References to the "Company," "TPB Acquisition Corp I," "our," "us" or "we" refer
to TPB Acquisition Corporation I. The following discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the unaudited condensed interim 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 (the
"Securities Act"), 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. 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 final prospectus for its
Initial Public Offering filed with the U.S. Securities and Exchange Commission
(the "SEC") and those described in our other filings with 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 as a Cayman Islands exempted company
on February 8, 2021. We were formed 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 (the "Business
Combination").
We are not limited to a particular industry or geographic region for purposes of
consummating a Business Combination. We are in an early stage and emerging
growth company and, as such, we are subject to all of the risks associated with
early stage and emerging growth companies.
All activity through September 30, 2021, relates to our formation and the
initial public offering (the "Initial Public Offering"), which is described
below and, subsequent to the Initial Public Offering, identifying a prospective
target for an initial Business Combination. We will not generate any operating
revenues until after the completion of its initial Business Combination, at the
earliest. We will generate non-operating income in the form of interest income
from the proceeds derived from the Initial Public Offering held in trust.
December 31st is our fiscal year end.
Our sponsor is TPB Acquisition Sponsor I, LLC (the "Sponsor"). The registration
statement for our Initial Public Offering was declared effective on August 10,
2021. On August 13, 2021, we consummated our Initial Public Offering of
17,500,000 units (the "Units" and, with respect to the Class A ordinary shares
included in the Units being offered, the "Public Shares"), at $10.00 per Unit,
generating gross proceeds of $175.0 million, and incurring offering costs of
approximately $10.5 million, of which approximately $6.1 million and
approximately $489,000 was for deferred underwriting commissions (see Note 6 to
our condensed interim financial statements) and offering costs allocated to
derivate warrant liabilities, respectively. On August 17, 2021, we consummated a
partial exercise by the underwriters of their over-allotment option for 536,299
additional Units, generating gross proceeds of approximately $5.4 million (the
"Over-Allotment"), and incurring offering costs of $295,000, of which $188,000
was for deferred underwriting commissions.
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Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 4,000,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $1.50 per Private Placement Warrant to the Sponsor, generating
proceeds of $6.0 million (see Note 4 to our financial statements). Concurrent
with the consummation of the Over-Allotment on August 17, 2021, the Sponsor
purchased 71,507 additional Private Placement Warrants, generating proceeds of
$107,260 (the "Second Private Placement").
Upon the closing of the Initial Public Offering, Over-Allotment, Private
Placement and the Second Private Placement, $180.4 million ($10.00 per Unit) of
the net proceeds of the Initial Public Offering and the Private Placement was
placed in a trust account (the "Trust Account"), located in the United States,
and only invested in U.S. government treasury obligations with a maturity of
185 days or less or in money market funds meeting certain conditions under
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, until the earlier of (i) the completion of a Business
Combination and (ii) the distribution of the funds held in the Trust Account, as
described below.
Results of Operations
Our entire activity from February 8, 2021 (inception) through August 13, 2021,
was in preparation for an Initial Public Offering and, subsequent to the Initial
Public Offering, identifying a prospective target for an initial Business
Combination. We will not generate any operating revenues until the closing and
completion of our initial Business Combination, at the earliest.
For the three months ended September 30, 2021, we had a net loss of
approximately $1.1 million which consisted of approximately $367,000 of general
and administrative expenses, approximately $17,000 of general and administrative
expenses related party, approximately $654,000 loss upon issuance of private
placement warrants, approximately $577,000 of offering costs associated with
derivative warrant liabilities, partially offset by approximately $700 income
from investments held in the Trust Account, and approximately $496,000 from the
change in fair value of derivative warrant liabilities.
For the period from February 8, 2021 (inception) through September 30, 2021, we
had a net loss of approximately $1.2 million which consisted of approximately
$432,000 of general and administrative expenses, approximately $17,000 of
general and administrative expenses related party, approximately $654,000 of
loss upon issuance of private placement warrants, approximately $577,000 of
offering costs associated with derivative warrant liabilities, partially offset
by approximately $700 of income from investments held in the Trust Account, and
approximately $496,000 from the change in fair value of derivative warrant
liabilities.
Liquidity and Capital Resources
As of September 30, 2021 we had approximately $895,000 in our operating bank
account and working capital of approximately $1.2 million.
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the cash contribution of $25,000 from the Sponsor to
purchase 7,187,500 Class B ordinary shares (the "Founder Shares"), and the loan
from the Sponsor of approximately $300,000 under the Note. We repaid the Note in
full on August 16, 2021. Subsequent to the consummation of the Initial Public
Offering, our liquidity has been satisfied through the net proceeds from the
consummation of the Initial Public Offering and the Private Placement held
outside of the Trust Account. 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 our officers and directors may, but are not obligated to,
provide us Working Capital Loans. As of September 30, 2021, there were no
amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet our needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using the funds held outside of the Trust Account for
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.
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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
a monthly fee of $10,000 for general and administrative services, including
office space, utilities and administrative support. We began incurring these
fees on August 10, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation. In
the three months ended September 30, 2021, and for the period from February 8,
2021 (inception) through September 30, 2021, we incurred approximately $17,000
of such fees, presented as general and administrative fees - related party on
the accompanying unaudited condensed interim statements of operations. At
September 30, 2021, $17,000 is accrued and presented in the accrued expenses on
the accompanying unaudited condensed balance sheet.
The underwriters are entitled to a deferred fee of $0.35 per unit issued in the
Initial Public Offering, or approximately $6.3 million 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 we complete a Business Combination,
subject to the terms of the underwriting agreement.
Forward Purchase Agreements
On August 10, 2021, we entered into a forward purchase agreement with the
Sponsor, pursuant to which the Sponsor agreed to purchase up to an aggregate of
2,500,000 Units (the "Forward Purchase Units"), at a price of $10.00 per Unit,
for an aggregate purchase price of up to $25,000,000. The purchase of the
Forward Purchase Units is expected to take place in one or more private
placements, with the full amount to have been purchased no later than
simultaneously with the closing of the Business Combination. The forward
purchase warrants included in the Forward Purchase Units will be exercised on
the same terms as the Public Warrants.
We also entered into additional forward purchase agreements on August 10, 2021,
whereby additional forward purchasers agreed to purchase up to an aggregate of
8,750,000 Class A ordinary shares (the "Forward Purchase Shares"), at a price of
$10.00 per share, for an aggregate purchase price of up to $87,500,000 in
connection with the closing of the initial Business Combination. The additional
forward purchasers may satisfy their funding commitments with respect to a
number of additional Forward Purchase Shares by (i) committing to purchase some
or all of the additional Forward Purchase Shares allocated to such additional
forward purchaser, (ii) executing a non-redemption agreement with respect to an
equal number of Public Shares held by it (on a share-for-share basis such that
the agreement not to redeem one Public Shares shall be deemed to satisfy a
commitment to purchase one additional Forward Purchase Share), or (iii) a
combination of the foregoing. Any purchases of the additional Forward Purchase
Shares are expected to take place in one or more private placements, but no
later than simultaneously with the closing of the Business Combination. Pursuant
to the additional forward purchase agreements, the Sponsor agreed to transfer up
to 50% (not to exceed 2,187,500 Founder Shares), but not less than 10% (not to
exceed 437,500 Founder Shares), of the Founder Shares outstanding as of the
closing of the Initial Public Offering to fully subscribing additional forward
purchasers. In addition, the Sponsor agreed that the remaining Founder Shares
held by it will be subject to price-based vesting conditions. Such shares will
vest in three equal installments when the price of the Class A ordinary shares
on Nasdaq equals or exceeds $10.00, $12.50 and $15.00 for any 20 trading days
within any 30 trading-day period, commencing on the date of the closing of the
initial Business Combination and ending on the third anniversary thereof. The
Sponsor will forfeit any remaining Founder Shares for no consideration to the
extent the trading price thresholds described above are not met during the
specified period.
The proceeds of any purchases under the forward purchase agreements will not be
deposited in the Trust Account. The Forward Purchase Shares will not have any
redemption rights in connection with the Business Combination or in connection
with certain amendments to out amended and restated memorandum and articles of
association and will not be entitled to liquidating distributions from the Trust
Account if we fail to complete the Business Combination within the Combination
Period. Forward purchase shares will be subject to certain registration rights,
as long as such Forward Purchase Shares are held by the Sponsor, the additional
forward purchasers or the forward transferees. The forward purchase shares, to
the extent issued prior to the record date for a shareholder vote on the
Business Combination or any other matter, will have the right to vote on such
matter with all other outstanding Class A ordinary shares.
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Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed interim financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed interim financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We have identified the
following as our critical accounting policies:
Derivative Financial Instruments
We do use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants and forward purchase agreements, to determine if
such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to FASB ASC 480 and FASB ASC Topic 815, "Derivatives and
Hedging" ("ASC 815"). The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity is
re-assessed at the end of each reporting period. Derivative warrant liabilities
are classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
The warrants issued in connection with the Initial Public Offering (the "Public
Warrants") and the Private Placement Warrants are recognized as derivative
liabilities in accordance with ASC 815. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjusts the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value will be
recognized in our unaudited condensed Statement of operations. The fair value of
the Public Warrants issued in connection with the Public Offering and Private
Placement Warrants were initially and subsequently measured at fair value using
a Monte Carlo simulation model. Derivative warrant liabilities are classified as
non-current liabilities as their liquidation will not be reasonably expected to
require the use of current assets or require the creation of current
liabilities.
Class A Ordinary Shares Subject to Possible Redemption
We account for its Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC 480. Shares of Class A ordinary shares
subject to mandatory redemption (if any) are classified as liability instruments
and are measured at fair value. Shares of conditionally redeemable Class A
ordinary shares (including Class A 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, shares of Class A
ordinary shares are classified as shareholders' equity. The Company's Class A
ordinary shares feature certain redemption rights that are considered to be
outside of the Company's control and subject to the occurrence of uncertain
future events. Accordingly, as of September 30, 2021, 18,036,299 shares of Class
A ordinary shares subject to possible redemption are presented as temporary
equity, outside of the shareholders' equity section of our unaudited condensed
balance sheet.
Effective with the closing of the Initial Public Offering (including exercise of
the over-allotment option), the Company recognized the accretion from initial
book value to redemption amount, which resulted in charges against additional
paid-in capital (to the extent available) and accumulated deficit.
Net Loss per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. Net income (loss) per
ordinary share is calculated by dividing the net income (loss) by the weighted
average number of ordinary shares outstanding for the respective period.
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We do not consider the effect of the warrants issued in connection with the
Initial Public Offering (including exercise of the over-allotment option) and
the Private Placement to purchase an aggregate of 10,083,600 ordinary shares in
the calculation of diluted income (loss) per share, because their exercise is
contingent upon future events and their inclusion would be anti-dilutive under
the treasury stock method. Accretion associated with the redeemable Class A
ordinary shares is excluded from earnings per share as the redemption value
approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("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. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The Company adopted ASU 2020-06 on February
8, 2021 (inception) using a modified retrospective method for transition.
Adoption of the ASU did not impact our financial position.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on our unaudited condensed interim financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
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