Business Context and Reporting Period
This Form 10-Q covers Thunder Bridge Acquisition, Ltd. for the three months ended March 31, 2019. Although the request identifies Repay Holdings Corp., the filing is for Thunder Bridge, a Cayman Islands special purpose acquisition company that proposed acquiring Repay and changing its name to Repay Holdings Corporation. The company had no operating revenue and was pursuing an initial business combination.
The financial statements are unaudited. Thunder Bridge had until December 21, 2019 to complete a business combination under its original charter, while the merger agreement permitted termination if closing had not occurred by June 30, 2019.
Financial Position and Key Metrics
| Metric | March 31, 2019 | Comparable period or prior date |
|---|---|---|
| Cash and cash equivalents outside the trust | $159,379 | $108,818 at December 31, 2018 |
| Trust account cash and marketable securities | $264.8 million | $263.3 million at December 31, 2018 |
| Total assets | $265.0 million | $263.5 million at December 31, 2018 |
| Total liabilities | $11.0 million | $10.0 million at December 31, 2018 |
| Shares subject to possible redemption | 24,269,099 shares; $249.0 million redemption value | 24,361,111 shares; $248.5 million at December 31, 2018 |
| Shareholders’ equity | $5.0 million | $5.0 million at December 31, 2018 |
| Net income | $517,612 | $(60) in Q1 2018 |
| Loss from operations | $(1.0 million) | $(60) in Q1 2018 |
| Net cash used in operating activities | $(266,305) | $(60) in Q1 2018 |
| Basic and diluted loss available to ordinary shares | $(0.12) per share | $(0.00) in Q1 2018 |
First-quarter 2019 net income consisted primarily of $201,253 of interest income and $1.32 million of unrealized gains on marketable securities held in the trust account, offset by $1.00 million of formation costs and other operating expenses. There was no operating revenue.
Cash increased by $50,561 during the quarter. Financing cash inflow of $316,866, representing sponsor advances, exceeded operating cash usage. The company reported a working-capital deficit of $1.09 million and had $316,866 outstanding under sponsor advances at March 31, 2019.
The company had no long-term debt, capital leases, operating leases, or other long-term contractual obligations reported at March 31, 2019. A deferred underwriting fee payable of $9.69 million remained payable upon completion of a business combination, subject to the underwriting agreement.
Material Changes Versus the Prior Comparable Period
- Net income increased to $517,612 from a $60 loss, primarily because trust-account interest and unrealized investment gains were recognized in 2019.
- Operating expenses increased substantially to $1.00 million from $60 as the company incurred public-company, transaction, legal, accounting, and due-diligence costs.
- Operating cash outflow increased to $266,305 from $60.
- Cash outside the trust account increased to $159,379 from $108,818, supported by sponsor financing rather than operating cash generation.
- The number of redeemable public shares declined by approximately 92,000, while their recorded redemption value increased to $249.0 million.
- On January 21, 2019, Thunder Bridge entered into a merger agreement to acquire Repay through domestication and a merger. The original stated merger consideration was $600 million, subject to adjustments.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
On May 9, 2019, after the quarter end, the parties amended the merger agreement. The base merger consideration was reduced from $600 million to $580.65 million, the required cash consideration was reduced by $30 million, and the post-closing company could retain up to $50 million of excess cash for corporate purposes, including debt repayment or acquisitions.
Thunder Bridge also agreed to a $135 million PIPE investment at $10 per share, subject to closing conditions. The proceeds were intended to fund merger consideration, warrant payments, transaction expenses, and potentially post-closing corporate purposes. SunTrust had provided a commitment for approximately $170.4 million of credit facilities at the merger closing.
The proposed warrant amendment required approval from holders of at least 65% of the outstanding public warrants. It would reduce each warrant’s underlying shares to one-quarter of a share while maintaining an effective price of $11.50 per whole share and provide a $1.50 cash payment per warrant. The amendment was a condition to closing and introduced execution and dilution risks.
Management stated that the company’s limited cash, working-capital deficit, continuing transaction costs, and dependence on sponsor financing raised substantial doubt about its ability to continue as a going concern. If the merger or another business combination could not be completed, the company expected to cease operations and liquidate the trust account, subject to applicable obligations.
Public shareholders had redemption rights in connection with a business combination. If no business combination was completed within the applicable period, public shares were to be redeemed from the trust account, while founder shares and warrants could expire worthless. Additional equity issuance, PIPE financing, debt financing, founder-share conversion, and the management incentive plan could materially dilute existing shareholders.
The filing reports no legal proceedings and no material changes to previously disclosed risk factors. Nasdaq had requested information concerning certain persons and entities; the company submitted a response on April 2, 2019 and reported no further request as of the filing.
Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material change in internal control over financial reporting during the quarter.
Most Important Facts for Investors to Verify
- Verify the identity and reporting status of the issuer: this filing is for Thunder Bridge Acquisition, Ltd., not an operating Repay Holdings Corp. filing.
- Confirm whether the proposed Repay merger, domestication, PIPE financing, credit facilities, and warrant amendment closed and on what final terms.
- Review final merger consideration, cash and equity mix, escrow and earn-out provisions, sponsor share cancellations, and management incentive plan dilution.
- Assess the amount of public-share redemptions and the resulting ownership and capitalization structure.
- Verify the availability and terms of sponsor financing and post-closing debt, given the reported $159,379 of unrestricted cash and $1.09 million working-capital deficit.
- Reconcile the trust-account balance, deferred underwriting fee, warrant obligations, and any cash payments required at closing.
- Review Repay’s operating results and debt separately; this Form 10-Q does not provide Repay’s standalone revenue, profit, margins, or cash flow.