References to the "Company," "our," "us" or "we" refer to TPG Pace Beneficial II
Corp. The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the unaudited
condensed financial statements and the notes thereto contained elsewhere in this
Quarterly Report on Form 10-Q. 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
All statements other than statements of historical fact included in this
Quarterly Report on Form 10-Q including, without limitation, statements under
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. When used in this Quarterly Report on Form 10-Q,
words such as "anticipate," "believe," "estimate," "expect," "intend" and
similar expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors detailed in our filings with the United States Securities and Exchange
Commission ("SEC"). All subsequent written or oral forward-looking statements
attributable to us or persons acting on the Company's behalf are qualified in
their entirety by this paragraph.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
and formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses ("Business Combination"). We have reviewed, and continue
to review, a number of opportunities to enter into a Business Combination with
an operating business, but we are not able to determine at this time whether we
will complete a Business Combination with any of the target businesses that we
have reviewed or with any other target business.
We intend to consummate a Business Combination using cash from the proceeds of
our initial public offering (the "Public Offering") that closed on April 16,
2021 (the "Close Date") and the private placement of our Class A ordinary shares
("Private Placement Shares") that occurred at the Close Date, and from
additional issuances of, if any, our capital stock and our debt, or a
combination of cash, stock and debt.
At March 31, 2022, we held cash of $1,734,857 and current liabilities of
$2,290,996. Further, 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.
Going Concern
If we do not complete an initial Business Combination within 24 months from the
Close Date, we will (i) cease all operations except for the purposes of winding
up, (ii) as promptly as reasonably possible, but not more than ten business days
thereafter, redeem all of the Class A ordinary shares issued in the Public
Offering at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account with Continental Stock Transfer and Trust
Company acting as trustee (the "Trust Account"), including interest, net of
taxes (less up to $100,000 of such net interest to pay dissolution expenses),
divided by the number of then outstanding public shares, which redemption will
completely extinguish the shareholder rights of owners of Class A ordinary
shares (including the right to receive further liquidation distributions, if
any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining shareholders
and the board of directors, dissolve and liquidate, subject in each case to our
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law. In the event of such distribution, it is
possible that the per share value of the residual assets remaining available for
distribution, including Trust Account assets, will be less than the initial
public offering price in the Public Offering. This mandatory liquidation and
subsequent dissolution requirement raises substantial doubt about our ability to
continue as a going concern.
The condensed financial statements presented in this Quarterly Report on Form
10-Q 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
For the three months ended March 31, 2022 and the period from January 4, 2021
("Inception") to March 31, 2021, we incurred net losses of $406,875 and $51,396,
respectively. Our business activities from Inception to the Close Date consisted
primarily of costs associated with our formation. Our business activities since
our Public Offering have consisted solely of identifying and evaluating
prospective acquisition targets for a Business Combination.
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Liquidity and Capital Resources
Prior to the closing of the Public Offering, our only sources of liquidity were
an initial sale of Class F ordinary shares (" Class F Founder Shares"), par
value $0.0001 per share, to our sponsor, TPG Pace Beneficial II Sponsor, Series
LLC, a Delaware series limited liability company (the "Sponsor"), and the
proceeds of a promissory note (the "Note") from our Sponsor, in the amount of
$750,000.
The registration statement for our Public Offering was declared effective by the
SEC on April 13, 2021. In our Public Offering, we sold 40,000,000 Class A
ordinary shares at a price of $10.00 per share, generating proceeds of
$400,000,000, including the issuance of 5,000,000 Class A ordinary shares as a
result of the underwriters' partial exercise of their over-allotment option.
Simultaneously with the effectiveness of our Public Offering, we closed the
private placement of an aggregate of 1,000,000 Class A ordinary shares (the
"Private Placement Shares"), at a price of $10.00 per share, to the Sponsor,
generating proceeds of $10,000,000.
On the Close Date, we placed gross proceeds of $400,000,000 and $10,000,000 from
the Public Offering and the sale of the Private Placement Shares, respectively,
less underwriting discounts of $8,000,000; and funds of $2,000,000 designated to
pay our accrued formation and offering costs, ongoing administrative and
acquisition search costs, plus repay notes payable of $750,000 to the Sponsor at
the Close Date were placed into a non-interest-bearing U.S. based trust account
at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company
acting as trustee (the "Trust Account").
On December 8, 2021, our Sponsor loaned us $2,000,000 under an unsecured
non-interest bearing promissory note to fund ongoing operational needs.
At March 31, 2022, we had cash of $1,734,857 and negative working capital of
$186,983.
Starting January 2022, the funds in the Trust Account may be invested only in
specified U.S. government treasury bills with a maturity of 180 days or less and
in money market funds meeting certain conditions under Rule 2a-7 under the
Investment Company Act which invest only in direct U.S. government treasury
obligations (collectively "Permitted Investments").
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our Business
Combination. However, if our estimates 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 Class A ordinary shares at the completion of our
Initial Business Combination, in which case we may issue additional securities
or incur debt in connection with such Business Combination (including from our
affiliates or affiliates of our Sponsor).
We have 24 months from the Close Date to complete our Business Combination. If
we do not complete a Business Combination within this period, we shall (i) cease
all operations except for the purposes 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, equal to the aggregate
amount then on deposit in the Trust Account, including interest earned on the
funds in the Trust Account and not previously released to the Company to pay its
taxes (less up to $100,000 of interest to pay dissolution expenses) divided by
the number of then outstanding Public Shares, which redemption will completely
extinguish public shareholders' rights as shareholders (including the right to
receive further liquidation distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the remaining shareholders and the board of directors,
dissolve and liquidate, subject in each case to our obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law. The Sponsor and our four independent directors ("Initial
Shareholders") and our officers and internal directors have entered into a
letter agreement with us, pursuant to which they have waived their rights to
liquidating distributions from the Trust Account with respect to the Class F
ordinary shares, Class G ordinary shares and Private Placement Shares if we fail
to complete the Business Combination within 24 months from the Close Date.
However, if the Initial Shareholders acquire Public Shares after the Close Date,
they will be entitled to liquidating distributions from the Trust Account with
respect to such Public Shares if we fail to complete the Business Combination
within the allotted 24-month time period.
We intend to use to use substantially all of the funds held in the Trust
Account, including earned interest (which interest shall be net of taxes
payable) to consummate a Business Combination. To the extent that our capital
stock or debt is used, in whole or in part, as consideration to consummate a
Business Combination, the remaining proceeds held in the Trust Account after
completion of the Business Combination and redemptions of Class A ordinary
shares, if any, will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth
strategy.
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Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements. 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 entered into any non-financial agreements involving assets.
Contractual Obligations
At March 31, 2022, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities. On the Close
Date, we entered into an administrative support agreement pursuant to which we
have agreed to pay an affiliate of the Sponsor a total of $50,000 per month for
office space, administrative and support services. Upon the earlier of the
completion of the Initial Business Combination and the Company's liquidation, we
will cease paying these monthly fees.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires our
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the condensed financial statements, and income and expenses during the
periods reported. Actual results could materially differ from those estimates.
We have identified the following as our critical accounting policies:
Redeemable Ordinary Shares
All of the 40,000,000 Class A ordinary shares sold in the Public Offering
contain a redemption feature which allows for the redemption of such public
shares in connection with our liquidation if there is a shareholder vote or
tender offer in connection with the Business Combination and in connection with
certain amendments to our amended and restated memorandum and articles of
association. In accordance with SEC and its staff's guidance on redeemable
equity instruments, which has been codified in ASC 480-10-S99, redemption
provisions not solely within our control require common stock subject to
redemption to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity's
equity instruments, are excluded from the provisions of ASC 480.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying
amount of redeemable ordinary shares are affected by charges against additional
paid-in capital and accumulated deficit.
Offering Costs
We comply with the requirements of Accounting Standards Codification ("ASC")
340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A, "Expenses of Offering."
We incurred offering costs of $799,929 in connection with our Public Offering
primarily consisting of accounting and legal services, securities registration
expenses and exchange listing fees. These costs, along with paid and deferred
underwriter discounts totaling $22,000,000, were charged to temporary equity at
the Close Date.
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements of Financial Accounting
Standards Board ASC Topic 260, "Earnings Per Share". Net loss per ordinary share
is computed by dividing net loss applicable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period, as
calculated using the treasury stock method. At March 31, 2022, we had
outstanding forward purchase contracts to purchase up to 17,500,000 Class A
ordinary shares. The weighted average of these shares was excluded from the
calculation of diluted net loss per ordinary share since the exercise of the
forward purchase contracts is contingent upon the occurrence of future events.
As a result, diluted net loss per ordinary share is the same as basic net loss
per ordinary share for the periods presented.
As of March 31, 2022, we had two participating classes of ordinary shares, Class
A ordinary shares and Class F ordinary shares. The Company's Class G ordinary
shares convert to Class A ordinary shares at a certain point in time after a
Business Combination and then, only if the Company's Class A ordinary shares are
trading at certain levels. As such, our Class G ordinary shares are determined
to be non-participating for the purposes of computations of basic earnings per
share. The weighted average of these shares was excluded from the calculation of
diluted net loss per ordinary share because its inclusion would have been
anti-dilutive.
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Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815 - 40) ("ASU 2020-06"). ASU 2020 06 simplifies
the accounting for certain financial instruments with characteristics of
liabilities and equity, including convertible instruments and contracts on an
entity's own equity. The ASU is part of the FASB's simplification initiative,
which aims to reduce unnecessary complexity in U.S. GAAP. The ASU's amendments
are effective for fiscal years beginning after December 15, 2021, and interim
periods within those fiscal years. The Company's adoption of ASU 2020-06 on
January 1, 2022 did not have a material impact on the Company's condensed
financial statements.
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