References to the "Company," "our," "us" or "we" refer to Nebula Acquisition
Corporation. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
unaudited condensed consolidated financial statements and the notes thereto
contained elsewhere in this report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Delaware corporation on October
2, 2017 and 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. We intend to complete our initial
business combination using cash from the proceeds of our initial public offering
(the "Initial Public Offering") and the private placements of the private
placement warrants, our capital stock, debt or a combination of cash, stock and
debt. Our sponsor is Nebula Holdings, LLC, a Delaware limited liability company
(the "Sponsor").
We consummated the Initial Public Offering on January 12, 2018.
On January 5, 2020, we entered into a Business Combination Agreement (as
amended, the "Merger Agreement") with BRP Hold 11, Inc., a Delaware corporation
("Blocker"), the Blocker's sole stockholder (the "Blocker Holder"), Nebula
Parent Corp., a Delaware corporation ("ParentCo"), NBLA Merger Sub LLC, a Texas
limited liability company ("Merger Sub LLC"), NBLA Merger Sub Corp., a Delaware
corporation ("Merger Sub Corp"), Open Lending, LLC, a Texas limited liability
company ("Open Lending"), and Shareholder Representative Services LLC, a
Colorado limited liability company, as the Securityholder Representative. Open
Lending is a lending enablement platform for the automotive finance market
powered by proprietary data, advanced decisioning analytics, an innovative
insurance structure and scaled distribution. The platform enables near-prime
consumers, approximately 50% of borrowers today, to finance their vehicles at
more attractive rates when compared to traditional lending alternatives, while
presenting a similar risk profile to the lender as that of a prime borrower. The
Merger Agreement provides for each of the following transactions to occur in the
following order: (i) Merger Sub Corp will merge with and into the Company (the
"First Merger"), with the Company surviving the First Merger as a wholly owned
subsidiary of ParentCo (the "NAC Surviving Company"); (ii) immediately following
the First Merger and prior to the Blocker Contribution (as defined below),
Blocker shall redeem a specified number of shares of Blocker common stock in
exchange for cash (the "Blocker Redemption"); (iii) immediately following the
Blocker Redemption, ParentCo will acquire, and the Blocker Holder will
contribute to ParentCo the remaining shares of Blocker common stock after giving
effect to the Blocker Redemption (the "Blocker Contribution") such that,
following the Blocker Contribution, Blocker will be a wholly-owned subsidiary of
the ParentCo; (iv) immediately following the Blocker Contribution, Merger Sub
LLC will merge with and into Open Lending (the "Second Merger"), with Open
Lending surviving the Second Merger as a wholly-owned subsidiary of ParentCo
(the "Surviving Company"); (v) immediately following the Second Merger, Blocker
will acquire, and ParentCo will contribute to Blocker all common units of the
Surviving Company directly held by ParentCo after the Second Merger; and (vi)
the NAC Surviving Company will acquire and ParentCo will contribute to the NAC
Surviving Company the remaining shares of Blocker common stock after giving
effect to the Blocker Redemption and the Blocker Contribution (the "ParentCo
Blocker Contribution") such that, following the ParentCo Blocker Contribution,
Blocker shall be a wholly-owned subsidiary of the NAC Surviving Company
(together with the other transactions related thereto, the "Proposed
Transactions"). Following the Proposed Transactions, it is expected that
ParentCo's common shares will be listed on the Nasdaq Capital Market.
16
Consummation of the transactions contemplated by the Merger Agreement is subject
to customary conditions of the respective parties, including the approval of the
Proposed Transactions by our stockholders in accordance with our amended and
restated certificate of incorporation and the completion of a redemption offer
whereby we will be providing our public stockholders with the opportunity to
redeem their shares of Class A common stock for cash equal to their pro rata
share of the aggregate amount on deposit in our trust account.
In connection with the Proposed Transactions, we have obtained commitments from
interested investors (each a "Subscriber") to purchase shares of Class A common
stock, which will be converted into ParentCo common shares in connection with
the closing of the Proposed Transaction (the "PIPE Shares"), for a purchase
price of $10.00 per share, in a private placement (the "PIPE"). Several
fundamental investors have committed an aggregate of $200 million to participate
in the Proposed Transaction through the PIPE anchored by our Sponsor. Our
Sponsor has agreed to subscribe for $85,000,000 worth of PIPE Shares for a
purchase price of $10.00 per share. Certain offering related expenses are
payable by us, including customary fees payable to the placement agents,
Deutsche Bank Securities and Goldman Sachs & Co., LLC. Such commitments are
being made by way of the Subscription Agreements, by and among the Company, each
Subscriber, Open Lending and ParentCo. The purpose of the sale of the PIPE
Shares is to raise additional capital for use in connection with the Proposed
Transactions and to meet the minimum cash requirements provided in the Merger
Agreement.
Contemporaneously with the execution of the Merger Agreement, certain
unitholders of Open Lending entered into the Company Support Agreement, pursuant
to which such unitholders agreed to approve the Merger Agreement and the
Proposed Transactions.
Contemporaneously with the execution of the Merger Agreement, certain of our
stockholders entered into the Investor Support Agreement, pursuant to which,
among other things, certain holders agreed (i) to approve the Merger Agreement
and the Proposed Transactions? (ii) not to redeem any shares held by such
stockholders in connection with the Proposed Transactions and (iii) to tender
any warrants to purchase Class A common stock held by such stockholder to us for
cash consideration of $1.50 per whole warrant and to vote all such warrants held
by such stockholder in favor of any amendment to the terms of such warrants
proposed by us, including the warrant amendment.
Contemporaneously with the execution of the Merger Agreement, the holders of our
founder shares (including our sponsor) entered into the Founder Support
Agreement, pursuant to which, among other things:
? Such holders agreed to approve the Merger Agreement and the Proposed
Transactions.
? Such holders agreed to forfeit (without consideration) all warrants held by
them to the Company.
? Our Sponsor agreed that to the extent the NAC Expenses, as defined in the
Founder Support Agreement, shall exceed an amount equal to $25,000,000 plus
the amount of cash as of the Reference Time, as defined in the Founder Support
Agreement, held by the Company without restriction outside of the Company's
trust account and any interest earned on the amount of cash held inside the
Company's trust account (collectively, the "NAC Expense Cap"), then, our
sponsor shall, on the closing date of the transaction, in its sole option,
either (a) pay any such amount in excess of the NAC Expense Cap to the Company
in cash, by wire transfer of immediately available funds to the account
designated by the Company, or (b) forfeit to the Company (for no
consideration) such number of founder shares (valued at $10.00 per founder
share) held by our sponsor that would, in the aggregate, have a value equal to
such amount in excess of the NAC Expense Cap? provided, that if our sponsor
shall elect to forfeit founder shares and the number of founder shares
available for forfeiture shall be insufficient to satisfy our sponsor's
obligations to satisfy such excess NAC Expenses, then Sponsor shall, satisfy
any such additional in cash on the closing date of the transaction.
17
? Such holders agreed to certain amendments to the lock up terms set forth in
that certain letter agreement, dated January 9, 2018, by and among the Company
and such holders, pursuant to which the lock up term will be extended for up
to seven years following the closing of the transaction for half the shares
held by such holders, depending on the trading price of the ParentCo Common
Shares (and subject to forfeiture if such trading prices are not reached).
? Such holders waived any anti-dilution protections provided to holders of the
founder shares in the Company's current certificate of incorporation.
? Such holders agreed to be issued up to 1,250,000 additional ParentCo Common
Shares (the "Earn-Out Shares") as follows: (i) such holders would be entitled
to an aggregate of 625,000 ParentCo Common Shares, if prior to or as of the
second anniversary of the of the transaction, the VWAP is greater than or
equal to $12.00 over any 20 trading days within any 30-trading day period? and
(ii) such holders would be entitled to an aggregate of an additional 625,000
ParentCo Common Shares if, prior to or as of the second anniversary of the
closing of the transaction, the VWAP is greater than or equal to $14.00 over
any 20 trading days within any 30-trading day period. If a change of control
of ParentCo occurs prior to the second anniversary of the closing of the
transaction, such holders will be entitled to receive all unissued Earn-Out
Shares prior to the consummation of such change of control.
In addition, pursuant to the terms of the Merger Agreement, all SEC and other
regulatory filing fees incurred in connection with the proxy statement shall be
paid by the Company; provided, however, if the closing of the Proposed
Transactions (the "Closing") occurs, fifty percent of such fees shall be deemed
to be the Company's expenses and fifty percent of such fees shall be deemed to
be Open Lending's expenses. As of March 31, 2020, we have paid $446,906 in
regulatory filings fees in connection with such events, and expected to receive
a reimbursement of $223,453 from Open Lending if the Closing occurs.
In connection with the Proposed Transactions, ParentCo filed a Registration
Statement on Form S-4 with the SEC on March 18, 2020, which contains a
preliminary proxy statement for the Company's stockholders and warrantholders.
We will mail a definitive proxy statement and other relevant documents to our
stockholders and warrantholders. The Company's stockholders, warrantholders and
other interested persons are advised to read, when available, the preliminary
proxy statement, and amendments thereto, and definitive proxy statement in
connection with our solicitation of proxies for the special meeting to be held
to approve the Proposed Transactions because these proxy statements will contain
important information about the Company, Open Lending, and the Proposed
Transactions. The definitive proxy statement will be mailed to the Company's
stockholders and warrantholders as of a record date to be established for voting
on the Proposed Transactions. Stockholders and warrantholders will also be able
to obtain copies of the proxy statement, without charge, once available, at the
SEC's Internet site at http://www.sec.gov or by directing a request to: Nebula
Acquisition Corporation, Four Embarcadero Center, Suite 2100, San Francisco, CA
94111, or by calling (513) 618-7161.
On March 18, 2020, we entered into Amendment No. 1 and Waiver (the "First
Amendment") to the Merger Agreement. The First Amendment amends the Merger
Agreement to (i) waive the provisions in the Merger Agreement that require us to
commence a tender offer for the public warrants, (ii) provide that we shall seek
the approval of the holders of the public warrants, at a meeting of the holders
of the public warrants, to amend the terms of the Warrant Agreement, dated
January 9, 2018 (the "Warrant Agreement"), between the Company and American
Stock Transfer & Trust Company, LLC to provide that, upon consummation of the
Proposed Transactions, each of our outstanding public warrants, which entitle
the holder to purchase one share of Class A common stock, will be exchanged for
cash in the amount of $1.50 per each whole public warrant (the "Warrant
Amendment"), (iii) provide that the obligations of Open Lending, Blocker and the
Blocker Holder to consummate the transactions contemplated by the Merger
Agreement shall be conditioned on the registered holders of the public warrants
holding at least a majority of the public warrants approving the Warrant
Amendment, and (iv) provide that all of the contingency consideration
(consisting of 15,000,000 ParentCo Common Shares) will be issued if, prior to or
as of the second anniversary of the Closing, the VWAP of the ParentCo Common
Shares is greater than or equal to $13.00 for any twenty (20) trading days
within any thirty (30) trading day period.
18
On March 18, 2020, we entered into Amendment No. 1 to the Founder Support
Agreement (the "Founder Support Agreement Amendment"), which amendment provides
that (i) the Earn-Out Shares will be issued by ParentCo to the Sponsor if, prior
to or as of the second anniversary of the Closing, the VWAP of the ParentCo
Common Shares is greater than or equal to $13.00 for any twenty (20) trading
days within any thirty (30) trading day period and (ii) 3,437,500 ParentCo
Common Shares issued in exchange for the shares of Class B common stock will be
released from lockup and no longer subject to forfeiture if, prior to or as of
the seventh anniversary of the Closing, the VWAP of the ParentCo Common Shares
is greater than or equal to $13.00 for any twenty (20) trading days within any
thirty (30) trading day period.
On March 26, 2020, we entered into Amendment No. 2 and Consent (the "Second
Amendment") to the Merger Agreement to, among other things, provide for Open
Lending to use the proceeds of the recently consummated debt financing (the
"Debt Financing") to make a non-liquidating distribution to the holders of Open
Lending's membership units in an aggregate amount not to exceed the net proceeds
of the Debt Financing received by Open Lending (the "Company Distribution").
Upon receipt of its portion of the Company Distribution, Blocker intends to make
one or more non-liquidating distributions to the Blocker Holder of cash in
excess of the amount of cash necessary to fund certain tax payments and expenses
of the Blocker (the "Blocker Distribution"). Pursuant to the Second Amendment,
Open Lending and ParentCo consented to the (a) Company Distribution and the (b)
Blocker Distribution as required by the terms of the Merger Agreement.
In addition, the Second Amendment amends the Merger Agreement to, among other
things, reduce the cash consideration payable by ParentCo under the Merger
Agreement at Closing by an amount equal to the Company Distribution. The Second
Amendment does not modify or change the overall type of consideration or amounts
to be received by the equity holders of Open Lending in connection with the
Proposed Transactions as compared to the type of consideration and amounts to be
received by the equity holders of Open Lending in connection with the Proposed
Transactions if the Company Distribution had not occurred.
Extension
Additionally, on January 9, 2020, we held a special meeting of stockholders (the
"Meeting"). At the Meeting, the stockholders approved an amendment (the "Charter
Amendment") to our amended and restated certificate of incorporation to extend
the date by which we have to consummate a business combination (the "Extension")
for an additional five months, from January 12, 2020 to June 12, 2020. The
purpose of the Charter Amendment is to allow us more time to complete the
Proposed Transactions. No shares of our common stock were redeemed in connection
with the Extension.
On March 6, 2020, the Company notified the Nasdaq Stock Market ("Nasdaq") of the
death of one of its director's. As a result of such event, the Company is
temporarily not in compliance with the continued listing requirements as set
forth in Nasdaq Listing Rules 5605(b)(1) and 5605(d)(2)(A) regarding the
composition of the board and its compensation committee, respectively, because a
majority of the board is not comprised of independent directors and the
compensation committee is not comprised of at least two independent directors.
The Company has determined to rely on the cure periods set forth in Nasdaq
Listing Rules 5605(b)(1)(A) and 5605(d)(4) with respect to the composition of
the board and its compensation committee, respectively.
On March 6, 2020, the Company received a response letter from Nasdaq
acknowledging the Company's non-compliance with Nasdaq Listing Rule 5605. The
Nasdaq letter further provided that consistent with Nasdaq Listing Rules
5605(b)(1)(A) and 5605(d)(4), Nasdaq will provide the Company with a cure period
in order to regain compliance until the earlier to occur of (i) its next annual
stockholders meeting or March 2, 2021; or (ii) if the next annual shareholders'
meeting is held before August 31, 2020, then the Company must evidence
compliance no later than August 31, 2020.
The Company expects to regain compliance with Nasdaq Listing Rule 5605 prior to
the expiration of the cure period provided by Nasdaq.
19
On February 18, 2020, we received a notification from the staff of the Nasdaq
Stock Market (the "Staff") indicating that we were no longer in compliance with
Nasdaq Listing Rule 5550(a)(3) (the "Rule"), which requires us to have a minimum
of 300 public holders. On April 3, 2020, we submitted materials illustrating our
plan to gain compliance with the Rule and requesting an extension to regain
compliance with the Rule. On April 14, 2020, we received a notification from the
Staff that it has granted us an extension to regain compliance with the Rule on
or before August 17, 2020.
Results of Operations
Since our Initial Public Offering, our activity has been limited to the search
for a prospective initial Business Combination, and we will not be generating
any operating revenues until the closing and completion of our initial business
combination. We have neither engaged in any operations nor generated any
revenues to date. We will not generate any operating revenues until after
completion of our initial business combination. We will generate non-operating
income in the form of interest income on cash and cash equivalents. We expect to
incur increased expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended March 31, 2020, we had net loss of approximately
$168,000, which consisted of approximately $1.0 million in investment income,
offset by approximately $865,000 in general and administrative costs,
approximately $50,000 in franchise tax expense, and approximately $292,000 in
income tax expense.
For the three months ended March 31, 2019, we had net income of approximately
$1.1 million, which consisted of approximately $1.5 million in investment
income, offset by approximately $102,000 in general and administrative costs,
approximately $50,000 in franchise tax expense, and approximately $309,000 in
income tax expense.
Going Concern Consideration and Capital Resources
As of March 31, 2020, we had approximately $616,000 in our operating bank
account, approximately $7.3 million of investment income available in the Trust
Account to pay for franchise and income taxes (less $100,000 of investment
income to pay dissolution expenses, and up to $500,000 of investment income
released to us for working capital purposes, which was withdrawn by us in
December 2019), and working capital deficit of approximately $692,000.
Through March 31, 2020, our liquidity needs have been satisfied through receipt
of a $25,000 capital contribution from the Sponsor in exchange for the issuance
of the Founder Shares to the Sponsor, an aggregate of approximately $242,000 in
advances due to related party, approximately $291,000 in loans from the Sponsor,
the net proceeds from the consummation of the Private Placement not held in the
Trust Account, and proceeds from investment income released from the Trust
Account to pay for taxes. We repaid the loans from the Sponsor in full in
February 2018. We anticipate that we may need to obtain additional loans from
the Sponsor or obtain funding from other sources in order to satisfy our working
capital requirements through June 12, 2020, the mandatory liquidation date.
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (the "COVID-19
outbreak"). In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally. The full impact of
the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak
on our results of operations, financial position and cash flows will depend on
future developments, including the duration and spread of the outbreak and
related advisories and restrictions. These developments and the impact of the
COVID-19 outbreak on the financial markets and the overall economy are highly
uncertain and cannot be predicted. If the financial markets and/or the overall
economy are impacted for an extended period, our results of operations,
financial position and cash flows may be materially adversely affected.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Updated ("ASU")
2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a
Going Concern", management has determined that the working capital deficit,
mandatory liquidation and subsequent dissolution raises substantial doubt about
our ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after June 12, 2020.
20
Related Party Transactions
Founder Shares
On October 16, 2017, the Sponsor purchased 7,187,500 shares of Class B common
stock (the "Founder Shares") for an aggregate price of $25,000. As used herein,
unless the context otherwise requires, Founder Shares shall be deemed to include
the shares of Class A common stock issuable upon conversion thereof. The Founder
Shares are identical to the Class A common stock included in the Units sold in
the Initial Public Offering except that the Founder Shares automatically convert
into shares of Class A common stock at the time of our initial Business
Combination and are subject to certain transfer restrictions, as described in
more detail below. 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. The Sponsor agreed
to forfeit up to 937,500 Founder Shares to the extent that the over-allotment
option was not exercised in full by the underwriters so that the Founder Shares
will represent 20% of our issued and outstanding shares after the Initial Public
Offering. In December 2017, the Sponsor transferred 25,000 Founder Shares to
each of our then independent directors, at the original per share purchase
price. Also in January 2018, another 25,000 Founder Shares were transferred to
one of our independent directors. On January 12, 2018, we were advised by the
underwriters' that it had elected to exercise a portion of the over-allotment
option for 2,500,000 additional Units for additional gross proceeds of $25
million. The partial exercise resulted in the forfeiture of 312,500 shares of
Class B common stock held by the Sponsor.
Our initial stockholders have agreed, subject to 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 the initial Business Combination or (B)
subsequent to the initial Business Combination, (x) if the last sale price of
our Class A common stock equals or exceeds $12.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period commencing at least 150
days after the initial Business Combination, or (y) the date on which we
complete a liquidation, merger, stock exchange or other similar transaction that
results in all of our stockholders having the right to exchange their shares of
common stock for cash, securities or other property.
Private Placement
Simultaneously with the closing of the Initial Public Offering on January 12,
2018, the Sponsor paid us $7.5 million for 5,000,000 Private Placement Warrants
at a price of $1.50 per whole warrant. Each whole Private Placement Warrant is
exercisable for one whole share of our Class A common stock at a price of $11.50
per share. A portion of the purchase price of the Private Placement Warrants has
been added to the proceeds from the Initial Public Offering held in the Trust
Account. If the initial Business Combination is not completed within the
Combination Period, the proceeds from the sale of the Private Placement Warrants
held in the Trust Account 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. The Private Placement Warrants will be
non-redeemable and exercisable on a cashless basis so long as they are held by
the Sponsor or its permitted transferees.
The Sponsor and our officers and directors have agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants until 30 days after the completion of the initial Business Combination.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and Warrants that may
be issued upon conversion of working capital loans, if any, are entitled to
registration rights (in the case of the Founder Shares, only after conversion of
such shares to shares of Class A common stock) pursuant to a registration rights
agreement signed on January 12, 2018. These holders are entitled to certain
demand and "piggyback" registration rights. However, the registration rights
agreement provides that we will not permit any registration statement filed
under the Securities Act to become effective until termination of the applicable
lock-up period for the securities to be registered. We will bear the expenses
incurred in connection with the filing of any such registration statements.
21
Related Party Loans
Our Sponsor had loaned us an aggregate of up to $300,000 to cover expenses
related to the Initial Public Offering pursuant to a promissory note (the
"Note"). This loan was non-interest bearing and payable upon the completion of
the Initial Public Offering. We repaid this amount in full in February 2018.
In order to fund working capital deficiencies or finance transaction costs in
connection with an initial 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 our initial Business
Combination, we would repay such loaned amounts. In the event that our initial
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, at a price of $1.50 per warrant at the
option of the lender. The warrants would be identical to the private placement
warrants, including as to exercise price, exercisability and exercise period.
The terms of such loans by our officers and directors, if any, have not been
determined and no written agreements exist with respect to such loans. We do not
expect to seek loans from parties other than our Sponsor or an affiliate of our
Sponsor as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
Trust Account. As of March 31, 2020, there were no working capital loans
outstanding.
Due to Related Party
An affiliate of the Company paid administrative expenses on behalf of the
Company for an aggregate of approximately $242,000 and $204,000, as reflected in
the accompanying condensed consolidated balance sheets as of March 31, 2020 and
December 31, 2019, respectively. These amounts are due on demand and are
non-interest bearing.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
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 consolidated financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. The Company has identified the following as its critical
accounting policies:
Class A Common Stock subject to possible redemption
All of the 27,500,000 common shares sold as part of units in the Initial Public
Offering contain a redemption feature which allows for the redemption of common
shares under our Liquidation or Tender Offer/Stockholder Approval provisions. In
accordance with FASB ASC 480, redemption provisions not solely within our
control require the security to be classified outside of permanent equity.
Ordinary liquidation events, which involve the redemption and liquidation of all
of the entity's equity instruments, are excluded from the provisions of FASB ASC
480. Although we did not specify a maximum redemption threshold, its charter
provides that in no event will it redeem its Public Shares in an amount that
would cause its net tangible assets (stockholders' equity) to be less than
$5,000,001.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of the security at the end of each reporting period.
Increases or decreases in the carrying amount of redeemable common stock shall
be affected by charges against additional paid-in capital. Accordingly, at March
31, 2020 and December 31, 2019, 26,695,125 and 26,695,125 of the 27,500,000
public shares were classified outside of permanent equity, respectively.
Net Income (Loss) per Share
Net income per share is computed by dividing net income by the weighted-average
number of shares of common stock outstanding during the periods. We have not
considered the effect of the warrants sold in the Initial Public Offering
(including the consummation of the over-allotment) and Private Placement to
purchase an aggregate of 14,166,667 shares of our Class A common stock in the
calculation of diluted income per share, since their inclusion would be
anti-dilutive under the treasury stock method.
22
Our statements of operations include a presentation of income per share for
common stock subject to redemption in a manner similar to the two-class method
of income per share. Net income per share, basic and diluted for shares of Class
A common stock for the three months ended March 31, 2020 and 2019 is calculated
by dividing the interest income earned on the Trust Account of approximately
$1.0 million and approximately $1.5 million, net of applicable taxes of
approximately $342,000 and approximately $359,000, and funds available to be
withdrawn from Trust for working capital purposes of $500,000 and approximately
$102,000, resulted in a net income of approximately $197,000 and approximately
$1.1 million, respectively, by the weighted average number of Class A common
stock outstanding for the periods. Net income per share, basic and diluted, for
Class B common stock for the three months ended March 31, 2020 and 2019 is
calculated by dividing the net loss of approximately $168,000 and net income of
approximately $1.1 million, less income attributable to Public Shares of
approximately $197,000 and approximately $1.1 million, resulted in a net loss of
approximately $365,000 and $0, by the weighted average number of Class B common
stock outstanding for the periods.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations;
Quarterly Results
As of March 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations other than obligations disclosed herein. No unaudited
quarterly operating data is included in this prospectus, as we have conducted no
operations to date.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company", we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions apply for a period of five years following the
completion of our Initial Public Offering or until we are no longer an "emerging
growth company," whichever is earlier.
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