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 unaudited condensed 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 Form10-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 September 30, 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 September 30, 2022, we had net income of $640,407,
which consisted of interest earned on investments held in Trust Account of
$964,841, offset by general and administrative expenses of $176,934 and loss of
$147,500 derived from the changes in fair value of the warrant liabilities.
For the nine months ended September 30, 2022, we had net income of $6,501,631,
which consisted of income of $6,195,000 derived from the changes in fair value
of the warrant liabilities and interest earned on investments held in Trust
Account of $1,183,136, offset by general and administrative expenses of
$876,505.
For the three months ended September 30, 2021, we had net income of $2,215,515,
which consisted of income of $2,655,000 derived from the changes in fair value
of the warrant liabilities and interest earned on investment held in Trust
Account of $3,700, offset by general and administrative expenses costs of
$439,597 and interest expense of $3,588.
For the nine months ended September 30, 2021, we had net income of $8,688,266,
which consisted of income of $11,652,500 derived from the changes in fair value
of the warrant liabilities and interest earned on investment held in Trust
Account of $46,397, offset by general and administrative expenses costs of
$2,205,473, transaction costs allocated to warrant liabilities of $791,150 and
interest expense of $14,008.
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 nine months ended September 30, 2022, cash used in operating activities
was approximately $0.7 million. Net income of approximately $6.5 million was
affected by non-cash charges related to the change in fair value of the warrant
liabilities of approximately $6.2 million and interest earned on investments
held in Trust Account of approximately $1.2 million. Changes in operating assets
and liabilities provided approximately $0.2 million of cash for operating
activities.
For the nine months ended September 30, 2021, cash used in operating activities
was approximately $1.1 million. Net income of approximately $8.7 million was
affected by non-cash charges (income) related to the change in fair value of the
warrant liabilities of approximately $11.7 million, interest earned on
investment held in Trust Account of approximately $46,000 and transaction costs
associated with the warrant liabilities of approximately $0.8 million. Changes
in operating assets and liabilities provided approximately $1.1 million of cash
for operating activities.
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As of September 30, 2022, we had investments held in the Trust Account of
$288,735,171 (including $1,235,171 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 September 30, 2022, we had cash of $33,253. 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 September 30,
2022, there was $775,000 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. We may not have sufficient liquidity to
fund the working capital needs of the Company through our liquidation date or
one year from the issuance of these condensed financial statements. 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 September 30, 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 unaudited 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 section of our condensed balance sheets.
Net Income Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income by the
weighted average number of ordinary shares outstanding during the period. We
apply the two-class method in calculating income per ordinary share. Accretion
associated with the redeemable shares of Class A ordinary shares is excluded
from income 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 unaudited condensed financial statements.
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