Business Context and Reporting Period
DMY Technology Group, Inc. filed this unaudited Form 10-Q for the quarter ended June 30, 2020. Although the request identifies Rush Street Interactive, Inc., the filing is for DMY Technology Group, Inc., a special purpose acquisition company (SPAC) that had not commenced operating activities. On July 27, 2020, after quarter-end, DMY entered into a Business Combination Agreement with Rush Street Interactive, LP and related parties.
DMY was formed to pursue a business combination, focusing primarily on mobile application and consumer internet companies with anticipated enterprise values of approximately $500 million to $1.5 billion. It completed its initial public offering on February 25, 2020.
Financial Metrics
| Metric | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 |
|---|---|---|
| Operating revenue | None | None |
| General and administrative expense | $446,541 | $566,661 |
| Franchise tax expense | $50,000 | $100,500 |
| Gain on Trust Account investments, dividends and interest | $120,572 | $641,026 |
| Net loss | $390,789 | $139,645 |
| Net loss per Class B share | $0.08 | $0.10 |
| Net cash used in operating activities | Not separately provided | $474,894 |
- Cash outside the Trust Account was $965,388 at June 30, 2020; reported working capital was approximately $603,000.
- Investments held in the Trust Account totaled $230.6 million, primarily in U.S. government securities, cash and cash equivalents.
- Class A shares subject to possible redemption totaled $218.2 million, representing 21,819,444 shares redeemable at approximately $10.00 per share.
- Total liabilities were $8.7 million, including $8.05 million of deferred underwriting commissions payable only if a business combination is completed. The filing reports no long-term debt or outstanding Working Capital Loans.
- Stockholders’ equity was $5.0 million at June 30, 2020.
- Net cash provided by financing activities was $231.4 million, primarily from the $230.0 million IPO and $6.6 million private placement of warrants. Net cash used in investing activities was $230.0 million for the Trust Account deposit.
Material Changes Versus the Prior Comparable Period
- There is no meaningful operating-year-over-year comparison because DMY was incorporated on September 27, 2019 and had no operations or revenue. The filing presents only 2020 quarterly and year-to-date activity.
- Compared with December 31, 2019, assets increased from $73,356 to $231.9 million following the February 2020 IPO and Trust Account funding.
- The IPO generated $230.0 million of gross proceeds and the Sponsor’s private placement generated $6.6 million. Offering costs were approximately $13.2 million, including $8.05 million of deferred underwriting commissions.
- The underwriters exercised their over-allotment option in full on February 25, 2020; consequently, the 5.75 million Founder Shares were no longer subject to forfeiture.
- The quarter-end filing disclosed the July 27, 2020 Business Combination Agreement with Rush Street Interactive, LP, which was the principal subsequent event.
Guidance, Outlook, Risks and Unusual Items
- Management stated that DMY would not generate operating revenue until after completing a business combination and expected continuing public-company, diligence and transaction expenses.
- DMY was required to complete a business combination by February 25, 2022. If it failed to do so, it would liquidate, redeem the public shares using the Trust Account, and the warrants could expire worthless.
- Public stockholders could redeem their shares in connection with a business combination, subject to applicable limitations. Redemptions and any additional equity or debt financing could materially affect ownership, leverage and dilution.
- Management believed available working capital and potential Sponsor or affiliate financing would be sufficient through the earlier of a business combination or one year from filing. Such financing was discretionary and not committed.
- COVID-19 was identified as a potential adverse factor affecting DMY’s financial position, results and search process; the specific impact was not determinable and no related adjustment was recorded.
- The filing reports no material changes to previously disclosed risk factors, no legal proceedings, no off-balance-sheet arrangements and no defaults on senior securities.
- DMY paid its Sponsor $10,000 per month for office, secretarial and administrative services and incurred $30,000 in the second quarter and $40,000 year to date for those services.
Investor Verification Items
- Confirm that the filing entity is DMY Technology Group, Inc., not an operating Rush Street Interactive entity, and review the subsequent Business Combination Agreement and its final transaction terms.
- Verify the treatment and availability of the $230.6 million Trust Account, including redemption rights and the $8.05 million deferred underwriting commission.
- Assess the potential dilution from 5.75 million Founder Shares, 18.1 million total public and private warrants, and any equity issued in the proposed business combination.
- Review the target company’s operating financial statements, valuation, transaction consideration, financing arrangements and post-closing ownership in the subsequent merger filings.
- Evaluate the February 25, 2022 liquidation deadline, Sponsor indemnification arrangements and the possibility that warrants could expire worthless if no transaction closes.