Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended March 31, 2020, filed May 13, 2020. The filing identifies the registrant as Experience Investment Corp., not Strata Critical Medical, Inc.; this entity discrepancy should be verified.
Experience Investment Corp. is a newly formed special purpose acquisition company focused on identifying a business combination, with an intended focus on the travel and leisure industry. It had not commenced operating activities as of March 31, 2020 and had generated no operating revenue. The financial statements are unaudited and prepared under U.S. GAAP.
Key Financial Metrics
| Metric | March 31, 2020 / Three Months Ended | December 31, 2019 |
|---|---|---|
| Cash outside Trust Account | $1.09 million | $1.31 million |
| Marketable securities in Trust Account | $277.13 million | $276.26 million |
| Total assets | $278.37 million | $277.69 million |
| Total liabilities | $10.10 million | $10.00 million |
| Deferred underwriting fee payable | $9.63 million | $9.63 million |
| Common stock subject to possible redemption | $263.27 million | $262.70 million |
| Stockholders’ equity | $5.00 million | $5.00 million |
| Operating revenue | None | Not applicable |
| Interest income | $869,270 | Quarterly comparable value not provided |
| Operating costs | $145,130 | Quarterly comparable value not provided |
| Net income | $572,071 | Quarterly comparable value not provided |
| Basic and diluted net income per share | $(0.01) | Quarterly comparable value not provided |
| Net cash used in operating activities | $212,273 | Quarterly comparable value not provided |
The reported net income was generated by interest earned on Trust Account investments, partially offset by operating costs and $152,069 of income tax expense. After allocating Trust Account earnings attributable to redeemable shares, adjusted net loss available to common shares was $62,704.
The Company had no long-term debt, capital leases, operating leases or other long-term liabilities disclosed. Liquidity consisted primarily of $1.09 million held outside the Trust Account; substantially all Trust Account funds were restricted for a business combination or shareholder redemptions.
Material Changes Versus the Prior Comparable Period
- The filing does not provide a prior-year or prior-quarter statement of operations, so a clear comparable-period analysis of revenue, expenses, margins, net income or cash flow is not available.
- Cash outside the Trust Account declined by approximately $212,000 from December 31, 2019, consistent with reported operating cash use.
- Trust Account investments increased by approximately $869,000, reflecting interest income.
- Income taxes payable increased from $208,612 to $360,681, while accounts payable and accrued expenses decreased from $136,694 to $93,176.
- Shares subject to possible redemption declined modestly to 26,163,140 from 26,180,927, while non-redeemable Class A shares increased to 1,336,860 from 1,319,073.
Outlook, Risks, Contingencies and Unusual Items
- Management expects no operating revenue until, at the earliest, completion of an initial business combination. No specific transaction, financial guidance or target has been disclosed in the filing.
- The Company must complete a business combination by September 17, 2021. If it fails to do so, it must cease operations, redeem the public shares using Trust Account funds, and liquidate, subject to applicable law.
- Public shareholders may redeem their shares for a pro rata portion of the Trust Account upon completion of a business combination. The Company must generally acquire a target with an aggregate fair market value of at least 80% of Trust Account assets, excluding specified amounts.
- The $9.625 million deferred underwriting fee is payable only if a business combination is completed, subject to the underwriting agreement.
- The Sponsor may provide working capital loans, but is not obligated to do so. Up to $1.5 million of such loans may be convertible into warrants.
- If a business combination is not completed, the public warrants and private placement warrants may expire worthless, and public shareholders could receive less than the original $10.00 per-unit offering price.
- Future financing or equity issuance could materially dilute existing shareholders. The Company also identified risks associated with debt financing, redemption obligations, target-company due diligence and failure to complete a transaction.
- The COVID-19-related CARES Act was enacted during the quarter, but the filing does not identify a material financial impact from it.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. No legal proceedings were reported.
Important Facts for Investors to Verify
- Confirm that the filing belongs to Experience Investment Corp. rather than Strata Critical Medical, Inc.
- Verify the status, terms and deadline of any proposed or completed business combination after March 31, 2020.
- Assess the restricted nature of the $277.13 million Trust Account and the redemption rights attached to approximately 26.16 million public shares.
- Review the $9.625 million deferred underwriting obligation and conditions for its payment.
- Evaluate the limited unrestricted cash balance and whether additional Sponsor financing or transaction financing will be required.
- Review potential dilution from 6.875 million Founder Shares, public and private warrants, future equity issuance and any convertible working capital loans.
- Confirm subsequent events and any changes to the September 17, 2021 liquidation deadline, as the filing’s subsequent-event review identified no reportable items through issuance.