References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to TZP Strategies Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to TZPS SPAC Holdings 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 final prospectus for its Initial Public Offering (defined below) 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 the Cayman Islands on August 31,
2020 formed for the purpose of effecting a merger, amalgamation, share exchange,
asset acquisition, share purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash derived from the proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, our shares, debt or a
combination of cash, shares 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
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from August 31, 2020 (inception) through June 30, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and identifying a target company for a Business
Combination. We do not expect to generate any operating revenues until after the
completion of our Business Combination. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Account. 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 June 30, 2021, we had net loss of approximately
$3.3 million, which consists of loss of approximately $3.1 million derived from
the changes in fair value of the warrant liability and operation costs of
approximately $0.2 million.
For the six months ended June 30, 2021, we had net income of approximately
$6.5 million, which consists of income of approximately $9.0 million derived
from the changes in fair value of the warrant liability offset by operation
costs of approximately $2.5 million.
Liquidity and Capital Resources
On January 22, 2021, we consummated the Initial Public Offering of 28,750,000
Units which includes the full exercise by the underwriter of its over-allotment
option in the amount of 3,750,000 Units, at $10.00 per Unit, generating gross
proceeds of $287,500,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 5,166,667 Private Placement Warrants at a
price of $1.50 per warrant in a private placement to the Sponsor, generating
gross proceeds of $7,750,000.
For the six months ended June 30, 2021, cash used in operating activities was
approximately $0.8 million. Net income of approximately $6.5 million was
affected by
non-cash
charges (income) related to the change in fair value of the warrant liability of
approximately ($9.0) million and transaction costs associated with the warrant
liability of approximately $0.8 million. Changes in operating assets and
liabilities provided approximately $1 million of cash for operating activities.
As of June 30, 2021, we had investments held in the Trust Account of
$287,542,697 (including approximately $42,697 of interest income) consisting of
a mutual fund with a maturity of 185 days or less. We may withdraw interest from
the Trust Account to pay taxes, if any. We intend to use substantially all of
the funds held in the Trust Account, including any amounts representing interest
earned on the Trust Account (less income taxes payable), to complete our
Business Combination. To the extent that our share capital 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.

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As of June 30, 2021, we had cash of $640,142. 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 fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. 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 $1,500,000 of such Working Capital Loans may be
convertible into warrants of the post-Business Combination entity at a price of
$1.50 per warrant. The warrants would be identical to the Private Placement
Warrants.
Off-Balance
Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance
sheet arrangements as of June 30, 2021. 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,
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$10,062,500 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
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires 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 financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC 815
under which the Warrants do not meet the criteria for equity treatment and must
be recorded as liabilities. Accordingly, we classify the Warrants as liabilities
at their fair value and adjust the Warrants to fair value at each reporting
period. This liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The Private Placement Warrants and
the warrants included as part of the Units (the "Public Warrants") for periods
where no observable traded price was available are valued using a binomial
lattice simulation model. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date.
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and measured at fair value.
Conditionally redeemable ordinary shares (including 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 our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' equity section of our condensed balance sheets.
Net Income (Loss) Per Ordinary Share
We apply the
two-class
method in calculating earnings per share. Net income per ordinary share, basic
and diluted for Class A redeemable ordinary shares is calculated by dividing the
interest income earned on the Trust Account by the weighted average number of
Class A redeemable ordinary shares outstanding since original issuance. Net loss
per ordinary share, basic and diluted for Class A and Class B
non-redeemable
ordinary shares is calculated by dividing the net income (loss), less income
attributable to Class A redeemable ordinary shares, by the weighted average
number of Class A and Class B
non-redeemable
ordinary shares outstanding for the periods presented.

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Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("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")
to simplify accounting for certain financial instruments. ASU
2020-06
eliminates the current models that require separation of beneficial conversion
and cash conversion features from convertible instruments and simplifies the
derivative scope exception guidance pertaining to equity classification of
contracts in an entity's own equity. The new standard also introduces additional
disclosures for convertible debt and freestanding instruments that are indexed
to and settled in an entity's own equity. ASU
2020-06
amends the diluted earnings per share guidance, including the requirement to use
the
if-converted
method for all convertible instruments. ASU
2020-06
is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
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.
Management does 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 unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in our Exchange Act reports is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our management, including our principal executive officer and principal
financial officer or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
On April 12, 2021, the Acting Director of the Division of Corporation Finance
and Acting Chief Accountant of the SEC together issued a statement regarding the
accounting and reporting considerations for warrants issued by special purpose
acquisition companies entitled "Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition Companies
("SPACs")" (the "SEC Statement"). Specifically, the SEC Statement focused on
certain settlement terms and provisions related to certain tender offers
following a business combination, which terms are similar to those contained in
the warrant agreement governing our warrants. As a result of the SEC Statement,
we reevaluated the accounting treatment of our Public Warrants and our Private
Placement Warrants, and determined to classify the warrants as derivative
liabilities measured at fair value, with changes in fair value each period
reported in earnings. Further, the Company corrected certain line items related
to the previously audited balance sheet as of January 22, 2021 in the Form
8-K
filed with the SEC on January 28, 2021 related to misstatements identified in
improperly applying accounting guidance on certain warrants, recognizing them as
components of equity instead of a derivative liability.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our disclosure controls and procedures as of
the end of the fiscal quarter ended June 30, 2021, as such term is defined in
Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that during the period covered by this
report, our disclosure controls and procedures were not effective, due solely to
the material weakness in our internal control over financial reporting described
above. In light of this material weakness, we performed additional analysis as
deemed necessary to ensure that our financial statements were prepared in
accordance with U.S. generally accepted accounting principles.
Notwithstanding the material weakness, management has concluded that the
financial statements included elsewhere in this Quarterly Report present fairly,
in all material respects, our financial position, results of operations and cash
flows in conformity with GAAP.
Changes in Internal Control over Financial Reporting
Other than as described above, there was no change in our internal control over
financial reporting that occurred during the fiscal quarter of 2021 covered by
this Quarterly Report on Form
10-Q
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting. In light of the aforementioned
material weakness, we plan to enhance our processes to identify and
appropriately apply applicable accounting requirements to better evaluate and
understand the nuances of the complex accounting standards that apply to our
financial statements. Our plans at this time include providing enhanced access
to accounting literature, research materials and documents and increased
communication among our personnel and third-party professionals with whom we
consult regarding complex accounting applications. The elements of our
remediation plan can only be accomplished over time, and we can offer no
assurance that these initiatives will ultimately have the intended effects.

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