Business context and reporting period
This is ChaSerg Technology Acquisition Corp.’s Form 10-K for the fiscal year ended December 31, 2019, filed March 4, 2020. Despite the request metadata, the registrant is ChaSerg, a special purpose acquisition company (SPAC), not Grid Dynamics Holdings. ChaSerg had no operating business or revenue; its activity was formation, the 2018 IPO, and pursuing a proposed combination with Grid Dynamics International, Inc.
On November 13, 2019, ChaSerg agreed to acquire Grid Dynamics. The transaction remained subject to stockholder, regulatory, and other closing conditions at the filing date. If completed, Grid Dynamics would become the operating business and the combined company would be renamed Grid Dynamics Holdings, Inc.
Financial results and position
| Metric | FY 2019 | Comparable period |
|---|---|---|
| Revenue | None | None |
| Operating costs | $7.14 million | $0.33 million, May 21–December 31, 2018 |
| Trust-account interest income | $4.66 million | $1.16 million, May 21–December 31, 2018 |
| Net income (loss) | $(3.32) million | $0.62 million, May 21–December 31, 2018 |
| Net cash used in operations | $(2.99) million | $(0.30) million, May 21–December 31, 2018 |
Trust-account interest partly offset operating costs; the company’s loss widened from the 2018 inception-period profit. The filing reports no operating margins because there was no revenue-generating business.
- Liquidity: December 31 cash outside the trust was $141,583; working capital deficit was approximately $5.42 million. Trust assets totaled $224.02 million, including approximately $4.02 million of interest available for tax obligations. The company had withdrawn $1.81 million of trust interest during 2019 for franchise and income taxes.
- Liabilities and debt: Total liabilities were $13.40 million, including $7.70 million of deferred underwriting fees, $5.36 million of accounts payable and accrued expenses, and a $300,000 non-interest-bearing convertible related-party note. The filing also reports $20,000 of related-party advances. It reports no long-term debt.
- Equity and cash available: Stockholders’ equity was approximately $5.00 million. The filing gives different measures of funds available for a transaction: approximately $216.32 million after deferred underwriting fees in one section and $224.02 million of trust assets elsewhere. These are not directly equivalent measures; the precise net cash available depends on fees, taxes, redemptions, and transaction terms.
Material changes, outlook, risks, and unusual items
- Proposed merger terms: The agreement provides for $130 million cash consideration, subject to reductions, and 25,523,810 Class A shares, subject to adjustments. The cash consideration may fall by up to $13.5 million based on trust cash available, with an offsetting share increase. Share consideration also has working-capital, debt, excess-cash, and EBITDA-related adjustments; an adjustment of up to 857,143 shares is described as being placed in escrow.
- Post-period transaction fees: On February 27, 2020, Cantor agreed to forfeit $5.775 million, or 75% of its $7.70 million deferred fee, if the Grid Dynamics merger closes. That day, ChaSerg also agreed to pay Cantor a $4.525 million capital-markets advisory fee upon closing, potentially reduced by up to $455,000 for specified payments to other firms.
- Going concern and deadline: The auditor’s report and management state that substantial doubt exists about ChaSerg’s ability to continue as a going concern. The company had to complete a business combination by April 9, 2020 or cease operations and liquidate. If it failed to complete a deal, public shares were generally to be redeemed from the trust, while warrants would expire worthless; creditor claims could reduce the redemption amount.
- Execution and financing risks: Closing depended on multiple approvals, including ChaSerg and Grid Dynamics stockholder approvals, approvals involving ASL and its shareholders, and government and exchange approvals. Redemptions could reduce available cash; the agreement also requires minimum cash and net tangible asset conditions. Additional financing might be required and could dilute shareholders or increase debt.
- Other investor risks: The filing highlights conflicts of interest, sponsor influence, potential founder-share anti-dilution, possible warrant dilution, limitations on redemption rights, and the risk that trust funds could be subject to creditor or bankruptcy claims. Management provided no operating guidance for a combined company in this 10-K.
- Controls: Management concluded that disclosure controls and internal control over financial reporting were effective at year-end. The auditor did not provide an internal-control attestation because ChaSerg was an emerging growth company.
Most important facts for investors to verify
- Whether the Grid Dynamics merger closed by the April 9, 2020 deadline, and the final approvals, redemption level, and cash remaining at closing.
- The definitive merger consideration after cash, working-capital, debt, excess-cash, and EBITDA adjustments, including any escrowed-share reduction.
- The transaction’s actual net cash proceeds after deferred-fee forfeiture, the Cantor advisory fee, taxes, other transaction expenses, and any additional financing.
- The precise unrestricted cash and working-capital position: the filing’s trust-fund and “available funds” figures describe different amounts and should not be treated as interchangeable.
- Whether related-party obligations, creditor claims, or sponsor indemnification affect public shareholders’ redemption proceeds.