References in this Quarterly Report on Form 10-Q (the "Quarterly Report") 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 Quarterly 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 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 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 under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Quarterly Report, words such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions, as they relate to us or our 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, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this Quarterly Report should be read as being applicable to all forward-looking statements whenever they appear in this Quarterly Report, For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, those detailed in Part I, Item 1A. Risk Factors, of our Annual Report on Form 10-K filed with the SEC as updated by this Quarterly Report and our subsequent filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and we assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by applicable law.





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 period ended June 30, 2022, were organizational activities and those necessary to prepare for the 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 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.

For the three months ended June 30, 2022, we had net income of $1,138,266, which consisted of change in fair value of warrant liabilities of $1,612,000 and interest earned on investments held in Trust Account of $104,231, offset by operating costs of $577,965.

For the six months ended June 30, 2022, we had net income of $4,786,852, which consisted of change in fair value of warrant liabilities of $6,619,334 and interest earned on investments held in Trust Account of $109,904, offset by operating costs of $1,942,386.

For the three months ended June 30, 2021, we had a net loss of $2,846,599, which consisted of the change in fair value of warrant liabilities of $2,184,667 and interest earned on investments held in the Trust Account in the amount of $19,375, offset by operating costs of $681,307.

For the six months ended June 30, 2021, we had a net income of $1,169,799, which consisted of the change in fair value of warrant liabilities of $2,622,001 and interest earned on investments held in the Trust Account in the amount of $24,243, offset by operating costs of $987,046 and transaction costs of $489,399 incurred in connection with warrant liabilities.





                                       17





Liquidity and Going Concern

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 Unit, 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, net of reimbursement, $8,050,000 of deferred underwriting fees and $438,318 of other offering costs.

For the six months ended June 30, 2022, net cash used in operating activities was $778,272, which consisted of our net income of $4,786,852, offset by change in fair value of warrant liabilities of $6,619,334 and interest earned on investments held in the Trust Account of $109,904. Changes in operating assets and liabilities provided $1,164,114 of cash from operating activities.

For the six months ended June 30, 2021, net cash used in operating activities was $1,067,935, which consisted of our net income of $1,169,799 and transaction costs allocated to warrant liabilities of $489,399, offset by change in fair value of warrant liabilities of $2,622,001 and interest earned on investments held in the Trust Account of $24,243. Changes in operating assets and liabilities used $80,889 of cash from operating activities.

As of June 30, 2022, we had cash of $219,019 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.





Going Concern

As of June 30, 2022, the Company had $219,019 in its operating bank accounts, $230,144,780 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and a working capital deficit of $1,734,294.

The Company intends to complete a Business Combination by February 2, 2023. However, in the absence of a completed Business Combination, the Company may require additional capital. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

In connection with the Company's assessment of going concern considerations in accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management has determined that if the Company is unable to complete a Business Combination by February 2, 2023, then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 2, 2023.





                                       18

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2022.





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 initial public offering.

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 initial public 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 initial public 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 Estimates

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 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 (deficit) section of our condensed balance sheets.





                                       19

Net Income (Loss) Per Common Share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. 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 Pronouncements

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

© Edgar Online, source Glimpses