The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an
integral part of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION
AND BUSINESS OPERATIONS
Software Acquisition Group Inc. (the “Company”)
is a blank check company incorporated in Delaware on May 9, 2019. 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 activity through June 30, 2020 relates to the Company’s formation, the initial public offering (the “Initial Public
Offering”), which is described below, identifying a target company for a Business Combination and the proposed acquisition
of CuriosityStream Inc., a Delaware corporation (“CuriosityStream”), as discussed in Note 9. The Company will not generate
any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating
income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statements for the Company’s
Initial Public Offering were declared effective on November 19, 2019. On November 22, 2019, the Company consummated the Initial
Public Offering of 14,950,000 units (the “Units” and, with respect to the shares of Class A common stock included in
the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of the over-allotment option
to purchase an additional 1,950,000 Units, at $10.00 per Unit, generating gross proceeds of $149,500,000, which is described in
Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 4,740,000 warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to Software Acquisition Holdings, LLC (the “Sponsor”),
generating gross proceeds of $4,740,000, which is described in Note 4.
Transaction costs amounted to $8,745,223
consisting of $2,990,000 of underwriting fees, $5,232,500 of deferred underwriting fees and $522,723 of other offering costs. In
addition, as of June 30, 2020, cash of $836,152 was held outside of the Trust Account and is available for working capital purposes.
Following the closing of the Initial Public
Offering on November 22, 2019, an amount of $149,500,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering, and the sale of the Private Warrants was placed in a trust account (the “Trust Account”) and
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 open-ended investment company that holds itself out as a money market fund meeting the
conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (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 funds in the
Trust Account to the Company’s stockholders, as described below.
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 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 (less any deferred underwriting commissions and taxes
payable on interest earned on the Trust Account) at the time of the signing of 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 stockholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may
seek stockholder approval of a Business Combination at a meeting called for such purpose at which 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 20% or more of the Public Shares without the Company’s prior written consent.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
The public stockholders will be entitled
to redeem their shares for a pro rata portion of the amount then in the Trust Account ($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 stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the
Company will pay to the underwriter (as discussed in Note 6). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants.
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 5) and any Public Shares purchased during or after the Initial Public 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 Initial Public Offering if the Company fails to complete its Business Combination.
If the Company is unable to complete a
Business Combination by May 22, 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 us 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 underwriter 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
Initial Public 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 underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to reserve for such
indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its
indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot
assure its stockholders that the Sponsor would be able to satisfy those 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. 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, 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.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on
the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not
readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the
SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they
do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations,
or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments,
consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results
and cash flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019
as filed with the SEC on March 20, 2020, which contains the audited financial statements and notes thereto. The financial information
as of December 31, 2019 is derived from the audited financial statements presented in the Company’s Annual Report on Form
10-K for the year ended December 31, 2019. The interim results for the three and six months ended June 30, 2020 are not necessarily
indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods.
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 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 condensed financial
statements in conformity with GAAP requires 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 revenues and expenses during the reporting period.
Making estimates requires management to
exercise significant judgment. 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 financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
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. The Company did not have any cash equivalents
as of June 30, 2020 and December 31, 2019.
Marketable Securities Held in Trust
Account
At June 30, 2020 and December 31, 2019,
the assets held in the Trust Account were substantially held in a money market fund that invests primarily in U.S. Treasury Bills.
During the six months ended June 30, 2020, the Company withdrew $181,858 of the interest earned on the Trust Account to pay for
its franchise taxes.
Common Stock Subject to Possible
Redemption
The Company accounts for its common stock
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability
instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption
rights that is 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
at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance
sheets.
Income Taxes
The Company complies with the accounting
and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits,
if any, as income tax expense. 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 is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position.
On March 27, 2020, President Trump signed
the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant
business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL)
and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss
rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest
limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and
Jobs Act tax provisions. The Company does not believe that the CARES Act will have a significant impact on Company's financial
position or statement of operations.
Net Income per Common Share
Net loss per common share is computed
by dividing net loss by the weighted average number of common shares outstanding for the period. At June 30, 2019, weighted average
shares were reduced for the effect of an aggregate of 487,500 shares of Class B common stock that are subject to forfeiture if
the over-allotment option is not exercised by the underwriter (see Notes 5). The Company applies the two-class method in calculating
earnings per share. Shares of common stock subject to possible redemption at June 30, 2020, which are not currently redeemable
and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed,
only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants
to purchase 12,215,000 shares of common stock that were sold in the Initial Public Offering and the private placement in the calculation
of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result,
diluted loss per share is the same as basic loss per share for the period presented.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
Reconciliation of Net Income per
Common Share
The Company’s net (loss) income is
adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate
in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per common
share is calculated as follows:
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
For the
Period from
May 9,
2019
(Inception)
Through
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
|
|
$
|
(88,607
|
)
|
|
$
|
104,484
|
|
|
$
|
(2,211
|
)
|
Less: Income attributable to shares subject to possible redemption
|
|
|
(33,942
|
)
|
|
|
(391,705
|
)
|
|
|
—
|
|
Adjusted net loss
|
|
$
|
(122,549
|
)
|
|
$
|
(287,221
|
)
|
|
$
|
(2,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
4,671,690
|
|
|
|
4,657,375
|
|
|
|
3,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.00
|
)
|
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist of cash accounts in a financial institution, which, at times may exceed
the Federal Depository Insurance Corporation coverage limit of $250,000. The Company had not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recently Issued Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 14,950,000 Units, which included the full exercise by the underwriter of its option to purchase an additional
1,950,000 Units at $10.00 per Unit. Each Unit consists of one share of the Company’s Class A common stock, $0.0001 par value,
and one-half of one redeemable warrant (“Public Warrant”). Each Public Warrant will entitle the holder to purchase
one share of Class A common stock at an exercise price of $11.50 per whole share (see Note 7).
SOFTWARE ACQUISITION GROUP
INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor purchased an aggregate of 4,740,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant for an aggregate purchase price of $4,740,000. Each Private Placement Warrant is exercisable to purchase one
share of Class A common stock at a price of $11.50 per share. The proceeds from the sale of the Private Placement Warrants were
added to the net 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 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.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In June 2019, the Company issued an aggregate
of 3,593,750 shares (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. On November
19, 2019, the Company effected a stock dividend for 0.04 share for each Founder Share outstanding, resulting in the Sponsor holding
an aggregate of 3,737,500 Founder Shares. The 3,737,500 Founder Shares included an aggregate of up to 487,500 shares subject to
forfeiture by the Sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that
the Sponsor will collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the
Proposed Offering (assuming the Sponsor does not purchase any Public Shares in the Initial Public Offering and excluding the Private
Placement Warrants and underlying securities). As a result of the underwriter’s election to fully exercise its over-allotment
option, 487,500 Founder Shares are no longer subject to forfeiture.
The 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.
Promissory Note — Related Party
On June 25, 2019, the Sponsor agreed to
loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Note”). The Note was non-interest bearing and payable on the earlier of December 31, 2019 or the completion
of the Initial Public Offering. The borrowings outstanding under the Note of $235,540 were repaid upon the consummation of the
Initial Public Offering on November 22, 2019.
Related Party Loans
In order to finance transaction costs in
connection with a Business Combination, the Company’s 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 warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement
Warrants. 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.
Administrative Support Agreement
The Company entered into an agreement whereby,
commencing on November 19, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation,
the Company will pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support.
For the three and six months ended June 30, 2020, the Company incurred $30,000 and $60,000, respectively, in fees for these services,
of which $75,000 and $15,000 is included in accrued expenses in the accompanying condensed balance sheets as of June 30, 2020 and
December 31, 2019, respectively.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement
entered into on November 19, 2019, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued
upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private
Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder
Shares) will be entitled to registration rights, requiring the Company to register such securities for resale (in the case of the
Founder Shares, only after conversion to our Class A common stock). The holders of the majority 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 and rights to require the Company to register for resale such securities pursuant to Rule 415 under the
Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred
fee of three and half percent (3.50%) of the gross proceeds of the Initial Public Offering, or $5,232,500. The deferred fee will
become payable to the underwriter 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.
NOTE 7. 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, $0.0001 par value common stock. Holders of the Company’s
common stock are entitled to one vote for each share. At June 30, 2020 and December 31, 2019, there were 934,265 and 905,560
shares of Class A common stock issued or outstanding, excluding 14,015,735 and 14,044,440 shares of Class A common stock subject
to possible redemption, respectively.
Class B Common Stock —
The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s
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 the case that additional shares of Class A common stock, or
equity linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related
to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class
A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive
such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable
upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as converted basis, 20% of the sum of
the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of
Class A common stock and equity linked securities issued or deemed issued in connection with a Business Combination (excluding
any shares or equity linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent
warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also
elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment
as provided above, at any time.
At June 30, 2020 and December 31, 2019,
there were 3,737,500 shares of Class B common stock issued and 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.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
Warrants — The Public
Warrants will become 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 Initial Public 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 Class A common shares issuable upon the exercise of the Public Warrants is not effective within 60 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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upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder,
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if, and only if, the last sale price of our 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 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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The Private Placement Warrants are identical
to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants will
and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable
until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be exercisable on a cashless basis and will be 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. 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.
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.
SOFTWARE ACQUISITION GROUP INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC
820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize
the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal
assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify
assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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Level 1:
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Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
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Level 2:
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Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
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Level 3:
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Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The following table presents information
about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019, and
indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
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Level
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June 30,
2020
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December 31,
2019
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Assets:
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Marketable securities held in Trust Account
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1
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$
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150,083,645
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$
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149,719,910
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NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued.
Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the condensed financial statements.
On August 10, 2020, the Company entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with CS Merger Sub Inc., a Delaware corporation
and wholly-owned subsidiary of the Company (“Merger Sub”), Hendricks Factual Media LLC, a Delaware limited liability
company (the “Majority Stockholder”), and CuriosityStream. The transactions contemplated under the Merger Agreement
are referred to as the “Transactions.”
Pursuant to the terms of the Merger Agreement,
a business combination between the Company and CuriosityStream will be effected through the merger of Merger Sub with and into
CuriosityStream, with CuriosityStream surviving as the surviving company (the “Surviving Company”) and a wholly-owned
subsidiary of the Company (the “Merger”). Once effective, all equity securities of CuriosityStream will be converted
into the right to receive the applicable portion of Merger Consideration (as defined below) 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 $302,098,500 (the “Merger Consideration”), as adjusted
in accordance with the terms of the Merger Agreement, in Class A common stock of the Company, as more specifically set forth therein.
The Merger will be consummated subject
to the deliverables and provisions as further described in the Merger Agreement.
More information about the Merger is included
in the preliminary proxy statement/prospectus that the Company filed with the SEC on August 12, 2020. The preliminary proxy statement/prospectus
contains the notice of special meeting of stockholders of the Company to vote on and adopt the Merger Agreement and to vote on
certain related proposals. There is no guarantee that the conditions to the closing of the Merger will be satisfied prior to, or
following such meeting.