Skillsoft Corp. / Churchill Capital Corp II — Form 10-Q summary
Important entity and period context: This is Churchill Capital Corp II’s SPAC filing for the quarter and nine months ended September 30, 2020—not an operating-company 10-Q for Skillsoft. Churchill reported no operating business or revenue during the period. It disclosed its Skillsoft merger agreement as a subsequent event, dated October 12, 2020.
Financial results and position
| Metric | Period or date | Reported value |
|---|---|---|
| Revenue | Quarter and nine months ended September 30, 2020 | None; Churchill had not commenced operations |
| Net income (loss) | Three months ended September 30, 2020 | $(92,949) |
| Net income | Nine months ended September 30, 2020 | $1,303,184 |
| Formation and operating costs | Three months / nine months ended September 30, 2020 | $240,937 / $768,783 |
| Trust-account interest income | Three months / nine months ended September 30, 2020 | $118,097 / $2,417,317 |
| Cash and prepaid expenses | September 30, 2020 | $1,744,991 cash; $162,225 prepaid expenses |
| Marketable securities in trust | September 30, 2020 | $697,283,649 |
| Total liabilities | September 30, 2020 | $21,689,446, including $21,371,000 deferred underwriting fees |
| Cash used in operating activities | Nine months ended September 30, 2020 | $923,534 |
Profitability and margins are not meaningful because Churchill had no operating revenue. The nine-month profit primarily reflected trust interest; the third quarter reported a small net loss as trust interest was much lower than in the comparable 2019 quarter. The filing reports no long-term debt or off-balance-sheet arrangements at September 30, 2020. Trust assets were restricted for the business combination and related permitted purposes, so they should not be viewed as general operating liquidity.
Changes versus the comparable period
- Third-quarter net result shifted from $2.51 million net income in 2019 to a $92,949 net loss in 2020. Trust interest fell to $118,097 from $3.53 million; operating costs were also lower, at $240,937 versus $369,066.
- Nine-month net income was $1.30 million in 2020 versus $2.51 million for the period from inception through September 30, 2019. The 2019 comparison covers a different period because Churchill was formed in April 2019.
- Trust-account securities increased to $697.28 million from $695.30 million at December 31, 2019. Cash outside the trust declined to $1.745 million from $2.238 million.
Merger, outlook, and risks
- On October 12, 2020, Churchill entered into a merger agreement with Skillsoft. The filing describes a proposed merger with Churchill surviving. Under the stated terms, Skillsoft Class A holders would receive Churchill shares, including Class C shares; those Class C shares would then be redeemed for $505 million in cash and $20 million of indebtedness, allocated pro rata. Completion remained subject to conditions; this filing does not report a completed transaction.
- Churchill had to complete a business combination by July 1, 2021, or by October 1, 2021 if it had an executed letter of intent, agreement in principle, or definitive agreement by July 1, 2021. Failure to complete one would require redemption of public shares and liquidation, subject to the filing’s terms.
- Management said it did not expect to need additional funds for ordinary expenditures, but noted that costs or redemptions could require financing. Additional securities or debt could dilute shareholders or increase financial risk.
- Disclosed risks include the possibility of negative interest rates reducing public shareholders’ redemption proceeds and COVID-19 disrupting the search for or completion of a business combination. Warrants could expire worthless if no combination is completed.
- No Skillsoft operating guidance, revenue outlook, or post-merger financial forecast is provided in this filing. Churchill said its disclosure controls were effective at a reasonable-assurance level; no legal proceedings were reported.
Important facts for investors to verify
- Review the full merger agreement and subsequent filings for final consideration, financing, closing conditions, amendments, and transaction status.
- Verify the amount of cash available to the combined company after redemptions, transaction expenses, deferred underwriting fees, and financing.
- Assess Skillsoft’s own financial statements, debt terms, liquidity, and operating outlook; they are not presented in this SPAC filing.
- Check the business-combination deadline, redemption mechanics, warrant terms, and potential dilution from founder shares, warrants, and any new securities.