Business Context and Reporting Period
The filing is a Form 10-Q for the three months ended March 31, 2019, filed May 15, 2019. The filing identifies the registrant as Big Rock Partners Acquisition Corp., a Delaware blank-check company, rather than NRX Pharmaceuticals, Inc. The company was seeking a business combination, initially focused on the U.S. senior housing and care industry, and had generated no operating revenue.
Financial Performance and Position
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Operating expenses | $163,181 | $192,374 |
| Interest income | $382,862 | $213,569 |
| Net income | $187,965 | $15,481 |
| Net cash used in operating activities | $297,696 | $197,817 |
| Ending operating cash | $1,818 | $267,191 |
- No operating revenue was reported. Net income was driven by interest earned on trust-account investments, not business operations.
- Basic and diluted net loss per common share, after the allocation attributable to redeemable shares, was reported as $0.03 loss in Q1 2019 versus $0.07 loss in Q1 2018.
- Total assets were $71.7 million, including $71.657 million held in the Trust Account. Approximately $1.277 million of the Trust Account represented accumulated interest available for taxes.
- Total liabilities were $1.981 million, including $1.487 million of promissory notes and $494,395 of current liabilities. Stock subject to possible redemption was $64.727 million.
- Stockholders’ equity was approximately $5.0 million. Working capital deficit was $345,652, excluding franchise and income taxes payable of $98,027.
- The Trust Account consisted of money market funds investing solely in U.S. Treasuries; management reported no material interest-rate risk.
Material Changes Versus the Prior Comparable Period
- Net income increased by $172,484, primarily because interest income rose by $169,293 and the prior-year period included a $1,599 unrealized loss on Trust Account securities.
- Operating expenses declined by $29,193, or approximately 15%.
- Operating cash usage increased by $99,879, while ending operating cash fell from $267,191 to $1,818.
- The company deposited $690,000 into the Trust Account for a second three-month extension and reported two extension-related promissory notes with aggregate principal of $1.380 million. Sponsor advances for non-business-combination expenses totaled $106,642.
- Shares subject to possible redemption declined to 6,241,203 from 6,310,461 at December 31, 2018, while non-redeemable common shares increased to 2,794,297 from 2,725,039.
Outlook, Risks, Contingencies, and Unusual Items
- The company’s deadline to complete a business combination had been extended to May 22, 2019. A stockholder meeting was scheduled for May 21, 2019 to seek approval for a further extension to August 22, 2019.
- If stockholders did not approve the extension or the company failed to complete a business combination, it would wind up and liquidate. The filing provides no assurance that an extension or business combination would be approved or completed.
- The company had minimal unrestricted cash and depended on sponsor and investor financing to fund expenses. Additional financing was not guaranteed and could require liquidity-conservation measures, including suspending the search for a transaction.
- Investor extension loans would generally be forgiven if no business combination occurred, subject to the specified limitation involving funds held outside the Trust Account. Sponsor expense advances would also generally be forgiven if no transaction closed.
- A 4% cash fee on the gross Initial Public Offering proceeds would be payable to EarlyBirdCapital upon completion of a business combination; no fee would be payable if no transaction occurred.
- Nasdaq had notified the company that it was not in compliance with the annual-meeting requirement. Nasdaq granted an extension to May 22, 2019, and the company scheduled its annual meeting for May 21, 2019.
- No legal proceedings, material changes to previously disclosed risk factors, off-balance-sheet arrangements, or long-term contractual obligations were reported. Management concluded that disclosure controls were effective as of March 31, 2019.
Investor Verification Items
- Verify the registrant identity: the supplied filing is for Big Rock Partners Acquisition Corp. and does not identify NRX Pharmaceuticals, Inc.
- Verify the outcome of the May 21, 2019 stockholder meeting, the requested extension to August 22, 2019, and whether a business combination was completed.
- Verify the treatment and availability of the $71.657 million Trust Account, including redemption rights and the use of interest for tax obligations.
- Reconcile the $1.487 million promissory-note liability with the $1.380 million investor notes and $106,642 sponsor advance.
- Assess the liquidation risk arising from the May 22, 2019 deadline, limited unrestricted cash, dependence on related-party financing, and potential shareholder redemptions.