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 Annual Report on Form 10-K.
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 Annual Report on Form
10-K.
Overview
We are a blank check company incorporated on November 5, 2018 as a Delaware
corporation and formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
similar business combination with one or more businesses or entities. We intend
to effectuate our initial business combination using cash from the proceeds of
the IPO and the sale of the private units, our capital stock, debt or a
combination of cash, stock and debt.
Our entire activity since inception relates to our formation, to prepare for our
IPO, which was consummated on March 7, 2019, and identifying a company for a
business combination.
Results of Operations
Our only activities from November 5, 2018 (inception) through December 31, 2019
were organizational activities, those necessary to consummate the IPO, described
below, and, after the IPO, searching for a target company for a business
combination. We do not expect to generate any operating revenues until after the
completion of our business combination. We generate non-operating income in the
form of interest income on marketable securities held 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, 2019, we had net income of $3,367,179, which
consisted of interest income on marketable securities held in the trust account
of $4,912,346 and an unrealized gain on marketable securities held in the trust
account of $128,899, offset by operating costs of $778,815 and provision for
income taxes of $895,251.
For the period from November 5, 2018 (inception) through December 31, 2018, we
had a net loss of $792, which consisted of operating and formation costs.
Liquidity and Capital Resources
Until the consummation of the IPO, our liquidity needs were satisfied through
the receipt of $25,000 from our sale of the founder shares and unsecured loans
from our Chief Executive Officer.
On March 7, 2019, we consummated our IPO of 24,000,000 units, at a price of
$10.00 per unit, generating gross proceeds of $240,000,000. Simultaneously with
the closing of the IPO, we consummated the sale of 615,000 private units to our
Sponsor and EarlyBirdCapital and its designee, generating gross proceeds of
$6,150,000.
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On March 12, 2019, in connection with the underwriters' exercise of their
over-allotment option in full, we consummated the sale of an additional
3,600,000 units at a price of $10.00 per unit, generating total gross proceeds
of $36,000,000. In addition, we also consummated the sale of an additional
72,000 private units to our Sponsor and EarlyBirdCapital and its designee at
$10.00 per private unit, generating total gross proceeds of $720,000.
Following the IPO, the exercise of the over-allotment option and the sale of the
private units, a total of $276,000,000 was placed in the trust account. We
incurred $6,059,098 in IPO related costs, including $5,520,000 of underwriting
fees, and $539,098 of other costs.
As of December 31, 2019, we had marketable securities held in the trust account
of $280,103,245 (including approximately $4,103,000 of interest income, net of
unrealized gains) consisting of U.S. treasury bills with a maturity of 180 days
or less. Interest income on the balance in the trust account may be used by us
to pay taxes. Through December 31, 2019, we withdrew $938,000 of interest earned
on the trust account to pay our income tax obligations.
For the year ended December 31, 2019, cash used in operating activities was
$1,634,432. Net income of $3,367,179 was affected by interest earned on
marketable securities held in the trust account of $4,912,346, an unrealized
gain on marketable securities held in our trust account of $128,899 and a
deferred income tax provision of $27,069. Changes in operating assets and
liabilities provided $12,565 of cash from operating activities.
We intend to use substantially all of the funds held in the trust account, to
acquire a target business and to pay our expenses relating thereto, including a
fee payable to EarlyBirdCapital, upon consummation of our initial business
combination for assisting us in connection with our initial business
combination. To the extent that our capital stock is used in whole or in part as
consideration to effect a business combination, the remaining funds held in the
trust account will be used as working capital to finance the operations of the
target business. Such working capital funds could be used in a variety of ways
including continuing or expanding the target business' operations, for strategic
acquisitions and for marketing, research and development of existing or new
products. Such funds could also be used to repay any operating expenses or
finders' fees which we had incurred prior to the completion of our business
combination if the funds available to us outside of the trust account were
insufficient to cover such expenses.
As of December 31, 2019, we had cash of $140,303. We intend to use the funds
held outside the trust account for identifying and evaluating prospective
acquisition candidates, performing business due diligence on prospective target
businesses, traveling to and from the offices, plants or similar locations of
prospective target businesses, reviewing corporate documents and material
agreements of prospective target businesses, selecting the target business to
acquire and structuring, negotiating and consummating the business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, the Sponsor or our officers and
directors or their affiliates may, but are not obligated to, loan us funds on a
non-interest basis 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 notes
may be convertible into private units, at a price of $10.00 per unit. The units
would be identical to the private units.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business prior to our initial business
combination. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our business
combination. Moreover, we may need to obtain additional financing either to
complete our business combination or because we become obligated to redeem a
significant number of our public shares upon completion of our business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination. If we are unable to complete our
initial business combination because we do not have sufficient funds available
to us, we will be forced to cease operations and liquidate the trust account.
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Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements as of December 31, 2019. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities other than an agreement to pay an affiliate
of our Sponsor a monthly fee of $10,000 for office space, utilities and
secretarial and administrative support. We began incurring these fees on March
5, 2019 and will continue to incur these fees monthly until the earlier of the
completion of the business combination and our liquidation.
We have engaged EarlyBirdCapital to act as an advisor in connection with a
business combination, to assist us in holding meetings with our shareholders to
discuss the potential business combination and the target business' attributes,
introduce us to potential investors that are interested in purchasing our
securities in connection with a business combination, assist us in obtaining
shareholder approval for the business combination and assist us with our press
releases and public filings in connection with the business combination. We will
pay EarlyBirdCapital a cash fee for such services upon the consummation of a
business combination in an amount equal to $9,660,000 (exclusive of any
applicable finders' fees which might become payable); provided that up to 30% of
the fee may be allocated at our sole discretion to other FINRA members that
assist us in identifying and consummating a business combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with GAAP 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:
Common stock subject to possible redemption
We account for common stock subject to possible redemption in accordance with
the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock that
feature redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, common stock
is classified as stockholders' equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, 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 loss per common share
We apply the two-class method in calculating earnings per share. Common stock
subject to possible redemption which is not currently redeemable and is not
redeemable at fair value, have been excluded from the calculation of basic net
loss per common share since such shares, if redeemed, only participate in their
pro rata share of the trust account earnings. Our net income is adjusted for the
portion of income that is attributable to common stock subject to possible
redemption, as these shares only participate in the earnings of the Trust
Account and not our income or losses.
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Recent accounting pronouncements
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on our financial statements.
Related Party Transactions
In order to finance transaction costs in connection with a business combination,
the Sponsor or certain of our officers and directors or their affiliates may,
but are not obligated to, loan us funds as may be required ("Working Capital
Loans"). If we complete a business combination, we would repay the Working
Capital Loans out of the proceeds of the trust account released to us.
Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the trust account to the extent such funds are available. In the event
that a business combination does not close, we may use a portion of proceeds
held outside the trust account to repay the Working Capital Loans, but no
proceeds held in the trust account would be used to repay the Working Capital
Loans. The Working Capital Loans would either be repaid upon consummation of a
business combination, without interest, or, at the lender's discretion, up to
$1,500,000 of such Working Capital Loans may be convertible into units of the
post business combination entity at a price of $10.00 per unit. The units would
be identical to the Private Units.
We entered into an agreement whereby, commencing on the March 5, 2019 through
the earlier of the consummation of a business combination and its liquidation,
to pay an affiliate of Mr. Vogel a total of $10,000 per month for office space,
utilities and secretarial and administrative support. For the year ended
December 31, 2019, we incurred and paid $100,000 in fees for these services.
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