Business Context and Reporting Period
This Form 10-Q was filed by Thunder Bridge Acquisition, Ltd., not Repay Holdings Corp., for the quarter ended September 30, 2018. The filing identifies the registrant as a Cayman Islands blank-check company formed to pursue an initial business combination. It had not commenced operating activities or generated operating revenue.
The company completed its initial public offering in June 2018, raising gross proceeds of $258.0 million from 25.8 million units, and sold 8.83 million private placement warrants for $8.83 million. Management was searching for a target business as of September 30, 2018.
Financial Condition and Results
| Metric | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 |
|---|---|---|
| Operating revenue | None | None |
| Loss from operations | $(171,030) | $(211,729) |
| Interest income | $1,104,596 | $1,110,965 |
| Unrealized gains on marketable securities | $139,542 | $169,223 |
| Net income | $1,073,108 | $1,068,459 |
| Net loss available to ordinary shares | $(105,976) | $(144,853) |
| Basic and diluted loss per share | $(0.01) | $(0.02) |
- Total assets were $262.7 million at September 30, 2018, including $261.9 million held in the Trust Account and $767,718 of cash outside the Trust Account.
- Liabilities totaled $9.7 million, including $9.69 million of deferred underwriting fees payable upon completion of a business combination.
- Temporary equity consisted of 24.4 million redeemable Class A shares valued at $248.0 million.
- Shareholders’ equity was $5.0 million. The company had no long-term debt or outstanding promissory note at September 30, 2018.
- Net cash used in operating activities was $406,509 for the nine months. Net cash used in investing activities was $260.6 million, primarily reflecting deposits into the Trust Account. Net cash provided by financing activities was $261.7 million.
- The filing does not present meaningful operating margins because the company had no operating revenue; reported income primarily reflected interest and unrealized investment gains.
Material Changes Versus the Prior Comparable Period
- Compared with the period from inception through September 30, 2017, the company completed its public offering and private placement, funded the Trust Account, and increased total assets from $176,330 to $262.7 million.
- Net income of $1.07 million for the nine months of 2018 contrasted with a net loss of $5,045 for the 2017 inception period, primarily because of interest income and unrealized gains on Trust Account investments.
- Cash outside the Trust Account increased to $767,718 from $25,817 at December 31, 2017, while the prior-year balance sheet had no Trust Account.
- The company issued public warrants and private placement warrants, and 24.4 million public shares became subject to possible redemption.
- The $156,600 promissory note outstanding at December 31, 2017 was repaid; no promissory note was outstanding at September 30, 2018.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The company had until December 21, 2019 to complete an initial business combination. If unsuccessful, it was required to cease operations, redeem the public shares using the Trust Account, and liquidate.
- Management expected available cash to fund operations through December 21, 2019, but cautioned that higher-than-expected search, diligence, or transaction costs could create a working-capital shortfall.
- Trust Account funds were restricted for use in connection with a business combination or redemption and could not fund ordinary operating expenses. The Trust Account was invested primarily in short-term U.S. Treasury obligations or qualifying money-market funds.
- Public shareholders had redemption rights in connection with a business combination. A business combination generally had to involve a target or targets with aggregate fair market value of at least 80% of the Trust Account balance, subject to the filing’s stated exclusions.
- The company had a contingent forward purchase agreement for 5.0 million units, potentially providing $50.0 million at the time of a business combination, but the investor’s obligation was conditional and subject to its consent.
- Additional financing might be required if the forward purchase agreement was not completed or if substantial shareholder redemptions occurred. Additional equity issuance could materially dilute investors; debt could increase financial and operating risks.
- The company reported no legal proceedings, no material changes to previously disclosed risk factors, and no off-balance-sheet financing arrangements.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2018, with no material changes to internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Registrant identity: Verify the apparent mismatch between the requested company, Repay Holdings Corp., and the filing registrant, Thunder Bridge Acquisition, Ltd.
- Business-combination status: Confirm whether and when a target transaction was identified or completed after this reporting date.
- Redemption exposure: Review the number and value of redeemable public shares and the potential effect of shareholder redemptions on transaction funding.
- Trust Account restrictions: Confirm the amount available for a business combination or redemption versus unrestricted operating cash.
- Deferred underwriting fees: Verify the $9.69 million contingent obligation and the conditions for payment.
- Dilution: Assess the impact of founder shares, 25.8 million public warrants, 8.83 million private placement warrants, potential forward units, and any additional financing.
- Runway and liquidation deadline: Confirm whether unrestricted cash was sufficient to fund operations through December 21, 2019 and whether the liquidation provisions were triggered.