PMVC 10-Q
PMV Consumer Acquisition Corp. (PMVC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from _________ to _________
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A Common Stock and one-half of one redeemable Warrant | PMVC.U | The New York Stock Exchange | ||
| Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share | PMVC.WS | The New York Stock Exchange |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 11, 2022, there are
PMV CONSUMER ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
i
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements.
PMV
CONSUMER ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Cash and marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liability - accrued expenses | $ | $ | ||||||
| Deferred underwriting fee payable | ||||||||
| Derivative warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B convertible common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
PMV
CONSUMER ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Franchise tax expense | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Fair value adjustment on derivative warrant liabilities | ( | ) | ||||||
| Other income (expense) | ( | ) | ||||||
| Income (loss) before provision for income taxes | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Weighted average shares outstanding, of Class A common stock | ||||||||
| Basic and diluted net income (loss) per share, Class A common stock | $ | $ | ( | ) | ||||
| Weighted average shares outstanding, of Class B convertible common stock(1) | ||||||||
| Basic and diluted net income (loss) per share, Class B convertible common stock | $ | $ | ( | ) | ||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
PMV CONSUMER ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(Unaudited)
| Class A Common Stock | Class B Convertible Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares(1) | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2022 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| (1) | On August 3, 2020, the Company effected a 1.4-for-1 forward stock split of its issued and outstanding shares of Class B convertible common stock (see Note 5). |
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
PMV CONSUMER ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(Unaudited)
| Class A Common Stock | Class B Convertible Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares(1) | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2021 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
PMV
CONSUMER ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of derivative warrant liability | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Proceeds from maturity of securities in Trust Account | ||||||||
| Investment of cash in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ||||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
PMV
CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
PMV Consumer Acquisition Corp. (the “Company”) was incorporated in Delaware on March 18, 2020. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on companies in the consumer industry. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2022, the Company had not commenced any operations. All activity through March 31, 2022, relates to the Company’s formation, the initial public offering (“Initial Public Offering”) and simultaneous private sale of warrants (“Private Warrants”), which is described below, and identifying a target for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering was declared effective on September 21, 2020. On September 24,
2020, the Company consummated the Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
Offering
costs amounted to $
6
PMV
CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (CONT.)
The
Company must complete a Business Combination having an aggregate fair market value of at least
The
Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Certificate of Incorporation, as amended (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote the Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer in connection with a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction, or do not vote at all.
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Certificate of Incorporation will provide that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group”, will be restricted from redeeming its
shares with respect to more than an aggregate of
7
PMV
CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (CONT.)
The
Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with
the completion of a Business Combination or an amendment to the Company’s Certificate of Incorporation described below, (b) to
waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to consummate
a Business Combination, and (c) not to propose an amendment to the Company’s Certificate of Incorporation to modify a public
stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or affect the substance
or timing of the Company’s obligation to redeem
The Company will have until September 24, 2022 (or such later date as may be approved by the stockholders in an amendment to the Certificate of Incorporation) to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company 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 franchise and income tax obligations and net of up to $50,000 of interest available to be used for liquidation 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 Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold
to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the
amount of funds in the Trust Account to below (i) $
8
PMV
CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 10, 2022, which contains the audited financial statements and notes thereto. The interim results for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standards at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
9
PMV
CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At March 31, 2022, and December 31, 2021, the assets held in the Trust Account were held primarily in U.S. Treasury Bills.
Common Stock Subject to Possible Redemption
The Company accounts for its
common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic
480, “Distinguishing Liabilities from Equity.” 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 is either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, at March 31, 2022, and December 31, 2021,
The Company has classified all of the shares of Class A common stock as temporary equity. Immediately upon the closing of the Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares of Class A common stock resulted in charges against additional paid-in capital and accumulated deficit.
10
PMV
CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Common Stock Subject to Possible Redemption (Cont.)
The Class A common stock subject to possible redemption reflected on the balance sheets as of March 31, 2022, and December 31, 2021, are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to public warrants | ( | ) | ||
| Class A shares offering costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption | $ |
Offering Costs
Offering costs consist of
legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that are directly related to the Initial
Public Offering. Offering costs were allocated on a relative fair value basis between temporary equity, stockholders’ equity (deficit)
and expense. The portion of offering costs allocated to the public warrants has been charged to expense. The portion of the offering costs
allocated to the public shares has been charged to temporary equity. On September 24, 2020, offering costs amounting to $
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
11
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements’ carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
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 shares of common stock outstanding for the period. The Company
has not considered the effect of warrants to purchase
The Company has two classes of shares, which are referred to as Class A common stock (the “Common Stock”) and Class B convertible common stock (the “Founder Shares”). Earnings and losses are shared pro-rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares share pro rata in the income (loss) of the Company. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings as the redemption value approximates fair value.
12
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Corporation coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Recent Accounting Pronouncements
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. The Company adopted ASU 2020-06 on January 1, 2022. Adoption of the ASU did not impact the Company's financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s 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 September 24, 2022, then the Company will cease all operations except for the purpose of liquidating. The 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 September 24, 2022. The Company intends to complete a Business Combination before the mandatory liquidation date.
NOTE 3—INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold
NOTE 4—PRIVATE PLACEMENT
Simultaneously with the closing
of the Initial Public Offering, the Sponsor purchased an aggregate of
13
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 5—RELATED PARTY TRANSACTIONS
Founder Shares
On March 20, 2020, the Sponsor
purchased
The over-allotment option
was not exercised, consequently
The Founder Shares are identical to the Class A common stock included in the Units sold in the Initial Public Offering except that the Founder Shares automatically convert into shares of Class A common stock at the time of the Company’s Initial Business Combination, are subject to certain transfer restrictions as described in more detail below, and prior to a Business Combination have the exclusive right to elect, replace and remove the directors of the Company. Holders of Founder Shares may also elect to convert their shares of Class B convertible common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
The Sponsor has agreed
(a) to waive its redemption rights with respect to its Founder Shares in connection with the completion of a Business Combination or an
amendment to the Company’s Certificate of Incorporation described below, (b) to waive its rights to liquidating distributions from
the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not to propose
an amendment to the Company’s Certificate of Incorporation to modify a public stockholders’ ability to convert or sell their
shares to the Company in connection with a Business Combination or affect the substance or timing of the Company’s obligation to
redeem
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares following the Initial Public Offering until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
14
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 5—RELATED PARTY TRANSACTIONS (CONT.)
Founder Shares (Cont.)
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial Business Combination. The Sponsor and the Company’s officers and directors have also agreed to vote any Founder Shares held by them and any public shares purchased after Initial Public Offering (including in open market and privately negotiated transactions) in favor of a Business Combination.
Promissory Note—Related Party
On June 16, 2020, the Sponsor
agreed to loan the Company up to an aggregate of $
Administrative Support Agreement
The Company entered into an
agreement whereby, commencing September 24, 2020 through the earlier of the Company’s consummation of a Business Combination and
its liquidation, the Company will pay an affiliate of the Sponsor a total of $
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor, the Company’s officers or directors or their affiliates may, but are
not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be
evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at
the lender’s discretion, up to $
15
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 6—COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on September 24, 2020, the holders of the Founder Shares, Private Warrants (and their underlying securities) and any warrants that may be issued upon conversion of working capital loans (“Working Capital Warrants”), if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). These holders will be entitled to certain demand and “piggyback” registration rights.
The holders of Founder Shares, Private Warrants and Working Capital Warrants will not be able to sell these securities until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled
to a deferred fee of $
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 7—STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock—The
Company is authorized to issue
Common Stock—The
authorized common stock of the Company includes up to
16
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 7—STOCKHOLDERS’ EQUITY (DEFICIT) (CONT.)
Common Stock (Cont.)—If the Company enters into an initial Business Combination, it may (depending on the terms of such an initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on the Business Combination, to the extent the Company seeks stockholder approval in connection with the Business Combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock.
At March 31, 2022, and December
31, 2021, there were
Warrants—Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) September 24, 2021. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock.
Under the terms of the warrant agreement, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its best efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the shares of Class A common stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants is not effective within 60 days following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption; |
| ● | if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to adjustment as described below) for any 20 trading days within a 30-trading day period ending on the third business day prior to the notice of redemption to the warrant holders; and |
17
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 7—STOCKHOLDERS’ EQUITY (DEFICIT) (CONT.)
Warrants (Cont.)—If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Warrants will be identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchaser or its permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
In addition, if (x) the Company
issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of an
initial Business Combination at an issue price or effective issue price of less than $
18
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 8—INCOME TAX
The Company’s net deferred tax asset at March 31, 2022, is as follows:
| Deferred tax asset | ||||
| Organizational costs/Start-up expenses | $ | |||
| Federal Net Operating Loss | ||||
| Total deferred tax asset | ||||
| Valuation allowance | ( | ) | ||
| Deferred tax asset, net of allowance | $ | |||
As of March 31, 2022, and
December 31, 2021, the Company had U.S. federal and state net operating loss carryovers (“NOLs”) of $
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management determined that a full valuation allowance was required.
A reconciliation of the income tax rate to the Company’s effective tax rate at March 31, 2022, is as follows:
| Statutory federal income tax rate | % | |||
| State taxes, net of federal tax benefit | % | |||
| Permanent Book/Tax Differences | ( | )% | ||
| Valuation allowance | % | |||
| Income tax provision | % |
The Company files income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by the various taxing authorities. The Company’s tax returns since inception remain open and subject to examination.
19
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 9—FAIR VALUE MEASUREMENTS
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2022, and December 31, 2021, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Description | March 31, 2022 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Cash and marketable securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant Liability – Private Placement Warrants | $ | $ | $ | $ | ||||||||||||
20
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 9—FAIR VALUE MEASUREMENTS (CONT.)
| Description | December 31, 2021 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Cash and marketable securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant Liability – Private Placement Warrants | $ | $ | $ | $ | ||||||||||||
Cash included in the tables above are not material.
Level 3 financial liabilities at March 31, 2022 consist of the Private Placement Warrant liability as there is little or no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
The Company’s Public Warrants were reclassified from Level 3 to Level 1 in Q4 2021; their fair value at March 31, 2022 is based on an observable market quote. The fair value of the Public Warrants prior to Q4 2021 and the fair value of the Private Warrants is based on a Monte Carlo simulation model, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The aforementioned warrant liabilities are not subject to qualified hedge accounting. There were no transfers between levels within the fair value hierarchy during the quarter ended March 31, 2022.
The following table provides quantitative information regarding Level 3 fair value measurements:
| As of March 31, 2022 | As of December 31, 2021 | |||||||
| Stock price | $ | $ | ||||||
| Strike price | $ | $ | ||||||
| Warrant price | $ | $ | ||||||
| Term (in years) | ||||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Probability of completing a Business Combination | % | % | ||||||
21
PMV CONSUMER ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 9—FAIR VALUE MEASUREMENTS (CONT.)
The following table presents the changes in the fair value of warrant liabilities:
| Private Warrants | Public Warrants | Total | ||||||||||
| Fair value as of March 18, 2020 (inception) | $ | $ | $ | |||||||||
| Initial measurement on September 30, 2020, Level 3 Inputs(1) | ||||||||||||
| Change in fair value recognized in earnings | ||||||||||||
| Derivative warrant liabilities – Level 3, at December 31, 2020 | ||||||||||||
| Change in fair value recognized in earnings | ||||||||||||
| Derivative warrant liabilities – Level 3, at March 31, 2021 | ||||||||||||
| Change in fair value recognized in earnings | ( | ) | ( | ) | ( | ) | ||||||
| Derivative warrant liabilities – Level 3, at June 30, 2021 | ||||||||||||
| Change in fair value recognized in earnings | ( | ) | ( | ) | ( | ) | ||||||
| Derivative warrant liabilities – Level 3, at September 30, 2021 | ||||||||||||
| Transfer of Public Warrants to Level 1 | ( | ) | ( | ) | ||||||||
| Change in fair value recognized in earnings | ( | ) | ( | ) | ||||||||
| Derivative warrant liabilities – Level 3, at December 31, 2021 | ||||||||||||
| Change in fair value recognized in earnings | ( | ) | ( | ) | ||||||||
| Derivative warrant liabilities – Level 3, at March 31, 2022 | $ | $ | $ | |||||||||
| (1) |
NOTE 10—SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the unaudited condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to PMV Consumer Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to PMV Consumer Acquisition Holdings Company, 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 of 1933 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 Form 10-Q, 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 final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (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 special purpose acquisition company formed under the laws of the State of Delaware on March 18, 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. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic location, although we are currently focusing our search for target businesses in the consumer industry. We intend to effectuate our initial business combination using cash from the proceeds of the IPO and the sale of the Private Warrants, our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in a business combination:
| ● | may significantly reduce the equity interest of our stockholders; | |
| ● | may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock; | |
| ● | will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and | |
| ● | may adversely affect prevailing market prices for our securities. |
23
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations; | |
| ● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and | |
| ● | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2022, were organizational activities, those necessary to prepare for the IPO, described below, and searching for a target business with which to complete a Business Combination. 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 after the IPO. 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 March 31, 2022, and March 31, 2021, we had a net income (loss) of $5,450,898 and ($420,832), respectively, which consists of interest income on marketable securities held in the Trust Account of $42,244 and $33,070, respectively, and a fair value adjustment on derivative liabilities of $5,663,845 and $236,500, respectively, offset by operating costs of $255,191 and $217,402, respectively.
Liquidity and Capital Resources
On September 24, 2020, we consummated the IPO of 17,500,000 Units at a price of $10.00 per Unit, generating gross proceeds of $175,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 6,150,000 Private Warrants to our Sponsor at a price of $1.00 per warrant, generating gross proceeds of $6,150,000.
Following the IPO and the sale of the Private Warrants, a total of $175,000,000 was placed in the Trust Account. We incurred $9,957,390 in offering costs, consisting of $3,500,000 of underwriting fees, $6,125,000 of deferred underwriting fees and $507,390 of other offering costs, of which $175,000 was offset with a credit paid by the Underwriter.
As of March 31, 2022, we had marketable securities held in the Trust Account of $175,151,406 (including $151,406 of interest income) consisting primarily of U.S. treasury bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through March 31, 2022, we had not withdrawn any interest earned on the Trust Account.
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 income taxes payable), to complete our 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.
24
As of March 31, 2022, we had cash of $1,288,374 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.
For the three months ended March 31, 2022, cash used in operating activities was $224,122. Net income of $5,450,898 was affected by interest earned on marketable securities held in the Trust Account of $42,244, a change in fair value of derivative warrant liabilities of $5,663,845, and net increase of changes in operating assets and liabilities of $31,069.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. 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 identical to the Private Warrants, at a price of $1.00 per warrant at the option of the lender.
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 equity 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
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 September 24, 2022, then the Company will cease all operations except for the purpose of liquidating. The 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 September 24, 2022. The Company intends to complete a Business Combination before the mandatory liquidation date.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2022.
25
Contractual Obligations
We do not have any long-term debt, 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, utilities and secretarial and administrative support. We began incurring these fees on September 24, 2020, and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to deferred fee of $0.35 per Unit, or $6,125,000. The deferred fee will be forfeited by the underwriters solely in the event that we fail to complete a Business Combination within the required time period, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of the 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 Liability
We account for the warrants issued in connection with our IPO in accordance with the guidance contained in ASC 815 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.
Class A Common Stock Subject to Possible Redemption
We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” 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. Changes in redemption value are reflected in additional paid in capital, or in the absence of additional capital, in accumulated deficit. 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, at March 31, 2022, and December 31, 2021, 17,500,000 Class A common shares subject to possible redemption, respectively, are presented at redemption value as temporary equity, outside of the stockholders’ equity (deficit) section of our condensed balance sheets.
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 shares of common stock outstanding for the period. The Company has not considered the effect of warrants to purchase 14,900,000 shares of Class A common stock that were sold in the Initial Public Offering and the private placement in the calculation of diluted income (loss) per share, since the average market price of the Company’s Class A common stock for the three months ended March 31, 2022 was below the Warrants’ $11.50 exercise price. As a result, diluted income (loss) per common share is the same as basic income (loss) per common share for the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our unaudited condensed financial statements.
26
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Through March 31, 2022, our efforts were limited to organizational activities, activities relating to our initial public offering and since the initial public offering, the search for a target business with which to consummate an initial business combination, including the consummation of the Merger. We have engaged in limited operations and have not generated any revenues. We have not engaged in any hedging activities since our inception on March 18, 2020. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
As of March 31, 2022, we were not subject to any market or interest rate risk. The net proceeds of the initial public offering and the sale of the private placement warrants held in the trust account have been invested in U.S. government treasury bills 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. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that, during the period covered by this report, our disclosure controls and procedures were not effective because of a material weakness in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the material weakness was identified in 2021 related to our accounting for complex financial instruments. This material weakness resulted in the restatement of our audited financial statements as of and for the year ended December 31, 2020, and our unaudited interim financial statements as of and for the quarters and year to date periods ended September 31. 2020, March 31, 2021, June 30, 2021, and September 30, 2021.
Remediation Plan and Status
In light of the material weakness in our internal controls, management has taken steps to enhance and improve the design and operating effectiveness of our internal controls over complex financial instruments, including the following implemented steps: (i) on-boarded additional qualified personnel with the requisite experience and training to supplement existing accounting professionals; (ii) expanded and improved the review process for complex securities and related accounting standards; and (iii) enhanced access to accounting literature.
We are working to remediate the material weakness as quickly and efficiently as possible and expect that the material weakness will be remediated in 2022. This expected timing incorporates management's continued efforts to strengthen processes, controls and policies as described above, as well as the necessary steps required to perform a management assessment of our internal controls. Notwithstanding the material weakness described above, our management has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operation and cash flows in conformity with generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
There were no changes during the quarter ended March 31, 2022 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1a. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks discussed in Part I, Item 1A “Risk Factors” in our Form 10-K filed with the SEC on March 10, 2022, for the year ended December 31, 2021.
You should understand that an investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in this section “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor incorporated by reference or contained herein below.
Summary of Risk Factors
| ● | The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our business combination on terms that would produce value for our stockholders. |
| ● | Our public stockholders are relying on management to locate a suitable target business for a potential business combination. We may not be successful in identifying a suitable target business and, even if one is identified, no assurance can be provided that we will successfully negotiate and consummate a business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate. |
| ● | Our executive officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination. |
| ● | Certain of our executive officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us following our initial business combination and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented. |
| ● | If we seek stockholder approval of our initial business combination, our Sponsor, officers and directors have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote. |
| ● | We may not be afforded an opportunity to vote on our proposed initial business combination, and even if we hold a vote, holders of our Founder Shares will participate in such vote, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination. |
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Summary of Risk Factors (Continued)
| ● | Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of the business combination. |
| ● | Our public stockholders ability to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target. |
| ● | Our public stockholders ability to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure. |
| ● | Our public stockholders ability to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock. |
| ● | If our stockholders fail to receive notice of our offer to redeem our Public Shares in connection with our business combination, or our stockholders fails to comply with the procedures for tendering their shares, such shares may not be redeemed. |
| ● | We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our Sponsor, executive officers and directors which may raise potential conflicts of interest. |
| ● | We will likely only be able to complete one business combination with the proceeds of the Initial Public Offering, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability. | |
| ● | Our warrants are accounted for as liabilities and changes in the value of our warrants could have a material effect on our financial results. |
| ● | The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a “going concern.” |
For a detailed disclosure of the risks relating to our operations, see the section titled “Risk Factors” appearing on pages 25 to 60 in our prospectus dated September 21, 2020, and as filed with the SEC on September 22, 2020, which is incorporated by reference herein. Except for the risk factors set forth below there have been no material changes to such risk factors.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected.
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Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.
The proceeds held in the trust account are invested only in U.S. government treasury obligations with a maturity of 180 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. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States.
In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of taxes paid or payable. Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share
Our warrants are accounted for as liabilities and changes in the value of our warrants could have a material effect on our financial results.
On April 12, 2021, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities instead of equity on the SPAC’s balance sheet. As a result of the SEC Staff Statement, we re-evaluated the accounting treatment of our warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value reported in our statement of operations for each reporting period.
As a result, included on our balance sheet as of March 31, 2022, and December 31, 2021, and contained elsewhere in this report are derivative liabilities related to embedded features contained within our warrants. ASC 815-40 provides for the re-measurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
Our proximity to our liquidation date expresses substantial doubt about our ability to continue as a “going concern.”
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that mandatory liquidation and subsequent dissolution raises 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 September 24, 2022. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 20, 2020, the Sponsor purchased 3,593,750 shares of Class B convertible common stock, the “Founder Shares”, for an aggregate purchase price of $25,000, or approximately $0.007 per share. On August 3, 2020, the Company effected a 1.4-for-1 forward stock split of its issued and outstanding shares of Class B convertible common stock, resulting in an aggregate of 5,031,250 Founder Shares being issued and outstanding. On November 5, 2020, the Underwriters’ over-allotment option expired unutilized resulting in 656,250 shares of Founder Shares being forfeited. As of March 31, 2022, 4,375,000 Founder Shares are issued and outstanding. The foregoing issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On September 24, 2020, we consummated the IPO of 17,500,000 Units, at $10.00 per Unit, generating gross proceeds of $175,000,000. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-241670). The registration statements were declared effective on September 21, 2020.
Simultaneously with the closing of the IPO, we consummated the sale of 6,150,000 warrants at a price of $1.00 per Private Warrant in a private placement to the Sponsor, generating gross proceeds of $6,150,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act
The Private Warrants are identical to the warrants underlying the Units sold in the IPO, except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchaser or its permitted transferees. The purchaser of Private Warrants has agreed not to transfer, assign, or sell any of the Private Warrants or Class A Common Stock underlying the Private Warrants (except to certain permitted transferees) until 30 days after the completion of the Company’s initial business combination.
Of the gross proceeds received from the IPO, and the sale of the Private Warrants, $175,000,000 was placed in the trust account established in connection with the IPO.
We paid a total of $3,500,000 in underwriting fees and $332,390 for other costs and expenses related to the Initial Public Offering, net of a $175,000 credit paid by the Underwriter. In addition, the underwriters agreed to defer $6,125,000 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
None
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed September 25, 2020 and incorporated herein by reference. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PMV Consumer Acquisition Corp. | ||
Date: May 11, 2022 |
By: | /s/ P. Kasper Jacobsen |
| Name: | P. Kasper Jacobsen | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
Date: May 11, 2022 |
By: | /s/ John N. Givissis |
| Name: | John N. Givissis | |
| Title: | Chief Accounting Officer | |
| (Principal Financial and Accounting Officer) | ||
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