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
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Churchill Capital
Corp II (the “Company”) was incorporated in Delaware on April 11, 2019. The Company was formed for the purpose
of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or 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 September 30,
2020, the Company had not commenced any operations. All activity through September 30, 2020 relates to the Company’s
formation, the initial public offering (“Initial Public Offering”), which is described below, identifying a target
for a Business Combination and activities in connection with the potential acquisition of Software Luxembourg Holding S.A., a public
limited liability company (société anonyme) incorporated and organized under the laws of the Grand Duchy of Luxembourg
(“Skillsoft”) (see Note 9). The Company will not generate any operating revenues until after the completion of its
initial 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 statement
for the Company’s Initial Public Offering was declared effective on June 26, 2019. On July 1, 2019, the Company
consummated the Initial Public Offering of 69,000,000 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 9,000,000 Units, at $10.00 per Unit, generating gross proceeds of $690,000,000,
which is described in Note 3.
Simultaneously with
the closing of the Initial Public Offering, the Company consummated the sale of 15,800,000 warrants (the “Private Placement
Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Churchill Sponsor II LLC, a Delaware
limited liability company (the “Sponsor”), generating gross proceeds of $15,800,000, which is described in Note 4.
Transaction costs
amounted to $34,319,807 consisting of $12,212,000 of underwriting discount, $21,371,000 of deferred underwriting discount and $736,807
of other offering costs. In addition, at September 30, 2020, cash of $1,744,991 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 July 1, 2019, an amount of $690,000,000 ($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 Placement 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 selected by the Company 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 completion of a Business
Combination or (ii) the distribution of the Trust Account, as described below, except that interest earned on the Trust Account
can be released to the Company to fund working capital requirements, subject to an annual limit of $250,000 and to pay
its tax obligations.
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. There is no assurance that the Company will be able to complete a Business Combination
successfully. The Company must complete an initial Business Combination having 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) at the time of the agreement
to enter into the initial 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.
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. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public
stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account
($10.00 per Public Share, plus any pro rata interest, net of amounts withdrawn for working capital requirements, subject to
an annual limit of $250,000 and to pay its taxes (“permitted withdrawals”)). The per-share amount to be distributed
to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company
will pay to the underwriters (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.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
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 shares voted are voted in favor of the
Business Combination. If a stockholder vote is not required by law or stock exchange requirements and the Company does not decide
to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate
of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the
tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with
the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or
the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder
approval in connection with a Business Combination, the Company’s Sponsor and its permitted transferees have agreed to vote
their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering 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.
If the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions 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 (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed
(a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the
completion of a Business Combination, (b) to waive its rights to liquidating distributions from the Trust Account with respect
to its Founder Shares if the Company fails to consummate a Business Combination within the Combination Window (as defined below)
and (c) not to propose 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 its Public Shares if the Company does not complete
a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their shares in conjunction
with any such amendment.
If the Company is
unable to complete a Business Combination by July 1, 2021 (or October 1, 2021 if the Company has an executed letter of
intent, agreement in principle or definitive agreement for a Business Combination by July 1, 2021) (the “Combination
Window”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account including interest (net of permitted withdrawals 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 Window.
The Sponsor has agreed
to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within
the Combination Window. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares
will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within
the Combination Window. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note
6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Window and,
in such event, such amounts will be included with the other 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).
In order to protect
the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a
third party (other than the Company’s independent registered public accounting firm) 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, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) the
amount per Public Share held in the Trust Account as of the liquidation of the Trust Account, if less than $10.00 per Public Shares
due to reductions in the value of the trust assets, in each case net of permitted withdrawals. This liability will not apply with
respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account or to any
claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust
Account due to claims of creditors by endeavoring to have all vendors, 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.
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 26, 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 nine months ended September 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
the condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of 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.
Cash and Cash Equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents
consist of mutual funds. The Company did not have any cash equivalents as of September 30, 2020 and December 31, 2019.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Marketable Securities Held in Trust Account
At September 30,
2020 and December 31, 2019, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. Through
September 30, 2020, the Company withdrew an aggregate of $1,820,250 of interest earned on the Trust Account to pay its income
taxes and for permitted withdrawals, of which $430,250 was withdrawn during the nine months ended September 30, 2020.
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 Class A 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 follows
the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.
ASC 740 prescribes
a recognition threshold and a measurement attribute for the financial statements 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 September 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations
by major taxing authorities since inception.
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 Loss per Common Share
Net loss per share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The Company
applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September 30,
2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic
net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings.
The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase
38,800,000 shares of common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent
upon the occurrence of future events. As a result, diluted net loss per common share is the same as basic net loss per common share
for the periods presented.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Reconciliation of Net Loss 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
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
For the
Period from
April 11,
2019
(Inception)
Through
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
|
|
$
|
(92,949
|
)
|
|
$
|
2,507,354
|
|
|
$
|
1,303,184
|
|
|
$
|
2,506,354
|
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
—
|
|
|
|
(2,489,595
|
)
|
|
|
(1,612,947
|
)
|
|
|
(2,489,595
|
)
|
Adjusted net loss
|
|
$
|
(92,949
|
)
|
|
$
|
17,759
|
|
|
$
|
(309,763
|
)
|
|
$
|
16,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
19,665,085
|
|
|
|
19,549,981
|
|
|
|
19,647,636
|
|
|
|
17,433,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.00
|
|
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentrations 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. The Company has not experienced losses on this
account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of
the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent 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. PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 69,000,000 Units at a purchase price of $10.00 per Unit, which includes the full exercise
by the underwriter of its option to purchase an additional 9,000,000 Units at $10.00 per Unit. Each Unit consists of one share
of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant
entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment
(see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with
the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 15,800,000 Private Placement Warrants at a price
of $1.00 per Private Placement Warrant, for an aggregate purchase price of $15,800,000. 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 proceeds from the Initial Public Offering held in the Trust Account. If the Company does not
complete a Business Combination within the Combination Window, 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. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the
Private Placement Warrants.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In May 2019,
the Sponsor purchased 8,625,000 shares (the “Founder Shares”) of the Company’s Class B common stock for
an aggregate price of $25,000. On June 7, 2019, the Company effected a stock dividend at one-third of one share of
Class B common stock for each outstanding share of Class B common stock, resulting in an aggregate of 11,500,000 Founder
Shares outstanding. On June 26, 2019, the Company effected a further stock dividend of one-half of a share of Class B
common stock for each outstanding share of Class B common stock, resulting in the Sponsor holding an aggregate of 17,250,000
Founder Shares. All share and per-share amounts have been retroactively restated to reflect the stock dividend. 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.
The Founder Shares
included an aggregate of up to 2,250,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment
option was not exercised in full or in part, so that the Sponsor would own, on an as-converted basis, 20% of the Company’s
issued and outstanding shares after the Initial Public Offering (assuming the Sponsor does not purchase any Units in the Initial
Public Offering). As a result of the underwriters’ election to fully exercise their over-allotment option, 2,250,000 Founder
Shares are no longer subject to forfeiture.
The Sponsor has agreed,
subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one
year after the completion of a Business Combination or (B) the date on which the Company completes a liquidation, merger,
stock exchange, reorganization or similar transaction after a Business Combination that results in all of the Company’s stockholders
having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing,
if the closing price of the 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 a Business Combination, the Founder Shares will be released form the lock-up.
Promissory Note — Related Party
On April 29,
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 “Promissory Note”). The Promissory Note was non-interest bearing and payable on
the earlier of December 31, 2019 or the completion of the Initial Public Offering. The Promissory Note in the amount of $200,000
was repaid in full upon the consummation of the Initial Public Offering on July 1, 2019.
Administrative Support Agreement
The Company entered
into an agreement whereby, commencing on June 26, 2019 through the earlier of the Company’s consummation of a Business
Combination and its liquidation, the Company will pay an affiliate of the Sponsor a total of $20,000 per month for office
space, administrative and support services. For the three and nine months ended September 30, 2020, the Company incurred and
paid $60,000 and $180,000 of such fees, respectively.
Advisory Fee
The Company may engage
M. Klein and Company, LLC, an affiliate of the Sponsor, or another affiliate of the Sponsor, as its lead financial advisor in connection
with a Business Combination and may pay such affiliate a customary financial advisory fee in an amount that constitutes a market
standard financial advisory fee for comparable transactions.
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If
the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust
Account released to the Company. In the event that a Business Combination does not close, the Company may use a portion of proceeds
held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined
and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement
Warrants.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on June 26, 2019, the holders of the Founder Shares, Private Placement Warrants and warrants
that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise
of the Private Placement Warrants or 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 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. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion
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 underwriters are
entitled to a deferred fee of $21,371,000 in the aggregate. The deferred fee will be waived by the underwriters in the event that
the Company does not complete a Business Combination, subject to the terms of the underwriting agreement. On July 1, 2019,
the underwriters agreed to waive the upfront and deferred underwriting discount on 7,940,000 units, resulting in a reduction of
the upfront and deferred underwriting discount of $1,588,000 and $2,779,000, respectively.
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
designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
At September 30, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
Common Stock
Class A
Common Stock — The Company is authorized to issue 200,000,000 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 September 30,
2020 and December 31, 2019, there were 2,436,522 and 2,380,049 shares of Class A common stock issued or outstanding,
excluding 66,563,478 and 66,619,951 shares of Class A common stock subject to possible redemption, respectively.
Class B
Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value
of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30,
2020 and December 31, 2019, there were 17,250,000 shares of Class B common stock issued and outstanding.
Holders of Class B
common stock will have the right to elect all of the Company’s directors prior to 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, 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 (net of the number
of shares of Class A common stock redeemed 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, any private placement-equivalent warrants issued,
or to be issued, to any seller in a Business Combination.
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation
of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days
after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The
Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will not
be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of
Class A common issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares
of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration. No warrant
will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking
to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities
laws of the state of the exercising holder, or an exemption from registration is available.
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 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.
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 use its reasonable
best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.
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;
|
|
•
|
upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period, to each warrant holder; and
|
|
•
|
if, and only if, the closing 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 on the third trading day prior to the date on which we send the notice of redemption to the warrant holders.
|
If and when the warrants
become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the
underlying securities for sale under all applicable state securities laws.
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 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. However, the warrants will not be adjusted for issuance
of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net
cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Window 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.
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 and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable,
assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the Private Placement Warrants will be exercisable on a cashless basis and 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.
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.
CHURCHILL CAPITAL CORP II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(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:
|
Level 1:
|
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.
|
|
|
|
|
Level 2:
|
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.
|
|
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The following table
presents information about the Company’s assets that are measured at fair value on a recurring basis at September 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
|
|
Level
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
697,283,649
|
|
|
$
|
695,295,418
|
|
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated
subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were
issued. Based upon this review, except as described below, the Company did not identify any subsequent events that would have required
adjustment or disclosure in the condensed financial statements.
Skillsoft Merger Agreement
On October 12, 2020,
the Company entered into an Agreement and Plan of Merger (the “Skillsoft Merger Agreement”) by and between the Company
and Skillsoft.
Pursuant to the terms
of the Skillsoft Merger Agreement, a business combination between the Company and Skillsoft will be effected through the merger
of Skillsoft with and into the Company, with the Company surviving as the surviving company (the “Skillsoft Merger”).
At the effective time of the Skillsoft Merger (the “Effective Time”), (a) each Class A share of Skillsoft, with nominal
value of $0.01 per share (“Skillsoft Class A Shares”), outstanding immediately prior to the Effective Time, will be
automatically canceled and the Company will issue as consideration therefor (i) such number of shares of the Company’s Class
A common stock, par value $0.0001 per share (the “Churchill Class A Common Stock”) equal to the Class A First Lien
Exchange Ratio (as defined in the Skillsoft Merger Agreement), and (ii) the Company’s Class C common stock, par value $0.0001
per share (the “Churchill Class C Common Stock”), equal to the Class C Exchange Ratio (as defined in the Skillsoft
Merger Agreement), and (b) each Class B share of Skillsoft, with nominal value of $0.01 per share (“Skillsoft Class B Shares”),
will be automatically canceled and the Company will issue as consideration therefor such number of shares of the Company’s
Class A common stock equal to the Per Class B Share Merger Consideration (as defined in the Skillsoft Merger Agreement). Pursuant
to the terms of the Skillsoft Merger Agreement, the Company is required to use commercially reasonable efforts to cause the Company
Class A Common Stock to be issued in connection with the transactions contemplated by the Skillsoft Merger Agreement (the “Skillsoft
Transactions”) to be listed on the New York Stock Exchange (“NYSE”) prior to the closing of the Skillsoft Merger
(the “Skillsoft Closing”). Immediately following the Effective Time, the Company will redeem all of the shares of Class
C Common Stock issued to the holders of Skillsoft Class A Shares for an aggregate redemption price of (i) $505,000,000 in cash
and (ii) indebtedness under the Existing Second Out Credit Agreement (as defined in the Skillsoft Merger Agreement), as amended
by the Existing Second Out Credit Agreement Amendment (as defined in the Skillsoft Merger Agreement), in the aggregate principal
amount equal to the sum of $20,000,000 to be issued by the Surviving Corporation (as defined in the Skillsoft Merger Agreement)
or one of its subsidiaries, in each case, pro rata among the holders of Churchill Class C Common Stock issued in connection with
the Skillsoft Merger.
The Skillsoft Merger Agreement contains customary representations,
warranties and covenants by the parties thereto and the closing is subject to certain conditions as further described in the Skillsoft
Merger Agreement