and advisory fees for Kensington		11,372
Net Business Combination	$	568,603
Less: non-cash net assets assumed from Kensington		592
Less: transaction costs and advisory fees for QuantumScape allocated to warrants		1,245
Add: Non-cash fair value of assumed common stock warrants		109,081
Add: accrued transaction costs and advisor fees		1,016
Net cash contributions from Business Combination	$	676,863

The number of shares of common stock issued immediately following the consummation of the Business Combination:


	Number of Shares
Common stock, outstanding prior to Business Combination		23,000,000
Less: redemption of Kensington shares		15,255
Common stock of Kensington		22,984,745
Kensington Founder Shares		5,750,000
Shares issued in PIPE Financing		50,000,000
Business Combination and PIPE Financing shares - Class A common stock		78,734,745
Legacy QuantumScape shares - Class A common stock(1)		110,734,478
Legacy QuantumScape shares - Class B common stock(1)		158,301,450
Total shares of common stock immediately after Business Combination		347,770,673

(1)

The number of Legacy QuantumScape Class A common stock was determined from the 27,533,913 shares of Legacy QuantumScape Class A common stock outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio. All fractional shares were rounded down.

(2)

The number of Legacy QuantumScape Class B common stock was determined from the 39,361,342 shares of Legacy QuantumScape Class B common stock outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio. All fractional shares were rounded down.