Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(MARK ONE)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2022
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number:
001-40019
 
 
PIVOTAL INVESTMENT CORPORATION III
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Delaware
  
84-3415215
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
The Chrysler Building
405 Lexington Avenue, 44th Floor
New York, NY, 10174
(Address of principal executive offices)
(212)-818-8800
(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, $0.0001 par value, and
one-fifth
of one redeemable warrant
  
PICC.U
  
The New York Stock Exchange
Class A Common Stock, $0.0001 par value
  
PICC
  
The New York Stock Exchange
Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share
  
PICC WS
  
The New York Stock Exchange
Check whether the issuer (1) 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.    ☐  Yes    No  ☒
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).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, anon-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   ☐
Non-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  ☒    No  ☐
As of November
10
, 2022, there were 27,600,000 shares of Class A common stock, $0.0001 par value, and 6,900,000 shares of Class B common stock, $0.0001 par value, issued and outstanding.
 
 
 
 

Table of Contents

PIVOTAL INVESTMENT CORPORATION III

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

 

     Page  

Part I. Financial Information

      1  

Item 1. Financial Statements (Unaudited)

      1  

Condensed Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021

      1  

Condensed Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

      2  

Condensed Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

      3  

Condensed Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)

      4  

Notes to Unaudited Condensed Financial Statements

      5  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      15  

Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

      19  

Item 4. Controls and Procedures

      19  

Part II. Other Information

      20  

Item 1A. Risk Factors

      20  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      20  

Item 6. Exhibits

      21  

Signatures

      22  

Table of Contents
PART I—FINANCIAL INFORMATION
 
Item 1.
Interim Financial Statements.
PIVOTAL INVESTMENT CORPORATION III
CONDENSED BALANCE SHEETS
 
    
September 30,
    
December 31,
  
    
2022
    
2021
  
    
(unaudited)
        
ASSETS
                 
Current assets
                 
Cash
    $ 79,926     $ 563,923  
Prepaid expenses
      49,008       135,734  
    
 
 
    
 
 
  
Total Current Assets
      128,934       699,657  
Marketable securities held in Trust Account
      277,637,215       276,079,114  
    
 
 
    
 
 
  
TOTAL ASSETS
   
$
277,766,149
 
  
$
276,778,771
 
    
 
 
    
 
 
  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                 
Current liabilities
                 
Accounts payable and accrued expenses
    $ 2,214,182     $ 1,460,005  
Income taxes payable
      150,304       —    
    
 
 
    
 
 
  
Total Current Liabilities
      2,364,486       1,460,005  
Warrant liabilities
      383,700       12,150,500  
Deferred underwriting fee payable
      9,660,000       9,660,000  
    
 
 
    
 
 
  
TOTAL LIABILITIES
   
 
12,408,186
 
  
 
23,270,505
 
    
 
 
    
 
 
  
Commitments and Contingencies (Note 7)
                 
Class A common stock subject to possible redemption 27,600,000 shares outstanding at redemption value as of September 30, 2022 and December 31, 2021
      276,972,991       276,000,000  
Stockholders’ Deficit
                 
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding
      —         —    
Class B common stock, $0.0001 par value; 25,000,000 shares authorized; 6,900,000 shares issued and outstanding, as of September 30, 2022 and December 31, 2021
      690       690  
Additional
paid-in
capital
      —         —    
Accumulated deficit
      (11,615,718 )      (22,492,424 ) 
    
 
 
    
 
 
  
Total Stockholders’ Deficit
   
 
(11,615,028
) 
  
 
(22,491,734
) 
    
 
 
    
 
 
  
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
   
$
277,766,149
 
  
$
276,778,771
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
1
PIVOTAL INVESTMENT CORPORATION III
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2022
    
2021
    
2022
    
2021
  
Formation and operating costs
    $ 175,441     $ 168,787     $ 1,214,900     $ 494,890  
    
 
 
    
 
 
    
 
 
    
 
 
  
Loss from operations
   
 
(175,441
) 
  
 
(168,787
) 
  
 
(1,214,900
) 
  
 
(494,890
) 
Other income (expenses):
                                 
Change in fair value of warrant liabilities
      1,023,200       4,220,700       11,766,800       9,349,490  
Fair value in excess of purchase price of private warrants
      —         —         —         (4,441,970 ) 
Transaction costs allocated to warrant liabilities
      —         —         —         (526,599 ) 
Interest earned on marketable securities held in Trust Account
      1,153,274       16,642       1,507,199       46,388  
Unrealized gain (loss) on marketable securities held in Trust Account
      40,071       (6,302 )      50,902       (8,140 ) 
    
 
 
    
 
 
    
 
 
    
 
 
  
Total other income, net
      2,216,545       4,231,040       13,324,901       4,419,169  
Income before provision for income taxes
      2,041,104       4,062,253       12,110,001       3,924,279  
Provision for income taxes
      (254,740 )      —         (260,304 )      —    
    
 
 
    
 
 
    
 
 
    
 
 
  
Net income
   
$
1,786,364
 
  
$
4,062,253
 
  
$
11,849,697
 
  
$
3,924,279
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Weighted average shares outstanding, Class A common stock
      27,600,000       27,600,000       27,600,000       23,353,846  
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic and diluted net income per share, Class A common stock
   
$
0.05
 
  
$
0.12
 
  
$
0.34
 
  
$
0.13
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Weighted average shares outstanding, Class B common stock
      6,900,000       6,900,000       6,900,000       6,761,538  
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic and diluted net income per share, Class B common stock
   
$
0.05
 
  
$
0.12
 
  
$
0.34
 
  
$
0.13
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
2
PIVOTAL INVESTMENT CORPORATION III
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
 
    
Class A
Common Stock
     
Class B
Common Stock
     
Additional

Paid-in

Capital
     
Accumulated

Deficit
    
Total

Stockholders’

Deficit
  
    
Shares
     
Amount
     
Shares
     
Amount
  
Balance – January 1, 2022
   
 
—  
 
   
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
—  
     
$
(22,492,424
) 
  
$
(22,491,734
) 
Net income
      —          —          —          —          —          5,448,253       5,448,253  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance – March 31, 2022
   
 
—  
 
   
 
—  
 
   
 
6,900,000
 
   
 
690
 
   
 
—  
 
   
 
(17,044,171
) 
  
 
(17,043,481
) 
Remeasurement adjustment on redeemable common stock
                                                   (84,386 )      (84,386 ) 
Net income
      —          —          —          —          —          4,615,080       4,615,080  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance – June 30, 2022
   
 
—  
 
   
 
—  
 
   
 
6,900,000
 
   
 
690
 
   
$
—  
     
 
(12,513,477
) 
  
 
(12,512,787
) 
Remeasurement adjustment on redeemable common stock
                                                   (888,605 )      (888,605 ) 
Net income
      —          —          —          —          —          1,786,364       1,786,364  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance – September 30, 2022
      —       
$
 —       
 
6,900,000
 
   
$
690
 
   
$
 —       
$
(11,615,718
) 
  
$
(11,615,028
) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
 
    
Class A
Common Stock
     
Class B
Common Stock
     
Additional

Paid-in

Capital
    
Accumulated

Deficit
    
Total

Stockholders’

Equity (Deficit)
  
    
Shares
     
Amount
     
Shares
     
Amount
  
Balance – January 1, 2021
   
 
—  
 
   
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
24,310
 
  
$
(851
) 
  
$
24,149
 
Remeasurement adjustment on redeemable common stock
      —          —          —          —          (24,310 )      (24,037,348 )      (24,061,658 ) 
Net loss
      —          —          —          —          —         (6,806,034 )      (6,806,034 ) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – March 31, 2021
   
 
—  
 
   
 
—  
 
   
 
6,900,000
 
   
 
690
 
   
 
—  
 
  
 
(30,844,233
) 
  
 
(30,843,543
) 
Net income
      —          —          —          —          —         6,668,060       6,668,060  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – June 30, 2021
   
 
—  
 
   
 
—  
 
   
 
6,900,000
 
   
 
690
 
   
 
—  
 
  
 
(24,176,173
) 
  
 
(24,175,483
) 
Net income
      —          —          —          —          —         4,062,253       4,062,253  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance – September 30, 2021
   
 
—  
 
   
$
—  
     
 
6,900,000
 
   
$
690
 
   
$
—  
 
  
$
(20,113,920
) 
  
$
(20,113,230
) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
3
PIVOTAL INVESTMENT CORPORATION III
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    
For the Nine Months Ended
September 30,
  
    
2022
    
2021
  
Cash Flows from Operating Activities:
                 
Net income
    $ 11,849,697     $ 3,924,279  
Adjustments to reconcile net income to net cash used in operating activities:
                 
Change in fair value of warrant liabilities
      (11,766,800 )      (9,349,490 ) 
Fair value in excess of purchase price of private warrants
      —         4,441,970  
Transaction costs allocated to warrant liabilities
      —         526,599  
Interest earned on marketable securities held in Trust Account
      (1,507,199 )      (46,388 ) 
Unrealized (gain) loss on marketable securities held in Trust Account
      (50,902 )      8,140  
Changes in operating assets and liabilities:
                 
Prepaid expenses
      86,726       (171,940 ) 
Accounts payable and accrued expenses
      754,177       184,195  
Income taxes payable
      150,304       —    
    
 
 
    
 
 
  
Net cash used in operating activities
   
 
(483,997
) 
  
 
(482,635
) 
    
 
 
    
 
 
  
Cash Flows from Investing Activities:
                 
Investment of cash in Trust Account
      —         (276,000,000 ) 
    
 
 
    
 
 
  
Net cash used in investing activities
   
 
—  
 
  
 
(276,000,000
) 
    
 
 
    
 
 
  
Cash Flows from Financing Activities:
                 
Proceeds from sale of Units, net of underwriting discounts paid
      —         270,480,000  
Proceeds from sale of Private Placement Warrants
      —         7,270,000  
Proceeds from promissory notes – related party
      —         125,000  
Repayment of promissory notes – related party
      —         (125,000 ) 
Payment of offering costs
      —         (459,512 ) 
    
 
 
    
 
 
  
Net cash provided by financing activities
   
 
—  
 
  
 
277,290,488
 
    
 
 
    
 
 
  
Net Change in Cash
   
 
(483,997
) 
  
 
807,853
 
Cash – Beginning
      563,923       —    
    
 
 
    
 
 
  
Cash – Ending
   
$
79,926
 
  
$
807,853
 
    
 
 
    
 
 
  
Non-cash
investing and financing activities:
                 
Offering costs included in accrued offering costs
    $ —       $ 31,025  
    
 
 
    
 
 
  
Remeasurement adjustment on redeemable common stock
    $ 972,991     $ 24,061,658  
    
 
 
    
 
 
  
Deferred underwriting fee payable
    $ —     $ 9,660,000  
    
 
 
    
 
 
  
The accompanying notes are an integral part of the unaudited condensed financial statements.
 
4
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION, GOING CONCERN AND BUSINESS OPERATIONS
Pivotal Investment Corporation III (the “Company”) was incorporated in Delaware on October 6, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. 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 September 30, 2022, the Company had not commenced any operations. All activity for the period from October 6, 2020 (inception) through September 30, 2022 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below and subsequent to the Initial Public Offering, and seeking to identify a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate
non-operating
income on cash and cash equivalents in the form of interest income from the proceeds derived from the Initial Public Offering and simultaneous private placement described below.
The registration statement for the Company’s Initial Public Offering was declared effective on February 8, 2021. On February 11, 2021, the Company consummated the Initial Public Offering of 27,600,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriters of the over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit, generating gross proceeds of $276,000,000, which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,270,000 warrants (each, a “Private Placement Warrant” and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Pivotal Investment Holdings III LLC, a Delaware limited liability company and entity affiliated with certain of the Company’s officers (the “Sponsor”), generating gross proceeds of $7,270,000, which is described in Note 5.
Transaction costs amounted to $15,695,537, consisting of $5,520,000 of underwriting fees, $9,660,000 of deferred underwriting fees and $515,537 of other offering costs.
Following the closing of the Initial Public Offering on February 11, 2021, an amount of $276,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), invested in U.S. government securities, within the meaning set forth in Section 2(a)(16)of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule
2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below, except that interest earned on the Trust Account can be released to the Company to pay its tax obligations.
While the Company’s management has broad discretion with respect to the specific application of the cash held outside of the Trust Account, substantially all of the net proceeds from the Initial Public Offering and the sale of the Private Placement Warrants, which are placed in the Trust Account, are intended to be applied generally toward completing a Business Combination. The Company must complete its initial Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (net of amounts previously disbursed to management for tax obligations and excluding the amount of deferred underwriting discounts held in the Trust Account) at the time of the agreement to enter into an initial Business Combination. Notwithstanding the foregoing, if the Company is not then listed on the NYSE for whatever reason, it would no longer be required to meet the foregoing 80% fair market value test. The Company intends to only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its 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 (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
 
5
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon the consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. 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 Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the conversions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“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 holders of Founder Shares (as defined below in Note 6) have agreed to vote their Founder Shares (as defined below in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares, without voting, and if they vote, irrespective of whether they vote for or against the proposed Business Combination.
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct conversions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides 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” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The holders of Founder Shares (as defined below in Note 6) have agreed (a) to waive their conversion rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or
pre-business
combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a Business Combination by February 11, 2023 and such period is not extended by stockholders, 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 (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) 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.
The holders of Founder Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters are expected to waive their rights to the deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
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 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) $10.00 per share or (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
 
6
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that the specific impact is not readily determinable as of the date of the condensed balance sheets. The condensed balance sheets do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Going Concern
At September 30, 2022, the Company had $79,926 in its operating bank accounts, $277,637,215 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $1,571,328, net of interest on trust assets. As of September 30, 2022, approximately $1,637,215 of the amount on deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations.
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the condensed financial statements. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2. REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s condensed financial statements as of and for the periods ended
June
 30, 2022 and
June
 30, 2021, management identified a presentation error made in its historical condensed financial statements. The Company determined that the sale of the private placement warrants is incorrectly reflected as a line item in Condensed Statement of Stockholders’ Deficit. As a result, the remeasurement of redeemable common stock was overstated by $7,270,000. In addition, on the Condensed Statement of Operations, the fair value in excess of the purchase price of private placement warrants was not presented as an individual line item but was combined into the change in fair value of warrant liabilities. As a result of these errors, the Condensed Statement of Cash Flows was impacted by these same line items.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”; the Company evaluated the changes and has determined that the related impact was not material to all previously presented financial statements. The Company, in consultation with its Audit Committee, concluded that its previously issued condensed financial statements will be revised to report the corrected remeasurement of Class A common stock subject to redemption.
The impact of the revision on the Company’s unaudited condensed financial statements is reflected in the following table:
 
    
As Previously
Reported
     
Adjustment
     
As Revised
  
Condensed Statement of Cash Flows for the nine months ended September 30, 2021 (unaudited)
                           
Cash Flows from Operating Activities:
                           
Change in fair value of warrant liabilities
    $ (4,907,520 )     $ (4,441,970 )     $ (9,349,490 ) 
Fair value in excess of purchase price of private warrants
    $ —        $ 4,441,970      $ 4,441,970  
Non-cash
Investing and Financing Activities:
                           
Remeasurement adjustment on redeemable common stock
    $ 31,331,658      $ (7,270,000 )     $ 24,061,658  
Condensed Statement of Operations for the nine months ended September 30, 2021 (unaudited)
                           
Other income (expense):
                           
Change in fair value of warrant liabilities
    $ 4,907,520      $ 4,441,970      $ 9,349,490  
Fair value in excess of purchase price of private warrants
    $ —        $ (4,441,970 )     $ (4,441,970 ) 
NOTE 3. 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 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 period ended December 31, 2021, as filed with the SEC on April 7, 2022. The interim results for the three and nine months ended September 30, 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 of 2002, 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.
 
7
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
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 standard 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 the reported amounts of 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and 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 September 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At September 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Offering Costs
Offering costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred in the condensed statements of operations. Offering costs associated with the Class A common stock issued were charged to temporary equity upon the completion of the Initial Public Offering. Offering costs amounting to $15,168,938 were charged to stockholders’ deficit upon the completion of the Initial Public Offering and $526,599 were expensed as of the date of the Initial Public Offering.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature 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 Class A 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, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.
 
8
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement adjustment from carrying value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional
paid-in
capital (to the extent available) and accumulated deficit.
Components of Equity
Upon the Initial Public Offering, the Company issued Class A common stock and Public Warrants. The Company also issued Private Placement Warrants. The Company allocated the proceeds received from the issuance using the
with-and-without
method. Under that method, the Company first allocated the proceeds to the Warrants based on their initial fair value measurement of $20,604,690 and then allocated the remaining proceeds, net of underwriting discounts and offering costs of $22,438,938 to the Class A common stock. All of the 27,600,000 shares of Class A common stock are presented within temporary equity, as these shares are subject to redemption upon the occurrence of events not solely within the Company’s control.
Warrant Liabilities
The Company assessed its warrants under ASC
480-25,
“Distinguishing liabilities from equity” and ASC
815-40
“Derivatives and Hedging—Contracts in Entity’s Own Equity”. The Company accounts for the Public Warrants (as defined below) and Private Placement Warrants (collectively, the “Warrants”) as warrant liabilities. A provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Company accounts for Warrants for shares of the Company’s common stock that are not indexed to its own stock as derivative liabilities at fair value on the condensed balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the condensed statements of operations in the period of change.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
Our effective tax rates from continuing operations were 12.48% and 0.00% for the three months ended September 30, 2022 and 2021, respec
t
ively, and 2.15% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value of warrant liabilities, and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
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 September 30, 2022 and December 31, 2021. 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
 
9
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
Net Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per common stock is computed by dividing net income by the weighted average number of common stocks outstanding for the period. The Company applies the
two-class
method in calculating earnings per share. Remeasurement adjustment associated with the redeemable shares of Class A common stocks is excluded from earnings per share as the redemption value approximates fair value.
The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 12,790,000 shares in the calculation of diluted net income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):
 
    
Three Months Ended September 30,
     
Nine Months Ended September 30,
  
    
2022
     
2021
     
2022
     
2021
  
    
Class A
     
Class B
     
Class A
     
Class B
     
Class A
     
Class B
     
Class A
     
Class B
  
Basic and diluted net income per common stock
                                                                        
Numerator:
                                                                        
Allocation of net income
    $ 1,429,091      $ 357,273      $ 3,249,802        812,451      $ 9,479,758      $ 2,369,939      $ 3,043,196      $ 881,083  
Denominator:
                                                                        
Basic and diluted weighted average shares outstanding
      27,600,000        6,900,000        27,600,000        6,900,000        27,600,000        6,900,000        23,353,846        6,761,538  
Basic and diluted net income per common stock
    $ 0.05      $ 0.05      $ 0.12      $ 0.12      $ 0.34      $ 0.34        0.13      $ 0.13  
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 Coverage of $250,000. The Company had not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s condensed balance sheets, primarily due to their short-term nature, except for warrant liabilities (see Note 9).
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 27,600,000 Units, which includes a full exercise by the underwriters of their over-allotment option in the amount of 3,600,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and
one-fifth
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 9).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 7,270,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $7,270,000 in a private placement. Each Private Placement Warrant will be exercisable to purchase one share of Class A common stock at an exercise price of $11.50. The proceeds from the sale of Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.
 
10
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On October 6, 2020, the Company’s sponsor (“Sponsor”) paid $25,000 to cover certain offering and formation costs of the Company in consideration for 5,750,000 shares of the Company’s Class B common stock (the “Founder Shares”). Our Sponsor subsequently transferred certain shares to our officers and directors and other third parties in each case at the same
per-share
purchase price paid by our initial stockholders. On February 8, 2021, the Company effected a stock dividend of 0.2 shares of Class B common stock for each outstanding share of Class B common stock resulting in there being an aggregate of 6,900,000 Founder Shares outstanding. The Founder Shares will automatically convert into Class A common stock upon the consummation of a Business Combination on a
one-for-one
basis, subject to adjustments as described in Note 7. The Founder Shares included an aggregate of up to 900,000 shares subject to forfeiture by the holders to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial stockholders will own, on an
as-converted
basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment option, no Founder Shares are currently subject to forfeiture.
The holders of Founder Shares have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the 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 a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital 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.​​​​​​​
Related Party Advances
On December 30, 2021, the Company reimbursed MGG Investment Group LP, an affiliate of the Sponsor, $160,491 for payment of expenses in 2021 on behalf of the Company.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s officer, directors, Sponsor or an affiliate of the foregoing, may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
Related Party—Consulting Agreement
On February 22, 2021, the Company entered into an agreement with a family member of the CEO and President for services related to a potential Business Combination. The agreement specified that the consultant would provide the Company with advice on due diligence, deal structuring, documentation and obtaining stockholder approval for a cost of $9,917 per month, or $119,000 in total, if a Business Combination was closed at any time prior to February 22, 2022. For the period ended December 31, 2021, the Company incurred and paid approximately $72,600 in fees related to these services. Effective September 30, 2021, this agreement was terminated.
 
11
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
NOTE 7. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on February 8, 2021, the holders of the Founder Shares (and any shares of Class A common stock issuable upon conversion of the Founder Shares), Private Placement Warrants (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants), and warrants (and any shares of Class A common stock issuable upon exercise of such warrants) that may be issued upon conversion of working capital loans have registration rights to require the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities are entitled to make up to two demands that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriter’s Agreement
The underwriters from the Initial Public Offering are entitled to a deferred fee of $0.35 per Unit, or $9,660,000 in the aggregate. The deferred fee will be forfeited by the underwriters solely in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement.
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class
 A Common Stock
— The Company is authorized to issue up to 125,000,000 shares of Class A, $0.0001 par value common stock. Holders of the Company’s shares of Class A common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there were 27,600,000 shares of Class A common stock issued and outstanding, including Class A common stock subject to possible redemption which are presented as temporary equity.
Class
 B Common Stock
— The Company is authorized to issue up to 25,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to one vote for each share. As of September 30, 2022 and December 31, 2021, there were 6,900,000 shares of Class B common stock issued and outstanding.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a
one-for-one
basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an
as-converted
basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering, net of conversions, plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, any private placement-equivalent securities issued, or to be issued, to any seller in a Business Combination, any private placement equivalent securities issued to the initial stockholders or their affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are
re-measured
and reported at fair value at each reporting period, and
non-financial
assets and liabilities that are
re-measured
and reported at fair value at least annually.
 
12
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
 
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.
At September 30, 2022 and December 31, 2021, assets held in the Trust Account were $277,637,215 and $276,079,114, respectively, which is invested primarily in U.S. Treasury Securities. Through September 30, 2022 and December 31, 2021, the Company has not withdrawn any of interest earned on the Trust Account.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
 
    
Level
     
December 31, 2021
     
September 30, 2022
  
Assets:
                           
Marketable securities held in Trust Account
      1      $ 276,079,114      $ 277,637,215  
Liabilities:
                           
Warrant Liability – Private Placement Warrants
      2        6,906,500        218,100  
Warrant Liability – Public Warrants
      1        5,244,000        165,600  
Warrant Liabilities
The Warrants were accounted for as liabilities in accordance with ASC
815-40
and are presented within warrant liabilities on our accompanying September 30, 2022 and December 31, 2021 condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
The Public Warrants and the Private Warrants were initially valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own public warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the public warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Warrants. For periods subsequent to the detachment of the warrants from the Units on February 11, 2021, the close price of the public warrant price will be used as the fair value as of each relevant date. At December 31, 2021 the Private Warrants transferred to Level 2 due to the use of an observable market quote for a similar asset in an active market.
At September 30, 2022, the values of the Public Warrants and Private Placement Warrants were $165,600 and $218,100, respectively, based on a fair value of $0.03 per warrant.
At December 31, 2021, the values of the Public Warrants and Private Placement Warrants were $5,244,000 and $6,906,500, respectively, based on a fair value of $0.95 per warrant.
 
13
PIVOTAL INVESTMENT CORPORATION III
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
The following table presents the changes in the fair value of warrant liabilities:
 
    
Private
Placement
     
Public
     
Warrant
Liabilities
  
Fair value as of December 31, 2021
   
$
6,906,500
 
   
$
5,244,000
 
   
$
12,150,500
 
Change in valuation inputs or other assumptions
      (3,562,300 )       (2,704,800 )       (6,267,100 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of March 31, 2022
   
 
3,344,200
 
   
 
2,539,200
 
   
 
5,883,400
 
Change in valuation inputs or other assumptions
      (2,544,500 )       (1,932,000 )       (4,476,500 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of June 30, 2022
   
 
799,700
 
   
 
607,200
 
   
 
1,406,900
 
Change in valuation inputs or other assumptions
      (581,600 )       (441,600 )       (1,023,200 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of September 30, 2022
   
$
218,100
 
   
$
165,600
 
   
$
383,700
 
    
 
 
     
 
 
     
 
 
  
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On October 27, 2022, Pivotal Investment Corporation III (the “Company”) received a written notice (the “Notice”) from the staff of NYSE Regulation (the “Staff”) of the New York Stock Exchange (“NYSE’’) indicating that the Staff has determined that the Company’s warrants, each warrant exercisable for one share of Class A Common Stock of the Company (the “Warrants”), are no longer suitable for listing on the NYSE based on “abnormally low” price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual. As a result, the Staff has determined to commence proceedings to delist the Warrants from the NYSE.
The Company has a right to a review of this determination by a Committee of the Board of Directors of the NYSE. The NYSE will apply to the Securities and Exchange Commission to delist the Warrants upon completion of all applicable procedures, including any appeal by the Company of the Staff’s decision. The Company does not currently intend to appeal the determination.
Trading in the warrants on the NYSE will be suspended immediately while trading in the Company’s Class A Common Stock and Units will Continue on the NYSE. The Warrants may be traded on the pink sheets or any other available market once trading in the Warrants has been suspended by the NYSE.
 
14

Table of Contents

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 Pivotal Investment Corporation III. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Pivotal Investment Holdings III 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 completion of the Proposed Business Combination (as defined below), 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, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the 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.

 

15

Table of Contents

Overview

We are a blank check company formed under the laws of the State of Delaware on October 6, 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 or entities (a “Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and searching for a target business with which to consummate an initial Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.

For the three months ended September 30, 2022, we incurred net income of $1,786,364, which primarily consisted of change in fair value of warrant liabilities of $1,023,200, interest earned on marketable securities held in Trust Account of $1,153,274, and unrealized gain on marketable securities held in Trust Account of $40,071, offset by formation and operating costs of $175,441 and provision for income taxes of $254,740.

For the nine months ended September 30, 2022, we incurred net income of $11,849,697, which primarily consisted of change in fair value of warrant liabilities of $11,766,800, interest earned on marketable securities held in Trust Account of $1,507,199, and unrealized gain on marketable securities held in Trust Account of $50,902, offset by formation and operating costs of $1,214,900 and provision for income taxes of $260,304.

For the three months ended September 30, 2021, we incurred net income of $4,062,253, which primarily consisted of change in fair value of warrant liabilities of $4,220,700 and interest earned on marketable securities held in Trust Account of $16,642, offset by formation and operating costs of $168,787 and unrealized loss on marketable securities held in Trust Account of $6,302.

For the nine months ended September 30, 2021, we incurred net income of $3,924,279, which primarily consisted of change in fair value of warrant liabilities of $9,349,490 and interest earned on marketable securities held in Trust Account of $46,388, offset by formation and operating costs of $494,890, fair value in excess of purchase price of private warrants of $4,441,970, transactions costs allocated to warrant liabilities of $526,599, and unrealized loss on marketable securities held in Trust Account of $8,140.

Liquidity and Capital Resources

On February 11, 2021, we consummated the Initial Public Offering of 27,600,000 Units, at a price of $10.00 per Unit, which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,600,000 Units, generating gross proceeds of $276,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,270,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $7,270,000.

Following the Initial Public Offering, and the sale of the Private Placement Warrants, a total of $276,000,000 was placed in the Trust Account. We incurred $15,695,537 in transaction costs, including $5,520,000 of underwriting fees, $9,660,000 of deferred underwriting fees and $515,537 of other offering costs.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions and income taxes payable), to complete our 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.

For the nine months ended September 30, 2022, net cash used in operating activities was $483,997. Net income of $11,849,697 was affected by change in fair value of warrant liabilities of $11,766,800, interest earned on marketable securities held in Trust Account of $1,507,199, and unrealized gain on marketable securities held in Trust Account of $50,902. Changes in operating assets and liabilities provided $991,207 of cash for operating activities.

 

16

Table of Contents

For the nine months ended September 30, 2021, net cash used in operating activities was $482,635. Net income of $3,924,279 was affected by interest earned on marketable securities held in the Trust Account of $46,388, unrealized loss on marketable securities held in trust account of $8,140, change in fair value of warrant liabilities of $9,349,490, fair value in excess of purchase price of private warrants of $4,441,970 and transaction costs allocated to warrant liabilities of $526,599. Changes in operating assets and liabilities provided $12,255 of cash for operating activities.

At September 30, 2022, we had marketable securities held in the Trust Account of $277,637,215 (including $1,637,215 of interest income and unrealized gain on marketable securities held in trust account) consisting of money market funds which are invested primarily in U.S. Treasury securities. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2022, we have not withdrawn any interest earned from 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.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. 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 of the post Business Combination entity, at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.

If we are unable to raise such additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the condensed financial statements.

Going Concern

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until February 11, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension has not been requested by the Sponsor and approved by the Company’s stockholders, 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 an extension not requested by the Sponsor, and potential subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 11, 2023. The Company intends to continue to search for and seek to complete a Business Combination before the mandatory liquidation date. The Company is within 12 months of its mandatory liquidation date as of the time of filing of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $9,660,000 in the aggregate. The deferred fee will be forfeited by the underwriters solely in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement. 

Critical Accounting Policies

The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed 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:

 

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Warrant Liabilities

The company assessed its warrants under ASC 480-25, “Distinguishing liabilities from equity” and ASC 815-40 “Derivatives and Hedging—Contracts in Entity’s Own Equity”. The Company accounts for the Public Warrants (as defined below) and Private Placement Warrants (collectively, the “Warrants”) as derivative liabilities. A provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Company accounts for Warrants for shares of the Company’s common stock that are not indexed to its own stock as derivative liabilities at fair value on the condensed balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the condensed statements of operations in the period of change.

Common Stock Subject to Possible Redemption

We account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable shares of Class A common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of our condensed balance sheets.

We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

 

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Net Income (Loss) Per Common Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of stock. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common stock outstanding for the respective period. We did not consider the effect of the warrants issued in connection with the initial public offering and the private placement in the calculation of diluted income (loss) per common share because their exercise is contingent upon future events. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share. Remeasurement associated with the redeemable Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.

Use of Estimates

The preparation of the 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 as of the date of the condensed financial statements and the 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. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments and related party transactions. As a result, we performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with GAAP. Accordingly, management believes that the condensed financial statements included in this Quarter Report present fairly in all material respects our condensed financial position, results of operations and cash flows for the period presented.

 

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Management has identified a material weakness in internal controls related to the accounting for complex financial instruments and review of related party transactions. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our condensed financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications, including the identification and disclosure of related party transactions. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1A. Risk Factors

As of the date of this Quarterly Report, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 except as set forth below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

We identified an additional material weakness in our internal control over financial reporting relating to our complex financial instruments and related party transactions. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the condensed financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. 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 condensed financial statements will not be prevented or detected on a timely basis.

As described elsewhere in this report, in connection with the preparation of our condensed financial statements as of September 30, 2022, management identified errors made in our historical condensed financial statements where we improperly classified some of our Class A common stock subject to possible redemption. We previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration that a redemption cannot result in net tangible assets being less than $5,000,001 pursuant to our amended and restated certificate of incorporation. Management determined that the Class A common stock issued during our initial public offering can be redeemed or become redeemable subject to the occurrence of future events considered outside our control. Therefore, management concluded that temporary equity should include all shares of Class A common stock subject to possible redemption. As a result, management has noted a classification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock. Management concluded that the foregoing constituted a material weakness as of September 30, 2022. Management also identified errors in our identification and disclosure of related party transactions.

As a result, we performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the condensed financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented. However, we cannot assure you that the foregoing will not result in any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our condensed financial statements.

We may be subject to excise taxes under the Inflation Reduction Act of 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On February 11, 2021, we consummated the Initial Public Offering of 27,600,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 3,600,000 Units, at $10.00 per Unit, generating gross proceeds of $276,000,000. Citigroup acted as sole the book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-252080 and 333-252527). The Securities and Exchange Commission declared the registration statements effective on February 8, 2021.

 

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Simultaneous with the consummation of the Initial Public Offering, and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 7,270,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $7,270,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

We paid a total of $5,520,000 in underwriting discounts and commission and $515,537 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer up to $9,660,000 in underwriting discounts and commissions.

Of the gross proceeds received from the Initial Public Offering including the over-allotment option, and the Private Placement Warrants, $276,000,000 was placed in the Trust Account and shall be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders. 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 6.

Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

No.    Description of Exhibit
    31.1*    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    31.2*    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    32.1**    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    32.2**    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*    Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Online XBRL Document
101.SCH*    Inline XBRL Taxonomy Extension Schema Document
101.CAL*    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*    The cover page from the Company’s Quarterly report on Form10-Q for the quarter ended September 30, 2022 has been formatted in Inline XBRL and is included in Exhibits 101.

 

* 

Filed herewith.

**

Furnished.

 

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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.

 

    PIVOTAL INVESTMENT CORPORATION III
Date: November 10, 2022     By:   /s/ Kevin Griffin
    Name:   Kevin Griffin
    Title:  

Chief Executive Officer and President

(Principal Executive Officer)

Date: November 10, 2022     By:   /s/ Jim Brady
    Name:   Jim Brady
    Title:  

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

22

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