NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
1. Description of Organization and
Business Operations
Organization and General
PropTech Acquisition Corporation (the
“Company”) is a blank check company incorporated in Delaware on July 31, 2019 (date of inception). The Company was
formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or
other similar business combination with one or more businesses (the “Business Combination”). The Company is an early
stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging
growth companies.
As of June 30, 2020, the Company had not
yet commenced any operations. All activities for the period from July 31, 2019 (date of inception) to June 30, 2020 related to
the Company’s formation and the Offering (as defined below), and since the closing of the Offering, the search for a prospective
target for the initial Business Combination. The Company has selected December 31 as its fiscal year end.
Sponsor and Initial Public Offering
On November 26, 2019, the Company closed
its initial public offering (the “Offering”) of 17,250,000 units at $10.00 per unit (including the underwriters’
full exercise of their over-allotment option) (the “Units” and, with respect to the shares of Class A common stock
included in the Units, the “Public Shares”) which is discussed in Note 3 and the sale of 5,700,000 warrants (each,
a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.00
per Private Placement Warrant in a private placement (the “Private Placement”) to our sponsor, HC PropTech Partners
I LLC (the “Sponsor”) that closed simultaneously with the closing of the Offering (as described in Note 4). The Company
has listed the Units, the Public Shares and the Public Warrants (as defined below) on the Nasdaq Capital Market (“Nasdaq”).
Trust Account
Upon the closing of the Offering on November
26, 2019, the Company deposited $172,500,000 ($10.00 per Unit) from the proceeds of the Offering and the sale of the Private Placement
Warrants, into a trust account (the “Trust Account”), which were then invested in U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any money
market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company
Act”), which invest only in direct U.S, government treasury obligations until the earlier of: (i) the consummation of a
Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described
below.
Initial Business Combination
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Offering and sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market
value equal to at least 80% of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions
and taxes payable on income earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business
Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50%
or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the
Company will be able to successfully effect a Business Combination.
The Company will provide its holders of
the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholders meeting called to approve
the Business Combination or (ii) by means of a tender offer. In connection with a Business Combination, the Company may seek stockholder
approval of a Business Combination at a meeting called for such purpose at which public stockholders may seek to redeem their
shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination
only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a
Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor
of the Business Combination.
If the Company seeks stockholder approval
of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s 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 seeking redemption
rights with respect to 15% or more of the Public Shares without the Company’s prior written consent.
The public stockholders will be entitled
to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any pro
rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The per-share amount to be distributed to public stockholders who redeem their shares will not be reduced by the deferred underwriting
commissions the Company will pay to the representative of the underwriters (as discussed in Note 5). There will be no redemption
rights upon the completion of a Business Combination with respect to the Company’s warrants (“Warrants”). These
shares of Class A common stock will be recorded at a redemption value and classified as temporary equity upon the completion of
the Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If a stockholder vote is not required
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, offer such redemption pursuant to the tender offer rules of the Securities
and Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same information
as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor has agreed
(a) to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Offering in favor of
a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation
with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless
the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any
such amendment; (c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying
securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business
Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder
approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating
to stockholders’ rights of pre-Business Combination activity and (d) that the Founder Shares and Private Placement Warrants
(including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination
is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to
any Public Shares purchased during or after the Offering if the Company fails to complete its Business Combination.
If the Company is unable to complete a
Business Combination within 18 months from the closing of the Offering, or May 26, 2021, (the “Combination Period”),
the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no
more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously
released to the Company to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then
outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors,
proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations
to provide for claims of creditors and the requirements of applicable law. The representative of the underwriters has agreed to
waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete
a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in
the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is
possible that the per share value of the assets remaining available for distribution will be less than the Offering price per
Unit ($10.00).
The Sponsor has agreed that it will be
liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar
agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00
per public share and (ii) the actual amount per public share held in the Trust Account as of the day of liquidation of the Trust
Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such
liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights
to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s
indemnity of the underwriters of the Offering against certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the “Securities Act”). However, we have not asked the Sponsor to reserve for such indemnification obligations,
nor have we independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. None of the
Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims
by vendors and prospective target businesses.
On January 9, 2020, the Company announced
that, commencing on January 13, 2020, the holders of Units may elect to separately trade the shares of Class A common stock and
warrants included in the Units. No fractional warrants will be issued upon separation of the Units and only whole warrants will
trade. The shares of Class A Common Stock and the warrants currently trade on the Nasdaq Capital Market under the symbols “PTAC”
and “PTACW,” respectively. The Units not separated will continue to trade on the Nasdaq Capital Market under the symbol
“PTACU.”
Going Concern Consideration
As of June 30, 2020, the Company had approximately
$1.1 million of cash in its operating account, approximately $710,000 of investment income held in the Trust Account available
to pay franchise and income taxes (less up to $100,000 of such net interest to pay dissolution expenses), and working capital
of approximately $1.4 million (including approximately $66,000 of franchise tax obligations).
Through June 30, 2020, the Company’s
liquidity needs have been satisfied through proceeds of $25,000 from the Sponsor for issuance of the Founder Shares (Note 4),
$225,000 in loans from the Sponsor, and the net proceeds from the consummation of the Private Placement not held in the Trust
Account. The balance of $225,000 in loans was paid in full upon the closing of the Offering on November 26, 2019.
In connection with the Company’s
assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that mandatory
liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after
May 26, 2021.
2. Basis of Presentation and Summary
of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”)
for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair
presentation have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2020.
The accompanying unaudited condensed financial
statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s
Annual Report on form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (the “SEC”)
on March 20, 2020.
Emerging Growth Company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with
the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not
previously approved.
Further, Section 102(b)(1) of 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 a 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 statements with
those of another public company, which is neither an emerging growth company nor an emerging growth company which has opted out
of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of these financial statements
in conformity with 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. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the balance sheet, which management considered in formulating
its estimate, could change due to one or more future confirming events. Actual results could differ from those estimates.
Net Income (Loss) Per Share of Common
Stock
Net income (loss) per share of common
stock is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of
common stock outstanding for the period. The Company has not considered the effect of the Public Warrants and the Private Placement
Warrants to purchase an aggregate of 14,325,000 shares of Class A common stock in the calculation of diluted loss per share, since
inclusion would be anti-dilutive under the treasury stock method as of June 30, 2020.
The Company’s statement of operations
includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method
of income per share. Basic and diluted net income per share of Class A common stock for the three months ended June 30, 2020 is
calculated by dividing the investment income earned on the investments held in the Trust Account (approximately $54,000, net of
funds available to be withdrawn from the Trust Account for payment of taxes, resulting in a total of approximately $3,000), by
the weighted average number of shares of Class A common stock outstanding for the period. Basic and diluted net loss per share
of Class B common stock for the three months ended June 30, 2020 is calculated by dividing net loss less income attributable to
Class A common stock of approximately $3,000, by the weighted average number of shares of Class B common stock outstanding for
the period.
Basic and diluted net income per share
of Class A common stock for the six months ended June 30, 2020 is calculated by dividing the investment income earned on the investments
held in the Trust Account (approximately $1.0 million, net of funds available to be withdrawn from the Trust Account for payment
of taxes, resulting in a total of approximately $709,000), by the weighted average number of shares of Class A common stock outstanding
for the period. Basic and diluted net loss per share of Class B common stock for the six months ended June 30, 2020 is calculated
by dividing net income less income attributable to Class A common stock of approximately $709,000, by the weighted average number
of shares of Class B common stock outstanding for the period.
Concentrations of Credit Risk
Financial instruments that potentially
subject the Company to credit risk consist principally of cash and investments held in the Company’s operating account and
the Trust Account. Cash is maintained in accounts with financial institutions, which, at times may exceed the federal depository
insurance coverage of $250,000. At June 30, 2020, the Company has not experienced losses on these cash accounts and management
believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.
The Company’s investments held in the Trust Account as of June 30, 2020 consist entirely of an investment in a money market
fund that invests solely in only U.S. treasury securities.
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.
Investments Held in Trust Account
The Company’s portfolio of investments
held in the Trust Account are comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, and money market funds that invest solely in U.S. government securities.
The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented
on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value
of these securities is included in gain on investments (net), dividends and interest, held in the Trust Account in the accompanying
statements of operations. The fair value for trading securities is determined using quoted market prices in active markets.
Fair Value Measurements
FASB ASC 820, Fair Value Measurement,
defines fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received
for the sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement
date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). These tiers include:
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Level 1, defined
as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
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Level 2, defined
as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and
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Level 3, defined
as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers
are unobservable.
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In some circumstances, the inputs used
to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value
measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to
the fair value measurement.
As of June 30, 2020, and December 31,
2019, the recorded values of cash, accounts payable, accrued expenses, and taxes payable approximate their fair values due to
the short-term nature of the instruments. The Company’s investments held in the Trust Account as of June 30, 2020 consist
entirely of an investment in a money market fund that invests solely in U.S. treasury securities. The fair value of investments
held in the Trust Account is determined using quoted market prices in active markets.
Offering Costs
Offering costs consist of expenses incurred
in connection with the preparation of the Offering. These expenses, together with the underwriting discounts and commissions,
in the amount of approximately $10 million, were charged to equity upon completion of the Offering.
Class A Common Stock Subject
to Possible Redemption
As discussed in Note 1, all of the 17,250,000
shares of Class A common stock sold as part of Units in the Offering contain a redemption feature which allows for the redemption
of the shares of Class A common stock if the Company holds a stockholder vote or there is a tender offer for shares in connection
with a Business Combination. In accordance with FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”),
redemption provisions not solely within the control of the Company require the security to be classified outside of permanent
equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments,
are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter
provides that in no event will it redeem its shares of Class A common stock in an amount that would cause its net tangible assets
(stockholders’ equity) to be less than $5,000,001 upon the closing of a Business Combination.
The Company recognizes changes in redemption
value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases
or decreases in the carrying amount of redeemable shares of Class A common stock are affected by adjustments to additional paid-in
capital. Accordingly, at June 30, 2020 and December 31, 2019, 16,352,652 and 16,316,085 shares of Class A common stock subject
to conditional redemption, respectively, are presented as temporary equity, outside of the stockholders’ equity section
of the Company’s unaudited condensed balance sheets.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under FASB ASC, 740, “Income Taxes (“ASC 740”). Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement
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.
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 and no amounts accrued for interest and penalties as of June 30,
2020 and December 31, 2019. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any,
as income tax expense. No amounts were accrued for the payment of interest and penalties as of June 30, 2020 and 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.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU
No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”),
which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to
the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption
permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.
Management does not believe that any other
recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on the Company’s
unaudited condensed financial statements.
3. Initial Public Offering
On November 26, 2019, the Company closed
the Offering for the sale of 17,250,000 Units (including the underwriters’ full exercise of their overallotment option)
at a price of $10.00 per Unit, generating gross proceeds of $172.5 million, and incurring offering costs of approximately $10.0
million, including approximately $6.0 million in deferred underwriting commissions.
Each Unit consists of one share of the
Company’s Class A common stock, par value $0.0001 per share and one-half of one redeemable warrant (the “Public Warrants”).
Each whole Public Warrant is exercisable to purchase one share of the Company’s Class A common stock at an exercise price
of $11.50 per share (see Note 6).
4. Related Party Transactions
Founder Shares
In July 2019, the Sponsor purchased 3,881,250
founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. On October 30, 2019, the Company
effected a stock dividend for approximately .11 shares for each share of Class B common stock outstanding, resulting in the Sponsor
holding an aggregate of 4,312,500 founder shares (“Founder Shares”). In October 2019, the Sponsor transferred 25,000
Founder Shares to four of the Company’s directors, and to a senior advisor. The Sponsor had agreed to forfeit up to 562,500
Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On November 26, 2019,
the underwriters exercised the over-allotment option in full; thus, these Founder Shares were no longer subject to forfeiture.
The Company’s initial stockholders
have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the
completion of a Business Combination or (B) the date on which the Company completes a liquidation, merger, capital stock exchange
or similar transaction that results in the Company’s stockholders having the right to exchange their shares of common stock
for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s Class A common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination,
the Founder Shares will be released from the lock-up.
Private Placement Warrants
In connection with the Offering, the Sponsor
purchased an aggregate of 5,700,000 Private Placement Warrants at a price of $1.00 per warrant ($5,700,000 in the aggregate) each
exercisable to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, in a private placement
that closed simultaneously with the closing of the Offering. The proceeds from the sale of the Private Placement Warrants was
added to the net proceeds from the 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 Warrants will be used to fund the redemption
of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
Promissory Note — Related
Party
On July 31, 2019, the Sponsor agreed to
loan the Company an aggregate of up to $300,000 to cover expenses related to the Offering pursuant to a promissory note (the “Note”).
The Note was non-interest bearing and was due on the earlier of March 31, 2020 or upon the completion of the Offering. The Company
borrowed $225,000 under the Note. The Note balance was paid in full upon the closing of the Offering on November 26, 2019.
Related Party Loans
In order to finance transaction costs
in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working
Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination,
without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business
Combination into additional Private Placement Warrants at a price of $1.00 per Warrant. 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. 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. At June
30, 2020 and December 31, 2019, there were no outstanding Working Capital Loans.
Administrative Support Agreement
The Company agreed to pay $10,000 a month
for office space, utilities, and secretarial and administrative support to the Sponsor. Services commenced on the date the securities
were first listed on the Nasdaq and will terminate upon the earlier of the consummation by the Company of a Business Combination
or the liquidation of the Company. The Company incurred $30,000 and $60,000 for expenses in connection with such services for
the three and six months ended June 30, 2020, respectively, which is reflected in the accompanying statements of operations.
5. Commitments and Contingencies
Risks and Uncertainties
On January 30, 2020, the World Health
Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19
outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure
globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s
results of operations, financial position and cash flows will depend on future developments, including the duration and spread
of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial
markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy
continue to be impacted for an extended period, the Company’s financial position, results of operations and cash flows may
be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be
materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat
its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s
ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors
and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability
to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing,
which may be impacted by the COVID-19 outbreak and the resulting market downturn.
Registration Rights
The holders of the Founder Shares, the
Private Placement Warrants (and their underlying securities) and any Warrants that may be issued upon conversion of the Working
Capital Loans (and underlying securities) are entitled to registration rights pursuant to a registration rights agreement executed
in connection with the closing of the Offering. The holders of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The
registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in
registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The underwriters were paid a cash underwriting
discount at closing of $3,450,000, which is equal to two percent (2.00%) of the gross proceeds of the Offering. In addition, the
representative of the underwriters is entitled to a deferred fee of 3.50% of the gross proceeds of the Offering, or $6,037,500.
The deferred fee will become payable to the representative of the underwriters from the amounts held in the Trust Account solely
in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
6. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 1,000,000
shares of $0.0001 par value preferred stock. At June 30, 2020 and December 31, 2019, there were no preferred shares issued or
outstanding.
Class A Common Stock
The Company is authorized to issue up
to 100,000,000 shares of Class A common stock, $0.0001 par value. Holders of the Company’s Class A common stock are entitled
to one vote for each share. As of June 30, 2020, and December 31, 2019, there were 17,250,000 shares of Class A common stock issued
and outstanding, of which 16,352,652 and 16,316,085 shares of Class A common stock were classified outside of permanent equity,
respectively.
Class B Common Stock
The Company is authorized to issue up
to 10,000,000 shares of Class B common stock, $0.0001 par value. Holders of the Company’s Class B common stock are entitled
to one vote for each share. The shares of Class B common stock will automatically convert into shares of Class A common stock
at the time of the Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations,
recapitalizations and the like.
In July 2019, the Sponsor purchased 3,881,250
founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. On October 30, 2019, the Company
effected a stock dividend for approximately .11 shares for each share of Class B common stock outstanding, resulting in the Sponsor
holding an aggregate of 4,312,500 shares of Class B common stock. In October 2019, the Sponsor transferred 25,000 Founder Shares
to four of the Company’s directors and to a senior advisor. The Sponsor had agreed to forfeit up to 562,500 Founder Shares
to the extent that the over-allotment option was not exercised in full by the underwriters. On November 26, 2019, the underwriters
exercised the over-allotment option in full; thus, these Founder Shares were no longer subject to forfeiture (see also Note 4).
As of June 30, 2020, and December 31, 2019, there were 4,312,500 shares of Class B common stock outstanding.
The Company may issue additional common
stock or preferred stock to complete its Business Combination or under an employee incentive plan after completion of its Business
Combination.
Warrants
The Public Warrants are exercisable on
the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the effective date of the registration
statement relating to the Offering. No Public Warrants will be exercisable for cash unless the Company has an effective and current
registration statement covering the common shares issuable upon exercise of the Public Warrants and a current prospectus relating
to such common shares. Notwithstanding the foregoing, if a registration statement covering the common shares issuable upon the
exercise of the Public Warrants is not effective within 60 business days from the consummation of a Business Combination, the
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, exercise the 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 Public Warrants will expire five years from the consummation of
a Business Combination or earlier upon redemption or liquidation.
The Company may call the Public Warrants
for redemption (excluding the Private Placement Warrants), in whole and not in part, at a price of $0.01 per warrant:
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●
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at any time while
the Public Warrants are exercisable,
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●
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upon not less than
30 days’ prior written notice of redemption to each Public Warrant holder,
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●
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if, and only if,
the last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the
warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of
redemption to the warrantholders and,
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●
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if and only if,
there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants
at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until
the date of redemption.
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The Private Placement Warrants are identical
to the Public Warrants underlying the Units sold in the Offering, except that the Private Placement Warrants and the common shares
issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until after the completion
of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable
on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private
Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The exercise price and number of shares
of Class A 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. In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its
initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with
such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the
case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor
or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the
Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions),
and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting
on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market
Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal
to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described
above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
Additionally, in no event will the Company be required to net cash settle the Public Warrants. 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 the respect to such warrants. Accordingly, the warrants may expire worthless. 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 shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the
event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. 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.
7. Fair Value Measurements
The following tables present information
about the Company’s financial assets that are measured at fair value on a recurring basis as of June 30, 2020 and December
31, 2019 by level within the fair value hierarchy:
June 30, 2020
Description
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Quoted Prices in Active Markets
(Level 1)
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|
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Significant Other Observable
Inputs
(Level 2)
|
|
|
Significant Other Unobservable
Inputs
(Level 3)
|
|
Investments held in Trust Account
|
|
|
|
|
|
|
|
|
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Money Market Fund
|
|
$
|
173,210,276
|
|
|
$
|
-
|
|
|
$
|
-
|
|
December 31, 2019
Description
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
|
Significant Other Observable
Inputs
(Level 2)
|
|
|
Significant Other Unobservable
Inputs
(Level 3)
|
|
Investments held in Trust Account
|
|
|
|
|
|
|
|
|
|
Money Market Fund
|
|
$
|
1,600
|
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. Treasury Securities
|
|
|
172,737,105
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
172,738,705
|
|
|
$
|
-
|
|
|
$
|
-
|
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8. Subsequent Events
On July 30, 2020, the Company entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with PTAC Merger Sub Corporation, a Delaware corporation
and wholly-owned subsidiary of the Company (“Merger Sub”), Porch.com, Inc., a Delaware corporation (“Porch”),
and Joe Hanauer, in his capacity as the representative of all Pre-Closing Holders (as defined in the Merger Agreement) (the “Holder
Representative”).
Pursuant to the terms of the Merger Agreement,
a business combination between Porch and the Company will be effected through the merger of Merger Sub with and into Porch, with
Porch surviving as the surviving company and a wholly-owned subsidiary of the Company (the “Merger”). Once effective,
all equity securities of Porch will be converted into the right to receive the applicable portion of merger consideration pursuant
to the terms and subject to the conditions set forth in the Merger Agreement.
Under the terms of the Merger Agreement,
the aggregate consideration to be paid in the Merger is $471,500,000, as adjusted in accordance with the terms of the Merger Agreement,
and apportioned between cash and Class A common stock of the Company, par value $0.001 per share (“PTAC Common Shares”),
as more specifically set forth therein. In addition, the Company will issue to the Pre-Closing Holders an aggregate of 5,000,000
restricted PTAC Common Shares.
At the effective time of the Merger (the
“Effective Time”), (a) each share of common stock, par value $0.01 per share, of Porch (“Porch Common
Stock”) that is issued and outstanding immediately prior to the Effective Time (other than dissenting shares, Porch
Restricted Shares (as defined in the Merger Agreement), and shares of Porch Common Stock, if any, held in the treasury of the
Company) will be canceled and converted into and become the right to receive the applicable portion of the total merger consideration
in accordance with an allocation schedule to be provided by Porch (the “Allocation Schedule”) that will set
forth the allocation of the merger consideration and the earn-out shares among the pre-closing holders of Porch, and (b) each
warrant to purchase Porch Common Stock or preferred stock, par value $0.01 per share, of Porch (“Porch Preferred Stock”)
(other than Underwater Warrants (as defined in the Merger Agreement)) that is unexercised and outstanding immediately prior to
the Effective Time will be canceled and converted into and become the right to receive the applicable portion of the total merger
consideration in accordance with the Allocation Schedule.
In connection with the execution of the
Merger Agreement, certain holders representing at least a majority of each of Porch Preferred Stock, Series B Preferred Stock
of Porch and a majority of the Porch Common Stock (determined on an as-converted basis) have entered into voting and support agreements
(the “Support Agreements”) with the Company, along with irrevocable written consents to convert all of the
Porch Preferred Stock to Porch Common Stock prior to the Closing. The Support Agreements provide for, among other things, that
the stockholders of Porch party thereto will vote their respective equity securities in Porch in favor of the Merger Agreement
and the consummation of the transactions contemplated thereby.
On July 30, 2020, the Company entered
into subscription agreements (each, a “Subscription Agreement”) with certain investors (the “PIPE Investors”)
pursuant to which, among other things, the PIPE Investors have agreed to subscribe for and purchase, and the Company has agreed
to issue and sell to the PIPE Investors, an aggregate of 15,000,000 PTAC Common Shares for an aggregate purchase price of $150,000,000.00
on the date of Closing, on the terms and subject to the conditions set forth therein. The Subscription Agreement contains customary
representations and warranties of Porch, on the one hand, and each PIPE Investor, on the other hand, and customary conditions
to closing, including the consummation of the transactions contemplated by the Merger Agreement.
For additional information regarding the
Merger, the Merger Agreement and Porch, see the Form 8-K filed by the Company with the SEC on July 31, 2020.
Management has evaluated subsequent events
to determine if events or transactions occurring through the date the financial statements were available for issuance require
potential adjustment to or disclosure in the financial statements and has concluded that, except as set forth above, all such
events that would require recognition or disclosure have been recognized or disclosed.