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 those factors described herein including Item 1A "Risk Factors," and in
the Risk Factors section of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021, and our Quarterly Report on Form 10-Q for the periods
ended March 31, 2022 and June 30, 2022 filed with the U.S. Securities and
Exchange Commission on March 31, 2022, May 16, 2022, and August 12, 2022
respectively. 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, 2022, 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 and pursuing 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.
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 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.
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
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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 within Note 1 to the condensed interim financial statements.
Proposed Business Combination
As described in Note 1 to the unaudited condensed financial statements in Item 1
of this Form 10-Q, on September 14, 2022, we entered into a Business Combination
Agreement (the "Business Combination Agreement") by and among Lavoro Limited, an
exempted company incorporated with limited liability in the Cayman Islands ("New
PubCo"), Lavoro Merger Sub I Limited, an exempted company incorporated with
limited liability in the Cayman Islands and a direct, wholly owned subsidiary of
New PubCo ("First Merger Sub"), Lavoro Merger Sub II Limited, an exempted
company incorporated with limited liability in the Cayman Islands and a direct,
wholly owned subsidiary of New PubCo ("Second Merger Sub"), Lavoro Merger Sub
III Limited, an exempted company incorporated with limited liability in the
Cayman Islands and a direct, wholly owned subsidiary of New PubCo ("Third Merger
Sub" and, together with First Merger Sub and Second Merger Sub, the "Merger
Subs"), Lavoro Agro Limited, an exempted company incorporated with limited
liability in the Cayman Islands, and the Company. Each of New PubCo, the Merger
Subs, Lavoro Agro Limited and us (individually referred to herein as a "Party"
and, collectively, as the "Parties").
Pursuant to the Business Combination Agreement, the Parties have agreed that, on
the terms and subject to the conditions set forth in the Business Combination
Agreement, on the date immediately prior to the date on which the Third Merger
takes place (the "Closing Date"), substantially concurrently with and
immediately after the closing of the PIPE Investment, (A) First Merger Sub shall
be merged with and into our Company (the "First Merger"), with our Company
surviving as a direct wholly owned subsidiary of New PubCo, (B) immediately
following the First Merger, the Company, as successor in the First Merger, shall
be merged with and into Second Merger Sub (the "Second Merger" and, together
with the First Merger, the "SPAC Mergers"), with Second Merger Sub surviving as
a direct wholly owned subsidiary of New PubCo, and (C) on the Closing Date,
Third Merger Sub shall be merged with and into Lavoro Agro Limited (the "Third
Merger" and, together with the SPAC Merger, the "Mergers") Lavoro Agro Limited
surviving as a direct wholly owned subsidiary of New PubCo.
As a result of the Third Merger, among other things, (i) each common share, par
value US$0.00005 per share, of Lavoro Agro Limited ( the "Lavoro Agro Limited
Share") owned by Lavoro Agro Limited, Third Merger Sub or any wholly owned
subsidiary of Lavoro Agro Limited immediately prior to the Third Merger shall
automatically be cancelled, (ii) each Lavoro Agro Limited Share that is not a
Cashout Share (as defined in the Business Combination Agreement) that is issued
and outstanding immediately prior to the Third Effective Time (as defined in the
Business Combination Agreement) will be converted into and shall for all
purposes represent only the right to receive a number of validly issued, fully
paid and nonassessable Class A ordinary shares of New PubCo, par value $0.001
per share, equal to the Per Share Stock Consideration (as defined in the
Business Combination Agreement) and (iii) each Cashout Share, if any, shall be
converted into and shall for all purposes represent only the right to receive
the Per Share Cash Consideration.
The Per Share Stock Consideration delivered to shareholders of Lavoro Agro
Limited shall be an amount of New PubCo Ordinary Shares equal to the equity
value of $1.125 billion, as adjusted by the Adjustment Factor (as defined in the
Business Combination Agreement), divided by the fully diluted outstanding shares
of Lavoro Agro Limited prior to the closing of the proposed Business Combination
(the "Closing"), divided by $10.00 (the per share reference price). Pursuant to
the SPAC Mergers, (i) each of our Class A ordinary shares and the Company's
Class B ordinary shares (collectively, the "ordinary shares"), other than
ordinary shares that are owned us, First Merger Sub or any wholly owned
subsidiary of the Company, will be exchanged for New PubCo Ordinary Shares (as
adjusted in accordance with the SPAC Exchange Ratio (as defined in the Business
Combination Agreement)), and (ii) each Public Warrant and Private Placement
Warrant will become a warrant to acquire New PubCo Ordinary Shares (as adjusted
in accordance with the SPAC Exchange Ratio) on the same terms and conditions.
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The Business Combination Agreement, the SPAC Mergers and the related transaction
agreements have been unanimously approved by our board of directors and the
board of directors has unanimously determined to recommend that our shareholders
vote to approve the SPAC Shareholder Matters (as defined in the Business
Combination Agreement) and such other actions as contemplated by the Business
Combination Agreement.
Consummation of the transactions contemplated by the Business Combination
Agreement is subject to customary closing conditions, including approval by the
Company's and the Lavoro Agro Limited shareholders. The Business Combination
Agreement also contains other conditions, including, among others: (i) the
Company having at least $5,000,001 of net tangible assets following the exercise
by the holders of the Class A ordinary shares issued in the our initial public
offering of securities and outstanding immediately before the First Effective
Time of their right to redeem their Class A ordinary shares in accordance with
our governing documents, (ii) the approval by the applicable governmental
authorities and the absence of any applicable Legal Requirement prohibiting or
enjoining the consummation of the transactions, (iii) the receipt of approval
for the New PubCo Ordinary Shares to be listed on Nasdaq or another public stock
market or exchange in the United States, subject to the official notice of
issuance thereof and the requirement to have a sufficient number of round lot
holders, and (iv) the effectiveness of the registration statement on Form F-4
filed by New PubCo (the "Registration Statement"), which Registration Statement
shall not be subject to any stop order or proceeding (or threatened proceeding
by the SEC) seeking a stop order with respect to the Registration Statement. On
September 29, 2022, New Pubco filed a registration statement with the SEC on
Form F-4.
In addition, each party's obligations to consummate the Closing is subject to
the condition that SPAC Cash (as defined in the Business Combination Agreement),
comprising the aggregate amount of cash contained in the Trust Account (giving
effect to the Redemption (as defined in the Business Combination Agreement)),
plus proceeds of the PIPE Investment, minus transaction costs, shall equal or
exceed $180,000,000. The parties agreed that they may solicit additional PIPE
Investments prior to the Closing, on terms and with counterparties mutually
agreeable to the parties.
PIPE Subscription Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, our Sponsor entered into the PIPE Subscription Agreement") pursuant
to which the PIPE Investor has committed (the "PIPE Investment") to subscribe
for and purchase, 10,000,000 Class A ordinary shares (at $10.00 per share), for
an aggregate purchase price of $100,000,000. The Sponsor is an affiliate of our
Company.
Sponsor Letter Agreement
Concurrently with the execution of the Business Combination Agreement, our
Sponsor also amended its existing letter agreement, dated August 13, 2021 (the
"Amendment to the Sponsor Letter Agreement") with our Company as more fully
described in Note 4 to the unaudited condensed financial statements contained
herein in Item 1 to this Quarterly Report on Form 10-Q.
On September 15, 2022, the Business Combination Agreement, form of PIPE
Subscription Agreement, and the Amendment to the Sponsor Letter Agreement were
filed with SEC by us as exhibits to a Current Report on Form 8-K.
Liquidity and Going Concern
As of September 30, 2022, we had approximately $ 875,000 in our operating bank
account and working capital deficit of approximately $3.5 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 Private
Placement held outside of the Trust Account and loans from our Sponsor. 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.
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On April 28, 2022, we issued an unsecured promissory note (the "2022 Note") in
the principal amount of up to $3,000,000 to our Sponsor, of which $1,000,000 was
funded upon execution of the 2022 Note. As of September 30, 2022, there was
$2,000,000 outstanding under the Working Capital Loan.
Based on the foregoing, management has determined that we do not have sufficient
liquidity to meet our anticipated obligations for at least twelve months after
the financial statements are available to be issued, as such, the events and
circumstances raise substantial doubt about our ability to continue as a going
concern. The accompanying unaudited interim condensed financial statements have
been prepared on a going concern basis and do not include any adjustments that
might arise as a result of uncertainties about our ability to continue as a
going concern.
Results of Operations
Our entire activity since inception up to September 30, 2022 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective target and
the pursuit of an initial Business Combination. We will not be generating any
operating revenues until the closing and completion of our initial Business
Combination, at the earliest.
For the three months ended September 30, 2022, we had net loss of approximately
$5.5 million, which consisted of a non-cash charge of approximately $4.3 million
resulting from changes in fair value of derivative warrant liabilities,
approximately $2.1 million in general and administrative expenses, and
approximately $30,000 in general and administrative expenses - related party,
partially offset by approximately $904,000 in income from investments held in
the trust account.
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 nine months ended September 30, 2022, we had net loss of approximately
$2.3 million, which consisted of approximately $4.4 million in general and
administrative expenses and $90,000 in general and administrative expenses -
related party, partially offset by approximately $1.1 million resulting from
changes in fair value of derivative warrant liabilities and approximately
$990,000 in income from investments held in the trust account
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.
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. For
the three months ended September 30, 2022 and 2021, the Company incurred $30,000
and approximately $17,000 of such fees, respectively, which are presented as
general and administrative fees - related party in the accompanying condensed
statements of operations. For the nine months ended September 30, 2022 and for
the period from February 8, 2021 (inception) through September 30, 2021, the
Company incurred $90,000 and approximately $17,000 of such fees, respectively,
which are presented as general and administrative fees - related party in the
accompanying condensed statements of operations. As of September 30, 2022 and
December 31, 2021, approximately $137,000 and $47,000, respectively, is accrued
related to these services and presented in accrued expenses on the accompanying
condensed balance sheets.
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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 "Sponsor Forward
Purchase Agreement"). 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.
The Sponsor waived all rights under the Sponsor Forward Purchase Agreement and
the Sponsor Forward Purchase Agreement will be terminated upon the consummation
of the proposed Business Combination.
We also entered into additional forward purchase agreements on August 10, 2021
(the "Third Party Forward Purchase Agreements"), whereby additional forward
purchasers agreed to purchase approximately 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 approximately $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 Third Party 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.
The right to purchase Forward Purchase Shares in connection with the proposed
Business Combination has been waived by each entity party to the Third Party
Forward Purchase Agreements.
PIPE Subscription Agreement
Concurrently with the execution and delivery of the Business Combination
Agreement, our Sponsor entered into a share subscription agreement (a "PIPE
Subscription Agreement") pursuant to which our Sponsor has committed (the "PIPE
Investment") to subscribe for and purchase 10,000,000 Class A ordinary shares
(at $10.00 per share), for an aggregate purchase price of $100,000,000.
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Related Party Loan
On April 28, 2022, we issued an unsecured promissory note (the "2022 Note") in
the principal amount of up to $3,000,000 to our Sponsor, of which $1,000,000 was
funded upon execution of the 2022 Note. The 2022 Note does not bear interest, is
not convertible, and may be further drawn down from time to time prior to the
maturity date upon request by the Company, subject to our Sponsor's approval.
The principal balance of the 2022 Note will be payable on the earliest to occur
of (i) the date on which we consummate an initial Business Combination or (ii)
the date that the winding up of the Company is effective. The 2022 Note is
subject to customary events of default, the occurrence of certain of which
automatically triggers the unpaid principal balance of the 2022 Note and all
other sums payable with regard to the 2022 Note becoming immediately due and
payable. As of September 30, 2022 $2,000,000 was outstanding under the note.
Critical Accounting Policies
The preparation of condensed interim financial statements in accordance with
accounting principles generally accepted in the United States of America
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 condensed 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 2021 Annual Report on Form 10-K filed with the SEC
on March 30, 2022. There have been no significant changes in the application of
our critical accounting policies during the nine months ended September 30,
2022.
Recent Accounting Pronouncements
See Note 2 to the unaudited interim financial statements included in Part I,
Item 1 of this Quarterly Report for a discussion of recent accounting
pronouncements.
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 condensed interim 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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