References in this Quarterly Report on Form 10-Q (this "Quarterly Report") to
"we," "us" or the "Company" refer to D and Z Media Acquisition Corp. References
to our "management" or our "management team" refer to our officers and
directors, and references to the "Sponsor" refer to D and Z Media 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 this
Quarterly Report and the final prospectus for our initial public offering
("Initial Public Offering") filed with the U.S. Securities and Exchange
Commission (the "SEC") on January 27, 2021. 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.
We are a blank check company incorporated on October 7, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses ("Business Combination"). We intend to
effectuate our initial Business Combination using cash from the proceeds of our
Initial Public Offering and the private placement of the private placement
warrants (the "Private Placement Warrants") that occurred simultaneously with
the consummation of our Initial Public Offering (the "Private Placement"), the
proceeds of the sale of our shares in connection with our initial Business
Combination, shares issued to the owners of the target, debt issued to bank or
other lenders or the owners of the target, or a combination of the foregoing.
We expect to continue to incur significant costs in the pursuit of our initial
Business Combination. We cannot assure you that our plans to complete our
initial 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 inception through June 30, 2021 were organizational
activities and those necessary to prepare for our Initial Public Offering,
described below, and, since our Initial Public Offering, our activity has been
limited to identifying a target company for a Business Combination. We do not
expect to generate any operating revenues until after the completion of our
initial Business Combination. We generate non-operating income in the form of
interest income on marketable securities held in the trust account established
for the benefit of our public stockholders (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 in
connection with searching for, and completing, our initial Business Combination.
For the three months ended June 30, 2021, we had a net loss of $5,566,539, which
consisted of operating costs of $527,575 and change in fair value of warrant
liability of $5,043,333 offset by interest income on marketable securities held
in the Trust Account of $4,369.
For the six months ended June 30, 2021, we had a net loss of $6,930,299, which
consisted of operating costs of $1,894,312 and change in fair value of warrant
liability of $5,043,333, offset by interest income on marketable securities held
in the Trust Account of $7,346.
Liquidity, Capital Resources and Going Concern
Until the consummation of our Initial Public Offering, our only source of
liquidity was an initial purchase of shares of Class B common stock, par value
$0.0001 per share ("Founder Shares"), by the Sponsor and loans from the Sponsor.
On January 28, 2021, we consummated our Initial Public Offering of 28,750,000
units ("Units"), including the issuance of 3,750,000 Units as a result of the
underwriters' full exercise of their over-allotment option, at $10.00 per Unit,
generating gross proceeds of $287,500,000. Simultaneously with the consummation
of our Initial Public Offering, we consummated the Private Placement of an
aggregate of 5,100,000 Private Placement Warrants to the Sponsor and Loop
Capital Markets LLC ("Loop Capital") at a price of $1.50 per Private Placement
Warrant, generating gross proceeds of $7,650,000.
Following our Initial Public Offering and the Private Placement, a total of
$287,500,000 was placed in the Trust Account. We incurred $16,309,358 in
transaction costs, consisting of $5,750,000 in cash underwriting fees,
$10,062,500 of deferred underwriting fees and $496,858 of other offering costs.
For the six months ended June 30, 2021, cash used in operating activities was
$1,546,429. Net loss of $6,930,299 was affected by change in fair value of
warrant liability of $5,043,333, interest earned on marketable securities held
in the Trust Account of $7,346, executive compensation cost of $150,000 and
changes in operating assets and liabilities, which provided $197,833 of cash
from operating activities.
As of June 30, 2021, we had marketable securities held in the Trust Account of
$287,507,346. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust Account
(excluding deferred underwriting commissions), to complete our initial Business
Combination. We may withdraw interest to pay our taxes. To the extent that our
equity or debt is used, in whole or in part, as consideration to complete our
initial 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 June 30, 2021, we had cash held outside the Trust Account of $257,200. 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor or an affiliate of the
Sponsor or certain of our officers and directors may loan us funds as may be
required. If we complete our initial Business Combination, we would repay such
loaned amounts. In the event that our initial 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 the Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into warrants identical to the Private Placement Warrants, at a
price of $1.50 per warrant at the option of the lender.
In May 2021, we received a Commitment Letter from the Sponsor whereby the
Sponsor commits to funding any working capital shortfalls through the earlier of
an initial Business Combination or our liquidation. The loans would be issued as
required and each loan would be evidenced by a promissory note, up to an
aggregate of $125,000. The loans will be non-interest bearing, unsecured and
payable upon the consummation of our initial Business Combination or at the
holder's discretion, convertible into warrants at a price of $1.50 per warrant.
If we do not complete a Business Combination, any such loans will be forgiven.
We expect we will need additional financing in order to meet the expenditures
required for operating our business prior to our initial Business Combination.
We anticipate the Sponsor will be raising additional funding during the third or
fourth quarter of 2021 to be loaned to us as described in the foregoing
paragraphs, however we cannot provide any assurances that additional financing
will be available to us on commercially acceptable terms, if at all.
Moreover, we may need to obtain additional financing to complete our initial
Business Combination, either because the transaction requires more cash than is
available from the proceeds held in the Trust Account or because we become
obligated to redeem a significant number of our public shares upon completion of
the Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. If we are unable to
complete our initial Business Combination because we do not have sufficient
funds available to us, we will be forced to cease operations and liquidate the
Trust Account. In addition, following our initial Business Combination, if cash
on hand is insufficient, we may need to obtain additional financing in order to
meet our obligations.
The foregoing conditions raise substantial doubt about our ability to continue
as a going concern until the earlier of the consummation of our initial Business
Combination or one year from this filing.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or other long-term
liabilities. We had agreed, commencing on January 26, 2021, to pay the Sponsor a
monthly fee of $15,000 for office space and secretarial and administrative
services until the earlier of the completion of our initial Business Combination
and our liquidation. On May 25, 2021, we agreed with the Sponsor to cease such
agreement. The Sponsor is obligated to pay $30,000 per month to Mark Wiltamuth,
our Chief Financial Officer, for his services prior to the consummation of our
initial Business Combination, subject to the terms of an agreement between the
Sponsor and Mr. Wiltamuth that was entered into after the consummation of our
Initial Public Offering.
The underwriters of our Initial Public Offering are entitled to a deferred fee
of $0.35 per Unit, or $10,062,500 in the aggregate. Subject to the terms of the
underwriting agreement, (i) the deferred fee was placed in the Trust Account and
will be released to the underwriters only upon the completion of our initial
Business Combination and (ii) the deferred fee will be waived by the
underwriters in the event that we do not complete a Business Combination.
Critical Accounting Policies and Estimates
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:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and measured at fair value.
Conditionally redeemable common stock (including common stock that features
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) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our common stock features certain redemption
rights that are considered to be outside of our control and subject to the
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our balance sheet.
Net Loss Per Common Stock Share
Net income (loss) per share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the period.
We have not considered the effect of the warrants sold in our Initial Public
Offering and the Private Placement to purchase an aggregate of 14,683,333 shares
in the calculation of diluted loss per share, since the exercise of the warrants
are contingent upon the occurrence of future events and the inclusion of such
warrants would be anti-dilutive.
Our statement of operations includes a presentation of income (loss) per share
for Redeemable Class A Common Stock in a manner similar to the two-class method
of income (loss) per share. Net income per common share, basic and diluted, for
Redeemable Class A Common Stock is calculated by dividing the proportionate
share of income or loss on marketable securities held by the Trust Account, net
of applicable franchise and income taxes, by the weighted average number of
common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for Non-Redeemable Class A and Class B
Common Stock is calculated by dividing the net loss, adjusted for income or loss
on marketable securities attributable to Redeemable Class A Common Stock, by the
weighted average number of non-redeemable common stock outstanding for the
Non-Redeemable Class A and Class B Common Stock includes Founder Shares and
non-redeemable shares of common stock as these shares do not have any redemption
features. Non-Redeemable Class A and Class B Common Stock participates in the
income or loss on marketable securities based on non-redeemable common stock
shares' proportionate interest.
Public Warrants and Private Placement Warrants
We account for the public warrants and the Private Placement Warrants issued in
connection with our Initial Public Offering in accordance with ASC Topic 815-40,
Derivatives and Hedging, Contracts in Entity's Own Equity, under which the
warrants do not meet the criteria for equity classification and must be recorded
as liabilities. As the warrants meet the definition of a derivative as
contemplated in ASC 815, the warrants are measured at fair value at inception
and at each reporting date in accordance with ASC 820, "Fair Value Measurement",
with changes in fair value recognized in the statements of operations in the
period of change.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board 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.
We are currently assessing the impact, if any, that ASU 2020-06 would have on
our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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