References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Zimmer Energy Transition Acquisition Corp. References to our
"management" or our "management team" refer to our officers, references to the
"sponsor" refer to ZETA Sponsor LLC, a Delaware limited liability company. 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" 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. The words
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "might," "plan," "possible," "potential," "predict," "project," "should,"
"would" and similar expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report are based on
our current expectations and beliefs concerning future developments and their
potential effects on us. There can be no assurance that future developments
affecting us will be those that we have anticipated. These forward-looking
statements involve a number of risks, uncertainties (some of which are beyond
our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these
forward-looking statements. These risks and uncertainties include, but are not
limited to, those factors described in the section entitled "Risk Factors" of
the Company's final prospectus for our Initial Public Offering (defined below)
filed with the Securities and Exchange Commission (the "SEC") and in our other
SEC filings. Should one or more of these risks or uncertainties materialize, or
should any of our assumptions prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements. We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
may be required under applicable securities laws.
Overview
We are a blank check company incorporated on February 25, 2021 as a Delaware
corporation 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. We have not identified any business
combination target. We intend to effectuate our initial business combination
using cash from the proceeds of our initial public offering (the "Initial Public
Offering") and the Private Placement (defined below) of the Private Placement
Warrants (defined below), the proceeds of the sale of our shares in connection
with our initial business combination (pursuant to the Forward Purchase
Agreements (defined below) entered into in connection with the Initial Public
Offering or other forward purchase agreements or backstop agreements we may
enter into following the consummation of our Initial Public Offering or
otherwise), our capital stock, debt or a combination of cash, stock and debt.
We expect 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
As of June 30, 2021, we had not commenced any operations. All activity for the
period from February 25, 2021 (inception) through June 30, 2021 relates to our
formation and Initial Public Offering, and, since the completion of the Initial
Public Offering, our search for a target to consummate a business combination.
We will not generate any operating revenues until after the completion of a
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 and placed in the Trust Account (defined below).
19
Table of Contents
For the three months ended, and the period from February 25, 2021 (inception)
through, June 30, 2021, we had a net loss of $8,418,544 and $8,429,799,
respectively, consisting of formation and operating costs of $159,268 and
$170,523, respectively. For the three months ended, and the period from February
25, 2021 (inception) through, June 30, 2021, we had unrealized loss on fair
value of warrants and forward purchase warrants amounting to $1,316,994 and
$2,951,652, respectively, financing expense of $3,196,156, and offering cost
allocated to warrants of $794,474.
Liquidity and Capital Resources
Our liquidity needs have been satisfied prior to the completion of our Initial
Public Offering through a capital contribution of our sponsor of $25,000 for the
shares of our Class B common stock, par value $0.0001 per share (the "founder
shares"), and a loan available to us of $300,000 by our sponsor under an
unsecured promissory note.
On June 18, 2021, we consummated our Initial Public Offering of 34,500,000 units
(the "Units"), which includes the exercise in full of the underwriters' option
to purchase an additional 4,500,000 Units at the initial public offering price
to cover over-allotments. Each Unit consists of one share of Class A common
stock, $0.0001 par value per share, and one-third of one redeemable warrant.
Each whole warrant entitles the holder thereof to purchase one share of our
Class A common stock at a price of $11.50 per share, subject to adjustment, and
only whole warrants are exercisable. The Units were sold at an offering price of
$10.00 per Unit, generating gross proceeds of $345,000,000. Commencing on August
6, 2021, holders of the Units may elect to separately trade the public shares
and warrants included in the Units. No fractional warrants will be issued upon
separation of the Units and only whole warrants will trade. Simultaneously with
the consummation of the Initial Public Offering and the issuance and sale of the
Units on June 18, 2021, we consummated the private placement of 10,550,000
warrants (the "Private Placement Warrants") at a price of $1.00 per Private
Placement Warrant, generating total proceeds of $10,550,000 (the "Private
Placement").
Transaction costs for the Initial Public Offering amounted to $18,426,851,
consisting of $6,200,000 of underwriting discount, $10,850,000 of deferred
underwriting discount, and $1,376,851 of other offering costs.
Upon closing of the Initial Public Offering and the Private Placement, a total
of $345,000,000 ($10.00 per Unit) was placed in a U.S.-based trust account (the
"Trust Account"), with Continental Stock Transfer & Trust Company acting as
trustee. The proceeds held in the Trust Account have been invested only 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, which invest only in direct U.S. government
treasury obligations.
As of June 30, 2021, we had cash outside our Trust Account of $2,198,290 and had
working capital of $2,362,109 (not taking into account any tax obligations).
All remaining cash from the Initial Public Offering is held in the Trust
Account and is generally unavailable for use prior to an initial business
combination. We believe the cash outside of our Trust Account is sufficient to
meet the expenditures required for operating our business prior to our initial
business combination.
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
taxes payable and deferred underwriting discounts and commissions) and the
proceeds from the sale of the forward purchase securities to complete our
initial business combination. We may withdraw interest to pay our franchise and
income taxes. We estimate our annual franchise tax obligations for the taxable
years beginning after the completion of our Initial Public Offering, based on
the number of shares of our common stock authorized and outstanding after the
completion of our Initial Public Offering, to be $200,000, which is the maximum
amount of annual franchise taxes payable by us as a Delaware corporation per
annum, and which we may pay from funds from the Initial Public Offering held
outside of the Trust Account or from interest earned on funds held in the Trust
Account and released to use for this purpose. To the extent that our capital
stock or debt is used, in whole or in part, as consideration to complete our
initial 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.
20
Table of Contents
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 initial business
combination. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial 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 initial
business combination. Moreover, we may need to obtain additional financing
either to complete our initial business combination or because we become
obligated to redeem a significant number of our public shares upon completion of
our business combination, in which case we may issue additional securities or
incur debt in connection with such business combination, which may include a
specified future issuance. Subject to compliance with applicable securities
laws, we would only complete such financing simultaneously with the completion
of our initial business combination. If we are unable to complete our initial
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 initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
Commitments and Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
Registration Rights
The holders of the (i) founder shares, which were issued in a private placement
prior to the closing of the Initial Public Offering, (ii) Private Placement
Warrants and (iii) private placement warrants that may be issued upon conversion
of working capital loans (and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants and warrants that may be issued
upon conversion of working capital loans and upon conversion of the founder
shares) are entitled to registration rights pursuant to a registration rights
agreement dated as of June 15, 2021. The holders of at least 20% in interest of
the then-outstanding number of these securities are entitled to demand that we
file a registration statement covering such securities subsequent to the
completion of the initial business combination and to require us to effect up to
an aggregate of three underwritten offerings of such securities. In addition,
the holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the completion of the initial
business combination. In addition, the shares of Class A common stock and
warrants (and underlying shares of Class A common stock) purchased by the Zimmer
Entity as part of the Units in the Initial Public Offering are entitled to
registration rights under the registration rights agreement. The Zimmer Entity
is not subject to any lock-up period with respect to any securities it purchased
in the Initial Public Offering. We will bear the expenses incurred in connection
with the filing of any such registration statements.
Pursuant to the Forward Purchase Agreements (as defined below), we agreed to use
reasonable best efforts (i) to file within 30 days after the closing of the
business combination a registration statement with the SEC for a secondary
offering of the forward purchase shares and the forward purchase warrants (and
underlying shares of Class A common stock), (ii) to cause such registration
statement to be declared effective promptly thereafter but in no event later
than 60 days after the initial filing, (iii) to maintain the effectiveness of
such registration statement until the earliest of (A) the date on which the
Forward Purchasers (as defined below) or their respective assignees cease to
hold the securities covered thereby, and (B) the date all of the securities
covered thereby can be sold publicly without restriction or limitation under
Rule 144 under the Securities Act and (iv) after such registration statement is
declared effective, cause us to conduct firm commitment underwritten offerings,
subject to certain limitations. In addition, the Forward Purchase Agreements
provide for certain "piggy-back" registration rights to the holders of forward
purchase securities to include their securities in other registration statements
filed by us.
Administrative Services Agreement
Pursuant to an administrative services agreement, dated June 15, 2021, we have
agreed to pay Zimmer Partners, LP a total of $10,000 per month from funds held
outside the Trust Account for office space, utilities and secretarial and
administrative support. Upon the earlier of the consummation by the Company of
an initial business combination or the Company's liquidation, the Company will
cease paying these monthly fees. As of June 30, 2021, we have accrued $5,333
pursuant to the agreement in accrued expenses.
21
Table of Contents
Forward Purchase Agreements
On June 11, 2021, we entered into forward purchase agreements (the "Forward
Purchase Agreements") with ZP Master Utility Fund, Ltd. (the "Zimmer Entity")
and Bluescape Resources Company LLC ("Bluescape Resources" and, together with
the Zimmer Entity, the "Forward Purchasers"). Pursuant to the Forward Purchase
Agreements, the Zimmer Entity agreed to purchase 10,000,000 units and Bluescape
Resources agreed to purchase up to 10,000,000 units, with each unit consisting
of one share of Class A common stock and one-third of one warrant to purchase
one share of Class A common stock, at $11.50 per share, subject to adjustment,
for a purchase price of $10.00 per unit (the "Forward Purchase Units"). The
obligation of Bluescape Resources to purchase the Forward Purchase Units
pursuant to its Forward Purchase Agreement is subject to the approval of its
investment committee. The purchase of the Forward Purchase Units will take place
in one or more private placements to occur concurrently and only in connection
with the closing of the initial business combination. The proceeds from the sale
of forward purchase securities may be used as part of the consideration to the
sellers in the initial business combination, expenses in connection with the
initial business combination or for working capital in the post-business
combination company.
Underwriting Agreement
The underwriters in the Initial Public Offering are entitled to a deferred
underwriting discount of $10,850,000, which will be payable to the underwriters
from the amounts held in the Trust Account solely in the event that we complete
an initial business combination, subject to the terms of the underwriting
agreement.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Critical Accounting Policies
The preparation of unaudited 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 Liabilities
We account for the warrants issued in connection with our Initial Public
Offering and the Forward Purchase Units in accordance with Accounting Standards
Codification ("ASC") 815-40, "Derivatives and Hedging-Contracts in Entity's Own
Equity" ("ASC 815"), under which the warrants do not meet the criteria for
equity classification and must be recorded as liabilities. As the warrants meet
the definition of a derivative as contemplated in ASC 815, the warrants are
measured at fair value at issuance and at each reporting date in accordance with
ASC 820, Fair Value Measurement, with changes in fair value recognized in the
Statement of Operations in the period of change.
Class A Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Common stock subject to mandatory redemption (if any) is classified as a
liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock 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) is classified as
temporary equity. At all other times, common stock is classified as
shareholders' equity. Our common stock feature certain redemption rights that is
considered to be outside of our control and subject to the occurrence of
uncertain future events.
22
Table of Contents
Net Income (Loss) Per Common Share
We comply with accounting and disclosure requirements of Financial Accounting
Standards Board ("FASB") ASC 260, Earnings Per Share. The statements of
operations include a presentation of income (loss) per Class A redeemable public
share and income (loss) per founder non-redeemable share following the two-class
method of income per share. In order to determine the net income (loss)
attributable to both the public Class A redeemable shares and founder
non-redeemable shares, we first considered the total income (loss) allocable to
both sets of shares. This is calculated using the total net income (loss) less
any dividends paid. For purposes of calculating net income (loss) per share, any
remeasurement of the accretion to redemption value of the Class A common shares
subject to possible redemption was considered to be dividends paid to our public
shareholders. Subsequent to calculating the total income (loss) allocable to
both sets of shares, we split the amount to be allocated using a ratio of 39%
for the Class A public shares and 61% for the founder non-redeemable shares for
the three months ended June 30, 2021 and 32% for the Class A public shares and
68% for the non-redeemable shares for the period from February 25, 2021
(inception) through June 30, 2021, reflective of the respective participation
rights.
As of June 30, 2021, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into common shares
and then share in our earnings. As a result, diluted loss per share is the same
as basic loss per share for the periods presented.
Recent Accounting Standards
In August 2020, the 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 pronouncements, if currently adopted, would have a
material effect on our unaudited condensed financial statements.
© Edgar Online, source Glimpses
ZIMMER ENERGY TRANSITION ACQUISITION CORP. 
