References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to TZP Strategies Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to TZPS SPAC Holdings LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are not historical facts and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Quarterly Report including, without limitation, statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form
10-K
filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on August 31,
2020 formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, our shares, debt or a
combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from August 31, 2020 (inception) through March 31, 2022 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and identifying a target company for a Business
Combination. We do not expect to generate any operating revenues until after the
completion of our Business Combination. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended March 31, 2022, we had net income of approximately
$3.3 million, which consisted of income of approximately $3.7 million derived
from the changes in fair value of the warrant liabilities and interest earned on
investments held in Trust Account of approximately $4,000, offset by general and
administrative expenses of approximately $419,000.
For the three months ended March 31, 2021, we had net income of approximately
$9.8 million, which consisted of income of approximately $12.1 million derived
from the changes in fair value of the warrant liabilities and interest earned on
investments held in Trust Account of approximately $39,100, offset by general
and administrative expenses of approximately $1.5 million, transaction costs
allocable to warrants of $791,000 and interest expense of approximately $5,000.
Liquidity and Capital Resources
On January 22, 2021, we consummated the Initial Public Offering of 28,750,000
Units which includes the full exercise by the underwriter of its over-allotment
option in the amount of 3,750,000 Units, at $10.00 per Unit, generating gross
proceeds of $287,500,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 5,166,667 Private Placement Warrants at a
price of $1.50 per warrant in a private placement to the Sponsor, generating
gross proceeds of $7,750,000.
For the three months ended March 31, 2022, cash used in operating activities was
approximately $275,000. Net income of approximately $3.3 million was affected by
non-cash
charges (income) related to the change in fair value of the warrant liabilities
of approximately $3.7 million and interest earned on investments held in Trust
Account of approximately $4,000. Changes in operating assets and liabilities
provided approximately $145,000 of cash for operating activities.
For the three months ended March 31, 2021, cash used in operating activities was
approximately $486,000. Net income of approximately $9.8 million was affected by
non-cash
charges (income) related to the change in fair value of the warrant liabilities
of approximately $12.1 million, interest earned on investments held in Trust
Account of approximately $39,100 and transaction costs associated with the
warrant liabilities of approximately $791,000. Changes in operating assets and
liabilities provided approximately $1.0 million of cash for operating
activities.
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As of March 31, 2022, we had investments held in the Trust Account of
$287,556,052 (including $56,052 of interest income) consisting of securities
held in a money market fund that invests in U.S. Treasury securities. We may
withdraw interest from the Trust Account to pay taxes, if any. We intend to use
substantially all of the funds held in the Trust Account, including any amounts
representing interest earned on the Trust Account (less income taxes payable),
to complete our Business Combination. To the extent that our share capital or
debt is used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the target business or businesses,
make other acquisitions and pursue our growth strategies.
As of March 31, 2022, we had cash of $31,353. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
On August 10, 2021, we issued an unsecured promissory note (the "Note") in the
principal amount of $1,000,000 to the Sponsor. The Note does not bear interest
and is repayable in full upon consummation of a Business Combination. If we do
not complete a Business Combination, the Note shall not be repaid and all
amounts owed under it will be forgiven. Upon the consummation of a Business
Combination, the Sponsor shall have the option, but not the obligation, to
convert the principal balance of the Note, in whole or in part, into private
placement warrants, at a price of $1.50 per private placement warrant. The Note
is subject to customary events of default, the occurrence of which automatically
trigger the unpaid principal balance of the Note and all other sums payable with
regard to the Note becoming immediately due and payable. As of March 31, 2022,
there was $350,000 outstanding under the Note.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such Working Capital Loans may be
convertible into warrants of the post-Business Combination entity at a price of
$1.50 per warrant. The warrants would be identical to the Private Placement
Warrants.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board Accounting Standards Update
("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," the Company has until January 22, 2023, to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by this time. If a Business Combination is
not consummated by this date, there will be a mandatory liquidation and
subsequent dissolution of the Company. Management has determined that the
liquidity condition and mandatory liquidation, should a Business Combination not
occur, and potential subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after January 22, 2023.
Off-Balance
Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance
sheet arrangements as of March 31, 2022. We do not participate in transactions
that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating
off-balance
sheet arrangements. We have not entered into any
off-balance
sheet financing arrangements, established any special purpose entities,
guaranteed any debt or commitments of other entities, or purchased any
non-financial
assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$10,062,500 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC 815
under which the Warrants do not meet the criteria for equity treatment and must
be recorded as liabilities. Accordingly, we classify the Warrants as liabilities
at their fair value and adjust the Warrants to fair value at each reporting
period. This liability is subject tore-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our statements of
operations. The Private Placement Warrants and Public Warrants for periods where
no observable traded price was available were valued using a binomial lattice
simulation model. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value for the Warrants as of each relevant date.
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' (deficit) equity section of our condensed balance
sheets.
Net Income (Loss) Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted average number of ordinary shares outstanding during the period.
We apply the
two-class
method in calculating income (loss) per ordinary share. Accretion associated
with the redeemable shares of Class A ordinary shares is excluded from income
(loss) per ordinary share as the redemption value approximates fair value.
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Recent Accounting Standards
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 condensed financial statements.
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