NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
TZP
Strategies Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on
August 31, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses or entities (a “Business Combination”).
As
of March 31, 2021, the Company had not commenced any operations. All activity for the period from August 31, 2020 (inception)
through March 31, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”),
which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The
Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will
generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company
has selected December 31 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering was declared effective on January 19, 2021. On January 22,
2021, the Company consummated the Initial Public Offering of 28,750,000 units (the “Units” and, with respect to the Class A
ordinary shares included in the Units sold, the “Public Shares”) 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 which is described
in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 5,166,667 warrants (the “Private Placement
Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to TZPS SPAC Holdings LLC (the “Sponsor”),
generating gross proceeds of $7,750,000, which is described in Note 4.
Transaction
costs amounted to $16,409,038, consisting of $5,750,000 of underwriting fees, $10,062,500 of deferred underwriting fees and $596,538
of other offering costs.
Following
the closing of the Initial Public Offering on January 22, 2021, an amount of $287,500,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account
(the “Trust Account”), and will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out
as a money market fund investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the Investment Company
Act, as determined by the Company, until the earliest of: (i) the completion of a Business Combination and (ii) the distribution
of the funds in the Trust Account to the Company’s shareholders, as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more
operating businesses or assets with a fair market value equal to at least 80% of the assets held in the Trust Account (as defined below)
(net amounts previously disbursed to management for working capital purposes and excluding the amount of deferred underwriting commissions
and taxes payable on the income earned on the Trust Account). The Company will only complete a Business Combination if the post-Business
Combination company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires
a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment
Company Act of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully
effect a Business Combination.
The
Company will provide the holders of the public shares (the “Public Shareholders”) with the opportunity to redeem all or a
portion of their public shares upon the completion of the Business Combination, either (i) in connection with a general meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek
shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public
Shareholders will be entitled to redeem their Public Shares, equal to the aggregate amount then on deposit in the Trust Account, calculated
as of two business days prior to the consummation of the Business Combination (initially anticipated to be $10.00 per Public Share),
including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares,
subject to certain limitations as described in the prospectus. The per-share amount to be distributed to the Public Shareholders who
properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as
discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s
warrants.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 and, if the Company
seeks shareholder approval, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires
the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company. If a shareholder vote
is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant
to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the
Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information
as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval
in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares
purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder
may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed
Business Combination.
Notwithstanding
the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant
to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder
is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the
Public Shares without the Company’s prior written consent.
The
Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection
with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles
of Association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the
Company’s initial Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination
within the Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights
or pre-initial business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their
Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account, including interest earned on the Trust account and not previously released to pay taxes, divided by the number
of then issued and outstanding Public Shares.
The
Company will have until January 22, 2023 to consummate a Business Combination (the “Combination Period”). However, if
the Company has not completed a Business Combination within 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 Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including
interest earned and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses),
divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish the rights of the Public
Shareholders as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the Company’s remaining Public Shareholders and its Board
of Directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands 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 Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the
Combination Period.
The
Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will
receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its
respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account
if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights
to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business
Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account
that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share
value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In
order to protect the amounts held 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 (other than the Company’s independent registered public accounting firm) for services rendered or products
sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce
the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) 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 $10.00 per Public Share, due to
reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not
apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and as 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”). In the event that an executed waiver is deemed to be
unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.
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 (other than 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.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial
reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position,
results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial
Public Offering as filed with the SEC on January 20, 2021, as well as the Company’s Current Report on Form 8-K, as filed with
the SEC on January 28, 2021 (see Note 2). The interim results for the three months ended March 31, 2021 are not necessarily
indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Correction
of Previously Issued Financial Statement
On April 12, 2021, the Acting Director of the
Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting
considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”).
Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business
combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement,
we reevaluated the accounting treatment of our public warrants and our private placement warrants, and determined to classify the warrants
as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result of the SEC statement, the Company
corrected certain line items related to the previously audited balance sheet as of January 22, 2021 in the Form 8-K filed with the
SEC on January 28, 2021 related to misstatements identified in improperly applying accounting guidance on certain warrants, recognizing
them as components of equity instead of a derivative liability under the guidance of Accounting Standard Codification (“ASC”)
815-40, “Derivatives and Hedging – Contracts on an Entity’s Own Equity” (“ASC 815-40”). The following
balance sheet items as of January 22, 2021 were impacted: an increase of $20.9 million in warrant liabilities, a decrease of
$20.9 million in the amount of Class A ordinary shares subject to redemption, an increase of $0.8 million in additional
paid-in capital and an increase in $0.8 million in accumulated deficit.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Liquidity and Capital Resources
As of March 31, 2021, the Company had approximately $0.9 million in
its operating bank account, and a working capital deficit of approximately $0.1 million.
The Company’s liquidity needs to date have been satisfied through
a payment of $25,000 from the Sponsor to cover certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares,
the loan from the Sponsor pursuant to the Note (as defined in Note 5), and the proceeds from the consummation of the Private Placement
not held in the Trust Account. The Company repaid the Note in full upon consummation of the Initial Public Offering. In addition, in order
to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 5).
As of March 31, 2021, the Company had no borrowings under the Working Capital Loans.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this
time period, the Company will be using these funds for the purpose of paying existing accounts payable, identifying and evaluating prospective
Initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder 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.
Use
of Estimates
The
preparation of the condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly 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 March 31, 2021 and December 31, 2020.
Offering
Costs
Offering costs consist of legal, accounting, underwriting fees and
other costs incurred through the balance sheet date that are directly related to the Initial Public Offering. Offering costs amounting
to $15,617,888 were charged to shareholders’ equity upon the completion of the Initial Public Offering, and $791,150 of the offering
costs were allocated to the warrant liabilities and charged to the statement of operations.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Class
A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument
and are 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 the Company’s
control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s
ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, at March 31, 2021, 26,352,349 Class A ordinary shares subject to possible redemption
is presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
Warrant
Liability
The
Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria
for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair
value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet
date until exercised, and any change in fair value is recognized in our statement of operations.
Income
Taxes
The
Company accounts for income taxes under ASC Topic 740, “Income Taxes,” which 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’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of March 31, 2021 and December 31, 2020,
there were no unrecognized tax benefits and no amounts accrued for interest and penalties. 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 considered to be an exempted Cayman Islands company
with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in
the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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 for the period. The
calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i)
Initial Public Offering, (ii) the exercise of the over-allotment option and (iii) Private Placement Warrants since exercise price of
the warrants was below the average market price for the period.
The
Company’s statement of operations includes a presentation of income (loss) per share for ordinary shares subject to possible redemption
in a manner similar to the two-class method of income (loss) per share. Net income per ordinary share, basic and diluted, for Class A
redeemable ordinary shares is calculated by dividing the interest income earned on the Trust Account, by the weighted average number
of Class A redeemable ordinary shares outstanding since original issuance. Net loss per share, basic and diluted, for Class A and Class
B non-redeemable ordinary shares is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable ordinary
shares, by the weighted average number of Class A and Class B non-redeemable ordinary shares outstanding for the period. Class A and
Class B non-redeemable ordinary shares includes the Founder Shares as these shares do not have any redemption features and do not participate
in the income earned on the Trust Account.
The
following table reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
|
Three Months Ended
March
31,
|
|
|
|
2021
|
|
Redeemable Class A Ordinary Shares
|
|
|
|
Numerator: Earnings allocable to Redeemable Class A Ordinary Shares
|
|
|
|
Interest Income
|
|
$
|
39,082
|
|
Redeemable Net Earnings
|
|
$
|
39,082
|
|
Denominator: Weighted Average Redeemable Class A Ordinary
Shares
|
|
|
|
|
Redeemable Class A Ordinary Shares, Basic and Diluted
|
|
|
28,750,000
|
|
Earnings/Basic and Diluted Redeemable Class A Ordinary
Shares
|
|
$
|
—
|
|
|
|
|
|
|
Non-Redeemable Class A and B Ordinary Shares
|
|
|
|
|
Numerator: Net Income minus Redeemable Net Earnings
|
|
|
|
|
Net Income
|
|
$
|
9,816,388
|
|
Redeemable Net Earnings
|
|
|
(39,082
|
)
|
Non-Redeemable Net Income
|
|
$
|
9,777,306
|
|
Denominator: Weighted Average Non-Redeemable Class A
and B Ordinary Shares
|
|
|
|
|
Non-Redeemable Class A and B Ordinary Shares, Basic
and Diluted
|
|
|
6,966,292
|
|
Income/Basic and Diluted Non-Redeemable Class A and
B Ordinary Shares
|
|
$
|
1.40
|
|
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
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.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their
short-term nature.
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 January 1, 2022
and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The
Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash
flows.
NOTE
3. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 28,750,000 Units which includes a full exercise by the underwriters of their over-allotment
option in the amount of 3,750,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one Class A ordinary share
and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one
Class A ordinary share at an exercise price of $11.50 per whole share (see Note 7).
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 5,166,667 Private Placement Warrants at a price
of $1.50 per Private Placement Warrant, for an aggregate purchase price of $7,750,000, in a private placement. Each Private Placement
Warrant is exercisable to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 7).
A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the
Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the
Private Placement 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
On September 2, 2020, the Sponsor paid $25,000 to cover
certain offering and formation costs of the Company in consideration for 7,187,500 Class B ordinary shares (the “Founder Shares”).
On January 11, 2021, the Sponsor transferred 25,000 Class B ordinary shares to the independent director nominee. These 25,000
shares would not be subject to forfeiture in the event the underwriters’ overallotment option was not exercised. The Founder Shares
included an aggregate of up to 937,500 shares that were subject to forfeiture depending on the extent to which the underwriters’
over-allotment option was exercised, so that the number of Founder Shares would equal, on an as-converted basis, approximately 20% of
the Company’s issued and outstanding ordinary shares after the Initial Public Offering. As a result of the underwriters’ election
to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture.
The
Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) one
year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price
of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights
issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least
150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange
or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary
shares for cash, securities or other property.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Promissory Note — Related Party
On September 1, 2020, the Company issued an unsecured promissory
note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount
of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) February 28, 2021 and (ii) the completion
of the Initial Public Offering. As of March 31, 2021 and December 31, 2020, there was $0 and $123,492, respectively, outstanding under
the Promissory Note.
Related Party Loans
In order to finance transaction costs in
connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and
directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the
Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In
the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to
repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except
for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with
respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender’s discretion, up to $1,500,000 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. As of March 31, 2021 and December 31, 2020, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE 6. COMMITMENTS
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic
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
condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Registration and Shareholders Rights
Pursuant to a registration and shareholders rights
agreement entered into on January 19, 2021, the holders of the Founder Shares, Private Placement Warrants and any warrants that may
be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of the Working Capital Loans) will be entitled to registration rights pursuant
to a registration and shareholder rights. The holders of these securities are entitled to make up to three demands, excluding short form
demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to completion of a Business Combination. However, the registration and shareholder
rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective
until termination of the applicable lockup period. The registration rights agreement does not contain liquidating damages or other cash
settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred
in connection with the filing of any such registration statements.
Underwriting Agreement
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.
NOTE 7. STOCKHOLDERS’ EQUITY
Preference Shares — The Company is authorized to
issue 1,000,000 preference shares with a par value of $0.0001 per share with such designation, rights and preferences as may
be determined from time to time by the Company’s board of directors. At March 31, 2021 and December 31, 2020, there were
no shares of preferred stock issued or outstanding.
Class A Ordinary shares — The Company is authorized
to issue 300,000,000 shares of Class A ordinary shares with a par value of $0.0001 per share. Holders of Class A ordinary shares
are entitled to one vote for each share. At March 31, 2021, there were 2,397,651 shares of Class A ordinary shares issued and
outstanding, excluding 26,352,349 shares of Class A ordinary shares subject to possible redemption. At December 31, 2020, there
were no shares of Class A ordinary shares issued or outstanding.
Class B Ordinary shares — The Company is authorized
to issue 30,000,000 shares of Class B ordinary shares with a par value of $0.0001 per share. At March 31, 2021 and December 31,
2020, there were 7,187,500 shares of Class B ordinary shares issued and outstanding.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Only holders of the Class B ordinary shares will have
the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and Class B
ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The Class B ordinary shares will automatically convert
into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holders thereof at a ratio such
that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted
basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of Initial Public Offering,
plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any
equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a
Business Combination, excluding Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A
ordinary shares issued, deemed issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued
to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans. In no event
will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one-to-one.
NOTE 8. WARRANTS
Warrants — Public Warrants may only
be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants
will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) one year from
the closing of the Initial Public Offering. The Public Warrants will expire five years from the completion of a Business Combination
or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A
ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration
statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus
relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from
registration is available. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share
upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or
deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable,
but in no event later than 20 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts
to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable
upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within
60 business days after the closing of a Business Combination, and to maintain the effectiveness of such registration statement and a current
prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement;
provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange
such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company
may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance
with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain
in effect a registration statement, but the Company will use its commercially reasonable efforts to register or qualify the shares under
applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares
issuable upon exercise of the warrants is not effective by the 60th day after the closing of a Business Combination, warrant holders may,
until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an
effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption, but the Company will use its commercially reasonable efforts to register or qualify the shares under applicable
blue sky laws to the extent an exemption is not available.
Redemption of warrants when the price per Class A
ordinary share equals or exceeds $18.00. Once the warrants become exercisable, the Company may redeem the outstanding warrants
(except as described with respect to the Private Placement Warrants):
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
|
●
|
if,
and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted) for any 20 trading
days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable by the Company,
the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all
applicable state securities laws.
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Redemption of warrants when the price per Class A
ordinary share equals or exceeds $10.00. Once the warrants become exercisable, the Company may redeem the outstanding warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise
their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and
the fair market value of the Class A ordinary shares;
|
|
●
|
if,
and only if, the closing price of the Class A ordinary shares equal or exceeds $10.00 per public share (as adjusted) for any 20
trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption of the warrant
holders; and
|
|
●
|
if
the closing price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading
day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted),
the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants,
as described above.
|
If the Company calls the Public Warrants for redemption,
as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on
a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon
exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend
or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted
for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash
settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company
liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public
Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such
Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional Class A
ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an
issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined
in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without
taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,
and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net
of redemptions), and (z) the volume weighted average trading price of its Class A ordinary shares during the 20 trading day
period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market
Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the
nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger
price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public
Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers
or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted
transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the
Public Warrants.
NOTE 9. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
TZP STRATEGIES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The Company classifies its U.S. Treasury and equivalent
securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities
are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At March 31, 2021, assets held in the Trust Account
were comprised of $287,539,082 in U.S. Treasury securities. During the three months ended March 31, 2021, the Company did not withdraw
any interest income from the Trust Account.
The following table presents information about the Company’s
assets and liabilities that are measured at fair value on a recurring basis at March 31, 2021 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value.
|
|
Held-To-Maturity
|
|
|
Level
|
|
|
Amortized
Cost
|
|
|
Gross
Holding
Loss
|
|
|
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
U.S. Treasury Securities (Mature on 4/22/2021)
|
|
|
|
1
|
|
|
$
|
287,539,082
|
|
|
$
|
(3,818
|
)
|
|
$
|
287,534,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
Warrant Liability – Public Warrants
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
5,750,000
|
|
March 31, 2021
|
|
|
Warrant Liability – Private Placement Warrants
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3,100,000
|
|
The Warrants were accounted for as liabilities in accordance
with ASC 815-40 and are presented within warrant liabilities on our accompanying March 31, 2021 condensed balance sheet. The warrant
liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair
value of warrant liabilities in the condensed statement of operations.
The Public Warrants and Private Placement Warrants are valued at both the
initial measurement date and at March 31, 2021, using a binomial lattice model in a risk-neutral framework, which is considered to be
a Level 3 fair value measurement. The binomial lattice model’s primary unobservable input utilized in determining the fair
value is the expected volatility of the ordinary shares. The expected volatility was derived from observable public warrant pricing on
comparable ‘blank-check’ companies without an identified target. For periods subsequent to the detachment of the Public Warrants
from the Units where active trading of the Company’s Public Warrants is observable, the close price of the Public Warrant price
will be used as the fair value of the Public Warrants as of each relevant date.
The key inputs into the aforementioned binomial lattice model for the Public
Warrants and Private Placement Warrants both the initial measurement date and at March 31, 2021 were as follows:
|
|
Initial Measurement on January 22, 2021
|
|
|
March 31, 2021
|
|
Term (years)
|
|
|
6.0
|
|
|
|
5.8
|
|
Unit Price / Stock Price
|
|
$
|
10.35
|
|
|
$
|
9.71
|
|
Dividend Yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Risk-Free Rate
|
|
|
0.61
|
%
|
|
|
1.11
|
%
|
Volatility
|
|
|
20.00
|
%
|
|
|
10.8
|
%
|
The following table presents the changes in the fair value of
Level 3 liabilities measured at fair value:
|
|
Private Placement
Warrants
|
|
|
Public Warrants
|
|
|
Warrant Liabilities
|
|
Fair value as of January 1, 2021
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Initial measurement on January 22, 2021
|
|
|
7,336,667
|
|
|
|
13,608,333
|
|
|
|
20,945,000
|
|
Change in fair value
|
|
|
(4,236,667
|
)
|
|
|
(7,858,333
|
)
|
|
|
(12,095,000
|
)
|
Fair value as of March 31, 2021
|
|
$
|
3,100,000
|
|
|
|
5,750,000
|
|
|
|
8,850,000
|
|
There were no transfers in or out of Level 3 from other levels
in the fair value hierarchy. Transfers are recorded at the end of the reporting period.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements, other than as described below and the correction of previously
issued financial statements discussed in Note 2.
The immediacy of the effective date of the new guidance set forth
in the SEC Statement has resulted in a significant number of SPAC’s re-evaluating the accounting treatment for their warrants
with their professional advisors, including auditors and other advisors responsible for assisting SPAC’s in the preparation of
financial statements. This, in turn, has resulted in the Company’s delay in preparing and finalizing its condensed financial
statements as of and for the quarter ended March 31, 2021 and filing this Form 10-Q with the SEC by the prescribed deadline. As a
result, On May 28, 2021, the Company received a deficiency letter from the Nasdaq Capital Market (“Nasdaq”) indicating
that it is not in compliance with Section 5250(c) of the Nasdaq Rules and Regulations as a result of its failure to timely file the
Form 10-Q for the fiscal quarter ended March 31, 2021. Under the Nasdaq’s rules, the Company has 60 calendar days from the
date of the deficiency letter to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. As required by the
Nasdaq rules, on May 28, 2021, the Company issued a press release regarding the matters described herein.