References in this Quarterly Report on Form 10-Q/A (the "Form 10-Q/A") to the
"Company," "Z-Work," "our," "us" or "we" refer to Z-Work Acquisition Corp.
References to our "management" or our "management team" refer to our officers
and directors and references to "Sponsor" refer to Z-Work Acquisition, LLC. 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 Form
10-Q/A. 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 Form 10-Q/A includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of 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 Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), 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, including that the conditions of
the Proposed Business Combination are not satisfied. 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 Annual Report on Form 10-K 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.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021 and June 30, 2021. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly valued our Class A common
stock subject to possible redemption. We previously determined the Class A
common stock subject to possible redemption to be equal to the redemption value
of $10.00 per share of Class A common stock while also taking into consideration
a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Class A common stock issued during the Initial
Public Offering can be redeemed or become redeemable subject to the occurrence
of future events considered outside of the Company's control. Therefore,
management concluded that the redemption value should include all Class A common
stock subject to possible redemption, resulting in the Class A common stock
subject to possible redemption being equal to their redemption value. As a
result, management has noted a reclassification error related to temporary
equity and permanent equity. This resulted in a restatement to the initial
carrying value of the Class A common stock subject to possible redemption with
the offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock. In connection with the change in
presentation for the shares of Class A common stock subject to redemption, the
Company also restated its income (loss) per common share calculated to allocate
net income (loss) evenly to Class A and Class B common stock. This presentation
contemplates a Business Combination as the most likely outcome, in which case,
both classes of common stock pro rata in the income (loss) of the Company.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 30, 2020, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. We intend to effectuate our
business combination using cash from the proceeds of the offering and the sale
of the Private Placement Warrants, our capital stock, debt or a combination of
cash, stock 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 operating revenues
to date. Our only activities for the three and nine months ended September 30,
2021, were organizational activities and those necessary to prepare for the
offering, described below, and after the completion of our offering, identifying
a target company for a business combination. We do not expect to generate any
operating revenues until after the completion of our initial business
combination. We generate non-operating income in the form of interest income on
marketable securities held after the offering. 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 in connection with searching
for, and completing, a business combination. Additionally, we recognize non-cash
gains and losses with other income (expense) related to changes in recurring
fair value measurement of our warrant liabilities at each reporting period.
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For the three months ended September 30, 2021, we had net income of $2,147,156,
which consisted of the change in fair value of warrants of $3,271,333 and income
on investments held in the Trust Account of $4,916, offset by operating costs of
$1,129,093.
For the nine months ended September 30, 2021, we had a net income of $3,316,995,
which consisted of the change in fair value of warrants of $5,893,334 and income
on investments held in the Trust Account of $29,159, offset by operating costs
of $2,116,139 and transaction costs of $489,399 incurred in connection with
warrant liabilities.
Liquidity and Capital Resources
On February 2, 2021, we consummated the offering of 23,000,000 units (the
"Units" and, with respect to the Class A common stock included in the Units
sold, the "Public Shares"), at a price of $10.00 per Units, which included the
full exercise by the underwriters of their over-allotment option in the amount
of 3,000,000 Units, generating gross proceeds of $230,000,000. Simultaneously
with the closing of the offering, we consummated the sale of 4,733,333 warrants
(the "Private Placement Warrants") to the Sponsor and Jefferies LLC
("Jefferies") at a price of $1.50 per Private Placement Warrant generating gross
proceeds of $7,100,000.
Following the offering, the full exercise of the over-allotment option, and the
sale of the Private Placement Warrants, a total of $230,000,000 was placed in
the Trust Account. We incurred $13,088,318 in transaction costs, including
$4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees and
$438,919 of other offering costs.
For the nine months ended September 30, 2021, net cash used in operating
activities was $1,136,204, which consisted of our net income of $3,316,955 and
transaction costs allocated to warrant liabilities of $489,399, offset by change
in fair value of warrant liabilities of $5,893,334 and income on investments
held in the Trust Account of $29,159. Changes in operating assets and
liabilities provided $979,935 of cash from operating activities.
As of September 30, 2021, we had cash of $1,075,056 held outside the Trust
Account. 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, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a business combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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 loans may be convertible into warrants, at a
price of $1.50 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate 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 public shares upon consummation
of our business combination, in which case we may issue additional securities or
incur debt in connection with such business combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our business combination. If we are unable
to complete our business combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our business combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than the administrative support
agreement with our Sponsor, under which we began to incur monthly fees in
connection with our offering.
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Administrative Services Agreement
Pursuant to the agreement, we pay our Sponsor a monthly fee of $12,500 until the
earlier of the consummation of an initial business combination or the Company's
liquidation (or its earlier termination), or $150,000 per year, $100,000 of
which will be paid to our President, Chief Financial Officer, as an annual cash
salary and $50,000 of which will be paid for additional support services
expected to be sourced from Communitas Capital, a venture firm of which our
Executive Co-Chairman is Managing Partner. We will continue to incur these fees
monthly until the earlier of the completion of the business combination and our
liquidation.
Deferred Underwriters Fees
Additionally, the underwriters of our offering are entitled to a deferred fee of
$0.35 per share, or $8,050,000 in the aggregate of which $6.9 million is
deferred and held in the Trust Account and $1.15 million was used to purchase
warrants in connection with our offering. 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.
Registration Rights
The holders of Founders Shares, Private Placement Warrants issued in connection
with the offering and Private Placement warrants that may be issued upon
conversion of working capital loans (and the securities underlying such
securities) have registration rights to require us to register a sale of any of
our securities held by them. These holders may make up to three demands,
excluding short form registration demands, that we register such securities for
sale under the Securities Act. In addition, these holders will have "piggy-back"
registration rights to include their securities in other registration statements
filed by us, subject to certain limitations. We will bear the expenses incurred
in connection with the filing of any such registration statements.
Critical Accounting Policies
The preparation of 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 period reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Warrant Liabilities
We account for the Warrants (as defined herein) in accordance with the guidance
contained in Accounting Standards Codification ("ASC") 815-40, Derivatives and
Hedging - Contracts in Entity's Own Equity ("ASC 815-40"), 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 are valued using a Black Scholes
Option Pricing Model. The Public Warrants for periods where no observable traded
price was available are valued using a Monte Carlo simulation. 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 Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that feature
redemption rights that is either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is
classified as stockholders' equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of our condensed balance sheets.
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Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common stock outstanding for the period. The Company applies
the two-class method in calculating earnings per share. Accretion associated
with the redeemable shares of Class A common stock is excluded from earnings per
share as the redemption value approximates fair value.
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, including the standard referenced in the next
paragraph, if currently adopted, would have a material effect on our condensed
financial statements.
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