Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended September 30, 2019, filed November 13, 2019. The filing identifies the registrant as Experience Investment Corp., not Strata Critical Medical, Inc. The company was incorporated on May 24, 2019 as a blank-check company formed to pursue a merger, acquisition, or similar business combination, with an intended focus on the travel and leisure industry. It had not commenced operating activities as of September 30, 2019.
The financial statements are unaudited and cover the three months ended September 30, 2019 and the period from inception through September 30, 2019. There is no meaningful prior comparable operating period because the company was newly formed.
Financial Results and Key Metrics
- Revenue: None. The company does not expect operating revenue until after completing a business combination.
- Net income: $99,139 for the quarter and $98,139 from inception through September 30, 2019.
- Interest income: $168,280, generated by marketable securities held in the Trust Account.
- Operating and formation costs: $43,053 for the quarter and $44,053 from inception.
- Income taxes: Provision of $26,088.
- Earnings per share: Basic and diluted net income per share was reported as $(0.01), after excluding interest income attributable to redeemable public shares.
- Cash flow: Net cash used in operating activities was $1,297. Investing activities used $275.0 million to fund the Trust Account, while financing activities provided $276.8 million. Ending cash outside the Trust Account was $1.82 million.
- Assets and liquidity: Total assets were $277.0 million, including $275.17 million of marketable securities in the Trust Account and $1.82 million of cash outside the Trust Account.
- Debt and liabilities: Total liabilities were $9.98 million, including a $9.625 million deferred underwriting fee payable and a $231,366 related-party promissory note. The promissory note was repaid in October 2019.
- Redeemable shares: 26,187,385 Class A shares were classified as subject to possible redemption at a value of $262.0 million.
- Trust funding: The company completed its initial public offering of 27.5 million units at $10.00 per unit, generating $275.0 million of gross proceeds, and sold 5.0 million private placement warrants for $7.5 million.
- Margins: Operating and revenue margins are not meaningful because the company had no operating revenue and was still a pre-combination shell company.
Material Changes Versus the Prior Comparable Period
No meaningful year-over-year or sequential comparison is provided because the company was incorporated on May 24, 2019 and completed its initial public offering on September 17, 2019. The principal developments during the reported period were the initial public offering, establishment of the Trust Account, issuance of private placement warrants, and commencement of the search for a target business.
- The underwriters partially exercised their over-allotment option for 2.5 million units; the remaining 1.25 million units were forfeited.
- The company recorded a $9.625 million deferred underwriting fee payable, which becomes payable only if a business combination is completed, subject to the underwriting agreement.
- The company forfeited 312,500 founder shares following the partial exercise of the over-allotment option.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The company intends to use substantially all Trust Account funds to complete a business combination. The target must generally have an aggregate fair market value of at least 80% of the Trust Account assets, excluding deferred underwriting commissions and taxes payable on Trust Account interest.
- The company must complete a business combination by September 17, 2021. If it does not, it must cease operations, redeem the public shares using Trust Account funds, and liquidate, subject to applicable law.
- Public stockholders may redeem their shares for their pro rata portion of the Trust Account in connection with a business combination. The company must maintain at least $5,000,001 of net tangible assets immediately before or upon completion of a business combination.
- There is no assurance that a business combination will be completed. If the company liquidates, public warrants may expire worthless and public shareholders could receive less than the $10.00 initial offering price per unit.
- Future business combinations may require additional equity or debt financing, which could dilute existing investors, increase leverage, or impose restrictive covenants.
- The Sponsor may provide working capital loans, potentially up to $1.5 million convertible into warrants, although no such working capital loan terms had been established as of the filing date.
- The company had no long-term debt, lease obligations, off-balance-sheet arrangements, or legal proceedings reported as of September 30, 2019.
- Management stated that disclosure controls and procedures were effective and that there were no material changes in internal control over financial reporting.
- Market risk was considered limited because Trust Account investments consisted primarily of short-term U.S. Treasury securities or qualifying money market funds.
Most Important Facts for Investors to Verify
- Verify the registrant’s identity: the supplied filing is for Experience Investment Corp., while the request metadata names Strata Critical Medical, Inc.
- Confirm the status and terms of any business combination, including the September 17, 2021 deadline and applicable shareholder redemption rights.
- Reconcile the $275.17 million Trust Account balance with public shares subject to redemption and the $9.625 million deferred underwriting fee.
- Review dilution from founder shares, public warrants, private placement warrants, potential working capital warrants, and any future financing.
- Confirm repayment of the $231,366 related-party promissory note in October 2019 and identify any subsequent related-party or working capital loans.
- Assess whether the $1.82 million of cash outside the Trust Account is sufficient to fund operating and transaction expenses before a business combination.