Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended September 30, 2018. The filing identifies the registrant as Big Rock Partners Acquisition Corp., not NRX Pharmaceuticals, Inc. It is a Delaware blank-check company focused on acquiring a business in the U.S. senior housing and care industry. Activity remained limited to the search for a business combination; the company had not generated operating revenue.
The company completed its initial public offering in November 2017 and was required to complete a business combination by November 22, 2018, subject to up to two three-month extensions through May 22, 2019. Each extension required a $690,000 deposit into the trust account, although the Sponsor was not obligated to fund an extension.
Key Financial Metrics
| Metric | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 |
|---|---|---|
| Operating costs | $220,243 | $684,427 |
| Interest income | $283,390 | $769,441 |
| Income before taxes | $63,073 | $85,014 |
| Income tax provision | $34,989 | $48,052 |
| Net income | $28,084 | $36,962 |
| Basic and diluted net loss per share | $(0.06) | $(0.19) |
| Net cash used in operating activities | Not separately provided for the quarter | $(402,303) |
Reported net income was driven by interest earned on trust-account investments rather than operating activity. After allocating trust-account income attributable to redeemable shares, adjusted net loss was $160,159 for the quarter and $505,764 for the nine-month period.
- Cash outside the trust account was $77,086 at September 30, 2018, compared with $449,374 at December 31, 2017.
- Marketable securities held in the trust account were $69.76 million, compared with $69.03 million at December 31, 2017. The investments were substantially U.S. Treasury bills or similar short-term Treasury investments.
- Total assets were $69.89 million; total current liabilities were $375,575.
- Common stock subject to possible redemption was $64.51 million, representing 6,397,438 shares.
- The company reported no long-term debt, capital lease obligations, operating lease obligations, or off-balance-sheet arrangements.
- Working capital deficit was $67,657, excluding franchise and income taxes payable of $184,102.
Material Changes Versus Prior Periods
- Cash outside the trust account declined by $372,288 during the first nine months of 2018, primarily reflecting $402,303 of operating cash usage, partially offset by $37,515 withdrawn from the trust account and $7,500 of financing-related cash usage.
- Trust-account securities increased by approximately $731,926 from December 31, 2017, mainly from accumulated interest, net of approximately $37,515 withdrawn to pay franchise taxes.
- Operating costs increased substantially from the $1,187 incurred during the period from inception through September 30, 2017, reflecting the company’s post-IPO public-company and business-combination activities. The filing does not provide a comparable prior-year third-quarter period.
- Accounts payable and accrued expenses increased to $327,523 from $85,671 at December 31, 2017, and income tax payable was $48,052.
- Shares issued and outstanding, excluding redeemable shares, increased to 2,638,062 from 2,590,985.
- The Sponsor stopped charging the $10,000 monthly administrative fee effective August 20, 2018. The company incurred $75,000 of such fees during the first nine months of 2018.
Guidance, Outlook, Risks and Unusual Items
- Management expected existing cash to fund operations through November 22, 2018, or May 22, 2019 if both extensions were used. Management stated that additional funding was not expected to be necessary for ordinary operating expenditures, but acknowledged that additional capital might be required for transaction costs or significant shareholder redemptions.
- An affiliate of the Sponsor committed to provide up to $200,000 in non-interest-bearing, unsecured loans for business-combination transaction costs. No amounts were outstanding at September 30, 2018. The broader disclosure also describes potential working-capital loans of up to $1.5 million that could be convertible into units.
- If a business combination was not completed within the permitted period, the company would cease operations other than winding up and liquidate the trust account. There was no assurance that a transaction or financing would be completed on acceptable terms.
- Contingent fees payable upon completion of a business combination included a 4.0% IPO-proceeds marketing fee, a finder’s fee equal to 1.0% of transaction consideration, and advisory fees subject to specified minimums or percentages. No such fees were payable if no business combination occurred.
- The company reported no legal proceedings and no material changes to the risk factors in its 2017 Form 10-K.
- Disclosure controls and procedures were evaluated as effective as of September 30, 2018, and no material change in internal control over financial reporting was reported.
Investor Verification Priorities
- Verify the issuer identity: the supplied filing is for Big Rock Partners Acquisition Corp., despite the request metadata naming NRX Pharmaceuticals, Inc.
- Confirm whether the company completed a business combination by November 22, 2018, and whether either extension was used through May 22, 2019.
- Verify the ultimate disposition of the $69.76 million trust account and the treatment of the 6,397,438 potentially redeemable shares.
- Review subsequent filings for liquidation, redemption activity, financing, or completion of a transaction.
- Assess liquidity outside the trust account, Sponsor funding commitments, and contingent transaction fees relative to remaining operating needs.