References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Pine Technology Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Pine Technology Sponsor 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 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 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 Annual Report on Form 10-K filed with 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 formed under the laws of the State of Delaware 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 intend to effectuate our initial Business Combination using cash
from the proceeds of our IPO and the sale of the Private Placement Warrants, our
capital stock, debt or a combination of cash, stock and debt.
Recent Developments Terminated Business Combination Agreement
On December 7, 2021, we entered into the Merger Agreement with Merger Sub and
Tomorrow.io.
On March 6, 2022, the parties to the Merger Agreement entered into the
Termination Agreement pursuant to which, due to market conditions, the parties
agreed to terminate the Merger Agreement effective as of such date, after taking
several factors into consideration. Pursuant to the Termination Agreement,
Tomorrow.io was obligated to pay us $1,500,000 upon the earliest to occur of (a)
120 days from the date of the Termination Agreement, (b) two business days after
the initial closing of Tomorrow.io's Next Financing and (c) immediately prior to
the consummation of a Change of Control. The Termination Payment of $1,500,000
for the reimbursement of business combination expenses was recorded as
receivable as of March 31, 2022, and was received in full on July 1, 2022.
As a result of the Termination Agreement, the Merger Agreement is of no further
force and effect, and certain agreements entered into in connection with the
Merger Agreement, including, but not limited to, the Parent Support Agreement,
dated as of December 7, 2021, by and among the Company, Tomorrow.io and Sponsor,
the Voting and Support Agreements, dated as of December 7, 2021, by and among
the Company, Merger Sub, Tomorrow.io and certain Tomorrow.io stockholders, and
the Subscription Agreements, dated December 7, 2021, by and among Company with
its Sponsor and certain other investors, were either terminated or no longer be
effective, as applicable, in accordance with their respective terms.
We intend to continue to pursue the consummation of a Business Combination with
an appropriate target.
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The foregoing description of the Termination Agreement does not purport to be
complete and is qualified in its entirety by the terms and conditions of the
Termination Agreement, which is filed herewith as Exhibit 10.1, which is
incorporated by reference herein.
For more information about the Terminated Business Combination Agreement and
other recent developments, please see "Note 1. Organization and Business
Operation - Initial Business Combination."
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through September 30, 2022 were organizational activities,
those necessary to prepare for our IPO and identifying a target company for our
initial Business Combination, and activities in connection with the proposed
acquisition of Tomorrow.io, which has subsequently been terminated. 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 September 30, 2022, we had net income of $1,137,618,
which consists of interest income on amounts held in the Trust Account of
$1,796,863 and change in the fair value of the warrant liability of $59,333,
offset by formation and operating costs of $352,010, interest expense of $291
and provision for income taxes of $366,277.
For the nine months ended September 30, 2022, we had net income of $23,107,857,
which consists of interest income on amounts held in the Trust Account of
$2,057,229, reimbursement of business combination expenses of $1,500,000, and
change in the fair value of the warrant liability of $20,865,323, offset by
formation and operating costs of $940,022, interest expense of $946 and
provision for income taxes of $373,727.
For the three months ended September 30, 2021, we had a net income of
$1,411,521. We incurred $639,593 of formation and operating costs consisting
mostly of general and administrative expenses. We had investment income of
$25,784 on our amounts held in the Trust Account and change in the fair value of
the warrant liability of $2,025,330.
For the nine months ended September 30, 2021, we had a net income of $6,735,800.
We incurred $799,820 of formation and operating costs consisting mostly of
general and administrative expenses. We had investment income of $55,688 on our
amounts held in the Trust Account and change in the fair value of the warrant
liability of $8,680,011 offset by offering expenses related to warrant issuance
of $844,080 and excess fair value over cash received for private placement
warrants of $355,999
Liquidity and Capital Resources
On March 15, 2021, we consummated the IPO of 34,500,000 units at a price of
$10.00 per Unit, which includes the full exercise by the underwriters of the
over-allotment option, at $10.00 per Unit, generating gross proceeds of
$345,000,000. Simultaneously with the closing of the IPO, we consummated the
sale of 5,933,333 Private Placement Warrants to the Sponsor at a price of $1.50
per warrant, generating gross proceeds of approximately $8,900,000.
Following the IPO, the exercise of the over-allotment option and the sale of the
Private Placement Warrants, a total of $345,000,000 was placed in the Trust
Account. We incurred $19,478,776 in transaction costs, including $6,900,000 of
underwriting fees, $12,075,000 of deferred underwriting fees and $503,776 of
other costs.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $346,769,996 (including $1,769,996 of interest income) consisting of U.S.
government securities 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, which invest only in direct U.S. government treasury obligations. Interest
income on the balance in the Trust Account may be used by us to pay taxes.
Through September 30, 2022, we withdrew $363,050 of interest income from the
Trust Account to pay our tax obligations.
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For the nine months ended September 30, 2022, cash provided by operating
activities was $461,544. Net income of $23,107,857 was affected by interest
income on amounts held in the Trust Account of $2,057,229, interest expense of
$946 and change in the fair value of the warrant liability of $20,865,323.
Changes in operating assets and liabilities used $275,293 of cash for operating
activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $968,248. Net income of $6,735,800 was affected by interest earned on cash
and marketable securities held in the Trust Account of $55,688, a change in fair
value of warrant liabilities of $8,680,011, excess of fair value over cash
received for Private Placement Warrants of $355,999 and offering costs allocated
to warrants of $844,080. Changes in operating assets and liabilities used
$168,428 of cash for operating activities.
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
deferred underwriting commissions and income taxes payable), to complete our
initial Business Combination. To the extent that our capital stock 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.
On March 6, 2022 we entered into a Termination Agreement and Plan of Merger with
Tomorrow.io and pursuant to the Termination Agreement, Tomorrow.io was obligated
to pay us $1,500,000 upon the earliest to occur of (a) 120 days from the
Termination Agreement, (b) two business days after the initial closing of
Tomorrow,io's Next Financing (as defined in the Termination Agreement) and (c)
immediately prior to the consummation of Change of Control (as defined in the
Termination Agreement). The Termination Payment was received on July 1, 2022.
Until consummation of a Business Combination, we will be using the funds not
held in the Trust Account and any additional Working Capital Loans from the
Company's Sponsor, an affiliate of the Company's Sponsor or certain of the
Company's directors and officers, for identifying and evaluating target
businesses, performing business due diligence on prospective target businesses,
traveling to and from the offices or similar locations of prospective target
businesses or their representatives or owners, reviewing corporate documents and
material agreements of prospective target businesses, structuring, negotiating
and completing a Business Combination.
As of September 30, 2022, we had cash of $1,137,976. 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 or similar locations of prospective target
businesses or their representatives or owners, review corporate documents and
material agreements of prospective target businesses, structure, negotiate and
complete a Business Combination.
Until the consummation of a Business Combination, the Company 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.
The Company has incurred and expects to continue to incur significant costs in
pursuit of its acquisition plans. The Company will need to raise additional
capital through loans or additional investments from its Sponsor, stockholders,
officers, directors, or third parties. The Company's officers, directors and
Sponsor may, but are not obligated to, loan the Company funds, from time to time
or at any time, in whatever amount they deem reasonable in their sole
discretion, to meet the Company's working capital needs. Accordingly, the
Company may not be able to obtain additional financing. 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,
curtailing operations, suspending the pursuit of a potential transaction, and
reducing overhead expenses. The Company cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all.
If the Company is unable to complete the Business Combination because it does
not have sufficient funds available, the Company will be forced to cease
operations and liquidate the Trust Account. These conditions raise substantial
doubt about the Company's ability to continue as a going concern one year from
the date that these financial statements are issued.
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On December 6, 2021, we issued a promissory note in the principal amount of
$350,000 to our Sponsor. Such promissory note bears interest at 0.33% per annum
and is repayable in full at the earlier of (i) March 15, 2023, or (ii) the date
on which we consummate an initial Business Combination as contemplated by our
amended and restated certificate of incorporation. If we do not consummate a
Business Combination, we may use a portion of any funds held outside the Trust
Account to repay the Note; however, no proceeds from the Trust Account may be
used for such repayment. As of September 30, 2022, the outstanding balance under
the Note amounted to an aggregate of $350,946, which includes $946 of accrued
interest.
In connection with the Company's assessment of going concern considerations in
accordance with the Financial Accounting Standards Board's ("FASB's") Accounting
Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an
Entity's Ability to Continue as a Going Concern," the Company has until March
15, 2023, to consummate a Business Combination. It is uncertain that the Company
will be able to consummate a Business Combination by this time. If a Business
Combination is not consummated by this date and an extension has not been
requested by the Sponsor and approved by the Company's shareholders, there will
be a mandatory liquidation and subsequent dissolution of the Company. We have
determined that the mandatory liquidation, should a Business Combination not
occur, and an extension not requested by the Sponsor, and potential 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 March 15, 2023.
The Company intends to continue to search for and seek to complete a Business
Combination before the mandatory liquidation date. The Company is within 12
months of its mandatory liquidation date as of the time of filing of this
Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2022 and
December 31, 2021.
Contractual Obligations
We do not have any capital lease obligations, operating lease obligations or
long-term liabilities, other than an agreement to pay an affiliate of the
Sponsor a monthly fee of $10,000 for office space, administrative and support
services to the Company. We began incurring these fees on March 11, 2021, and
will continue to incur these fees monthly until the earlier of the completion of
the Business Combination and our liquidation.
The underwriters of the IPO are entitled to a deferred fee of $12,075,000 in the
aggregate. The deferred fee will be waived by the underwriters in the event that
we do not complete a Business Combination, subject to the terms of the
underwriting agreement.
On December 6, 2021, we issued the Note in the principal amount of $350,000 to
our Sponsor. Such promissory note bears interest at 0.33% per annum and is
repayable in full at the earlier of (i) March 15, 2023, or (ii) the date on
which we consummate an initial Business Combination as contemplated by our
amended and restated certificate of incorporation. As of September 30, 2022, the
outstanding balance under the Note amounted to an aggregate of $350,946, which
includes $946 of accrued interest.
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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:
Class A Common Stock Subject to Possible Redemption
We account for our shares of 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 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) 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, the Class A Common Stock
subject to possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our unaudited condensed balance sheet.
Net Income per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, Earnings Per Share. Net income per share is computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the period, excluding common stock subject to forfeiture. At September
30, 2022 and 2021, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into shares of
common stock and then share in the earnings of the Company. As a result, diluted
income per share is the same as basic income per share for the period presented.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is reassessed
at the end of each reporting period.
We account for our 17,433,333 warrants (comprising 11,500,000 public included as
part of our units sold in our IPO (the "Public Warrants") and 5,933,333 Private
Placement Warrants sold to our Sponsor in a private placement which took place
concurrently with our IPO as derivative warrant liabilities in accordance with
ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at
fair value and adjusts the instruments to fair value at each reporting period.
The liabilities are subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in the Company's statement
of operations. The fair value of Public Warrants issued by the Company in
connection with its IPO was initially measured using a Monte Carlo simulation
model, and then subsequently measured at the public trading price. The fair
value of Private Placement Warrants has been estimated using a Modified
Black-Scholes model at each measurement date.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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