Business context and reporting period
This filing is Churchill Capital Corp II’s unaudited Form 10-Q for the quarter ended September 30, 2019—not a Skillsoft Corp. filing. Churchill was a newly formed blank-check company (SPAC), incorporated April 11, 2019, seeking a business combination. It had not begun operating activities or generated operating revenue.
Financial results and position
- Quarter ended September 30, 2019: Net income was $2.507 million, comprising $3.530 million of Trust Account interest and $0.012 million of unrealized gains, less $0.369 million of formation and operating costs and $0.666 million of income tax provision. Basic and diluted earnings per share were reported as $0.00.
- Inception through September 30, 2019: Net income was $2.506 million; formation and operating costs were $0.370 million. These figures largely reflect Trust Account investment income, not business operations.
- Assets and liquidity: Total assets were $695.450 million, including $692.406 million of marketable securities in the Trust Account and $2.224 million of cash outside the Trust. Current assets were $3.044 million.
- Liabilities and equity: Total liabilities were $21.439 million, including a $21.371 million deferred underwriting fee. The company reported $5.000 million of stockholders’ equity and $669.012 million of Class A shares classified as subject to possible redemption. It reported no long-term debt.
- Cash flows, inception to date: Operating activities used $1.789 million; investing activities used $688.863 million, mainly reflecting Trust funding; financing activities provided $692.876 million. Cash at September 30 was $2.224 million.
- Offering: The July 1, 2019 IPO sold 69.0 million units at $10 each, raising $690.0 million gross; a concurrent private placement raised $15.8 million. The filing reports $34.320 million of transaction costs.
Changes versus prior period
The company was formed in April 2019 and completed its IPO in July, so there is no comparable prior-year operating period. The filing presents quarterly results and inception-to-date results; inception-to-date amounts are not a like-for-like prior-period comparison.
Outlook, risks and unusual items
- Management expected no operating revenue until after a business combination and intended to use substantially all Trust Account funds, net of specified amounts, toward a transaction.
- The company was required to complete a qualifying business combination by July 1, 2021, extendable to October 1, 2021 if it had an executed letter of intent, agreement in principle or definitive agreement by the initial deadline; otherwise, it generally would redeem public shares and liquidate.
- Management said it did not expect to need additional funds for anticipated operating expenditures, but noted that higher-than-expected transaction costs, significant redemptions or insufficient funds could require financing or prevent a transaction.
- Risks include failure to complete a transaction, dilution or added debt in a transaction, and potential loss of value. Warrants would expire worthless if no business combination is completed. The Sponsor’s Trust Account indemnity has stated limits and exceptions.
- The company reported no material changes to the risk factors in its registration statement, no legal proceedings, no off-balance-sheet arrangements and no subsequent events requiring adjustment or disclosure. Disclosure controls were assessed as effective at a reasonable assurance level.
Important facts for investors to verify
- Confirm the issuer: this is Churchill Capital Corp II, not Skillsoft Corp.
- Review the Trust Account balance, permitted tax withdrawals, deferred underwriting fee and redemption terms.
- Assess the business-combination deadline, qualifying-transaction requirements and potential dilution or financing needs.
- Review warrant exercise, redemption and expiration terms, including the possibility that warrants become worthless.
- Note that reported net income came primarily from Trust Account interest and is not evidence of operating performance.