References to "we", "us", "our" or the "Company" are to Pine Island Acquisition
Corp., except where the context requires otherwise. 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 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
All statements other than statements of historical fact included in this Annual
Report on Form 10-K 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 Annual Report on Form 10-K, 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 Annual Report should be read as being
applicable to all forward-looking statements whenever they appear in this Annual
Report on Form 10-K. 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 our filings with the Securities
and Exchange Commission. 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.
65
Overview
We are a blank check company incorporated in Delaware on August 21, 2020. We
were 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 (the "Business Combination"). We are an emerging growth
company and, as such, are subject to all of the risks associated with emerging
growth companies.
Our sponsor is Pine Island Sponsor LLC, a Delaware limited liability company
(the "Sponsor"). The registration statement for our Initial Public Offering was
declared effective November 16, 2020. On November 19, 2020, we consummated our
Initial Public Offering of 20,000,000 units (the "Units" and, with respect to
the Class A common stock included in the Units being offered, the "Public
Shares"), at $10.00 per Unit, generating gross proceeds of $200.0 million, and
incurring offering costs of approximately $11.7 million, inclusive of
$7.0 million in deferred underwriting commissions. On November 20, 2020, the
underwriters partially exercised the over-allotment option and on November 24,
2020, purchased an additional 1,838,800 Units (the "Over-Allotment Units"),
generating gross proceeds of approximately $18.4 million, and incurred
additional offering costs of approximately $1.0 million in underwriting fees
(inclusive of approximately $644,000 in deferred underwriting fees) (the
"Over-Allotment").
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 4,000,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $1.50 per Private Placement Warrant with our Sponsor, generating
gross proceeds of $6.0 million. Simultaneously with the closing of the
Over-Allotment on November 24, 2020, we consummated the second closing of the
Private Placement, resulting in the purchase of an aggregate of an
additional 245,173 Private Placement Warrants by our Sponsor, generating gross
proceeds of approximately $368,000.
Upon the closing of the Initial Public Offering and the Private Placement on
November 19, 2020, $200.0 million ($10.00 per Unit) of the net proceeds of the
sale of the Units in the Initial Public Offering and the Private Placement were
placed in a trust account ("Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and invested only
in U.S. "government securities," within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
having a maturity of 185 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act, which
invest only in direct U.S. government treasury obligations, as determined by us,
until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below. Upon the closing of the
Over-Allotment on November 24, 2020, an additional amount of approximately $18.4
million was deposited to the Trust Account, for a total of approximately $218.4
million.
We will only have 24 months from the closing of the Initial Public Offering, or
November 19, 2022, (the "Combination Period") and our stockholders have not
amended the Certificate of Incorporation to extend such Combination Period, we
will (1) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter
subject to lawfully available funds therefor, 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 held in the Trust
Account and not previously released to us to pay our franchise and income 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 Stockholders' rights as stockholders (including the right to
receive further liquidating distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the remaining stockholders and the board of directors,
dissolve and liquidate, subject in each case to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable
law.
66
Results of Operations
Our entire activity since inception up to December 31, 2020 has been related to
our formation, Initial Public Offering, which was consummated on November 16,
2020, and since the Initial Public Offering, our activity has been limited to
the search for a prospective Initial Business Combination, and we will not be
generating any operating revenues until the closing and completion of our
Initial Business Combination. We expect to incur increased 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 period from August 21, 2020 (inception) through December 31, 2020, we
had net loss of approximately $235,000, which consisted of approximately
$177,000 in general and administrative expenses, approximately $72,000 in
franchise tax expense, offset by approximately $15,000 in investment income on
the Trust Account.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $404,000 outside of the Trust
Account, working capital of approximately $1.1 million and approximately $15,000
of investment income available in the Trust Account to pay for our tax
obligations.
Our liquidity needs to date have been satisfied through a capital contribution
of $25,000 from our Sponsor to purchase the Founder Shares, a loan under a
promissory note from our Sponsor of approximately $105,000, and the net proceeds
from the consummation of the Private Placement not held in the Trust Account. We
fully repaid the promissory note on November 19, 2020. In addition, in order to
finance transaction costs in connection with a Business Combination, our
officers, directors and Initial Shareholders may, but are not obligated to,
provide us Working Capital Loans. As of December 31, 2020, there were no amounts
outstanding under any Working Capital Loans.
Until the consummation of a Business Combination, we will be using the funds not
held in the Trust Account for identifying and evaluating prospective acquisition
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to acquire, and
structuring, negotiating and consummating the Business Combination. We will need
to raise additional capital through loans or additional investments from our
Sponsor, stockholders, officers, directors, or third parties. Our officers,
directors and Sponsor may, but are not obligated to, loan us funds, from time to
time or at any time, in whatever amount they deem reasonable in their sole
discretion, to meet our working capital needs. Accordingly, we may not be able
to obtain additional financing. If we are 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, curtailing operations, suspending
the pursuit of a potential transaction, and reducing overhead expenses.
We cannot provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial
doubt about our ability to continue as a going concern through November 19,
2022. These financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities that
might be necessary should we be unable to continue as a going concern.
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (COVID-19). In
March 2020, the WHO classified the COVID-19 outbreak as a pandemic (the
"COVID-19 pandemic"), based on the rapid increase in exposure globally. The full
impact of the COVID-19 pandemic continues to evolve. The impact of the COVID-19
pandemic on our results of operations, financial position and cash flows will
depend on future developments, including the duration and spread of the pandemic
and related advisories and restrictions. These developments and the impact of
the COVID-19 pandemic on the financial markets and the overall economy are
highly uncertain and cannot be predicted. If the financial markets and/or the
overall economy are impacted for an extended period, our results of operations,
financial position and cash flows may be materially adversely affected.
Additionally, our ability to complete an initial Business Combination, including
the Proposed Business Combination, may be materially adversely affected due to
significant governmental measures being implemented to contain the COVID-19
pandemic or treat its impact, including travel restrictions, the shutdown of
businesses and quarantines, among others, which may limit our ability to have
meetings with potential investors or affect the ability of a potential target
company's personnel, vendors and service providers to negotiate and consummate
an initial Business Combination in a timely manner. Our ability to consummate an
initial Business Combination may also be dependent on the ability to raise
additional equity and debt financing, which may be impacted by the COVID-19
pandemic and the resulting market downturn.
67
Related Party Transactions
Founder Shares
On August 24, 2020, our Sponsor purchased 8,625,000 shares of the Company's
Class B common stock, par value $0.0001 per share, (the "Founder Shares") for an
aggregate price of $25,000. In September 2020, our Sponsor transferred 30,000
Founder Shares to Michael E. Roemer and 50,000 Founder Shares to David Wajsgras.
These 80,000 Founder Shares are not subject to forfeiture in the event the
underwriters' over-allotment option is not exercised. On November 13, 2020 on
November 16, 2020, respectively, our Sponsor effected a surrender of 1,437,500
and 1,437,500 shares of Class B common stock to the Company for no
consideration, resulting in a decrease in the total number of shares of Class B
common stock outstanding from 8,625,000 to 5,750,000. All shares and associated
amounts have been retroactively restated to reflect the share surrenders. Our
Sponsor agreed to forfeit up to 750,000 Founder Shares to the extent that the
over-allotment option is not exercised in full by the underwriters, so that the
Founder Shares will represent 20.0% of our issued and outstanding shares after
the Initial Public Offering. On November 24, 2020, the underwriters partially
exercised the over-allotment option to purchase as additional 1,838,800 Units
and forfeited the remaining option; thus, only 290,300 shares of Class B common
stock remain subject to forfeiture. On November 24, 2020, the remaining 290,300
shares of Class B common stock were forfeited.
Private Placement Shares
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 4,000,000 Private Placement Warrants, at a price of
$1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds
of $6.0 million. Simultaneously with the closing of the Over-Allotment on
November 24, 2020, we consummated the second closing of the Private Placement,
resulting in the purchase of an aggregate of an additional 245,173 Private
Placement Warrants by our Sponsor, generating gross proceeds of approximately
$368,000.
Related Party Loans
On August 24, 2020, our Sponsor agreed to loan us an aggregate of up to $300,000
to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). This loan is non-interest bearing and payable upon
the completion of the Initial Public Offering. We borrowed approximately
$105,000 under the Note and fully repaid to our Sponsor on November 19, 2020.
Working Capital Loans
In order to 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
("Working Capital Loans"). If we complete a Business Combination, we would repay
the Working Capital Loans out of the proceeds of the Trust Account released to
us. Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the Trust Account. In the event that a Business Combination does not
close, we may use a portion of proceeds held outside the Trust Account to repay
the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination or, at the lender's
discretion, up to $1.5 million 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.
Except for the foregoing, the terms of such Working Capital Loans, if any, have
not been determined and no written agreements exist with respect to such loans.
As of December 31, 2020, we had no borrowings under the Working Capital Loans.
68
Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any (and any shares of
common stock issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares), are entitled to registration rights pursuant to a
registration rights agreement. These holders will be entitled to certain demand
and "piggyback" registration rights. However, the registration rights agreement
will provide that we will not be required to effect or permit any registration
or cause any registration statement to become effective until termination of the
applicable lock-up period. We will bear the expenses incurred in connection with
the filing of any such registration statements.
Underwriting Agreement
We granted the underwriter a 45-day option to purchase up to 3,000,000
additional Units to cover any over-allotments, at the Initial Public Offering
price less the underwriting discounts and commissions. On November 24, 2020, the
underwriter partially exercised the over-allotment option.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$4.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. An additional fee of $0.35 per Unit, or $7.0 million in the aggregate
will be payable to the underwriters for deferred underwriting commissions. 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.
In connection with the consummation of the Over-Allotment on November 24, 2020,
the underwriters were entitled to an additional fee of approximately $368,000
paid upon closing, and approximately $644,000 in deferred underwriting
commissions.
Critical Accounting Policies and Estimates
Investments held in Trust Account
Our portfolio of investments is comprised solely of U.S. Treasury Bills, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a
maturity of 185 days or less, or investments in money market funds that invest
in U.S. government securities, or a combination thereof. Our investments held in
the Trust Account are classified as trading securities. Trading securities are
presented on the balance sheet at fair value at the end of each reporting
period. Gains and losses resulting from the change in fair value of these
securities is included in gain on investments held in Trust Account in the
accompanying statement of operations. The estimated fair values of investments
held in the Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) is classified as
liability instruments and are measured at fair value. Conditionally
redeemable Class A common stock (including Class A common stock that features
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, Class A common
stock is classified as stockholders' equity. Our Class A common stock feature
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, at December
31, 2020, 20,679,234 shares of Class A common stock subject to possible
redemption is presented at redemption value as temporary equity, outside of the
stockholders' equity section of our balance sheet.
Net Loss Per Common Stock
We apply the two-class method in calculating earnings per share. Net loss per
share is computed by dividing net loss by the weighted-average number of common
stock outstanding during the periods. An aggregate of 20,679,234 Class A common
stock subject to possible redemption at December 31, 2020 has been excluded from
the calculation of basic loss per common stock, since such shares, if redeemed,
only participate in their pro rata share of the Trust earnings. We have not
considered the effect of the warrants sold in the initial public offering and
Private Placement to purchase an aggregate of 7,279,600 Class A common stock in
the calculation of diluted loss per common stock, since the exercise of the
warrants are contingent upon the occurrence of future events. As a result,
diluted net loss per common stock is the same as basic net loss per common stock
for the periods presented.
69
Recent Accounting Pronouncements
Our management does not believe that there are any other recently issued, but
not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on our balance sheet.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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