Business Context and Reporting Period
The filing is Roman DBDR Tech Acquisition Corp.’s unaudited Form 10-Q for the quarter ended June 30, 2021. Although the request metadata names GPGI, Inc., the filing identifies Roman DBDR Tech Acquisition Corp. as the registrant. It was a shell company/SPAC with no operating business or revenue, formed to complete a business combination.
On April 19, 2021, the SPAC agreed to merge with CompoSecure Holdings, L.L.C. The proposed transaction would create an Up-C structure and rename the public company CompoSecure, Inc. The merger remained subject to approvals and other closing conditions.
Financial Results and Position
- Revenue: None; the company had not commenced operations and did not expect operating revenue before a business combination.
- Net loss: $21.7 million for the three months and $12.7 million for the six months ended June 30, 2021. The quarterly loss included $1.4 million of operating and formation costs and a $20.3 million noncash expense from changes in warrant fair value. The six-month loss included $2.8 million of operating and formation costs and a $10.0 million warrant fair-value expense.
- Cash flow: Six-month operating cash outflow was $625,570; financing provided $40,000. Cash outside the trust fell from $603,615 at year-end 2020 to $18,045 at June 30, 2021.
- Trust and liquidity: Trust assets were $236.3 million, primarily money-market funds invested in U.S. Treasury securities. The company reported a $1.8 million working-capital deficit, excluding $100,000 of franchise and income taxes payable.
- Balance sheet: Total assets were $236.6 million and total liabilities were $47.8 million. Warrant derivative liabilities totaled $37.4 million, up from $27.5 million at December 31, 2020. Redeemable Class A shares were classified outside stockholders’ equity at $183.9 million. Stockholders’ equity was $5.0 million.
- Debt and margins: The SPAC reported no long-term debt or outstanding working-capital loans. Operating margins are not meaningful because it had no revenue.
Material Changes and Transaction Terms
- From December 31, 2020 to June 30, 2021, cash outside the trust decreased by $585,570, accounts payable and accrued expenses rose to $2.2 million from $98,112, and warrant liabilities increased by $10.0 million.
- The merger consideration is based on an approximately $853 million CompoSecure equity value. Planned transaction financing includes $45 million of Class A share subscriptions and $130 million of CompoSecure senior exchangeable notes, bearing 7% annual interest and exchangeable at $11.50 per share. Up to 7.5 million additional shares or units may be issued as earnout consideration.
- Closing conditions include required stockholder and equity-holder approvals, Nasdaq listing, completion of the PIPE investments, at least $5.0 million of net tangible assets, and specified minimum cash and maximum net-indebtedness tests. The agreement could be terminated if closing does not occur by December 31, 2021, subject to a possible extension to January 31, 2022.
Outlook, Risks, and Unusual Items
- Management said available resources were expected to meet needs through the earlier of a business combination or May 10, 2022. This depends in part on potential sponsor or affiliate loans, which are not generally obligated; the sponsor had agreed to provide up to $1.5 million, with no balance outstanding at quarter-end.
- If no business combination is completed by May 10, 2022, the company must cease operations and redeem public shares, subject to applicable terms. Warrants may expire worthless if the SPAC liquidates.
- The trust redemption value and transaction proceeds are exposed to shareholder redemptions, transaction expenses, and the merger’s closing conditions. The filing also describes potential financing needs if redemptions are significant.
- Management said COVID-19 could negatively affect the company’s financial position, operations, or target search, but the impact was not readily determinable.
- Warrant fair-value changes were a significant noncash driver of reported losses. The company disclosed a material weakness in internal control over financial reporting related to warrant accounting; controls were not effective at a reasonable-assurance level and remediation was not complete at June 30, 2021.
- The proposed tax receivable agreement would require payment to participating former CompoSecure holders of 90% of certain tax savings actually realized by the combined company.
Investor Facts to Verify
- Confirm the registrant identity and the status, approvals, financing, redemption levels, and closing conditions of the CompoSecure merger.
- Review the trust balance, cash available outside the trust, accrued expenses, and any sponsor or affiliate funding actually provided.
- Assess the $130 million exchangeable notes’ final terms and the combined company’s post-transaction debt and liquidity.
- Evaluate the warrant-liability valuation and whether the disclosed accounting-control material weakness has been fully remediated.
- Review the effects of the tax receivable agreement, earnout, potential redemptions, and transaction expenses on shareholder value and ownership.