Filing identity and business context
The supplied filing is KBL Merger Corp. IV’s unaudited Form 10-Q for the quarter ended June 30, 2018—not a filing identified as FORUM MARKETS Inc. Verify the issuer before relying on this summary. KBL Merger Corp. IV was a shell company seeking a business combination, with an intended focus on healthcare and wellness. It had not begun operations and reported no operating revenue.
Financial performance and position
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Operating expenses | $147,976 | $285,849 |
| Trust investment interest income | $485,432 | $872,916 |
| Income tax provision | $126,280 | $202,433 |
| Net income | $211,176 | $384,634 |
At June 30, 2018, cash outside the trust was $543,053, while cash and marketable securities in trust totaled $117.36 million. Total assets were $117.95 million; total liabilities were $4.74 million, including $4.025 million of deferred underwriting fees payable upon a business combination. Current liabilities were $719,915, including $491,841 due to a related party. Stockholders’ equity was $5.00 million; 10.71 million shares were classified as subject to possible redemption at approximately $10.10 per share.
For the six months, operating cash use was $327,907. Trust interest of $102,912 was released for taxes, financing cash inflow was $339,655 from sponsor advances, and cash increased by $114,660 to $543,053. No long-term debt was reported. The sponsor advances were unsecured, non-interest-bearing and due on demand; they could be formalized into a note and potentially become convertible.
Changes versus prior comparable periods
Second-quarter net income rose from $5,293 in 2017 to $211,176 in 2018; six-month results moved from a $25,967 loss in 2017 to $384,634 net income in 2018. Higher trust interest drove the improvement, while expenses also increased: second-quarter expenses were $147,976 versus $50,436, and six-month expenses were $285,849 versus $81,696. The 2018 six-month comparison includes a $202,433 tax provision, versus none reported for 2017.
Compared with December 31, 2017, outside cash rose from $428,393 to $543,053, trust assets increased from $116.59 million to $117.36 million, and current liabilities increased from $208,131 to $719,915, largely reflecting higher related-party amounts and taxes payable.
Outlook, risks and notable items
Management expected available working capital to meet needs through December 7, 2018, the scheduled liquidation date, and said it would use outside-trust funds to pursue a business combination. A combination required meeting the filing’s transaction and redemption conditions; completion was not assured. If no combination were completed within the applicable combination period, the company would liquidate and redeem public shares. Management stated mandatory liquidation and dissolution raised substantial doubt about the company’s ability to continue as a going concern.
The sponsor could, but was not obligated to, provide additional loans; up to $1 million of such loans could be convertible after a business combination. The filing reported no material change to previously disclosed risk factors, no legal proceedings, and no off-balance-sheet arrangements. Management reported disclosure controls were effective and no material change in internal control. Short-term U.S. Treasury investments were not considered a material interest-rate risk.
Important facts to verify
- Confirm the issuer: the filing names KBL Merger Corp. IV, not FORUM MARKETS Inc.
- Confirm the business-combination deadline and any subsequent transaction or liquidation developments; the filing cites December 7, 2018 as the scheduled liquidation date.
- Review the basis and availability of trust funds, redemption rights, and the $4.025 million deferred underwriting fee.
- Verify sponsor advances, related-party balances, and whether any additional working-capital financing was obtained after June 30, 2018.
- Review subsequent filings for changes to the going-concern assessment or other risks; this filing reported no material subsequent events through issuance.