GRID DYNAMICS HOLDINGS, INC. quarterly report, Q2 FY2019

Business context and reporting period

Important entity mismatch: The request identifies GRID DYNAMICS HOLDINGS, INC., but the supplied Form 10-Q is for ChaSerg Technology Acquisition Corp. (CIK/company identity should be verified before relying on this summary). It is a blank-check company formed to pursue a business combination, with a stated focus on technology. The filing covers the quarter and six months ended June 30, 2019; the financial statements are unaudited. The company had not begun operations and reported no operating revenue.

Key financial metrics

MetricThree months ended June 30, 2019Six months ended June 30, 2019
Operating revenueNoneNone
Trust-account interest income$1,317,860$2,617,791
General and administrative expenses$278,012$595,223
Income-tax provision$266,143$528,629
Net income$773,705$1,493,939

Reported income reflects investment interest, not operating performance; operating margins are not meaningful for this pre-combination SPAC. Six-month operating cash use was $1,134,084; investing cash provided $782,403, including withdrawals from the trust account. Cash declined by $351,681 to $659,543 outside the trust account. At June 30, trust assets totaled $222,993,855, primarily U.S. Treasury bills. Current liabilities were $415,607; total liabilities were $8,115,607, including $7.7 million in deferred underwriting fees payable only if a business combination closes. The filing reports no long-term debt. Stockholders’ equity was $5,000,002, with $210,712,990 of redeemable shares classified outside equity as temporary equity.

Changes versus comparable periods

The filing reports $773,705 net income for the second quarter and $1,493,939 for the first half of 2019. The cited 2018 comparison is only the period from inception on May 21 through June 30, 2018, when the company recorded a $1,575 net loss; it is not a comparable full quarter or six-month period. From December 31, 2018 to June 30, 2019, outside-trust cash fell from $1,011,224 to $659,543, while trust assets rose from $221,158,467 to $222,993,855. The company withdrew $782,403 of trust interest during the six months to pay franchise and income taxes.

Outlook, risks and unusual items

  • The company had until April 9, 2020 to complete a business combination. If it failed to do so, it would wind up and redeem public shares from the trust, subject to the filing’s terms; warrants would expire worthless.
  • Management said it expected no need to raise additional funds for current expenditures, but warned that underestimated search and transaction costs or significant redemptions could require financing. Sponsor-related working-capital loans may be available but are not committed; up to $1.5 million may be convertible into units at the lender’s option.
  • Management disclosed substantial doubt about the company’s ability to continue as a going concern because of mandatory liquidation if no combination is completed by the deadline.
  • Business-combination financing could dilute shareholders or add debt and related repayment, covenant, and liquidity risks. The filing gives no earnings or revenue guidance for a post-combination business.
  • Management reported no material changes to the risk factors in the 2018 Form 10-K, no legal proceedings, and no subsequent events requiring adjustment or disclosure. Disclosure controls were assessed as effective, with no material change in internal control reported.

Important facts for investors to verify

  • Confirm the filing’s registrant and period: this is ChaSerg Technology Acquisition Corp.’s 2019 Q2 filing, not a Grid Dynamics filing.
  • Verify business-combination status, deadline extensions or later developments, and the amount and availability of trust funds and outside-trust cash.
  • Review redemption, liquidation, warrant, deferred-underwriting-fee, and potential sponsor-loan terms and their effects on remaining shareholders.
  • Assess the going-concern disclosure and whether the company had adequate outside-trust funds to cover search and transaction expenses.