References to the "Company," "our," "us" or "we" refer to Churchill Capital Corp
II. The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with our audited
financial statements and the notes related thereto which are included in "Item
8. Financial Statements and Supplementary Data" of this Amendment. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Amendment.
Forward Looking Statements
All statements other than statements of historical fact included in this
Amendment including, without limitation, statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
When used in this Amendment, 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.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Amendment. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement and
revision of our Original Financial Statements. We are restating our historical
financial results to reclassify our Derivative Instruments as derivative
liabilities pursuant to ASC 815-40 rather than as a component of equity as we
had previously treated them. The impact of the restatement is reflected in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations below. Other than as disclosed in the Explanatory Note and with
respect to the impact of the restatement, no other information in this Item 7
has been amended and this Item 7 does not reflect any events occurring after the
Original Filing. The impact of the restatement is more fully described in Note 2
to our financial statements included in Item 15 of Part IV of this Amendment and
Item 9A: Controls and Procedures, both contained herein.
Overview
We are a blank check company formed under the laws of the State of Delaware 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. We intend to effectuate our business combination using cash
from the proceeds of the IPO and the sale of the private placement warrants, our
capital stock, debt or a combination of cash, stock and debt.
Recent Developments
Skillsoft Merger Agreement
On October 12, 2020, we entered into an Agreement and Plan of Merger (the
"Skillsoft Merger Agreement") by and between us and Skillsoft.
Pursuant to the terms of the Skillsoft Merger Agreement, a business combination
between us and Skillsoft will be effected through the merger of Skillsoft with
and into the Company, with the Company surviving as the surviving company (the
"Skillsoft Merger"). At the effective time of the Skillsoft Merger (the
"Effective Time"), (a) each Class A share of Skillsoft, with nominal value of
$0.01 per share ("Skillsoft Class A Shares"), outstanding immediately prior to
the Effective Time, will be automatically canceled and we will issue as
consideration therefor (i) such number of shares of our Class A common stock,
par value $0.0001 per share (the "Churchill Class A Common Stock") equal to the
Class A First Lien Exchange Ratio (as defined in the Skillsoft Merger
Agreement), and (ii) the Company's Class C common stock, par value $0.0001 per
share (the "Churchill Class C Common Stock"), equal to the Class C Exchange
Ratio (as defined in the Skillsoft Merger Agreement), and (b) each Class B share
of Skillsoft, with nominal value of $0.01 per share ("Skillsoft Class B
Shares"), will be automatically canceled and the Company will issue as
consideration therefor such number of shares of the Company's Class A common
stock equal to the Per Class B Share Merger Consideration (as defined in the
Skillsoft Merger Agreement). Pursuant to the terms of the Skillsoft Merger
Agreement, the Company is required to use commercially reasonable efforts to
cause the Company Class A Common Stock to be issued in connection with the
transactions contemplated by the Skillsoft Merger Agreement (the "Skillsoft
Transactions") to be listed on the New York Stock Exchange ("NYSE") prior to the
closing of the Skillsoft Merger (the "Skillsoft Closing"). Immediately following
the Effective Time, the Company will redeem all of the shares of Class C Common
Stock issued to the holders of Skillsoft Class A Shares for an aggregate
redemption price of (i) $505,000,000 in cash and (ii) indebtedness under the
Existing Second Out Credit Agreement (as defined in the Skillsoft Merger
Agreement), as amended by the Existing Second Out Credit Agreement Amendment (as
defined in the Skillsoft Merger Agreement), in the aggregate principal amount
equal to the sum of $20,000,000 to be issued by the Surviving Corporation (as
defined in the Skillsoft Merger Agreement) or one of its subsidiaries, in each
case, pro rata among the holders of Churchill Class C Common Stock issued in
connection with the Skillsoft Merger.
39
The consummation of the proposed Skillsoft Transactions is subject to the
receipt of the requisite approval of (i) the stockholders of Churchill (the
"Churchill Stockholder Approval") and (ii) the shareholders of Skillsoft (the
"Skillsoft Shareholder Approval") and the fulfillment of certain other
conditions.
In October 2020, the Company was advanced $2,000,000 for expenses incurred with
the Skillsoft Merger. If the planned business combination is not completed, the
Company would be required to refund any unused amount. For the year ended
December 31, 2020 the Company had utilized the advance in connection with the
Skillsoft Merger. As of the date of these financial statements, the advance is
no longer refundable.
On January 22, 2021, we entered into an amendment (the "Merger Agreement
Amendment"), to which amends and restates in its entirety the definition of
"Applicable Majority" in the Skillsoft Merger Agreement. The definition of
"Applicable Majority" is used in the Skillsoft Merger Agreement.
Global Knowledge Merger Agreement
Concurrently with its entry into the Skillsoft Merger Agreement, Churchill also
entered into an Agreement and Plan of Merger (the "Global Knowledge Merger
Agreement") by and among Churchill, Magnet Merger Sub, Inc., a Delaware
corporation and wholly-owned subsidiary of Churchill ("Merger Sub"), and Albert
DE Holdings Inc., a Delaware corporation owned by investment funds affiliated
with Rhône Capital L.L.C.
Pursuant to the Global Knowledge Merger Agreement, Merger Sub will merge with
and into Global Knowledge, with Global Knowledge surviving the transaction as a
wholly-owned subsidiary of Churchill (the "Global Knowledge Merger"). At the
effective time (the "Global Knowledge Effective Time") of the Global Knowledge
Merger, as consideration for the Global Knowledge Merger, 100% of the issued and
outstanding equity interests of Global Knowledge will be converted, in the
aggregate, into the right to receive warrants, each of which shall entitle the
holders thereof to purchase one share of Class A Churchill Common Stock at an
exercise price of $11.50 per share. The aggregate number of warrants to be
received by the equity holders of Global Knowledge as consideration in the
Global Knowledge Merger will be 5,000,000. The warrants to be issued to the
equity holders of Global Knowledge will be non-redeemable and otherwise
substantially similar to the private placement warrants issued to the Churchill
Sponsor in connection with Churchill's initial public offering.
The consummation of the proposed Global Knowledge Merger (the "Global Knowledge
Closing") is subject to the consummation of the Skillsoft Merger, among other
conditions contained in the Global Knowledge Merger Agreement.
Restructuring Support Agreement
On October 12, 2020, Global Knowledge entered into a Restructuring Support
Agreement (the "Global Knowledge RSA") with (i) 100% of its lenders under that
certain Amended and Restated First Lien Credit and Guaranty Agreement, dated as
of January 30, 2015, as amended from time to time, by and among, inter alios, GK
Holdings, as borrower, the guarantors from time to time party thereto, the
lenders from time to time party thereto and Credit Suisse, acting in its
capacity as administrative agent and collateral agent (the "First Lien Credit
Agreement," and the lenders thereto, the "First Lien Lenders"); and (ii) 100% of
its lenders under that certain Amended and Restated Second Lien Credit and
Guaranty Agreement, dated as of January 30, 2015, as amended from time to time,
by and among, inter alios, GK Holdings, as borrower, the guarantors from time to
time party thereto, the lenders from time to time party thereto and Wilmington
Trust, acting in its capacity as administrative agent and collateral agent (the
"Second Lien Credit Agreement," and there lenders thereto, the "Second Lien
Lenders," together with the First Lien Lenders, the "Secured Lenders"). The
Global Knowledge RSA contemplates an out-of-court restructuring (the
"Restructuring") that provides meaningful recoveries, funded by Churchill, to
all Secured Lenders. Churchill is a third-party beneficiary of the Global
Knowledge RSA with respect to enforcement of certain specific provisions and its
explicit rights under the Global Knowledge RSA and not a direct party.
Subscription Agreements
Prosus Agreement
On October 12, 2020, in connection with the execution of the Skillsoft Merger
Agreement, MIH Ventures B.V. ("Prosus") entered into a subscription agreement
(the "Prosus Agreement") with Churchill and the Sponsor, pursuant to which
Prosus subscribed for 10,000,000 newly-issued shares of Churchill Class A common
stock, at a purchase price of $10.00 per share, to be issued at the closing (the
"First Step Prosus Investment"), and Churchill granted Prosus a 30-day option
(the "Option") to subscribe for up to the lesser of (i) an additional 40,000,000
newly-issued shares of Churchill Class A common stock, at a purchase price of
$10.00 per share or (ii) such additional number of shares that would result in
Prosus beneficially owning shares of Class A common stock representing 35% of
the issued and outstanding shares of Churchill Class A common stock on a
fully-diluted and as-converted basis (excluding any warrants issued to Prosus
pursuant to the Prosus Agreement) immediately following the consummation of the
Skillsoft Merger (the "Prosus Maximum Ownership Amount") (the "Second Step
Prosus Investment" and together with the First Step Prosus Investment, the
"Prosus PIPE Investment"). On November 10, 2020, Prosus exercised the Option to
subscribe for an additional 40,000,000 shares of Churchill Class A common stock
in the Second Step Prosus Investment (or such number of shares as may be reduced
pursuant to the Prosus Agreement). Churchill and Prosus also agreed that
following the consummation of the Skillsoft Merger, to the extent that following
the Prosus Second Step Investment, Prosus beneficially owns less than the Prosus
Maximum Ownership Amount, Prosus will have the concurrent right to purchase a
number of additional shares of Churchill Class A common stock, at $10.00 per
share, that would result in Prosus maintaining beneficial ownership of at least,
but no more than, the Prosus Maximum Ownership Amount (the "Prosus Top-Up
Right").
As part of the Prosus Agreement, Prosus and the Company agreed to a strategic
support agreement, pursuant to which Prosus will provide certain business
development and investor relations support services in the event it exercises
the Option and beneficially owns at least 20% of the outstanding Churchill
Class A common stock following closing of the Prosus PIPE Investment on a
fully-diluted and as-converted basis. If Prosus exercises the Option and
consummates the Prosus PIPE Investment, it will also nominate an individual to
serve as the chairman of Churchill's Board. Pursuant to the Prosus Agreement, in
connection with Prosus's exercise of the Option and following the consummation
of the Second Step Prosus Investment, Churchill will issue to Prosus warrants to
purchase a number of shares of Churchill Class A common stock equal to one-third
of the number of shares of Churchill Class A common stock purchased in the
Prosus PIPE Investment (the "Prosus Warrants"). The Prosus Warrants will have
terms substantively identical to those included in the units offered in
Churchill's IPO.
SuRo Subscription Agreement
On October 14, 2020, in connection with the execution of the Skillsoft Merger
Agreement, Churchill entered into a subscription agreement with SuRo Capital
Corp. ("SuRo") pursuant to which SuRo subscribed for 1,000,000 newly-issued
shares of Churchill Class A common stock, at a purchase price of $10.00 per
share, to be issued at the closing of the Merger (the "SuRo Subscription
Agreement"). The obligations to consummate the transactions contemplated by the
SuRo Subscription Agreement are conditioned upon, among other things, customary
closing conditions and the consummation of the Skillsoft Merger.
Lodbrok Subscription Agreement
On October 13, 2020, in connection with the execution of the Global Knowledge
Merger Agreement, Churchill entered into a subscription agreement with Lodbrok
Capital LLP ("Lodbrok") pursuant to which Lodbrok subscribed for 2,000,000
newly-issued shares of Churchill Class A common stock, at a purchase price of
$10.00 per share, to be issued at the closing of the Global Knowledge Merger
(the "Lodbrok Subscription Agreement"). The obligations to consummate the
transactions contemplated by the Lodbrok Subscription Agreement are conditioned
upon, among other things, customary closing conditions and the consummation of
the Global Knowledge Merger.
For more information about the Skillsoft merger, Global Knowledge Merger and
other recent developments, please see "Item 1. Business - Recent Developments."
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through December 31, 2020 were organizational activities,
those necessary to prepare for the Initial Public Offering, identifying a target
for our Business Combination, and activities in connection with the proposed
acquisition of Skillsoft. We do not expect to generate any operating revenues
until after the completion of our Business Combination. We generate
non-operating income in the form of interest income on marketable securities
held in the Trust Account. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the year ended December 31, 2020, we had a net loss of $72,459,185, which
consists of formation and operating costs of $2,906,903, a loss on conversion
option liability of $1,604,359, a loss on the Prosus Agreement of $50,481,190, a
loss on warrant liability of $21,498,000, and a provision for income taxes of
$486,761, offset by reimbursement of transaction expenses of $2,000,000,
interest income on marketable securities held in the Trust Account of $2,516,752
and an unrealized gain on marketable securities held in our Trust Account of
$1,276.
For the period from April 11, 2019 (inception) through December 31, 2019, we had
a net loss of $14,682,592, which consists of formation and operating costs of
$744,859, transaction costs of $1,125,634, a loss on warrant liability of
$18,250,000 and a provision for income taxes of $1,247,517, offset by interest
income on marketable securities held in the Trust Account of $6,639,430 and an
unrealized gain on marketable securities held in our Trust Account of $45,988.
For the three months ended September 30, 2020, we had net income of $28,245,051,
which consists of operating costs of $240,937, interest income on marketable
securities held in the Trust Account of $118,097, an unrealized gain on
marketable securities held in our Trust Account of $5,184, a gain on warrant
liability of $28,838,000 and an income tax benefit of $24,707.
For the nine months ended September 30, 2020, we had a net loss of $25,340,816,
which consists of interest income on marketable securities held in the Trust
Account of $2,417,317, offset by and a loss on warrant liability of $26,644,000,
operating costs of $768,783, an unrealized gain on marketable securities held in
our Trust Account of $1,164 and a provision for income taxes of $346,514.
For the three months ended September 30, 2019, we had a net loss of $16,496,280,
which consists of interest income on marketable securities held in the Trust
Account of $3,530,496, unrealized gain on marketable securities held in our
Trust Account of $12,169, a loss on warrant liability of $17,878,000,
transaction costs of $1,125,634, formation and operating costs of $369,066, and
a provision for income taxes of $666,245.
For the period from April 11, 2019 (inception) through September 30, 2019, we
had a net loss of $16,497,280, which consists of interest income on marketable
securities held in the Trust Account of $3,530,496, an unrealized gain on
marketable securities held in our Trust Account of $12,169, a loss on warrant
liability of $17,878,000, transaction costs of $1,125,634, formation and
operating costs of $370,066, and a provision for income taxes of $666,245.
For the three months ended June 30, 2020, we had a net loss of $44,762,353,
which consists of operating costs of $225,983 and a loss on warrant liability of
$44,636,000, offset by interest income on marketable securities held in the
Trust Account of $49,145, an unrealized gain on marketable securities held in
our Trust Account of $16,897 and an income tax benefit of $33,588.
For the six months ended June 30, 2020, we had a net loss of $53,585,867, which
consists of interest income on marketable securities held in the Trust Account
of $2,299,220, a loss on warrant liability of $54,982,000, operating costs of
$527,846, an unrealized loss on marketable securities held in our Trust Account
of $4,020 and a provision for income taxes of $371,221.
For the three months ended March 31, 2020, we had a net loss of $8,823,514,
which consists of interest income on marketable securities held in the Trust
Account of $2,250,075, a loss on warrant liability of $10,346,000, operating
costs of $301,863, an unrealized loss on marketable securities held in our Trust
Account of $20,917 and a provision for income taxes of $404,809.
For the period from April 11, 2019 (inception) through June 30, 2019, we had a
net loss of $1,000, which consisted of formation costs.
Liquidity and Capital Resources
On July 1, 2019, we consummated the Initial Public Offering of 69,000,000 Units
at a price of $10.00 per Unit, which includes the full exercise by the
underwriters of the over-allotment option, at $10.00 per Unit, generating gross
proceeds of $690,000,000. Simultaneously with the closing of the IPO, we
consummated the sale of 15,800,000 Private Placement Warrants to the Sponsor at
a price of $1.00 per warrant, generating gross proceeds of $15,800,000.
40
Following the IPO, the exercise of the over-allotment option and the sale of the
Private Placement Warrants, a total of $690,000,000 was placed in the Trust
Account. We incurred $34,319,807 in transaction costs, including $12,212,000 of
underwriting fees, $21,371,000 of deferred underwriting fees and $736,807 of
other costs.
As of March 31, 2020, we had marketable securities held in the Trust Account of
$697,219,326 (including approximately $7,219,000 of interest income and
unrealized losses). As of June 30, 2020, we had marketable securities held in
the Trust Account of $697,226,368 (including approximately $7,226,000 of
interest income and unrealized losses). As of September 30, 2020, we had
marketable securities held in the Trust Account of $697,283,649 (including
approximately $7,284,000 of interest income and unrealized losses). As of
December 31, 2020, we had cash and marketable securities held in the Trust
Account of $696,957,196 (including approximately $6,957,000 of interest income
and unrealized gains) consisting of U.S. Treasury Bills with a maturity of 185
days or less. Interest income on the balance in the Trust Account may be used by
us to pay taxes. Through December 31, 2020, we withdrew $2,246,250 of interest
earned on the Trust Account to pay our income taxes and for permitted
withdrawals, of which $856,250 was withdrawn during the year ended December 31,
2020.
For the year ended December 31, 2020, cash used in operating activities was
$720,660. Net loss of $72,459,185 was affected by interest earned on marketable
securities held in the Trust Account of $2,516,752, an unrealized gain on
marketable securities held in our Trust Account of $1,276, a deferred tax
benefit of $8,681, a loss on conversion option liability of $1,604,359, a loss
on the Prosus Agreement of $50,481,190, and a non-cash charge loss on warrant
liabilities of $21,498,000. Changes in operating assets and liabilities provided
$681,685 of cash for operating activities.
For the period from April 11, 2019 (inception) through December 31, 2019, cash
used in operating activities was $2,027,918. Net loss of $14,682,592 was
affected by interest earned on marketable securities held in the Trust Account
of $6,639,430, an unrealized gain on marketable securities held in our Trust
Account of $45,988, a deferred tax provision of $9,657, transaction costs
related to the initial public offering of $1,125,634 and a non-cash charge loss
on warrant liabilities of $18,250,000. Changes in operating assets and
liabilities used $45,199 of cash for operating activities.
For the nine months September 30, 2020, cash used in operating activities was
$923,534. Net loss of $25,340,816 was affected by interest earned on marketable
securities held in the Trust Account of $2,417,317, a loss on warrant liability
of $26,644,000, an unrealized gain on marketable securities held in our Trust
Account of $1,164 and a deferred tax benefit of $9,413. Changes in operating
assets and liabilities provided $201,176 of cash for operating activities.
For the period from April 11, 2019 (inception) through September 30, 2019, cash
used in operating activities was $1,789,469. Net loss of $16,497,280 was
affected by interest earned on marketable securities held in the Trust Account
of $3,530,496, a loss on warrant liability of $17,878,000, transaction costs of
$1,125,634, an unrealized gain on marketable securities held in our Trust
Account of $12,169 and a deferred tax provision of $2,555. Changes in operating
assets and liabilities used $755,713 of cash for operating activities.
For the six months June 30, 2020, cash used in operating activities was
$715,744. Net loss of $53,585,867 was affected by interest earned on marketable
securities held in the Trust Account of $2,299,220, a loss on warrant liability
of $54,982,000, an unrealized loss on marketable securities held in our Trust
Account of $4,020 and a deferred tax benefit of 10,502. Changes in operating
assets and liabilities provided $193,825 of cash for operating activities.
For the three months March 31, 2020, cash used in operating activities was
$529,004. Net loss of $8,823,514 was affected by interest earned on marketable
securities held in the Trust Account of $2,250,075, a loss on warrant liability
of $10,346,000, an unrealized loss on marketable securities held in our Trust
Account of $20,917 and a deferred tax benefit of $14,050. Changes in operating
assets and liabilities provided $191,718 of cash for operating activities.
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.
As of March 31, 2020, we had cash of $2,014,521. As of June 30, 2020, we had
cash of $1,886,781. As of September 30, 2020, we had cash of $1,744,991. As of
December 31, 2020, we had cash of $3,873,865. 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, the initial stockholders or their
affiliates may, but are not obligated to, loan us funds as may be required. If
we complete a Business Combination, we would repay such loaned amounts. In the
event that a Business Combination does not close, we may use a portion of the
working capital held outside the Trust Account to repay such loaned amounts but
no proceeds from our Trust Account would be used for such repayment. Up to
$1,500,000 of such loans may be convertible into warrants identical to the
Private Placement Warrants, at a price of $1.00 per warrant at the option of the
lender.
On November 2, 2020, we entered into a convertible promissory note with the
Sponsor pursuant to which the Sponsor agreed to loan us up to an aggregate
principal amount of $1,500,000 (the "Convertible Promissory Note"). The
Convertible Promissory Note is non-interest bearing and payable on the earlier
of the date on which we consummate a Business Combination or the date that the
winding up of the Company is effective. If we do not consummate a Business
Combination, we may use a portion of any funds held outside the Trust Account to
repay the Promissory Note; however, no proceeds from the Trust Account may be
used for such repayment. Up to $1,500,000 of the Convertible Promissory Note may
be converted into warrants at a price of $1.00 per warrant at the option of the
Sponsor. The warrants would be identical to the Private Placement Warrants. As
of December 31, 2020, the outstanding balance under the Convertible Promissory
Note amounted to an aggregate of $1,500,000.
41
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $20,000 for office space,
administrative and support services to the Company. We began incurring these
fees on June 26, 2019 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $21,371,000 in the aggregate.
The deferred fee will be waived by the underwriters in the event that we do not
complete a Business Combination, subject to the terms of the underwriting
agreement. On July 1, 2019, the underwriters agreed to waive the upfront and
deferred underwriting discount on 7,940,000 units, resulting in a reduction of
the upfront and deferred underwriting discount of $1,588,000 and $2,779,000,
respectively.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Derivative Instruments
We account for the Derivative Instruments in accordance with the guidance
contained in ASC 815-40-15-7D and 7F under which the Derivative Instruments do
not meet the criteria for equity treatment and must be recorded as liabilities.
Accordingly, we classify the Derivative Instruments as liabilities at their fair
value and adjust the Derivative Instruments to fair value at each reporting
period. This liability is subject to re-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our statement of
operations. The Private Warrants and the Public Warrants for periods where no
observable traded price was available are valued using a Monte Carlo simulation.
For periods subsequent to the detachment of the Public Warrants from the Units,
the Public Warrant quoted market price was used as the fair value as of each
relevant date. The fair value of the convertible promissory note and the Prosus
Agreement were estimated using a Monte Carlo simulation approach.
Class A Common Stock Subject to Possible Redemption
We account for our Class A 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 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 Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
Class A common stock subject to possible redemption is presented at redemption
value as temporary equity, outside of the stockholders' equity section of our
balance sheets.
Net Income (Loss) per Common Share
We apply the two-class method in calculating earnings per share. Net income
(loss) per common share, basic and diluted for Class A redeemable common stock
is calculated by dividing the interest income earned on the Trust Account, net
of applicable taxes, by the weighted average number of shares of Class A
redeemable common stock outstanding for the period. Net loss per common share,
basic and diluted for non-redeemable common stock is calculated by dividing net
loss less income attributable to Class A redeemable common stock, by the
weighted average number of shares of non-redeemable common stock outstanding for
the period presented.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
42© Edgar Online, source Glimpses
SKILLSOFT CORP. 
