Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report of the Company on Form 10-Q for the quarter ended March
31, 2022, as filed with the Securities and Exchange Commission ("SEC") (this
"Report") includes forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "could,"
"would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or
the negative of such terms or other similar expressions. Such statements
include, but are not limited to, possible business combinations and the
financing thereof, and related matters, as well as all other statements other
than statements of historical fact included in this Form 10-Q. Factors that
might cause or contribute to such a discrepancy include, but are not limited to,
those described in our other SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on October 21, 2020. We were incorporated for the purpose of effecting a
Business Combination. Our sponsor is Pioneer Merger Sponsor LLC, a Cayman
limited liability company.
The registration statement for our Initial Public Offering was declared
effective on January 7, 2021. On January 12, 2021, we consummated its Initial
Public Offering of 40,250,000 Units, including 5,250,000 Over-Allotment Units,
at $10.00 per Unit, generating gross proceeds of $402.5 million, and incurring
offering costs of approximately $22.8 million, of which approximately $14.1
million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 6,700,000 Private Placement Warrants, at a price of
$1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds
of approximately $10.1 million.
Upon the closing of the Initial Public Offering, management agreed that an
amount equal to at least $10.00 per Unit sold in the Initial Public Offering,
including the proceeds of the Private Placement Warrants, will be held in the
Trust Account, located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and invested only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940, as amended, or 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, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
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If we are unable to complete a Business Combination within the Combination
Period, we will (i) cease all operations except for the purpose of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, 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 the Company to pay its taxes, if any (less up to $100,000 of
interest to pay dissolution expenses) divided by the number of the
then-outstanding Public Shares, which redemption will completely extinguish
Public Shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in each
case to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law.
Results of Operations
Our activity from October 21, 2020 through March 31, 2022, includes preparation
for our Initial Public Offering, and since our Initial Public Offering, our
activity has been limited to the search for a prospective initial Business
Combination. We will not generate any operating revenues until the closing and
completion of our initial Business Combination, at the earliest. We generate
non-operating income in the form of investment income from our investments 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
expenses for due diligence expenses.
For the three months ended March 31, 2022, we had net income of approximately
$26.3 million, which consisted of $17.5 million from the termination fee,
approximately $9.1 million in change in fair value of derivative warrant
liabilities, and approximately $36,000 income from investments held in Trust
Account, partially offset by approximately $297,000 in general and
administrative expenses.
For the three months ended March 31, 2021, we had net income of approximately
$6.4 million, which consisted of $8.6 million decrease in change in the fair
value of derivative warrant liabilities and approximately $9,000 of income from
investments held in Trust Account, partially offset by approximately $1.1
million of financing costs associated with the issuance of derivative warrant
liabilities, approximately $737,000 loss on excess of fair value over cash
received for Private Placement warrants, and approximately $361,000 of general
and administrative expenses.
Termination of Proposed Business Combination
On May 26, 2021, we entered into a Business Combination Agreement, by and among
us, Pioneer SPAC Merger Sub Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("Pioneer Merger Sub"), and Acorns Grow Incorporated,
a Delaware corporation ("Acorns"). On January 15, 2022, the Company and Pioneer
Merger Sub became party to that certain Termination Fee Agreement (the
"Termination Fee Agreement"), dated as of January 3, 2022, by and between the
Sponsor and Acorns. Pursuant to the Termination Fee Agreement, the parties
agreed to mutually terminate the Business Combination Agreement, dated as of May
26, 2021 (as amended, supplemented or otherwise modified from time to time, the
"Business Combination Agreement"), by and among us, Acorns and Pioneer Merger
Sub, subject to the conditions set forth in the Termination Fee Agreement.
The Termination Fee Agreement provides for deferred payments from Acorns to us.
Acorns is required to pay an aggregate sum of $17,500,000 to us in monthly
payments through December 15, 2022. In January and March 2022, we received
payments under the Termination Fee Agreement so that a total of $17,500,000 has
been paid pursuant to the Termination Fee Agreement. If we (i) have not
consummated an initial business combination on or before December 15, 2022 and
(ii) determine to redeem its public shares (and does not withdraw such
determination), Acorns is required to pay to us $15,000,000 no later than
December 22, 2022.
We intend to continue our search for an initial Business Combination. As
previously disclosed, if we do not complete an initial Business Combination, any
funds remaining, after paying expenses including those incurred in our search
for a Business Combination, from payments under the Termination Fee Agreement,
are expected to remain outside of the trust account and not be part of
liquidating distributions with respect to the Public Shares. See "Item 1.
Business -- Redemption of Public Shares and Liquidation If No Initial Business
Combination."
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Liquidity and Going Concern
As of March 31, 2022, we had approximately $12.5 million in cash and working
capital of approximately $12.3 million.
Our liquidity needs prior to receiving the $17.5 million in the first quarter
under the Termination Fee Agreement were satisfied through a contribution of
$25,000 from our Sponsor to cover for certain offering costs in exchange for the
issuance of the Founder Shares, the loans of approximately $141,000 prior to the
Initial Public Offering and $375,000 from our Sponsor pursuant to a second
promissory note of up to $500,000 available, and the proceeds from the
consummation of the Private Placement not held in the Trust Account. We repaid
the first promissory note of approximately $141,000 in full on January 15, 2021.
After receiving the termination fee payments totaling $17.5 million in the first
quarter of 2022, the Company repaid the second promissory note balance of
$455,000 in full on March 11, 2022. 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,
provide us Working Capital Loans. As of March 31, 2022 and December 31, 2021,
there were no amounts outstanding under any Working Capital Loan.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, "Presentation of Financial Statements - Going
Concern," we have until January 12, 2023 to consummate a Business Combination.
It is uncertain that we will be able to consummate a Business Combination by
this time. If a Business Combination is not consummated by this date, there will
be a mandatory liquidation and subsequent dissolution of the Company. Management
has determined that the mandatory liquidation, should a Business Combination not
occur, and potential subsequent dissolution raises substantial doubt about our
ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after January 12, 2023. Management continues to evaluate the impact of the
COVID-19 pandemic and has concluded that while it is reasonably possible that
the virus could have a negative effect on our financial position, the specific
impact is not readily determinable as of the date of the condensed consolidated
financial statements. The condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that
may be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares 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) were entitled to registration rights pursuant to a registration
and shareholder rights agreement signed upon the effective date of the Initial
Public Offering. The holders of these securities were entitled to make up to
three demands, excluding short form demands, that we register 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. 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 from the date of the final prospectus
relating to the Initial Public Offering to purchase up to 5,250,000 additional
Units to cover over-allotments, if any, at the Initial Public Offering price
less the underwriting discounts and commissions. On January 12, 2021, the
underwriter fully exercised its over-allotment option.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
approximately $8.1 million in the aggregate, paid upon the closing of the
Initial Public Offering. In addition, $0.35 per unit, or approximately $14.1
million in the aggregate will be payable to the underwriter for deferred
underwriting commissions. The deferred fee will become payable to the
underwriter 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.
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Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. A summary of our significant accounting
policies is included in Note 2 to our condensed financial statements in Part I,
Item 1 of this Report. Certain of our accounting policies are considered
critical, as these policies are the most important to the depiction of our
financial statements and require significant, difficult or complex judgments,
often employing the use of estimates about the effects of matters that are
inherently uncertain. Such policies are summarized in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
in our Annual Report on Form 10-K filed with the SEC on March 30, 2022. There
have been no significant changes in the application of our critical accounting
policies during the three months ended March 31, 2022.
We believe that our critical accounting policies and estimates have a higher
degree of inherent uncertainty and require our most significant judgments. In
addition, had we used to estimate different from any of these, our condensed
consolidated financial statements could have been materially different from
those presented. There were no changes in our critical accounting policies and
estimates during the three months ended March 31, 2022 from those set forth in
"Critical Accounting Policies" in our Annual Report on Form 10-K filed with the
SEC on March 30, 2022.
Recent Accounting Pronouncements
Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying condensed consolidated financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
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
condensed consolidated 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 condensed consolidated
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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