NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Insurance
Acquisition Corp. (the “Company”), is a blank check company incorporated in Delaware on March 13, 2018. The Company
was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or
other similar business transaction with one or more operating businesses or assets (a “Business Combination”).
Although
the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company
intends to focus its search on businesses providing insurance or insurance related services, with particular emphasis on regulated
insurance or reinsurance companies. 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.
All
activity through June 30, 2019 relates to the Company’s formation, its initial public offering (the “Initial Public
Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not
generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will
generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on March 19, 2019. On March 22,
2019, the Company consummated the Initial Public Offering of 15,065,000 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 underwriters of their over-allotment option in the amount of 1,965,000 Units, at $10.00 per Unit, generating gross proceeds
of $150,650,000, which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 425,000 units (the “Placement Units”)
at a price of $10.00 per Placement Unit in a private placement to the Company’s sponsor, Insurance Acquisition Sponsor,
LLC (together with Dioptra Advisors, LLC, the “Sponsor”) and Cantor Fitzgerald & Co. (“Cantor”), generating
gross proceeds of $4,250,000, which is described in Note 4.
Transaction
costs amounted to $9,661,484, consisting of $2,620,000 of underwriting fees, $6,419,000 of deferred underwriting fees and $622,484
of other offering costs. In addition, $1,048,801 of cash was held outside of the Trust Account (as defined below) and is available
for working capital purposes.
Following
the closing of the Initial Public Offering on March 22, 2019, an amount of $150,650,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the sale of the Placement Units was placed in a trust account (“Trust
Account”), which will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or
in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination; (ii) the redemption
of any Public Shares in connection with a stockholder vote to amend the Company’s Amended and Restated Certificate of Incorporation
to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if it does not complete
an initial Business Combination by September 22, 2020 (the “Combination Period”); or (iii) the distribution of the
Trust Account, as described below, except that interest earned on the Trust Account can be released to pay the Company’s
tax obligations, if the Company is unable to complete an initial Business Combination within the Combination Period or upon any
earlier liquidation of the Company.
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 Placement Units, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. Nasdaq rules provide that the Company must complete a Business Combination with one
or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of signing
a definitive agreement in connection with a Business Combination. The Company will only complete a Business Combination if the
post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target 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.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
The
Company will provide its 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. The decision as to whether the Company will seek stockholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then on deposit in the Trust Account ($10.00 per Public 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 representative (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.
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 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 a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation,
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”),
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of
the transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor and
the Company’s officers and directors (the “Insiders”) have agreed to vote their Founder Shares (as defined in
Note 5), the shares of Class A common stock included in the Placement Units (the “Placement Shares”) and any Public
Shares held by them in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the proposed transaction.
The
Company will also provide its stockholders with the opportunity to redeem all or a portion of their Public Shares in connection
with any stockholder vote to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation that
would affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if it does not complete
an initial Business Combination within the Combination Period. The stockholders will be entitled to redeem their shares for a
pro rata portion of the amount then on deposit in the Trust Account ($10.00 per share, plus any pro rata interest earned on the
funds held in the Trust Account, net of taxes payable). 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 representative (as discussed in
Note 6). There will be no redemption rights with respect to the Company’s warrants in connection with such a stockholder
vote to approve such an amendment to the Company’s Amended and Restated Certificate of Incorporation. Notwithstanding the
foregoing, the Company may not redeem shares in an amount that would cause its net tangible assets to be less than $5,000,001.
The Insiders have agreed to vote any Founder Shares, Placement Shares and any Public Shares held by them in favor of any such
amendment.
The
Company will have until the expiration of the Combination Period to consummate its initial Business Combination. If the Company
is unable to consummate a Business Combination within the Combination Period, the Company will (i) cease all operations except
for the purposes of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account,
including any interest earned on the Trust Account not previously released to the Company to pay its tax obligations and 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 liquidating distributions,
if any), subject to applicable law, and; (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each
case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will
expire worthless if the Company fails to complete a Business Combination within the Combination Period.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
The
Insiders and Cantor have agreed to waive their redemption rights with respect to any Founder Shares and Placement Shares, as applicable,
(i) in connection with the consummation of a Business Combination, (ii) in connection with a stockholder vote to amend the Company’s
Amended and Restated Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem
100% of its Public Shares if it does not complete its initial Business Combination within the Combination Period, and (iii) if
the Company fails to consummate a Business Combination within the Combination Period. The Insiders have also agreed to waive their
redemption rights with respect to any Public Shares held by them in connection with the consummation of a Business Combination
and in connection with a stockholder vote to amend the Company’s Amended and Restated Certificate of Incorporation to modify
the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if it does not complete its initial
Business Combination within the Combination Period. However, the Insiders will be entitled to redemption rights with respect to
Public Shares if the Company fails to consummate a Business Combination or liquidates within the Combination Period. Cantor will
have the same redemption rights as public stockholders with respect to any Public Shares it acquires. The representative has agreed
to waive its rights to deferred underwriting commissions held in the Trust Account in the event the Company does not consummate
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 residual assets remaining available for distribution (including Trust Account assets)
will be less than the Initial Public Offering price per Unit ($10.00). Placing funds in the Trust Account may not protect those
funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers (except
the Company's independent registered accounting firm), prospective target businesses or other entities it engages, execute agreements
with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such
persons will execute such agreements. Cohen & Company, LLC, the manager of the Sponsor, has agreed that it will be liable
under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses
or vendors or other entities that are owed money by the Company for service rendered, contracted for or products sold to the Company.
However, it may not be able to satisfy those obligations should they arise.
Notwithstanding
the foregoing redemption rights, if the Company seeks stockholder approval of its Business Combination and it does not conduct
redemptions in connection with its Business Combination pursuant to the tender offer rules, the Amended and Restated Certificate
of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with
whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange
Act of 1934, as amended), will be restricted from redeeming its shares with respect to an aggregate of 20.0% or more of the shares
sold in the Initial Public Offering. However, there is no restriction on the Company’s stockholders’ ability to vote
all of their shares for or against a Business Combination.
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 promulgated by 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 prospectus as filed
with the SEC on March 21, 2019, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on March 28,
2019. The interim results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be
expected for the year ending December 31, 2019 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.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Use
of estimates
The
preparation of 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 events. Accordingly, the actual results could
differ significantly from those estimates.
Cash
and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of June 30, 2019 and December 31, 2018.
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 feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common
stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common
stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the
Company’s condensed balance sheets.
Offering
costs
Offering
costs consist of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly
related to the Initial Public Offering. Offering costs amounting to $9,661,484 were charged to stockholders’ equity upon
the completion of the Initial Public Offering.
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 as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties
as of June 30, 2019 and December 31, 2018. 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 may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months. The Company is subject to income tax examinations
by major taxing authorities since inception.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Net
income (loss) per common share
Net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding
for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement
to purchase 7,745,000 shares of Class A common stock in the calculation of diluted income (loss) per share, since the exercise
of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The
Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to possible
redemption in a manner similar to the two-class method of income per share. Net income (loss) per common share, basic and diluted
for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable
franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding since original
issuance. Net income (loss) per common share, basic and diluted for Class A and Class B non-redeemable common stock is calculated
by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the weighted average number
of Class A and Class B non-redeemable common stock outstanding for the period. Class A and Class B non-redeemable common
stock includes the Founder Shares and the Placement Units as these shares do not have any redemption features and do not participate
in the income earned on the Trust Account.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $250,000. At June 30, 2019 and December 31, 2018, the
Company had not experienced losses on this account.
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 Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed balance
sheets, primarily due to their short-term nature.
Recently
issued accounting standards
In
July 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-11, Earnings per Share (Topic 260), Distinguishing
Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): Part I. Accounting for Certain Financial Instruments
with Down Round Features; Part II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of
Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this
update addresses the complexity of accounting for certain financial instruments with down round features. Down round features
are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the
basis of the pricing of future equity offerings. Also, entities must adjust their basic Earnings per Share (“EPS”)
calculation for the effect of the down round provision when triggered (that is, when the exercise price of the related equity-linked
financial instrument is adjusted downward because of the down round feature). That effect is treated as a dividend and as a reduction
of income available to common shareholders in basic EPS. An entity will also recognize the effect of the trigger within equity.
The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
The Company adopted this guidance during the six months ended June 30, 2019. The adoption of this guidance enabled the Company
to record the warrants as equity instruments and is not expected to have a material impact on the Company’s financial position,
results of operations, cash flows or disclosures moving forward until a trigger event occurs. Part II of this update addresses
the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending
content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting
requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable
noncontrolling interests. The amendments in Part II of this update are not expected to have an impact on the Company.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 15,065,000 Units at a purchase price of $10.00 per Unit, which includes the full
exercise by the underwriters of their over-allotment option in the amount of 1,965,000 Units at $10.00 per Unit. Each Unit consists
of one share of Class A common stock and one-half of one warrant (“Public Warrant”). Each whole Public Warrant entitles
the holder to purchase one share of Class A common stock at an exercise price of $11.50 (see Note 7).
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, Insurance Acquisition Sponsor, LLC and Cantor purchased an aggregate of 425,000
Placement Units at a price of $10.00 per Placement Unit, for an aggregate purchase price of $4,250,000. Insurance Acquisition
Sponsor, LLC purchased 375,000 Placement Units and Cantor purchased 50,000 Placement Units. Each Placement Unit consists of one
share of Class A common stock and one-half of one warrant (the “Placement Warrant”). Each whole Placement Warrant
is exercisable for one share of Class A common stock at a price of $11.50 per share. The proceeds from the Placement Units were
added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business
Combination within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption
of the Public Shares (subject to the requirements of applicable law) and the Placement Warrants will expire worthless. There will
be no redemption rights or liquidating distributions from the Trust Account with respect to the Placement Warrants.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
In
March 2018, the Company issued an aggregate of 1,000 shares of common stock to Insurance Acquisition Sponsor, LLC (the “Founder
Shares”) for an aggregate purchase price of $25,000.
On
December 26, 2018, the Company filed an amendment to its Certificate of Incorporation to, among other things, create two classes
of common stock, Class A and Class B, and to convert the outstanding Founder Shares into shares of Class B common stock. The Founder
Shares will automatically convert into shares of Class A common stock upon consummation of a Business Combination on a one-for-one
basis, subject to certain adjustments, as described in Note 7. On December 26, 2018, the Company effectuated a 3,697.5-for-1 forward
stock split of its common stock. On January 30, 2019, the Company effected a stock dividend of 1.3860717 share per share of Class
B common stock for each share of Class B common stock outstanding prior to the dividend and on March 19, 2019, the Company effected
a stock dividend of 1.00747961 share per share of Class B common stock for each share of Class B common stock outstanding prior
to the dividend, resulting in an aggregate of 5,163,333 shares of Class B common stock held by Insurance Acquisition Sponsor,
LLC and the directors of the Company. All share and per-share amounts have been retroactively restated to reflect the stock dividend
on the Founder Shares. The 5,163,333 Founder Shares included an aggregate of up to 655,000 shares of Class B common stock which
were subject to forfeiture by the Sponsor to the extent that the underwriters’ overallotment option was not exercised in
full or in part, so that the Founder Shares would represent 25% of the Company’s aggregate Founder Shares, Placement Shares
and issued and outstanding Public Shares after the Initial Public Offering. As a result of the underwriters’ election to
fully exercise their over-allotment option, 655,000 Founder Shares are no longer subject to forfeiture.
The
Insiders have agreed not to transfer, assign or sell any of their Founder Shares (except to permitted transferees) until (i) with
respect to 20% of such shares, upon consummation of the Company’s initial Business Combination, (ii) with respect to 20%
of such shares, when the closing price of the Class A common stock exceeds $12.00 for any 20 trading days within a 30-trading
day period following the consummation of a Business Combination, (iii) with respect to 20% of such shares, when the closing price
of the Class A common stock exceeds $13.50 for any 20 trading days within a 30-trading day period following the consummation of
a Business Combination, (iv) with respect to 20% of such shares, when the closing price of the Class A common stock exceeds $15.00
for any 20 trading days within a 30-trading day period following the consummation of a Business Combination and (v) with respect
to 20% of such shares, when the closing price of the Class A common stock exceeds $17.00 for any 20 trading days within a 30-trading
day period following the consummation of a Business Combination or earlier, in any case, if, following a Business Combination,
(vi) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results
in all of the public stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Advance
from Related Party
An
affiliate of the Sponsor advanced the Company an aggregate of $65,535 to be used for the payment of costs related to the Initial
Public Offering. The advances were non-interest bearing, unsecured and due on demand. The Company repaid the $65,535 of outstanding
advances upon the consummation of the Initial Public Offering on March 22, 2019.
Promissory
Note – Related Party
The
Company issued a $500,000 promissory note (the “Promissory Note”) to an affiliate of the Sponsor, pursuant to which
the Company borrowed an aggregate principal amount of $200,000. The Promissory Note was non-interest bearing and payable on the
earlier of June 30, 2019 or the completion of the Initial Public Offering. The Promissory Note was repaid upon the consummation
of the Initial Public Offering on March 22, 2019.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Administrative
Services Agreement
The
Company entered into an agreement, commencing on March 19, 2019 through the earlier of the Company’s consummation of a Business
Combination and its liquidation, to pay an affiliate of the Sponsor $10,000 per month for office space, utilities, secretarial
support and administrative services. For the three and six months ended June 30, 2019, the Company incurred $30,000 and 35,000
in fees for these services, respectively.
Consulting
Arrangements
In
January 2019, the Company entered into consulting arrangements with two individuals affiliated with Cohen & Company, LLC for
advisory services to be provided to the Company. These arrangements provide for aggregate monthly fees of $20,625. For the three
and six months ended June 30, 2019, the Company incurred $61,875 and $123,750 in such fees, respectively, of which $5,208 is included
in accounts payable and accrued expenses in the accompanying condensed balance sheets.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or one of its affiliates has committed
to loan the Company funds as may be required up to a maximum of $750,000 (“Working Capital Loans”), which will be
repaid only upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, the Company
may use a portion of any funds held outside the Trust Account to repay the Working Capital Loans; however, no proceeds from the
Trust Account may be used for such repayment. If such funds are insufficient to repay the Working Capital Loans, the unpaid amounts
would be forgiven. Up to $1,500,000 of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant
at the option of the holder. The warrants would be identical to the Placement Warrants. To date, there are no working capital
loans outstanding.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Registration
Rights
Pursuant
to a registration rights agreement entered into on March 19, 2019, holders of the Founder Shares, Placement Units (including securities
contained therein) and the 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 Placement Warrants or the warrants issued upon conversion of the Working Capital
Loans) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder
Shares, only after conversion to Class A common stock). The holders of these securities will be entitled to make up to three demands,
excluding short form demands, that the Company register such securities for sale under the Securities Act of 1933, as amended
(the “Securities Act”). In addition, the holders will have “piggy-back” registration rights to include
such securities in other registration statements filed by the Company and rights to require the Company to register for resale
such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company
will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable
lock-up period. Notwithstanding the foregoing, Cantor may not exercise its demand and “piggyback” registration rights
after five (5) and seven (7) years after the effective date of the registration statement related to the Initial Public Offering
and may not exercise its demand rights on more than one occasion. 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 of 2.0% of the gross proceeds of the Initial Public Offering, or $2,620,000.
In addition, the underwriters’ representative will be entitled to a deferred fee of $6,419,000. The deferred fee will become
payable to the underwriters’ representative 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 preferred stock with a par value of $0.0001 per share
with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.
At June 30, 2019 and December 31, 2018, there were no shares of preferred stock issued or outstanding.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Class
A Common Stock
— The Company is authorized to issue 50,000,000 shares of Class A common stock with a par value of
$0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At June 30, 2019 and December 31,
2018, there were 1,530,238 and -0- shares of Class A common stock issued and outstanding, excluding 13,959,762 and -0- shares
of Class A common stock subject to possible redemption, respectively.
Class
B Common Stock
— The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of
$0.0001 per share. Holders of the Company’s Class B common stock are entitled to one vote for each common share. At June
30, 2019 and December 31, 2018, there were 5,163,333 shares of Class B common stock issued and outstanding.
Holders
of Class B common stock will vote on the election of directors prior to the consummation of a Business Combination. Holders of
Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of
stockholders except as required by law.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination
on a one-for-one basis, subject to adjustment. 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, 25% of the sum of the total number of all
shares of common stock issued and outstanding upon completion of the Initial Public Offering, including Placement Shares, 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). 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.
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business
Combination or (b) March 22, 2020. The Public Warrants will expire five years after the completion of a Business Combination or
earlier upon redemption or liquidation.
The
Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise for cash of a warrant and
will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect
to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current,
subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company
will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable
upon such warrant exercise has been registered, qualified or deemed to be exempt from the registration or qualifications requirements
of the securities laws of the state of residence of the registered holder of the warrants. Notwithstanding the foregoing, if a
registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants has not been
declared effective by the end of 60 business days following the closing of a Business Combination, warrant holders may, until
such time as there is an effective registration statement and during any period when the Company shall have failed to maintain
an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9)
of the Securities Act.
The
Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination,
the Company will use its reasonable best efforts to file with the SEC, and within 60 business days following a Business Combination
to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon
exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants
expire or are redeemed, as specified in the warrant agreement. The Company will use its reasonable best efforts to maintain the
effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants
in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time
of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered
security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants
who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act
and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement,
but will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an
exemption is not available.
INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
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in
whole and not in part;
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at
a price of $0.01 per warrant;
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●
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upon
not less than 30 days’ prior written notice of redemption to each warrant holder;
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●
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if,
and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for
any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption
to each warrant holder; 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 shares of 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.
|
If
the Company calls the Public Warrants for redemption for cash, 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 shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no
event will the Company be required to net cash settle the warrants.
If
the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with
the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of 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 its initial stockholders or their respective affiliates, without taking into account any Founder
Shares held by them, as applicable, prior to such issuance), the exercise price of the Public Warrants will be adjusted (to the
nearest cent) to be equal to 115% of the newly issued price.
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.
The
Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that
the Placement Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable,
assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally,
the Placement Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Placement
Warrants are held by someone other than the Sponsor, Cantor or their permitted transferees, the Placement Warrants will be redeemable
by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE
8. FAIR VALUE MEASUREMENTS
The
Company classifies its U. S. Treasury and equivalent securities as held-to-maturity in accordance with ASC 320 “Investments
- Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent
to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed balance
sheets and adjusted for the amortization or accretion of premiums or discounts.
At
June 30, 2019, assets held in the Trust Account were comprised of $28,582 in cash and $151,579,139 in U.S. Treasury Bills.
The
gross holding losses and fair value of held-to-maturity securities at June 30, 2019 are as follows:
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Held-To-Maturity
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Amortized Cost
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Gross
Holding
Gains
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Fair Value
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June 30, 2019
|
|
U.S. Treasury Securities (Mature on 9/26/2019)
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$
|
151,579,139
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$
|
105,096
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$
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151,684,235
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INSURANCE ACQUISTION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
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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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. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or
disclosure in the condensed financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (this “Quarterly
Report”) to “we,” “us” or the “Company” refer to Insurance Acquisition Corp. References
to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor”
refer to Insurance Acquisition Sponsor, LLC and Dioptra Advisors, LLC. The following discussion and analysis of the Company’s
financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking
Statements
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical
facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.
All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements
in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the
Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking
statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,”
“seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such
forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based
on information currently available. A number of factors could cause actual events, performance or results to differ materially
from the events, performance and results discussed in the forward-looking statements. For information identifying important factors
that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to
the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the SEC. The Company’s
securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required
by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under
the laws of the State of Delaware on March 13, 2018 for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar Business Combination with one or more target businesses. We intend to effectuate our
Business Combination using cash from the proceeds of our Initial Public Offering and the sale of the Placement Units that occurred
simultaneously with the completion of our Initial Public Offering, our capital stock, debt or a combination of cash, stock and
debt.
The issuance of additional shares of our
stock in a Business Combination:
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may significantly dilute the equity interest of investors;
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may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
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●
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may adversely affect prevailing market prices for our common stock and/or warrants.
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Similarly, if we issue debt securities, it could
result in:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand and the lender demands payment;
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limitations on our ability to obtain additional financing if the debt security contains covenants restricting our ability to incur debt;
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our inability to pay dividends on our common stock due to covenants limiting or prohibiting dividends;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce, or possibly eliminate, the funds available for use as dividends on our common stock, expenses, capital expenditures, acquisitions and other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
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We expect to continue to incur significant
costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have not generated any revenues to date.
Our only activities from inception to March 31, 2019 were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any
operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest
income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a
Business Combination.
For the three months ended June 30, 2019,
we had net income of $478,780, which consisted of interest income on marketable securities held in the Trust Account of $898,481,
offset by operating costs of $240,530 and a provision for income taxes of $179,171.
For the six months ended June 30, 2019,
we had net income of $475,547, which consisted of interest income on marketable securities held in the Trust Account of $957,721,
offset by operating costs of $300,086 and a provision for income taxes of $182,088.
For the period from March 13, 2018 (inception) through June 30, 2018, we had a net loss of $812, which consisted of operating
costs of $812.
Liquidity and Capital Resources
On March 22, 2019, we consummated the Initial
Public Offering of 15,065,000 Units, which included the full exercise by the underwriters of their over-allotment option in the
amount of 1,965,000 Units, at $10.00 per Unit, generating gross proceeds of $150,650,000. Simultaneously with the closing of the
Initial Public Offering, we consummated the sale of 425,000 Placement Units to the Sponsor and Cantor at a price of $10.00 per
Unit, generating gross proceeds of $4,250,000.
Following the
Initial Public Offering and the sale of the Placement Units, a total of $150,650,000 was placed in the Trust Account and we had
$1,048,801 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available
for working capital purposes. We incurred $9,661,484 in transaction costs, including $2,620,000 of underwriting fees, $6,419,000
of deferred underwriting fees and $622,484 of other costs.
For the six months ended June 30, 2019,
cash used in operating activities was $355,910, which was comprised of our net income of $475,547, interest earned on marketable
securities held in the Trust Account of $957,721 and changes in operating assets and liabilities, which provided $126,264 of cash
for operating activities.
As of June 30, 2019, we had marketable
securities held in the Trust Account of $151,607,721 (including approximately $958,000 of interest income) consisting of U.S. Treasury
Bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes.
Through June 30, 2019, we did not withdraw any interest earned on the Trust Account.
We intend to use substantially all of the
funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less amounts released
to us to pay taxes and deferred underwriting commissions) to consummate our Business Combination. To the extent that our capital
stock or debt is used, in whole or in part, as consideration to consummate our Business Combination, the remaining proceeds held
in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
At June 30, 2019, we had cash of $675,302
held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses, travel to and from the offices, production facilities
or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital requirements
or finance transaction costs in connection with a Business Combination, our Sponsor or one of its affiliates has committed to loan
us funds as may be required up to a maximum of $750,000, and may, but is not obligated to, loan us additional funds to fund our
additional working capital requirements and transaction costs. If we complete a Business Combination, we would repay such loaned
amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the
Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000
of such loans may be convertible into warrants identical to the Placement Warrants, at a price of $1.00 per warrant at the option
of the lender.
We do not believe we will need to raise
additional funds in order to meet the expenditures required to identify and acquire a target business. However, if our estimate
of the costs of undertaking due diligence investigations and negotiating a Business Combination is less than the actual amount
necessary to do so, we may have insufficient funds available to pursue and consummate our Business Combination. Moreover, we may
need to obtain additional financing if we become obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or incur debt. Subject to compliance with applicable
securities laws, we would only obtain such financing simultaneously with the consummation of our Business Combination.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of June 30, 2019. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or
purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital
lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and administrative support to the Company. We began incurring
these fees on March 19, 2019 and will continue to incur these fees monthly until the earlier of the completion of the Business
Combination and the Company’s liquidation.
Critical Accounting Policies
The preparation of financial statements
and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could
materially differ from those estimates. We have not identified any critical accounting policies.
Recent accounting pronouncements
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Following the consummation of our Initial
Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in
U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest
solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure
to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls are procedures that
are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act,
such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
Evaluation of Disclosure Controls and
Procedures
Our management evaluated, with the participation
of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of June
30, 2019, pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of June 30, 2019, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial
Reporting
There were no changes in our internal control
over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent
quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results
to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus filed with the
SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.
Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results
of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our
final prospectus filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to
time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.
Unregistered
Sales of Equity Securities
On March 22, 2019, we sold 425,000 Placement
Units in a private placement for an aggregate purchase price of $4,250,000, or $10.00 per Unit, to the Sponsor (375,000 Placement
Units) and Cantor (50,000 Placement Units), pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities
Act. Each Placement Unit consists of one share of Class A common stock and one-half of one placement warrant. The Placement Warrants
are identical to the warrants included in the Units issued in the Initial Public Offering, except that, if held by Cantor, the
Sponsor or their permitted transferees, (a) they are not redeemable by the Company, (b) they (including the underlying Class A
common stock) may not be transferred, assigned or sold until 30 days after the consummation of the Company’s initial Business
Combination, subject to certain limited exceptions, and (c) they may be exercised on a cashless basis. In addition, for so long
as the placement warrants are held by Cantor or its designees, they may not be exercised after March 19, 2024. No underwriting
discounts or commissions were paid with respect to the private placement.
Use of Proceeds
On March 22, 2019, we consummated our Initial
Public Offering of 15,065,000 Units, which included the full exercise by the underwriters of their over-allotment option in the
amount of 1,965,000 Units, at $10.00 per Unit, generating gross proceeds of $150,650,000. Each Unit consists of one share of our
Class A common stock and one-half of one warrant, where each whole warrant entitles the holder to purchase one share of Class A
common stock at an exercise price of $11.50 per share, subject to adjustment.
Cantor (as representative
of the underwriters) and BTIG served as the underwriters for the Initial Public Offering. The Units sold in the Initial Public
Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-229741), which was declared
effective by the SEC on March 19, 2019.
We incurred a
total of $9,661,484 in transaction costs related to the Initial Public Offering. We paid a total of $2,620,000 in underwriting
discounts and commissions and approximately $622,484 in other costs and expenses related to the Initial Public Offering. In addition,
the underwriters agreed to defer $6,419,000 in underwriting discounts and commissions (which is currently held in the Trust Account),
which will be payable only upon consummation of an initial Business Combination.
After deducting the underwriting discounts
and commissions (excluding the deferred portion of up to $6,419,000 in underwriting discounts and commissions, which will be payable
only upon consummation of an initial Business Combination) and the total offering expenses, the total net proceeds from our Initial
Public Offering and the Private Placement were $151,698,801 of which $150,650,000 (or approximately $10.00 per Unit sold in the
Initial Public Offering) was placed in the Trust Account.
For a description of the use of the proceeds
generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
The following exhibits are filed as part
of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
*
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Filed herewith.
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**
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Furnished.
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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INSURANCE ACQUISITION CORP.
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Date: August 13, 2019
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/s/ John M. Butler
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Name:
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John M. Butler
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Title:
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Chief Executive Officer
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(Principal Executive Officer)
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Date: August 13, 2019
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/s/ Paul Vernhes
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Name:
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Paul Vernhes
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Title:
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Chief Financial Officer
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(Principal Financial Officer)
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20