Business Context and Reporting Period
The provided filing is a Form 10-K for Big Rock Partners Acquisition Corp., not NRX Pharmaceuticals, Inc. It covers the fiscal year ended December 31, 2019 and was filed March 30, 2020. Big Rock was a Delaware special purpose acquisition company formed to identify and complete a business combination; it had no operating business or revenue-generating activities during the period.
The company had not identified a target business as of the filing date. Its securities traded on Nasdaq under BRPAU, BRPA, BRPAR and BRPAW.
Financial Performance and Liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Interest income | $1.206 million | $1.089 million |
| Operating expenses | $713,187 | $1.007 million |
| Net income | $408,427 | $66,101 |
| Adjusted net loss attributable to non-redeemable shares | $295,467 | $748,864 |
| Basic and diluted net loss per share | $0.11 | $0.29 |
| Net cash used in operating activities | $792,731 | $473,187 |
| Trust account balance | $32.005 million | $70.766 million |
| Total liabilities | $2.574 million | $1.257 million |
| Stockholders’ equity | $5.000 million | $5.000 million |
Net income consisted primarily of interest earned on trust-account investments and did not reflect operating profitability. The company generated no operating revenue. At December 31, 2019, it had only $6 of unrestricted cash, $69,489 of current assets and a reported working-capital deficit of approximately $582,385, excluding certain franchise-tax amounts payable from trust-account interest.
The trust account held $32.005 million in money-market funds, including approximately $838,000 of accumulated interest. Approximately $513,000 of interest was withdrawn during 2019 to pay taxes. The company had no long-term debt, capital leases or operating lease obligations, but had $1.536 million of extension notes and $416,141 owed under a related-party promissory note.
Material Changes Versus the Prior Comparable Period
- Trust-account assets declined by $38.761 million, primarily because the company redeemed 3,885,751 public shares during 2019 for aggregate payments of approximately $40.727 million.
- Net income increased to $408,427 from $66,101, driven by higher interest income and lower operating expenses.
- Operating expenses declined approximately 29% year over year, while cash used in operating activities increased to $792,731.
- Shares subject to possible redemption decreased from 6,310,461 to 2,305,335.
- Total liabilities increased from $1.257 million to $2.574 million as the company incurred additional extension and related-party financing.
- Stockholders approved successive extensions of the business-combination deadline: to August 22, 2019, November 22, 2019 and March 23, 2020. Subsequent to year-end, the deadline was extended again to July 23, 2020.
Guidance, Outlook, Risks and Unusual Items
- The company expected to use substantially all trust-account proceeds, securities, debt or a combination thereof to complete one business combination. The target generally had to represent at least 80% of the trust-account balance and the post-transaction company had to acquire a controlling interest.
- If no business combination was completed by July 23, 2020, the company expected to redeem all public shares and liquidate. The redemption amount could be less than $10 per share because of creditor claims, bankruptcy risks or limitations on the indemnity provided by A/Z Property Partners.
- Extension notes and certain sponsor loans were payable upon a completed business combination but generally would be forgiven if no business combination occurred, subject to specified exceptions.
- Nasdaq had determined that the company was not compliant with the minimum public-holder requirement and initiated delisting proceedings. Subsequent to year-end, Nasdaq’s hearings panel allowed continued listing subject to conditions, including completion of a business combination with an operating company by August 10, 2020 and compliance with initial-listing standards.
- COVID-19 was identified as a risk to the company’s ability to locate investors, conduct due diligence and complete a transaction within the required time frame.
- Outstanding rights, warrants and the underwriter’s unit purchase option could cause substantial future dilution. Public warrants had an $11.50 exercise price and could expire worthless if no business combination occurred.
- The company reported effective disclosure controls and effective internal control over financial reporting as of December 31, 2019. The independent auditor audited the financial statements but was not engaged to audit internal control effectiveness.
Most Important Facts to Verify
- Confirm the issuer identity: the supplied filing is for Big Rock Partners Acquisition Corp. rather than NRX Pharmaceuticals, Inc.
- Verify the actual post-year-end outcome, including whether a business combination was completed, whether the company liquidated, and the final redemption amount.
- Verify the status of Nasdaq listing conditions and any subsequent delisting or relisting actions.
- Reconcile trust-account balances, redemptions, extension deposits and outstanding extension or related-party notes.
- Review the final capital structure, including potential dilution from rights, warrants, founder shares, representative shares and the unit purchase option.
- Assess whether creditor claims, sponsor indemnification limitations or bankruptcy proceedings could reduce distributions to public stockholders.