Business context and reporting period
This is Pivotal Investment Corporation II’s unaudited Form 10-Q for the quarter ended March 31, 2020, filed May 14, 2020. The filing identifies the registrant as a blank-check company, not Spruce Power Holding Corp.; verify that this is the intended filing. The company had not commenced operating activities and was seeking a business-combination target, with a stated focus on North American businesses affected by digital technology and changing distribution and consumer behavior.
Financial results and liquidity
- Revenue: None reported; management did not expect operating revenue before a business combination.
- Quarterly result: Net income was $511,389, comprising $778,592 of trust-account interest, $131,264 of operating and formation costs, and $135,939 of income-tax expense. Adjusted net loss attributable to shares not subject to possible redemption was $50,268; reported basic and diluted loss per share was $0.01.
- Cash flow: Operating activities used $179,018; $520,032 was withdrawn from the trust account for franchise and income taxes. Cash increased $341,014 to $965,957.
- Assets and liquidity: Total assets were $233.2 million, including $232.2 million in trust-account securities and $1.0 million of cash and other current assets. Trust assets included approximately $2.178 million of interest income.
- Liabilities and equity: Total liabilities were $8.3 million, including an $8.05 million deferred underwriting fee; there was no long-term debt reported. Class A shares subject to possible redemption were presented as temporary equity at $219.9 million. Stockholders’ equity was $5.0 million.
- Margins: Not meaningful for this pre-combination company, which had no operating revenue.
Changes versus prior periods
The income statement compares Q1 2020 with only the period from the company’s March 20, 2019 inception through March 31, 2019, so it is not a comparable prior-year quarter. The company reported a $375 loss in that inception period. Against December 31, 2019, trust securities increased from $231.9 million to $232.2 million and cash from $624,943 to $965,957; current liabilities rose from $214,393 to $237,504. Trust withdrawals for taxes and accrued tax liabilities are among the reported period movements.
Outlook, risks and unusual items
- The company had until January 16, 2021 to complete a business combination unless stockholders approved an extension. If it failed, it would wind up and redeem public shares from the trust, subject to applicable terms; warrants could expire worthless.
- A sponsor-affiliated managing member had agreed to consider purchasing up to $150 million of securities in connection with a combination. The amount and securities were not set, and the investor could decline, requiring alternative financing.
- The company reported $965,957 of cash outside the trust and said it did not expect to need additional funds for pre-combination expenditures, but cautioned that cost overruns or transaction needs could require financing. No assurance was given that a combination could be completed.
- The $8.05 million deferred underwriting fee is payable upon a completed combination and is forfeited if no combination is completed, subject to the underwriting agreement.
- Management reported no off-balance-sheet arrangements and no material market or interest-rate risk. It concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
- The filing reported no subsequent events requiring adjustment or disclosure. It did not provide a specific assessment of COVID-19’s effect on the company’s search or transaction prospects.
Key facts for investors to verify
- Confirm the registrant and filing identity: this source is Pivotal Investment Corporation II, although the request names Spruce Power Holding Corp.
- Check whether a business combination was pursued, completed, or extended before the January 16, 2021 deadline, and the resulting redemption and financing terms.
- Verify trust-account balances, taxes paid or payable, and the status of the deferred underwriting fee.
- Review the conditions and actual availability of the potential $150 million forward purchase and any alternative financing.
- Assess potential dilution from founder shares, public and private warrants, and any securities issued in a transaction.