References to "we," "us," "our" or the "Company" are to PropTech Acquisition
Corporation, except where the context requires otherwise. References to our
"management" or our "management team" are to our officers and directors, and
references to the "sponsor" are to HC PropTech Partners I LLC. The following
discussion and analysis of our financial condition and results of operations
should be read in conjunction with our unaudited condensed consolidated
financial statements and related notes thereto included elsewhere in this
report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section
and elsewhere in this Form 10-Q regarding the Company's financial position,
business strategy and the plans and objectives of management for future
operations, are forward-looking statements. When used in this Form 10-Q, words
such as "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements as a result of certain
factors detailed in our filings with the SEC.
Overview
We are a blank check company incorporated as a Delaware corporation 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 effectuate our initial business combination
using cash from the proceeds of our initial public offering and the private
placement of the private placement warrants, the proceeds of the sale of our
shares in connection with our initial business combination (pursuant to forward
purchase agreements or backstop agreements we may enter into), shares issued to
the owners of the target, debt issued to bank or other lenders or the owners of
the target, or a combination of the foregoing.
The issuance of additional shares in connection with an initial business
combination to the owners of the target or other investors:
? may significantly dilute the equity interest of investors in our initial
public offering, which dilution would increase if the anti-dilution
provisions in the Class B common stock resulted in the issuance of Class A
shares on a greater than one-to-one basis upon conversion of the Class B
common stock;
? may subordinate the rights of holders of our common stock if preferred
stock is issued with rights senior to those afforded our common stock;
? could cause a change in control if a substantial number of shares of our
common stock is issued, which may affect, among other things, our ability
to use our net operating loss carry forwards, if any, and could result in
the resignation or removal of our present officers and directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the stock ownership or voting rights of a person seeking to
obtain control of us; and
? may adversely affect prevailing market prices for our Class A common stock
and/or warrants.
18
Similarly, if we issue debt securities or otherwise incur significant debt to
bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an
initial business combination are insufficient to repay our debt
obligations;
? acceleration of our obligations to repay the indebtedness even if we make
all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if
the debt security is payable on demand;
? our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
? our inability to pay dividends on our common stock;
? using a substantial portion of our cash flow to pay principal and interest
on our debt, which will reduce the funds available for dividends on our
common stock if declared, our ability to pay expenses, make capital
expenditures and acquisitions, and fund other general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
? limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, and
execution of our strategy; and
? other purposes and other disadvantages compared to our competitors who
have less debt.
We expect to continue to incur significant costs in the pursuit of our initial
business combination plans. We cannot assure you that our plans to raise capital
or to complete our initial business combination will be successful.
On November 26, 2019, we completed our initial public offering of 17,250,000
units, including 2,250,000 units that were issued pursuant to the underwriters'
full exercise of their over-allotment option. The units were sold at a price of
$10.00 per unit, generating gross proceeds to us of $172.5 million. We incurred
offering costs of approximately $10.1 million, inclusive of approximately $6.0
million in deferred underwriting commissions.
On November 26, 2019, simultaneously with the consummation of our initial public
offering, we completed the private sale (the "private placement") of 5,700,000
private placement warrants at a purchase price of $1.00 per warrant to our
sponsor, generating gross proceeds to us of $5.7 million.
Upon the closing of our initial public offering, an aggregate of $172.5 million
of the net proceeds from our initial public offering and the private placement
was deposited in a trust account established for the benefit of our public
stockholders (the "trust account").
19
If we are unable to complete our initial business combination by May 26, 2021,
we will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account including interest earned
on the funds held in the trust account and not previously released to us to pay
our taxes (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 our remaining stockholders and our board
of directors, dissolve and liquidate, subject in each case to our 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 our warrants, which will expire worthless if we
fail to complete our initial business combination by May 26, 2021. The
representative of the underwriters has agreed to waive its rights to the
deferred underwriting commission held in the trust account in the event we do
not complete our initial business combination by May 26, 2021 and, in such
event, such amounts will be included with the 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 $10.00.
Our amended and restated certificate of incorporation provides that we will have
only 18 months from the closing of our initial public offering (or until May 26,
2021) to complete our initial business combination. If we are unable to complete
our initial business combination by May 26, 2021, we will: (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the public
shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account including interest earned on the funds held
in the trust account and not previously released to us to pay our taxes (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 our remaining stockholders and our board of directors, dissolve and
liquidate, subject in each case to our 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 our
warrants, which will expire worthless if we fail to complete our initial
business combination by May 26, 2021.
Proposed Business Combination
As more fully described in Note 1 to the unaudited condensed consolidated
financial statements included as Item 1 to this Quarterly Report on Form 10-Q,
on July 30, 2020, we entered into an Agreement and Plan of Merger (as amended,
the "Merger Agreement") with PTAC Merger Sub Corporation, our wholly-owned
subsidiary ("Merger Sub"), Porch.com, Inc., ("Porch"), and Joe Hanauer, in his
capacity as the representative of all Pre-Closing Holders (as defined in the
Merger Agreement) as well as certain other agreements.
For additional information regarding the Amendment, the Merger Agreement and
Porch, see the Form 8-K filed by the Company with the SEC on October 12, 2020
and the Form S-4 filed by the Company with the SEC on October 14, 2020.
Results of Operations
We have neither engaged in any significant operations nor generated any
operating revenue to date. Our only activities from inception related to our
formation and our initial public offering, and since the closing of our initial
public offering, the search for a prospective initial business combination.
Although we have not generated operating revenue, we have generated
non-operating income in the form of investment income from investments held in
the trust account. We expect to incur increased expenses as a result of being a
public company, as well as costs in the pursuit of an initial business
combination.
For the three months ended September 30, 2020, we had a net loss of
approximately $3.1 million, which consisted of approximately $4,000 in
investment income, offset by approximately $3.1 million in general and
administrative expenses, $30,000 in related-party administrative expenses, and
$50,000 in franchise tax expense.
For the nine months ended September 30, 2020, we had a net loss of approximately
$2.8 million, which consisted of approximately $1.0 million in investment
income, offset by approximately $3.3 million in general and administrative
expenses, $90,000 in related-party administrative expenses, approximately
$152,000 in franchise tax expense and approximately $189,000 in income tax
expense.
20
For the period from July 31, 2019 (date of inception) through September 30,
2019, we had a net loss of $8,000, which consisted solely of $8,000 in general
and administrative expenses.
Going Concern Consideration
As of September 30, 2020, we had approximately $907,000 in our operating
account, approximately $698,000 of investment income earned from investments
held in the trust account that may be released to us to pay our taxes (less up
to $100,000 of such net interest to pay dissolution expenses), and a working
capital deficit of approximately $1.8 million (including approximately $99,000
of franchise tax obligations).
In order to finance transaction costs in connection with an intended 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. Up to $1,500,000 of such loans may be convertible into warrants at
a price of $1.00 per warrant at the option of the lender. Such warrants would be
identical to the private placement warrants, including as to exercise price,
exercisability and exercise period. The terms of such working capital loans by
our sponsor or its affiliates, or our officers and directors, if any, have not
been determined and no written agreements exist with respect to such loans.
Through September 30, 2020, our liquidity needs have been satisfied through
proceeds of $25,000 from our sponsor for issuance of the founder shares,
$225,000 in loans from our sponsor, and the net proceeds from the private
placement not held in the trust account. The balance of $225,000 in loans was
paid in full at the closing of our initial public offering on November 26, 2019.
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 continue to be impacted for an extended period, our results of
operations, financial position and cash flows may be materially adversely
affected. Additionally, our ability to complete an initial business combination
may be materially adversely affected due to significant governmental measures
being implemented to contain the COVID-19 outbreak or treat its impact,
including travel restrictions, the shutdown of businesses and quarantines, among
others, which may limit our ability to have meetings with potential investors or
affect the ability of Porch's or any other potential target company's personnel,
vendors and service providers to negotiate and consummate an initial business
combination in a timely manner. Our ability to consummate an initial business
combination may also be dependent on the ability to raise additional equity and
debt financing, which may be impacted by the COVID-19 outbreak and the resulting
market downturn.
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standards Board (the "FASB") Accounting Standards
Update ("ASU") 2014-15, "Disclosure of Uncertainties about an Entity's Ability
to Continue as a Going Concern," management has determined that the 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 May 26, 2021.
Related Party Transactions
Founder Shares
In July 2019, our sponsor paid $25,000 in offering expenses on our behalf in
exchange for the issuance of 3,881,250 founder shares. In October 2019, we
effected a stock dividend for approximately .11 shares for each share of Class B
common stock outstanding, resulting in our sponsor holding an aggregate of
4,312,500 founder shares (up to 562,500 shares of which were subject to
forfeiture to the extent the underwriters did not exercise their over-allotment
option in full). On November 26, 2019, the underwriters exercised their
over-allotment in full; thus, these founder shares were no longer subject to
forfeiture. The founder shares will automatically convert into shares of Class A
common stock at the time of our initial business combination on a one-for-one
basis, subject to adjustments, and are subject to certain transfer restrictions,
as described in more detail below.
21
Our initial stockholders have agreed not to transfer, assign or sell any of
their founder shares until the earlier to occur of (A) one year after the
completion of our initial business combination or (B) subsequent to our initial
business combination, (x) if the last reported 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 our
initial business combination, or (y) the date on which we complete a
liquidation, merger, capital stock exchange, reorganization 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. Any
permitted transferees will be subject to the same restrictions and other
agreements of our initial stockholders with respect to any founder shares.
Private Placement Warrants
Simultaneously with the consummation of our initial public offering, we
completed the private placement of warrants to our sponsor, generating gross
proceeds of $5.7 million. Each Private Placement Warrant is exercisable for one
share of our Class A common stock at an exercise price of $11.50 per share. A
portion of the purchase price of the Private Placement Warrants was added to the
proceeds from our initial public offering held in the trust account. If our
initial business combination is not completed by May 26, 2021, 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 for cash and exercisable on a
cashless basis so long as they are held by the sponsor or its permitted
transferees.
Our sponsor agreed, subject to limited exceptions, not to transfer, assign or
sell any of its Private Placement Warrants until 30 days after the completion of
our initial business combination.
Promissory Note - Related Party
On July 31, 2019, our sponsor agreed to loan us an aggregate of up to $300,000
to cover expenses related to our initial public offering pursuant to a
promissory note (the "Note"). The Note was non-interest bearing and was due upon
the completion of our initial public offering. We borrowed $225,000 under the
Note. The Note balance was paid in full at closing of our initial public
offering on November 26, 2019.
Administrative Support Agreement
We agreed to pay $10,000 a month for office space, utilities, and secretarial
and administrative support to our sponsor. Services commenced on the date the
securities were first listed on the Nasdaq and will terminate upon the earlier
of our initial business combination or our liquidation. We incurred $30,000 and
$90,000 for expenses in connection with such services for the three and nine
months ended September 30, 2020, respectively, which is reflected in the
accompanying condensed consolidated statements of operations.
Critical Accounting Policies and Estimates
Investments Held in Trust Account
Our portfolio of investments held in the Trust Account are comprised of 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, and money market
funds that invest solely in U.S. government securities. Our investments held in
the Trust Account are classified as trading securities. Trading securities are
presented on the balance sheets at fair value at the end of each reporting
period. Gains and losses resulting from the change in fair value of these
securities is included in investment income from investments held in Trust
Account in our statements of operations. The fair value for trading securities
is determined using quoted market prices in active markets.
22
Class A Common Stock Subject to Possible Redemption
We account for the Class A common stock subject to possible redemption in
accordance with the Financial Accounting Standards Board ("FASB") Accounting
Standards Codification 480, "Distinguishing Liabilities from Equity." Shares of
Class A common stock subject to mandatory redemption (if any) are classified as
a liability and measured at fair value. Shares of conditionally redeemable Class
A common stock (including shares of Class A common stock that feature 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) are
classified as temporary equity. At all other times, shares of Class A common
stock are classified as stockholders' equity. Our Class A common stock features
certain redemption rights that are considered to be outside of our control and
subject to the occurrence of uncertain future events. We recognize changes in
redemption value immediately as they occur and will adjust the carrying value of
the security at the end of each reporting period. Increases or decreases in the
carrying value of redeemable shares of Class A common stock shall be affected by
charges against additional paid-in capital. Accordingly, as of September 30,
2020 and December 31, 2019, 16,038,695 and 16,316,085 shares of Class A common
stock subject to conditional redemption, respectively, are presented as
temporary equity, outside of the stockholders' equity section of our condensed
consolidated balance sheets.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which is intended
to simplify various aspects related to accounting for income taxes. ASU 2019-12
removes certain exceptions to the general principles in Topic 740 and also
clarifies and amends existing guidance to improve consistent application. This
guidance is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020, with early adoption permitted. We are
currently evaluating the impact of this standard on our financial statements and
related disclosures.
We do not believe that any other recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material impact on
our financial statements.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of September 30, 2020, and December 31, 2019, 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 long-term debt obligations, capital lease
obligations, operating lease obligations, purchase obligations or other
long-term liabilities.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 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" and 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 are electing to delay the
adoption of new or revised accounting standards, and as a result, we may not
comply with new or revised accounting standards on the relevant dates on which
adoption of such standards is required for non-emerging growth companies. As a
result, our financial statements may not be comparable to those of companies
that comply with new or revised accounting pronouncements as of public company
effective dates.
In addition, Section 107 of the JOBS Act also provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. In other words, an "emerging growth company" can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We intend to take advantage of the benefits of this
extended transition period. We will remain an emerging growth company until the
earlier of (1) the last day of the fiscal year (a) following November 26, 2024,
(b) in which we have total annual gross revenue of at least $1.07 billion, or
(c) in which we are deemed to be a large accelerated filer, which means the
market value of our Class A common stock that is held by non-affiliates exceeds
$700 million as of the prior June 30th, and (2) the date on which we have issued
more than $1.0 billion in non-convertible debt securities during the prior
three-year period.
23
© Edgar Online, source Glimpses
PORCH GROUP, INC. 
