Business Context and Reporting Period
This Form 10-K covers Thunder Bridge Acquisition, Ltd. for the fiscal year ended December 31, 2018. The filing is for the predecessor special purpose acquisition company, not an operating Repay Holdings Corporation entity. Thunder Bridge was an early-stage Cayman Islands blank-check company formed to complete a business combination and had generated no operating revenue.
On January 21, 2019, Thunder Bridge agreed to merge with Hawk Parent Holdings, LLC, the parent of Repay. The proposed transaction contemplated domestication as a Delaware corporation, a merger with Repay, and a name change to Repay Holdings Corporation. The transaction had not closed as of the filing date.
Financial Performance and Position
| Metric | Year ended December 31, 2018 | Comparable period |
|---|---|---|
| Operating revenue | None | None |
| Loss from operations | $1.2 million | $5,270 loss for the period from inception through December 31, 2017 |
| Interest and other income | $2.7 million | None |
| Net income | $1.5 million | $5,270 net loss |
| Net loss available to ordinary shareholders | $1.0 million | $5,270 loss |
| Basic and diluted loss per share | $0.14 | $0.00 |
| Net cash used in operating activities | $1.0 million | $5,270 |
| Cash outside trust account | $108,818 | $25,817 |
| Trust account and marketable securities | $263.3 million | None |
| Total assets | $263.5 million | $176,330 |
| Total liabilities | $10.0 million | $156,600 |
| Shares subject to possible redemption | $248.5 million | None |
| Stockholders’ equity | $5.0 million | $19,730 |
The 2018 net income was driven by $2.6 million of trust-account interest and $115,118 of unrealized gains on marketable securities, which more than offset $1.2 million of operating expenses. The company had no operating business, revenue, operating margin, or meaningful recurring cash flow.
The company had no long-term debt, capital leases, operating lease obligations, or other long-term liabilities at year-end. Deferred underwriting commissions totaled $9.69 million and were payable only if a business combination closed. Working capital was negative $81,317.
Material Changes and Transactions
- Thunder Bridge completed its initial public offering in June 2018, selling 25.8 million units at $10.00 per unit and generating gross proceeds of $258.0 million.
- The company also sold 8.83 million private placement warrants for $8.83 million. Public and private placement proceeds were placed in a trust account.
- Trust-account holdings increased to $263.3 million by December 31, 2018, including investment income. The reported redemption value was approximately $10.20 per public share.
- Operating activity increased substantially after the IPO because of public-company compliance costs and due diligence expenses.
- The company reported net income of $1.5 million in 2018 compared with a $5,270 net loss in the inception period in 2017, primarily because 2018 included trust-account investment income.
Repay Transaction, Outlook, Risks, and Unusual Items
The proposed Repay transaction carried stated merger consideration of $600 million, subject to closing adjustments, payable in a mix of cash and exchangeable Repay units. The transaction also contemplated approximately $170.4 million of committed credit facilities from SunTrust, sponsor share forfeitures and escrow arrangements, potential earn-out units, and a management incentive plan allocating 6.8 million shares.
Completion remained subject to shareholder redemptions, financing, Nasdaq listing requirements, regulatory matters, and other closing conditions. If the transaction with Repay failed, the company could pursue another business combination until December 21, 2019.
Management stated that the limited cash available outside the trust account might be insufficient to fund operations through completion of a business combination. The filing therefore stated that these conditions raised substantial doubt about the company’s ability to continue as a going concern. Sponsor and affiliate loans were possible but not obligatory.
On March 11, 2019, Nasdaq requested information concerning certain individuals and entities and their relationship with the company’s sponsor. The company was preparing a response with outside counsel and warned that further Nasdaq action could adversely affect its listing, which was a condition to closing the proposed Repay transaction.
If no business combination was completed by December 21, 2019, the company would cease operations, redeem public shares using trust-account proceeds, and liquidate. Public warrants would expire worthless. Trust-account funds could also be reduced by creditor claims, taxes, dissolution expenses, or ineffective sponsor indemnification.
Grant Thornton LLP issued an unqualified audit opinion on the financial statements. Management concluded that disclosure controls were effective as of December 31, 2018; no internal-control audit attestation was required because the company was an emerging growth company.
Investor Verification Items
- Verify that this filing relates to Thunder Bridge Acquisition, Ltd., the SPAC predecessor, rather than post-merger Repay Holdings Corporation.
- Confirm whether the proposed Repay merger closed, the final merger consideration, closing adjustments, financing, redemptions, and resulting share count.
- Review the Repay financial statements and operating metrics in the proxy statement, because this 10-K provides no Repay revenue, profit, cash flow, or margin data.
- Assess the impact of the $170.4 million proposed credit facilities, including interest rates, covenants, maturity, and leverage after closing.
- Monitor the Nasdaq inquiry and any effect on listing status or the proposed transaction.
- Evaluate liquidity outside the trust account, the stated going-concern uncertainty, deferred underwriting commissions, and potential sponsor or creditor claims against trust assets.
- Model dilution from public and private warrants, founder shares, earn-outs, escrowed shares, and the 6.8 million-share management incentive plan.