NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Description of Organization and Business Operations
VectoIQ Acquisition Corp. (the “Company”)
was incorporated in Delaware on January 23, 2018. The Company was formed for the purpose of effecting a merger, share exchange,
asset acquisition, stock purchase, recapitalization reorganization or similar business combination with one or more businesses
(the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes of
consummating a Business Combination, the Company intends to focus its search on the industrial technology, transportation and smart
mobility industries. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated
with emerging growth companies.
In the opinion of management, the unaudited
condensed consolidated financial statements furnished in this Form 10-Q include all adjustments necessary for a fair presentation
of the financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of
a normal recurring nature.
As of March 31, 2020, the Company had not
commenced operations. All activity for the period from January 23, 2018 (inception) through March 31, 2020 relates to the
Company’s formation and its initial public offering described below, and since the closing of its initial public offering,
a search for a Business Combination candidate. The Company will not generate any operating revenues until after the completion
of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income
on cash and cash equivalents and investments from the proceeds derived from its initial public offering. The Company has a December 31
year end.
The Company’s sponsor is VectoIQ Holdings, LLC,
a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s
initial public offering was declared effective May 15, 2018. On May 18, 2018, the Company consummated an initial public
offering of 20,000,000 units (each, a “Unit” and collectively, the “Units”) at $10.00 per Unit, which is
discussed in Note 3. Simultaneously with the closing of the initial public offering, the Company consummated the sale of 800,000
units (each, a “Private Placement Unit” and collectively, the “Private Placement Unit”) at a price of $10.00
per Private Placement Unit in a private placement to the Sponsor, Cowen Investments, LLC (collectively with the Sponsor, the
“Founders”) and certain funds and accounts managed by subsidiaries of BlackRock, Inc. (collectively, the “Anchor
Investor”).
Following the closing of the initial public
offering on May 18, 2018, an amount of $202,000,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the
initial public offering and the Private Placement Units was placed in a trust account (“Trust Account”) which was invested
in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company
that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the
distribution of the Trust Account, as described below.
On May 24, 2018, the underwriters notified
the Company of their exercise of the over-allotment option in full and, on May 29, 2018, purchased 3,000,000 additional Units
(the “Additional Units”) at $10.00 per Additional Unit upon the closing of the over-allotment option, generating total
gross proceeds of $30,000,000. On May 29, 2018, simultaneously with the sale of the Additional Units, the Company consummated
the sale of an additional 90,000 Private Units at $10.00 per additional Private Unit (the “Additional Private Units”),
generating total gross proceeds of $900,000. Following the closing of the over-allotment option, an additional $30,300,000 ($10.10
per Unit) was placed in the Trust Account, resulting in $232,300,000 ($10.10 per Unit) held in the Trust Account.
Transaction costs amounted to $5,244,622,
consisting of $4,600,000 of underwriting fees, including underwriting fees resulting from the exercise of the underwriters’
over-allotment, and $644,622 of initial public offering costs.
The Company’s management has
broad discretion with respect to the specific application of the net proceeds of the initial public offering and the sale of
Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination
successfully. The Company must complete its initial Business Combination with one or more target businesses having an
aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding taxes payable on income earned
on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will
only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be
required to register as an investment company under the Investment Company Act.
The Company will provide its holders of
the outstanding shares of its common stock, par value $0.0001, sold in the initial public offering (the “public stockholders”)
with the opportunity to redeem all or a portion of their Public Shares (as defined below in Note 3) upon the completion of
a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by
means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct
a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10 per Public Share).
These Public Shares are recorded at a redemption value and classified as temporary equity in accordance with the Financial Accounting
Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” The Company will proceed with a Business Combination only if the Company has net tangible assets
of at least $5,000,001 upon such consummation of a Business Combination and, if a stockholder vote is held to approve such transaction,
only if a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by
law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant
to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”)
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the
transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company
will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender
offer rules. Additionally, each public stockholder may elect to redeem their Public Shares without voting, and if they do vote,
irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection
with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined below
in Note 4) and any Public Shares purchased during or after the initial public offering in favor of a Business Combination.
In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public
Shares in connection with the completion of a Business Combination or any amendment to the provisions of the Company’s Amended
and Restated Certificate of Incorporation relating to its pre-initial business combination activity and related stockholders’
rights.
Notwithstanding the foregoing, the Amended
and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or
any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 15% of the common stock sold in the initial public offering, without the prior consent
of the Company.
The Company’s Founders, officers and
directors (the “initial stockholders”) have agreed not to propose an amendment to the Amended and Restated Certificate
of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares
if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity
to redeem their shares of common stock in conjunction with any such amendment.
If the Company does not consummate a Business
Combination by May 18, 2020 (the “Combination Period”), it 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 (less
up to $100,000 of interest to pay dissolution expenses, and taxes that were not previously released from the trust and paid), divided
by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights
as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders
and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under
Delaware law to provide for claims of creditors and the requirements of other applicable law.
The initial stockholders have agreed
to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the initial stockholders should acquire Public Shares in or after the initial
public offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares
if the Company fails to complete a Business Combination within the Combination Period. In the event of such distribution, it
is possible that the per share value of the residual assets remaining available for distribution (including Trust Account
assets) will be only $10.10 per share initially held in the Trust Account (or potentially less in certain circumstances). In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the
extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with
which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This
liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or
claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the
underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act.
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be
responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that
the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors (other
than the Company’s independent auditors), service providers, prospective target businesses or other entities with which
the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or
to monies held in the Trust Account.
On March 2, 2020, the Company entered into
a business combination agreement (the “Business Combination Agreement”) with VCTIQ Merger Sub Corp., a Delaware corporation
and wholly-owned subsidiary of the Company (“Merger Sub”), and Nikola Corporation, a Delaware corporation (“Nikola”),
pursuant to which the Company will effect a business combination with Nikola (the “Proposed Transaction”). See Note
3 for further discussion of the Proposed Transaction.
Going Concern
In connection with the Company's assessment
of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern”, management
has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company's ability to
continue as a going concern. Management plans to address this uncertainty through the consummation of a Business Combination. No
adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May
18, 2020.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are
presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply
with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration
statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with
the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of
the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election
to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard
is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth
company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s
financial statement with another public company that is neither an emerging growth company nor an emerging growth company that
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Net (Loss) Income Per Common Share
Net (loss) income per common share is computed
by dividing net (loss) income applicable to common stockholders by the weighted average number of shares of common stock outstanding
during the period, plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated
using the treasury stock method. As of March 31, 2020 and December 31, 2019, the Company had outstanding warrants to purchase 23,890,000
shares of common stock. These shares were excluded from the calculation of diluted net (loss) income per share of common stock
because their inclusion would have been anti-dilutive. As a result, diluted net (loss) income per common share is the same as basic
net (loss) income per common share for the periods presented.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts and a trust account held at financial
institutions, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. As of March 31, 2020 and
December 31, 2019, the Company has not experienced losses on these accounts and management believes the Company is not
exposed to significant risks on such accounts.
Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet due to their short-term nature.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be cash equivalents.
Cash and cash equivalents held in Trust
Account
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be that are held in the Trust Account to be cash
equivalents. As of March 31, 2020, the cash equivalents held in the Trust Account were held in 30-day U.S. Treasury bills. As of
December 31, 2019, the cash equivalents held in the Trust Account were held in money market funds.
Investments held in Trust Account
As of March 31, 2020 ,the Company had
no investments held in the Trust Account. As of December 31, 2019, the assets held in the Trust Account were held in 90-day U.S.
Treasury bills.
Common stock subject to possible redemption
The Company accounts for its common stock
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is 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 the Company’s control) is classified as
temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock
features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of
uncertain future events. Accordingly, common stock subject to possible redemption is presented as temporary equity, outside of
the stockholders’ equity section of the Company’s condensed balance sheet.
Offering costs
Offering costs consist of underwriting,
legal, accounting, and other expenses incurred through the balance sheet date that are directly related to the initial public offering.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included
the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
FASB ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. There were no unrecognized tax benefits as of March 31, 2020 or December 31, 2019. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment
of interest and penalties as of March 31, 2020 or December 31, 2019. The Company is currently not aware of any issues under review
that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax
examinations by major taxing authorities since inception.
The Company may be subject to potential
examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include
questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal,
state and city tax laws. The Company has recorded deferred tax liabilities relating to expenses deferred for income tax purposes
as of March 31, 2020 and December 31, 2019 amounting to $0 and $101,521, respectively.
Recent Accounting Pronouncements
The Company’s management does not
believe that there are any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s financial statements.
Coronavirus
(COVID-19) Pandemic.
On March 11, 2020 the World Health Organization
declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation
measures worldwide. As the Company is located in New York, the Company is currently under a shelter-in-place
mandate and many of our business partners are similarly impacted. The global outbreak of COVID-19 continues to rapidly evolve,
and the extent to which COVID-19 may impact the Company's business will depend on future developments, which are highly uncertain
and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel
restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the
effectiveness of actions taken in the United States and other countries to contain and treat the disease. The Company continues
to vigilantly monitor the situation with its primary focus on the health and safety of its business partners.
Note 3—Proposed Business Combination
Business Combination Agreement
Pursuant to the Business Combination Agreement,
at the closing of the Proposed Transaction (the “Closing”), Merger Sub will be merged with and into Nikola (the “Merger”),
with Nikola surviving the Merger as a wholly-owned direct subsidiary of the Company. Immediately prior to the effective time of
the Merger (the “Effective Time”), Nikola will cause the shares of Nikola’s preferred stock issued and outstanding
immediately prior to the Effective Time to be automatically converted into shares of Nikola common stock, and each converted share
of Nikola preferred stock will no longer be outstanding and will cease to exist. At the Effective Time, by virtue of the Merger,
all shares of Nikola common stock issued and outstanding immediately prior to the Effective Time will be canceled and converted
into the right to receive the number of shares of the Company’s common stock equal to the exchange ratio of 1.901 set forth
in the Business Combination Agreement (the “Exchange Ratio”). Each Nikola stock option that is outstanding immediately
prior to the Effective Time, whether vested or unvested, will be converted into an option to purchase a number of shares of the
Company’s common stock equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Nikola
common stock subject to such option immediately prior to the Effective Time and (ii) the Exchange Ratio, at an exercise price per
share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such option immediately prior to the
Effective Time divided by (B) the Exchange Ratio.
The Closing is subject to certain conditions,
including but not limited to the approval of the Company’s stockholders and Nikola’s stockholders of the Business Combination
Agreement. The Business Combination Agreement may also be terminated by either party under certain circumstances. Nikola has agreed
to customary “no shop” obligations subject to a customary “fiduciary out,” and Nikola would be required
to pay a termination fee in the amount of $82 million if the Business Combination Agreement is terminated under certain circumstances.
The Closing will occur as promptly as
practicable, but in no event later than three business days following the satisfaction or waiver of all of the closing
conditions contained in the Business Combination Agreement. Because the Company and Nikola have determined that the Closing
will not occur on or before May 18, 2020, the Company has called a special meeting of its stockholders to request approval to
extend the date by which the Company must complete an initial business combination from May 18, 2020 to July 31, 2020, as
described below.
Stockholder
Support Agreement
Also on March 2, 2020, certain stockholders
of Nikola holding the votes necessary to approve the Proposed Transaction entered into a Stockholder Support Agreement with the
Company (the “Stockholder Support Agreement”), pursuant to which such stockholders agreed to vote all of their shares
of Nikola capital stock in favor of the approval and adoption of the Proposed Transaction. Additionally, such stockholders agreed
not to (i) transfer any of their shares of Nikola capital stock (or enter into any arrangement with respect thereto) or (ii) enter
into any voting arrangement that is inconsistent with the Stockholder Support Agreement.
Registration Rights and Lock-Up Agreement
Pursuant to the Business Combination Agreement
and as a condition to the Closing, the Company, certain persons and entities holding the Founder Shares and Private Placement Units
(the “Original Holders”) and certain stockholders of Nikola (the “New Holders” and, collectively with the
Original Holders, the “Holders”) will enter into a Registration Rights and Lock-Up Agreement at the Closing (the “Registration
Rights and Lock-Up Agreement”). Pursuant to the terms of the Registration Rights and Lock-Up Agreement, the Company will
be obligated to file a registration statement to register the resale of certain securities of the Company held by the Holders.
In addition, pursuant to the terms of the Registration Rights and Lock-Up Agreement and subject to certain requirements and customary
conditions, including with regard to the number of demand rights that may be exercised, the Holders may demand at any time or from
time to time, that the Company file a registration statement on Form S-3 (or on Form S-1 if Form S-3 is not available) to register
the Company’s securities held by such Holders. The Registration Rights and Lock-Up Agreement will also provide the Holders
with “piggy-back” registration rights, subject to certain requirements and customary conditions.
The Registration Rights and Lock-Up Agreement
further provides for the securities of the Company held by the Holders to be locked-up for a period of time following the Closing,
as described below, subject to certain exceptions. The securities held by the Original Holders will be locked-up for one year following
the Closing, subject to earlier release if (i) the reported last sale price of the Company’s 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 Closing or (ii) if the Company consummates a liquidation,
merger, stock exchange or other similar transaction after the Closing which results in all of the Company’s stockholders
having the right to exchange their shares of common stock for cash, securities or other property. The securities held by the New
Holders, other than certain entities controlled by Trevor Milton, the current Chief Executive Officer of Nikola, will be locked-up
for 180 days after the Closing. The securities held by certain entities controlled by Trevor Milton will be locked up for one year
following the Closing, except that they would be permitted to sell or otherwise transfer an aggregate of $70.0 million shares of
the Company’s common stock commencing 180 days after the Closing.
Subscription Agreements
In connection with the execution of the
Business Combination Agreement, effective as of March 2, 2020, the Company entered into separate subscription agreements (each,
a “Subscription Agreement”) with a number of investors (each a “Subscriber”), pursuant to which the Subscribers
agreed to purchase, and the Company agreed to sell to the Subscribers, an aggregate of 52,500,000 shares of the Company’s
common stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $525
million, in a private placement (the “PIPE”).
The closing of the sale of the PIPE Shares
pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent
consummation of the Proposed Transaction. The purpose of the PIPE is to raise additional capital for use by the combined company
following the Closing.
Pursuant to the Subscription Agreements,
the Company granted certain registration rights to the Subscribers, including the Company’s agreement that, within 45 calendar
days after the Closing (the “Filing Deadline”), the Company will file with the SEC a registration statement registering
the resale of the PIPE Shares (the “Resale Registration Statement”), and will use its commercially reasonable efforts
to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof. Under certain circumstances
described in the Subscription Agreements, including if the Resale Registration Statement has not been filed with the SEC by the
Filing Deadline, additional payments by the Company may be assessed with respect to the PIPE Shares The additional payments by
the Company would accrue on the applicable registrable securities at a rate of 0.5% of the aggregate purchase price paid for such
registrable securities per month, subject to certain terms and limitations (including a cap of 5.0% of the aggregate purchase price).
Registration Statement
On March 13, 2020, the Company filed a
registration statement on Form S-4 with respect to the Proposed Transaction. The Form S-4 was declared effective on May 8,
2020. The Company has set May 8, 2020 as the record date for the special meeting in lieu of an annual meeting of the
Company’s stockholders to approve the Proposed Transaction and related matters, and has set June 2, 2020 as the date
for such meeting.
The
Company has called a special meeting of its stockholders, scheduled to be held on May 12, 2020, to request approval to amend the
Company’s amended and restated certificate of incorporation to extend the date by which the Company must complete an initial
business combination from May 18, 2020 to July 31, 2020, in order to allow the Company more time to complete the Proposed Transaction.
Note 4—Initial Public Offering
Pursuant
to the initial public offering, the Company sold 23,000,000 Units (including 3,000,000 Units subject to the underwriters’
over-allotment option) at a price of $10.00 per Unit. Each Unit consists of one share of common stock (such shares of common stock
included in the Units sold in the initial public offering, the “Public Shares”), and one redeemable warrant (each such
warrant included in the Units sold in the initial public offering, a “Public Warrant”). Each Public Warrant entitles
the registered holder to purchase one share of our common stock at a price of $11.50 per share, subject to adjustment, at
any time commencing on the later of 12 months from the closing of the initial public offering or 30 days after the completion of
the initial Business Combination. The Public Warrants will expire on the fifth anniversary of the Company’s completion of
an initial Business Combination, or earlier upon redemption or liquidation. As of March 31, 2020 and December 31, 2019, the Company
had 23,890,000 warrants outstanding.
The Company is accounting for its warrants
and the forward purchase agreement (as defined below) under ASC 815 and is including them in Shareholders’ Equity.
No Public Warrants will be exercisable for
cash unless the Company has an effective and current registration statement covering the shares of Common Stock issuable upon exercise
of the Public Warrants and a current prospectus relating to such shares. Notwithstanding the foregoing, if a registration statement
covering the issuance of the shares issuable upon exercise of the Public Warrants is not effective within 90 days from the closing
of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during
any period when the Company shall have failed to maintain an effective registration statement or a current prospectus, exercise
Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption
from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis.
The Private Warrants (as defined below)
are identical to the Public Warrants underlying the Units sold in the initial public offering, except that the Private Warrants
and the common stock issuable upon exercise of the Private Warrants will not be transferable, assignable or salable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will
be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees and Private
Warrants held by Cowen Investments LLC will not be exercisable more than five years after the effective date of the registration
statement related to the initial public offering in accordance with FINRA Rule 5110(f)(2)(G)(i). If the Private Warrants are
held by someone other than the initial shareholders or their permitted transferees, the Private Warrants will be redeemable by
the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company may call the Public Warrants
for redemption:
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon a minimum of 30 days’ prior written notice of redemption; and
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if, and only if, the last reported closing price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading
days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of
redemption to the warrant holders.
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If the Company calls the Public Warrants
for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a
“cashless basis,” as described in the warrant agreement.
The exercise price and number of common
stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend,
or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common
stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrant
shares. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the
funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will
they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants.
Accordingly, the warrants may expire worthless.
Note 5—Related Party Transactions
Founder Shares
On February 15, 2018, the Founders
purchased an aggregate of 5,750,000 shares (the “Founder Shares”) of the Company’s common stock, par value $0.0001,
for an aggregate purchase price of $25,000, or approximately $0.004 per share. The Sponsor and Cowen Investments purchased 4,301,000
and 1,449,000 of the Founder Shares, respectively. In March 2018, the Sponsor transferred 15,000 Founder Shares to each of
its initial director nominees. In April 2018, the sponsor forfeited 435,606 Founder Shares and the Anchor Investor purchased
435,606 Founder Shares for an aggregate purchase price of $1,894, or approximately $0.004 per share. In May 2018, Cowen
Investments forfeited 287,500 Founder Shares, which were subsequently purchased by the Sponsor and the Anchor Investor. Additionally,
in May 2018, the Sponsor purchased 254,829 Founder Shares for an aggregate purchase price of $1,108, or approximately $0.004
per share, and the Anchor Investor purchased 32,671 Founder Shares for an aggregate purchase price of $142, or approximately $0.004
per share.
The initial stockholders have agreed, subject
to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year
after the completion of the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if
the last sale price of the 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 the Company completes a liquidation, merger, capital stock exchange
or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares
of common stock for cash, securities or other property.
Private Placement Units
Simultaneously with the initial public offering,
the Founders and Anchor Investor purchased an aggregate of 890,000 Private Placement Units (including 90,000 Private Placement
Units in connection with the exercise of the over-allotment option) at a price of $10.00 per Private Placement Unit ($8,900,000 in
the aggregate) in a private placement. Each Private Placement Unit consists of one share of common stock (such shares of common
stock included in the Private Placement Units, the “Private Shares”) and one redeemable warrant (each, a “Private
Warrant”). Each Private Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share,
subject to adjustment (see Note 6). Proceeds from the Private Placement Units were added to the proceeds from the initial public
offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the
proceeds from the sale of the Private Placement Units held in trust will be part of the liquidating distribution to the public
stockholders, and the Private Warrants will expire worthless. The Private Warrants will be non-redeemable and exercisable on a
cashless basis so long as they are held by the Founders or their permitted transferees.
The Founders and the Company’s officers
and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Units
or the securities underlying the Private Placement Units until the earlier to occur of: (A) one year after the completion
of the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if the last sale price
of the 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 the Company completes a liquidation, merger, capital stock exchange or other similar
transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for
cash, securities or other property.
A fund affiliated with P. Schoenfeld Asset
Management LP, which is referred to as the “forward purchase investor,” is a member of the Sponsor and has entered
into a contingent forward purchase agreement with the Company (the “forward purchase agreement”) which provides for
the purchase by the forward purchase investor of 2,500,000 forward purchase shares, plus one of the Company’s redeemable
warrants for each forward purchase share, for total gross proceeds of up to $25,000,000. These shares and warrants will be purchased
in a private placement to close simultaneously with the consummation of the Company’s initial business combination. These
issuances will be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
While the Company may elect to have the
forward purchase investor purchase no securities under the contingent forward purchase agreement, if the Company requests that
the forward purchase investor purchase securities and the forward purchase investor defaults on such purchase or the forward purchase
investor exercises its right of refusal contained in the forward purchase agreement, the forward purchase investor will forfeit
up to all of its ownership interest in the Sponsor related to Founder Shares, and the Sponsor will have the right to redeem the
forward purchase investor’s remaining ownership interest in the Sponsor at the original purchase price.
Related Party Loans
On March 12, 2020, Cowen
Investments II, LLC agreed to loan the Company an aggregate of up to $422,000 to cover expenses related to the Proposed
Business Combination pursuant to a promissory note (the “Promissory Note”). The Promissory Note is non-interest
bearing and is due in full on the earlier of September 12, 2020 or the date the Company completes or terminates the Business
Combination Agreement. As of March 31, 2020, the Company had an outstanding balance of $422,000 under the Promissory Note. As
of December 31, 2019, there was no related party loan outstanding.
In addition, in order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust
Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, the Company 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 additional units of the post
Business Combination entity at a price of $10.00 per unit. The securities would be identical to the Private Placement Units. To
date, the Company had no borrowings under the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans.
Administrative Support Agreement
The Company entered into an agreement, commencing
on the effective date of the initial public offering through the earlier of the Company’s consummation of a Business Combination
and its liquidation, to pay the Sponsor a total of $10,000 per month for office space and general administrative services. The
Company accrued $30,000 and $195,000 for office space and general administrative services as of March 31, 2020 and December 31,
2019, respectively. During the three months ended March 31, 2020, the Company paid $195,000 for office space and general administrative
services included in general and administrative expenses in the condensed statement of operations.
The Sponsor, executive officers and directors,
or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities
on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business
Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to the Sponsor,
officers, directors or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There
is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on the
Company’s behalf.
Note 6—Commitments & Contingencies
Registration Rights
Pursuant
to a registration rights agreement entered into on May 15, 2018, the Founders, anchor investor, and the Company’s executive
officers, directors and director nominees and their permitted transferees will be entitled to demand that the Company register
for resale the Founder Shares, the Private Placement Units and underlying securities and any securities issued upon conversion
of Working Capital Loans. The holders of these securities will be entitled to make up to three demands, excluding short form demands,
that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to the Company’s consummation of the initial Business Combination.
The Company will bear the expenses incurred in connection with the filing of any such registration statements. Notwithstanding
the foregoing, Cowen Investments may not exercise its demand and “piggyback” registration rights after five and seven
years, respectively, after the effective date of the initial public offering and may not exercise its demand rights on more than
one occasion.
Business Combination Marketing Agreement
The Company engaged the underwriters as
advisors in connection with its Business Combination pursuant to a business combination marketing agreement. Pursuant to that agreement,
the Company will pay such advisors a cash fee for such services upon the consummation of an initial Business Combination in an
amount equal to 3.5% of the gross proceeds of the initial public offering, including any proceeds from the full or partial exercise
of the over-allotment option.
Note 7—Stockholders’ Equity
Common
Stock—The Company is currently authorized to issue 100,000,000 shares of common stock with a par value of
$0.0001 per share. Holders of common stock are entitled to one vote for each share. As of March 31, 2020 and December 31, 2019,
there were 29,640,000 shares of common stock issued and outstanding including 22,509,588 and 22,552,141 shares subject to redemption,
respectively.
Preferred
Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March
31, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
Note 8— Investment Valuation
FASB ASC 820 establishes a single definition
of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Company’s
investments and requires additional disclosure about fair value. Fair value is an estimate of the price the Company would receive
to sell an asset or pay to transfer a liability in an orderly arm’s length transaction between market participants at the
measurement date and sets out a fair value hierarchy. The valuation hierarchy is based upon the transparency of inputs used to
measure fair value. In accordance with U.S. GAAP, investments measured and reported at fair value are classified and disclosed
in one of the following categories:
Level 1: Quoted prices (unadjusted) are available
in active markets for identical investments as of the reporting date. The types of financial instruments in Level 1 include listed
equities and listed derivatives. The Company’s investments in the Trust Account are 30-day U.S. government treasury bills
and therefore are level 1 investments, since the Company is able to value the investments based on quoted prices in an active market.
Level 2: Pricing inputs are other than quoted prices
in active markets for identical investments, which are either directly or indirectly observable as of the reporting date, and fair
value is determined through the use of models or other valuation methodologies. Financial instruments in this category generally
include corporate bonds and loans, less liquid and restricted equity securities, certain over-the-counter derivatives. A significant
adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement.
Level 3: Pricing inputs include those that are generally
less observable or unobservable and include situations where there is little, if any, market activity for the investment. Financial
instruments in this category generally include equity and debt positions in private companies. Fair value for these investments
is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the
investment was acquired, the nature of the investment, local markets conditions, current and projected operating performance, and
financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require
significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the
values that would have been used had a ready market for these investments existed.
In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair
value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors
specific to the investment.
Upon the closing of the initial public offering
and the private placement, a total of $202,000,000 was deposited into the Trust Account at May 18, 2018. In connection with
the exercise of the overallotment option, an additional $30,300,000 was deposited. All proceeds in the Trust Account may be invested
in either U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions
under Rule 2a-7 under the Investment Company Act of 1940, as amended, and that invest solely in U.S. government treasury obligations.
The proceeds of the Trust account
were invested in in 30-day U.S. government treasury bills maturing in April 2020 as of March 31, 2020, yielding interest of approximately
(.025%). The Company considers all short-term investments with an original maturity of three months or less when purchased to be
that are held in the Trust Account to be cash equivalents.
As of December 31, 2019, the
proceeds of the Trust Account were invested in U.S. government treasury bills maturing in February 2020, yielding interest of approximately
1.5%. The Company classifies its U.S. government treasury bills and equivalent securities as held-to-maturity in accordance with
FASB ASC 320, “Investments — Debt and Equity Securities.” Held-to-maturity securities are those securities which
the Company has the ability and intent to hold until maturity. Held-to-maturity U.S. government treasury bills are recorded at
amortized cost on the accompanying December 31, 2019 condensed balance sheets and adjusted for the amortization or accretion of
premiums or discounts.
The following tables present information
about the Company’s assets that are measured on a recurring basis as of March 31, 2020 and December 31, 2019 and indicate
the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s
permitted investments at March 31, 2020 and December 31, 2019 consist of U.S. government treasury bills, fair values of its investments
are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities as
follows:
|
|
Carrying value
at March 31, 2020
|
|
|
Gross Unrealized
Holding Gain
|
|
|
Quoted Prices
in Active Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
384,710
|
|
|
$
|
-
|
|
|
$
|
384,710
|
|
Cash equivalents
|
|
|
237,992,861
|
|
|
|
-
|
|
|
|
237,992,861
|
|
Total
|
|
$
|
238,377,571
|
|
|
$
|
-
|
|
|
$
|
238,377,571
|
|
|
|
Carrying value
at December 31, 2019
|
|
|
Gross Unrealized
Holding Gain
|
|
|
Quoted Prices
in Active Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
10,316
|
|
|
$
|
-
|
|
|
$
|
10,316
|
|
U.S. government treasury bills
|
|
|
238,372,960
|
|
|
|
5,702
|
|
|
|
238,378,662
|
|
Total
|
|
$
|
238,383,276
|
|
|
$
|
5,702
|
|
|
$
|
238,388,978
|
|
Transfers to/from Levels 1, 2, and 3 are
recognized at the end of the reporting period. There were no transfers between levels for the three months ended March 31, 2020
or 2019.
Note 9 – Income Taxes
The Company’s financial statements
include total net income before taxes of $60,516 and $1,095,793 for the three months ended March 31, 2020 and 2019. The Company
made no tax payments during the three months ended March 31, 2020 and 2019. The income tax provision consists of the following:
|
|
For the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
230,470
|
|
|
$
|
151,046
|
|
Deferred
|
|
|
(81,710
|
)
|
|
|
79,070
|
|
State and Local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
56,107
|
|
|
|
36,683
|
|
Deferred
|
|
|
(19,811
|
)
|
|
|
19,203
|
|
Income tax provision
|
|
$
|
185,056
|
|
|
$
|
286,002
|
|
The table below presents the Company’s
deferred income taxes as of:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Deferred tax asset (liability):
|
|
|
|
|
|
|
|
|
Unrealized gains on marketable securities
|
|
$
|
-
|
|
|
$
|
(101,521
|
)
|
Start-up costs
|
|
|
357,750
|
|
|
|
241,613
|
|
Less: Valuation Allowance
|
|
|
(357,750
|
)
|
|
|
(241,613
|
)
|
Deferred tax liability
|
|
$
|
-
|
|
|
$
|
(101,521
|
)
|
The Company files income tax returns in
the U.S. federal jurisdiction and in New York and is subject to examination by the taxing authorities. The Company considered New
York to be a significant state tax jurisdiction. Its income tax returns are open for audit for tax years 2018 and forward.