Business Context and Reporting Period
Filing mismatch: The supplied Form 10-Q is for Software Acquisition Group Inc., not Curiositystream Inc. It covers the quarter ended March 31, 2020 and was filed May 15, 2020.
Software Acquisition Group was a blank-check company formed to complete a merger, acquisition, or similar business combination. As of March 31, 2020, it had not commenced operating activities, generated no operating revenue, and had not selected or substantively engaged with a specific target.
Key Financial Metrics
| Metric | Three months ended March 31, 2020 |
|---|---|
| Operating revenue | $0 |
| Operating costs | $238,523 |
| Interest income | $482,942 |
| Income before taxes | $244,419 |
| Income tax provision | $51,328 |
| Reported net income | $193,091 |
| Adjusted loss attributable to non-redeemable common shares | $164,672 |
| Basic and diluted reported EPS | $(0.04) |
| Net cash used in operating activities | $289,812 |
| Cash outside Trust Account | $803,596 |
| Marketable securities in Trust Account | $150,202,852 |
| Total liabilities | $5,430,475 |
| Deferred underwriting fee payable | $5,232,500 |
The Trust Account consisted substantially of money-market investments holding U.S. Treasury securities. No long-term debt, capital lease obligations, operating lease obligations, or off-balance-sheet arrangements were reported.
Material Changes Versus Prior Comparable Period
The filing presents March 31, 2020 balance-sheet amounts alongside December 31, 2019 amounts, but does not provide a comparable prior-year quarterly income statement or cash-flow period.
- Cash outside the Trust Account decreased from $1,093,408 to $803,596, primarily reflecting quarterly operating cash usage.
- Trust Account investments increased from $149,719,910 to $150,202,852 due to investment income.
- Shares subject to possible redemption increased in carrying value from $140,527,112 to $140,720,206.
- Retained earnings increased from $7,341 to $200,432, reflecting reported quarterly net income, partially offset by the change in redemption value recorded in additional paid-in capital.
- Income taxes payable increased from $1,952 to $53,280.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expected no operating revenue until after completion of a business combination.
- The company intended to use substantially all Trust Account funds for a business combination, subject to permitted tax payments and deferred underwriting commissions.
- If no business combination was completed by May 22, 2021, the company was required to cease operations, redeem public shares using the Trust Account, and liquidate, subject to creditor claims and applicable law.
- Public stockholders could redeem shares for a pro rata portion of the Trust Account upon completion of a business combination. The company was required to have at least $5,000,001 of net tangible assets at closing.
- The Sponsor agreed to support certain shortfalls in the Trust Account caused by third-party claims, but the filing stated that the Sponsor’s ability to satisfy this obligation had not been independently verified.
- The Sponsor paid or was to be paid $10,000 per month for office, utilities, and administrative support until the earlier of a business combination or liquidation.
- The deferred underwriting fee of $5,232,500 would become payable only if a business combination was completed.
- The company disclosed risks related to failure to complete a transaction, dilution from additional equity issuance, potential debt financing, redemption activity, and possible warrant expiration without value.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting. No material changes to previously disclosed risk factors were reported.
- The CARES Act was not expected to have a significant effect on the company’s financial position or operations.
Most Important Facts to Verify
- Confirm that this filing belongs to Software Acquisition Group Inc. and not Curiositystream Inc.
- Verify whether a business combination was completed before the May 22, 2021 deadline and how the Trust Account and public shares were ultimately handled.
- Reconcile the reported $193,091 net income with the $(0.04) EPS, which reflects allocation of Trust Account income to redeemable shares.
- Assess the availability and adequacy of the $803,596 held outside the Trust Account to fund operating and transaction expenses.
- Review the deferred underwriting fee, Sponsor indemnification arrangements, potential working-capital loans, and redemption provisions.
- Confirm the status and value of the public and private warrants, including their potential dilution and expiration terms.