Business Context and Reporting Period
This Form 10-Q covers the quarter ended March 31, 2020. The filing entity is dMY Technology Group, Inc., a Delaware blank-check company, rather than Rush Street Interactive, Inc. The company was formed on September 27, 2019 to pursue a business combination, with an intended focus on mobile applications, consumer internet, and related software businesses with enterprise values of approximately $500 million to $1.5 billion.
The company had not commenced operating activities or generated operating revenue as of March 31, 2020. Its activities consisted primarily of formation, its February 25, 2020 initial public offering and the search for a prospective business combination.
Financial Highlights
| Metric | Three months ended March 31, 2020 |
|---|---|
| Operating revenue | $0 |
| General and administrative expense | $120,120 |
| Franchise tax expense | $50,500 |
| Loss from operations | $(170,620) |
| Trust-account investment income and gains | $520,454 |
| Income tax expense | $98,690 |
| Net income | $251,144 |
| Cash flow from operating activities | $(66,705) |
| Cash and cash equivalents | $1.46 million |
| Investments held in trust | $230.52 million |
| Total liabilities | $8.63 million |
| Deferred underwriting commissions | $8.05 million |
The reported net income was driven by interest, dividends and market-value gains on trust-account investments; it did not reflect operating profitability. Basic and diluted earnings per share were $0.02 for Class A common stock and $(0.02) for Class B common stock. A conventional operating margin is not meaningful because the company had no operating revenue.
The company had no long-term debt, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities disclosed, other than its $10,000 monthly administrative-services fee payable to the sponsor. The sponsor note, which had approximately $90,000 outstanding before the IPO, was repaid in full on March 19, 2020.
Material Changes Versus the Prior Comparable Period
- The company completed its IPO on February 25, 2020, selling 23 million units at $10.00 per unit and generating gross proceeds of $230.0 million.
- The underwriters exercised the over-allotment option in full, eliminating the potential forfeiture of up to 750,000 founder shares.
- Approximately $230.0 million was placed in the trust account; trust investments totaled $230.52 million at March 31, 2020.
- The sponsor purchased 6.6 million private-placement warrants for $6.6 million.
- Compared with December 31, 2019, cash increased from zero to $1.46 million, total assets increased from $73,356 to $232.31 million, and temporary equity for redeemable Class A shares increased to $218.68 million.
- The filing does not provide a prior-year comparable quarterly income statement or cash-flow statement; therefore, year-over-year changes in revenue, profit and margins are not available.
Guidance, Outlook, Risks and Unusual Items
- Management expected to use available funds for identifying and evaluating targets, due diligence, travel, and negotiating and consummating a business combination.
- The company was required to complete a business combination by February 25, 2022. If it failed to do so, it generally would liquidate and redeem the public shares using the trust-account balance, subject to applicable law and permitted deductions.
- Public shareholders could redeem their shares in connection with a business combination. At March 31, 2020, 21,868,007 Class A shares were classified as temporary equity and subject to possible redemption at $10.00 per share.
- The company must generally acquire a target or targets with an aggregate fair market value of at least 80% of the net assets held in the trust account, subject to the conditions described in the filing.
- Management believed liquidity and potential sponsor-related borrowing capacity would be sufficient through the earlier of a business combination or one year from the filing date. No working-capital loans were outstanding at March 31, 2020, and sponsor funding was not obligated.
- COVID-19 was identified as a material uncertainty that could impair the target search, negotiations, travel, financing, or completion of a business combination. The specific impact was not determinable at the reporting date, and no related financial-statement adjustment was recorded.
- Completion of a business combination could involve substantial dilution from additional equity, conversion of founder shares, warrants, or issuance of debt. Public warrants and private-placement warrants could expire worthless if no business combination occurred.
- Deferred underwriting commissions of $8.05 million would become payable from trust-account funds only if a business combination were completed.
- The company qualified as an emerging growth company and elected to use the extended transition period for new accounting standards, which may reduce comparability with certain public companies.
Important Facts for Investors to Verify
- Verify the apparent entity mismatch: the supplied filing is for dMY Technology Group, Inc., not Rush Street Interactive, Inc.
- Confirm whether a subsequent filing documents the target identification, business combination, or any change in corporate name and operating business.
- Review the trust-account balance, redemption terms, liquidation deadline, and the conditions governing release of trust funds.
- Assess dilution from 5.75 million founder shares, 18.1 million total public and private warrants, and any additional securities issued in a transaction.
- Review sponsor-related arrangements, including the $10,000 monthly administrative fee, potential working-capital loans, indemnification obligations, and registration rights.
- Monitor the effect of COVID-19 and broader market conditions on the ability to complete a qualifying business combination before the deadline.