References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to FTAC Zeus Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer collectively to FTAC Zeus Sponsor, LLC and FTAC Zeus Advisors,
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 Delaware on December 11, 2020 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 target businesses. We intend to effectuate our business combination
using cash from the proceeds of our Initial Public Offering and the sale of the
Private Placement Units that occurred simultaneously with the completion of our
Initial Public Offering, our capital stock, debt or a combination of cash, stock
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
All activity for the period from December 11, 2020 (inception) through December
31, 2020 was de minimis and related only to our formation. All activity for the
period from January 1, 2021 (commencement of operations) through March 31, 2022
relates to our formation, the Initial Public Offering and, after the Initial
Public Offering, identifying a target company for an initial Business
Combination. We do not expect to generate any operating revenues until after the
completion of our Business Combination, at the earliest. We expect to generate
non-operating income in the form of interest income on marketable securities
held after the Initial Public Offering. 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 a net loss of $743,343, which
consisted of operating costs of $784,483, offset by interest income earned on
investments held in Trust Account of $41,140.
For the period from January 1, 2021 (commencement of operations) through March
31, 2021, we had a net loss of $1,381, which consisted of formation and
operating costs.
Liquidity and Capital Resources
On November 23, 2021, we consummated the Initial Public Offering of 40,250,000
Units (the "Units" and, with respect to the shares of Class A common stock
included in the Units sold, the "Public Shares"), which included the full
exercise by the underwriter of its over-allotment option in the amount of
5,250,000 Units, at a price of $10.00 per Unit, generating gross proceeds of
$402,500,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 1,778,750 units (each, a "Private Placement Unit") at a price of
$10.00 per Private Placement Unit in a private placement to our Sponsor,
generating gross proceeds of $17,787,500.
Transaction costs amounted to $24,712,590, consisting of $7,000,000 of
underwriting fees, $17,150,000 of deferred underwriting fees, $6,860,000 of
deferred advisory fees, $3,362,590 of other offering costs and a $9,660,000
reimbursement for the financial advisory fee.
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Following the closing of the Initial Public Offering, the full exercise of the
over-allotment option, and the sale of the Private Placement Units, a total of
$408,537,500 ($10.15 per Unit) was placed in the Trust Account and invested in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
with a maturity of 185 days or less, or in money market funds meeting certain
conditions under Rule 2a-7 of the Investment Company Act, as determined by us,
until the earlier of: (i) the consummation of a Business Combination or (ii) the
distribution of the funds in the Trust Account to the Company's stockholders, as
described below.
As of March 31, 2022, we had $2,696,822 in cash and working capital of
$2,620,200. Prior to the completion of our Initial Public Offering, our
liquidity needs had been satisfied through a capital contribution from the
Sponsor of $25,000 and a loan to us of up to $300,000 by our Sponsor under an
unsecured promissory note, which had no outstanding balance as of March 31,
2022. The outstanding balance under the promissory note of $122,926 was paid in
full on November 23, 2021.
As of March 31, 2022, we had cash, investments and marketable securities held in
the Trust Account of $408,582,511. We intend to use substantially all of the
funds held in the Trust Account, including any amounts representing interest
earned on the Trust Account to complete our Business Combination. We may
withdraw interest to pay taxes. During the three months ended March 31, 2022, we
did not withdraw any interest income from the Trust Account. To the extent that
our capital stock 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.
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 finance transaction costs in connection with a Business Combination,
our Sponsor or an affiliate of our Sponsor, or certain of our directors and
officers may, but are not obligated to, loan us funds as may be required. If we
complete a Business Combination, we may repay such loaned amounts out of the
proceeds of the Trust Account released to us. 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 $2,000,000 of such loans
may be convertible into units, at a price of $10.00 per unit, at the option of
the lender at the time of the Business Combination. The units would be identical
to the Private Placement Units. The terms of such loans, if any, have not been
determined and no written agreements exist with respect to such loans. We do not
expect to seek loans from parties other than our Sponsor or an affiliate of our
Sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
trust account. As of March 31, 2022, no such loans were outstanding.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business through the earlier of the
consummation of a Business Combination or one year from the date of the
financial statements. However, if our estimate of the costs of identifying a
target business, undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our Business
Combination. Moreover, we may need to obtain additional financing either to
complete our Business Combination or because we become obligated to redeem a
significant number of our Public Shares upon consummation of our Business
Combination, in which case we may issue additional securities or incur debt in
connection with such Business Combination. Subject to compliance with applicable
securities laws, we would only complete such financing simultaneously with the
completion of our Business Combination. If we are unable to complete our
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 Business Combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations.
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, other than an agreement to pay the Sponsor
or an affiliate of the Sponsor a monthly fee of $40,000 for office space,
administrative and shared personnel support services to the Company. We began
incurring these fees on November 19, 2021 and will continue to incur these fees
monthly until the earlier of the completion of the Business Combination and our
liquidation. For the three months ended March 31, 2022, we incurred and paid
$120,000 in fees for these services. As of March 31, 2022, $181,935 had been
accrued in Due to Related Party and charged to operating expenses, $21,935 of
which is still outstanding.
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Pursuant to a registration rights agreement entered into on November 18, 2021,
the holders of the Founder Shares, Private Placement Units (including securities
contained therein) and warrants that may be issued upon conversion of loans made
by the Sponsor or one of its affiliates have registration rights to require us
to register a sale of any of our securities held by them (in the case of the
founder shares, only after conversion to the Class A common stock). These
holders are entitled to make up to three demands, excluding short form
registration demands, that the Company registers such securities for sale under
the Securities Act. In addition, these holders have "piggy-back" registration
rights to include such securities in other registration statements we filed and
rights to require us to register for resale such securities pursuant to Rule 415
under the Securities Act.
The underwriter agreed to defer until consummation of the Business Combination
$17,150,000 of its underwriting commissions, which equals 4.0% of the gross
proceeds from the Units sold to the public, excluding any Units purchased
pursuant to the underwriter's overallotment option, and 6.0% of the gross
proceeds from the Units sold to the public pursuant to the underwriter's
overallotment option. This amount was placed in the Trust Account and will be
released to the underwriter only on completion of an initial Business
Combination.
We engaged Cohen & Company Capital Markets, a division of J.V.B. Financial
Group, LLC ("CCM"), to provide financial advisory services in connection with
the Initial Public Offering. We paid CCM a fee in an amount equal to 0.8% of the
aggregate proceeds of the Initial Public Offering (excluding the proceeds of the
exercise of the overallotment option) net of underwriter's expenses, upon the
closing of the Initial Public Offering. We also engaged CCM to act as an advisor
in connection with the Business Combination for which it will earn an advisory
fee of 1.6% of the proceeds of the Initial Public Offering (excluding the
proceeds of the exercise of the overallotment option) payable at closing of the
Business Combination. CCM is also entitled to an advisory fee equal to 2.4% of
the aggregate proceeds of the exercise of the overallotment option, payable at
the closing of the Business Combination. The underwriter has agreed to reimburse
us for the fee to CCM as it becomes payable out of the underwriting commissions,
including the deferred underwriting commissions payable at closing of the
Business Combination. Accordingly, a reimbursement receivable and deferred
advisory fee of $6,860,000 has been reflected in the accompanying balance
sheets.
Critical Accounting Policies
The preparation of the condensed financial statements in conformity with GAAP
requires 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
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.
We have identified the following as our critical accounting policies:
Offering Costs
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff
Accounting Bulletin ("SAB") Topic 5A - "Expenses of Offering". Offering costs
consist of legal, accounting, underwriting fees and other costs incurred through
the Initial Public Offering date that are directly related to the Initial Public
Offering. Offering costs directly attributable to the issuance of an equity
contract to be classified in equity are recorded as a reduction of equity.
Offering costs for equity contracts that are classified as assets and
liabilities are expensed immediately. As of March 31, 2022, the Company incurred
offering costs amounting to $24,712,590, consisting of $7,000,000 of
underwriting fees, $17,150,000 of deferred underwriting fees, $6,860,000 of
deferred advisory fees, $3,362,590 of other offering costs and a $9,660,000
reimbursement for the financial advisory fee. These offering costs are allocated
between components of temporary and permanent equity based on the relative fair
value of these components.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Class A common stock subject to
mandatory redemption is classified as a liability instrument and is 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 in temporary equity. At all other times, common stock
is classified as stockholders' equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, at March 31, 2022 and
December 31, 2021, the 40,250,000 shares of Class A common stock are presented
at redemption value as temporary equity, outside of the stockholders' deficit
section of our balance sheets.
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We recognize changes in redemption value immediately as they occur and adjust
the carrying value of redeemable Class A common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable Class A common stock are affected by charges
against additional paid in capital and accumulated deficit. This method would
view the end of the reporting period as if it were also the redemption date for
the security.
Net Loss Per Common Stock
We have two classes of shares, which are referred to as Class A common stock and
Class B common stock. Earnings and losses are shared pro rata between the two
classes of shares. We have not considered the effect of the warrants sold in the
Initial Public Offering and the Private Placement to purchase an aggregate of
21,014,375 shares of our Class A common stock in the calculation of diluted loss
per share, since their exercise is contingent upon future events. As a result,
diluted net loss per common stock is the same as basic net loss per common
stock.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception, and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. 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.
We do 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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