Business Context and Reporting Period
The filing is a Form 10-Q for the quarter and six months ended June 30, 2018, filed August 8, 2018. The filing identifies the registrant as Big Rock Partners Acquisition Corp., not NRX Pharmaceuticals, Inc. The company was a blank-check acquisition company formed to pursue a business combination, with a focus on the U.S. senior housing and care industry. It had not identified or completed a target transaction by June 30, 2018 and had generated no operating revenue.
Financial Condition and Results
| Metric | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 |
|---|---|---|
| Operating costs | $271,810 | $464,184 |
| Interest income | $272,482 | $486,051 |
| Unrealized gain on trust securities | $1,674 | $75 |
| Income tax provision | $8,948 | $13,063 |
| Net income (loss) | $(6,602) | $8,879 |
| Basic and diluted loss per share | $(0.06) | $(0.13) |
- Cash outside the trust account was $139,613 at June 30, 2018, compared with $449,374 at December 31, 2017.
- Marketable securities held in the trust account totaled $69.48 million, compared with $69.03 million at year-end 2017.
- Total assets were $69.70 million; current liabilities were $217,449, including $204,386 of accounts payable and accrued expenses.
- The company reported a working-capital deficit of $77,836 and no long-term debt, capital lease obligations, operating lease obligations, or other long-term liabilities.
- Cash used in operating activities for the six months was $334,900. Cash provided by investing activities was $32,639, reflecting withdrawals of trust-account interest for taxes, and cash used in financing activities was $7,500.
- The trust account consisted substantially of short-term U.S. Treasury securities. Approximately $483,000 of the trust balance represented interest income, and approximately $33,000 was withdrawn to pay franchise taxes.
Material Changes Versus Prior Comparable Period
- Cash outside the trust account declined by $309,761 from December 31, 2017, primarily because of operating expenditures and offering-cost payments.
- Trust-account securities increased by $453,487, while shares subject to possible redemption declined from 6,444,515 to 6,412,916.
- Accounts payable and accrued expenses increased from $85,671 to $204,386, and income tax payable increased from zero to $13,063.
- Six-month results were modestly profitable because trust-account interest exceeded operating costs and taxes; the second quarter produced a net loss because quarterly operating costs and taxes exceeded trust-account income.
- The filing does not provide a clear prior-year comparable quarter or six-month income statement for purposes of year-over-year operating comparison.
Outlook, Risks, Contingencies, and Unusual Items
- The company was required to complete a business combination by November 22, 2018, subject to up to two three-month extensions, potentially extending the deadline to May 22, 2019. Each extension requires a $690,000 trust-account deposit by the sponsor or its affiliates; they are not obligated to fund an extension.
- On July 30, 2018, a sponsor affiliate committed to provide up to $200,000 in non-interest-bearing, unsecured loans for transaction costs. No amounts were outstanding at the filing date, and the loans may be convertible into units at $10.00 per unit.
- Management expected available cash to meet needs through the applicable business-combination deadline, but noted that additional financing may be required. Sponsor, officer, director, and third-party funding is generally not guaranteed.
- If no business combination is completed, the company must cease operations and liquidate the trust account, subject to applicable redemption and liquidation provisions.
- Potential transaction-related fees include a 4.0% fee on initial public offering proceeds, a finder’s fee equal to 1.0% of transaction consideration, and advisory fees that may be $750,000 or at least $1.5 million depending on the transaction.
- The sponsor received $10,000 per month for office space, utilities, and administrative support; $60,000 was incurred during the first six months of 2018.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting. No legal proceedings or material changes to previously disclosed risk factors were reported.
Investor Verification Priorities
- Verify the apparent mismatch between the requested company name, NRX Pharmaceuticals, Inc., and the filing registrant, Big Rock Partners Acquisition Corp.
- Confirm whether the company completed a business combination, extended its deadline, or liquidated after June 30, 2018.
- Review the trust-account balance, redemption obligations, and any subsequent withdrawals or distributions.
- Determine whether the committed $200,000 sponsor-affiliate loans were advanced and whether additional working-capital loans or convertible units were issued.
- Assess the company’s ability to fund transaction costs given the $139,613 of unrestricted cash and $77,836 working-capital deficit at quarter-end.
- Review the contingent transaction, advisory, finder, and sponsor-service fees before evaluating the value available to public shareholders.