References to the "Company," "Periphas Capital Partnering Corporation,"
"Periphas," "our," "us" or "we" refer to Periphas Capital Partnering
Corporation. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
unaudited interim condensed financial statements and the notes thereto contained
elsewhere in this report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible Partnering Transactions (as defined below) and the financing
thereof, and related matters, as well as all other statements other than
statements of historical fact included in this Form 10-Q. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those
described in our other Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on September 11, 2020. We
were 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 (the "Partnering Transaction"). We are an emerging growth
company and, as such, the Company is subject to all of the risks associated with
emerging growth companies.
Our sponsor is PCPC Holdings, LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for our Initial Public Offering was
declared effective on December 9, 2020. On December 14, 2020, we consummated our
Initial Public Offering of 14,400,000 CAPSTM at $25.00 per CAPSTM, generating
gross proceeds of $360.0 million, and incurring offering costs of approximately
$4.0 million (net of reimbursement of offering costs of approximately $350,000
from the underwriter). On December 14, 2020, the underwriter exercised the
over-allotment option in full, and on December 16, 2020, purchased 2,160,000
additional CAPSTM (the "Over-Allotment CAPS™"), generating additional gross
proceeds of $54.0 million, and incurred additional offering costs of
approximately $540,000 in underwriting fees (the "Over-Allotment").
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 224,000 private placement CAPSTM
(the "Private Placement CAPSTM") at a price of $25.00 per CAPSTM to the Sponsor,
generating proceeds of $5.6 million. Simultaneously with the closing of the
Over-Allotment on December 16, 2020, we consummated the second closing of the
Private Placement, resulting in the purchase of an aggregate of an additional
21,600 Private Placement CAPSTM at a price of $25.00 per CAPSTM by the Sponsor,
generating gross proceeds to the Company of $540,000.
Upon the closing of the Initial Public Offering and the Private Placement on
December 14, 2020, $360.0 million ($25.00 per CAPSTM) of the net proceeds of the
sale of the CAPSTM in the Initial Public Offering and of the Private Placement
CAPSTM in the Private Placement were placed in a trust account ("Trust Account")
located in the United States with Continental Stock Transfer & Trust Company
acting as trustee, and were invested in money market funds meeting the
conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), which
invest only in direct U.S. government treasury obligations, as determined by us.
Upon the closing of the Over-Allotment on December 16, 2020, additional net
proceeds from the consummation of the Over-Allotment of $54.0 million were
placed in the Trust Account, for a total of $414.0 million held in Trust
Account. In early November 2022, we instructed Continental Stock Transfer &
Trust Company to liquidate the U.S. government securities or money market funds
held in the Trust Account. All funds in the Trust Account are currently held in
cash (i.e., in one or more non-interest bearing bank accounts) and will continue
to be held in cash until the earlier of consummation of a Partnering Transaction
or liquidation of the Company.
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Our management has broad discretion with respect to the specific application of
the net proceeds of our initial public offering (the "Initial Public Offering")
of our securities called CAPSTM, although substantially all of the net proceeds
of the Initial Public Offering are intended to be generally applied toward
completing a Partnering Transaction. Furthermore, there is no assurance that we
will be able to successfully complete a Partnering Transaction.
We will have until December 14, 2022, (or March 14, 2023, if we have executed a
letter of intent, agreement in principle or definitive agreement for the
Partnering Transaction by December 14, 2022) to complete our initial Partnering
Transaction (the "Partnering Period"). If we do not complete a Partnering
Transaction within this period of time (and stockholders do not approve an
amendment to the certificate of incorporation to extend this date), it 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
the Public Shares, at a per-share price, payable in cash, of $25.00, and
(iii) as promptly as reasonably possible following such redemption, subject to
the approval of the remaining shareholders and the board of directors, liquidate
and dissolve, subject in the case of clauses (i) and (iii), to our obligations
under Delaware law to provide for claims of creditors and in all cases subject
to the other requirements of applicable law.
Liquidity and Going Concern
As of September 30, 2022, we had cash of approximately $274,000 and a working
capital deficit of approximately $322,000.
Our liquidity needs through the Initial Public Offering had been satisfied
through a payment of $25,000 from the Sponsor to cover certain offering costs on
our behalf in exchange for the issuance of the Founder Shares and the
Performance Shares, the loan under the Note from the Sponsor of approximately
$148,000 to us, and the net proceeds from the consummation of the Private
Placement not held in the Trust Account. We fully repaid the Note on
December 15, 2020 and borrowing is no longer available. In addition, in order to
finance transaction costs in connection with a Partnering Transaction, the
Sponsor or an affiliate of the Sponsor, or certain of our officers and directors
may, but are not obligated to, provide us Working Capital Loans. As of
September 30, 2022 and December 31, 2021, the Company had $200,000 and $0,
respectively, outstanding Working Capital Loans.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's ("FASB") Accounting Standards Update
("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," we have until December 14, 2022 (or March 14,
2023, if we execute a letter of intent, agreement in principle or definitive
agreement for the Partnering Transaction by December 14, 2022) to consummate a
Partnering Transaction. It is uncertain that we will be able to consummate a
Partnering Transaction by this time. If a Partnering Transaction is not
consummated by this date, there will be a mandatory liquidation and subsequent
dissolution of the Company. Management has determined that the liquidity
condition and mandatory liquidation, should a Partnering Transaction not occur,
and potential subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after December 14, 2022.
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 our financial position, results of its operations and search
for a partner candidate company, the specific impact is not readily determinable
as of the date of these financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing
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corporations are permitted to net the fair market value of certain new stock
issuances against the fair market value of stock repurchases during the same
taxable year. In addition, certain exceptions apply to the excise tax. The U.S.
Department of the Treasury (the "Treasury") has been given authority to provide
regulations and other guidance to carry out and prevent the abuse or avoidance
of the excise tax. Any share redemption or other share repurchase that occur
after December 31, 2022, in connection with a Business Combination, extension
vote or otherwise, may be subject to the excise tax. Whether and to what extent
our would be subject to the excise tax in connection with a Business
Combination, extension vote or otherwise will depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in
connection with the Business Combination, extension or otherwise, (ii) the
structure of a Business Combination, (iii) the nature and amount of any "PIPE"
or other equity issuances in connection with a Business Combination (or
otherwise issued not in connection with a Business Combination but issued within
the same taxable year of a Business Combination) and (iv) the content of
regulations and other guidance from the Treasury. In addition, because the
excise tax would be payable to us and not by the redeeming holder, the mechanics
of any required payment of the excise tax have not been determined. The
foregoing could cause a reduction in the cash available on hand to complete a
Business Combination and in our ability to complete a Business Combination.
Risks and Uncertainties
Global events, such as recent geopolitical instability, inflation and the
COVID-19 pandemic, have created or contributed to uncertainty in macroeconomic
conditions, including changes in interest rates, supply chain disruptions, labor
shortages and increased labor costs, which, in turn, could decrease overall
economic activity, hinder economic growth or cause a recession in the United
States or in the global economy. The extent of the impact of ongoing
macroeconomic conditions on our financial position, results of our operations
and/or search for a target company is uncertain and will depend on political,
social, economic and regulatory factors that are outside of our control,
including but not limited to the incidence and severity of additional COVID-19
virus variants and actions that may be taken by regulators and businesses in
response to macroeconomic uncertainty. We considered the impact of the current
economic environment and COVID-19 on our estimates and assumptions and
determined that there were no material adverse impacts on the unaudited
condensed consolidated financial statements as of September 30, 2022 and for the
three and nine months ended September 30, 2022. As events continue to evolve and
additional information becomes available, our estimates and assumptions may
change materially in future periods.
Results of Operations
Our entire activity since inception up to our Initial Public Offering was in
preparation for our Initial Public Offering in December 2020, and since the
consummation of our Initial Public Offering, our activity has been limited to
the search for a prospective Partnering Transaction. We will not be generating
any operating revenues until the closing and completion of our initial
Partnering Transaction.
For the three months ended September 30, 2022, we had a net income of
approximately $1.8 million, which consisted of approximately a $836,000 gain
from changes in fair value of derivative warrant liabilities and approximately a
$1.5 million gain on investments held in Trust Account, partially offset by
approximately $120,000 in general and administrative expenses, $60,000 in
general and administrative expenses - related party, approximately $308,000 in
income tax expense, and approximately $50,000 in franchise tax expense.
For the three months ended September 30, 2021, we had net income of
approximately $2.4 million, which consisted of approximately $2.7 million gain
in change in fair value of derivative warrant liabilities and approximately a
$16,000 gain on investment held in Trust Account, partially offset by
approximately $140,000 in general and administrative expenses, $60,000 in
general and administrative expenses - related party, and approximately $50,000
in franchise tax expense.
For the nine months ended September 30, 2022, we had a net income of
approximately $6.8 million, which consisted of approximately a $5.8 million gain
from changes in fair value of derivative warrant liabilities and approximately a
$2.1 million gain on investments held in Trust Account, partially offset by
approximately $399,000 in general and administrative expenses, $180,000 in
general and administrative expenses - related party, approximately $382,000 in
income tax expense, and approximately $150,000 in franchise tax expense.
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For the nine months ended September 30, 2021, we had net income of approximately
$9.3 million, which consisted of approximately $10.1 million gain in change in
fair value of derivative warrant liabilities and approximately a $29,000 gain on
investment held in Trust Account, partially offset by approximately $519,000 in
general and administrative expenses, $183,000 in general and administrative
expenses - related party, and approximately $148,000 in franchise tax expense.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than an agreement to pay Administrative Services Agreement fees to our
Sponsor that total $20,000 per month for office space, secretarial and
administrative services provided to members of our management team. During each
of the three and nine months ended September 30, 2022 and 2021, the Company
incurred $60,000 and $180,000, respectively, in expenses in connection with such
services.
Registration and Stockholder Rights
The holders of the Founder Shares, Performance Shares, Forward Purchase Shares,
Private Placement Warrants and private placement shares underlying Private
Placement CAPSTM and private placement CAPSTM that may be issued upon conversion
of Working Capital Loans (and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants that are part of the Private
Placement CAPSTM, and CAPSTM may be issued upon conversion of Working Capital
Loans and upon conversion of the Founder Shares and the Performance Shares) are
entitled to registration rights pursuant to a registration rights agreement
signed upon the effective date of the Initial Public Offering, requiring the
Company to register such securities for resale. The holders of these securities
are entitled to make up to three demands, excluding short form demands, that we
register such securities. In addition, the holders have certain "piggy-back"
registration rights with respect to registration statements filed subsequent to
the completion of the Partnering Transaction. We will bear the expenses incurred
in connection with the filing of any such registration statements.
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP") requires management to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. A summary of our significant accounting
policies is included in Note 2 to our condensed financial statements in Part I,
Item 1 of this Quarterly Report. Certain of our accounting policies are
considered critical, as these policies are the most important to the depiction
of our financial statements and require significant, difficult or complex
judgments, often employing the use of estimates about the effects of matters
that are inherently uncertain. Such policies are summarized in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
in our Annual Report on Form 10-K filed with the SEC on March 22, 2022. There
have been no significant changes in the application of our critical accounting
policies during the nine months ended September 30, 2022.
Recent Issued Accounting Standards
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions." The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. The Company is still
evaluating the impact of this pronouncement on the condensed financial
statements.
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Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the accompanying financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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PERIPHAS CAPITAL PARTNERING CORPORATION 
