Filing summary
Entity and period: This is VPC Impact Acquisition Holdings’ unaudited Form 10-Q for the quarter ended March 31, 2021, filed May 24, 2021. Although the request identifies Bakkt, the filer was a blank-check company pursuing a merger with Bakkt Holdings, LLC; these are not Bakkt’s standalone operating results.
Financial results and position
| Metric | Quarter ended / as of March 31, 2021 |
|---|---|
| Operating revenue | None; the company had not commenced operations and expected no operating revenue before a business combination. |
| Formation and operating costs | $2.393 million |
| Net loss | $33.672 million, including a $31.292 million noncash loss from remeasurement of warrant liabilities |
| Trust account interest and other income | $9,704 and $4,476, respectively |
| Operating cash flow | $(176,000); ending cash outside the trust account was $1.002 million |
| Trust account | $207.386 million, invested in money market funds holding primarily U.S. Treasury securities |
| Current liabilities / working capital | Current liabilities were $3.114 million; management reported a working capital deficit of approximately $1.9 million. |
| Warrant liabilities | $53.805 million |
| Debt | No long-term debt or outstanding working capital loans reported |
The filing presents no prior-year comparable income statement or cash-flow period. Compared with December 31, 2020, total assets were broadly stable, while warrant liabilities rose from $22.513 million to $53.805 million and redeemable Class A shares declined from $173.122 million to $139.451 million. The quarter’s net loss was largely driven by warrant fair-value accounting, not operating activity.
Transaction, outlook, and risks
- On January 11, 2021, the company agreed to combine with Bakkt Holdings, LLC. The proposed transaction contemplated 208.2 million Bakkt Opco units and matching non-economic voting Class V shares for Bakkt equity holders, plus a $325 million PIPE investment. Closing remained subject to conditions and shareholder approval.
- Assuming no public-share redemptions, the filing projected that the public company would own approximately 22% of Bakkt Opco units and act as its managing member. The transaction had not closed as of the reporting period.
- The company expected available working capital and borrowing capacity to cover needs through the earlier of a business combination or one year from filing, but cautioned that cost overruns could leave it short of funds. Sponsor-affiliated parties could provide loans but were not obligated to do so.
- The company had until September 25, 2022 to complete a business combination; otherwise, it generally had to redeem public shares and liquidate. Warrants could expire worthless if no combination was completed.
- COVID-19 could adversely affect the company’s financial position or target search, but the specific impact was not determinable. The filing said risk factors were unchanged from its May 21, 2021 Form 10-K/A.
- Management reported disclosure controls were ineffective due to a material weakness associated with the restatement described in the 10-K/A. It planned enhanced accounting research and communication, but gave no assurance remediation would succeed. Management nevertheless concluded the quarter’s financial statements fairly presented the company’s position and results.
Most important facts to verify
- Confirm the proposed Bakkt transaction’s closing status, final terms, shareholder redemptions, and PIPE funding; this 10-Q describes a pending transaction, not completed results.
- Review the 10-K/A and related disclosures for the restatement, material weakness, and progress on remediation.
- Assess the warrant-liability valuation and its effect on reported earnings; the filing identifies fair-value estimates as a significant accounting estimate.
- Check whether cash outside the trust account and any available sponsor financing were sufficient to fund transaction costs and operations.
- Review the business-combination deadline, redemption and liquidation terms, and potential dilution from warrants, founder shares, and the PIPE.