Holley Inc. (formerly Empower Ltd.) — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. The financial statements cover the pre-combination SPAC, not Holley’s operating business. Holley’s business combination closed July 16, 2021, after the reporting date; the transaction is to be accounted for as a reverse recapitalization.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | None; the company reported no operations or operating revenue through June 30. | |
| Formation and operating costs | $1.66 million | $4.59 million |
| Net loss | $12.86 million | $15.88 million |
| Basic and diluted loss per non-redeemable share | $(1.35) | $(1.70) |
| Operating cash flow | Six-month cash used: $376,620 |
The losses largely reflect non-cash fair-value charges: warrant liability expense of $9.71 million for Q2 and $10.14 million year to date, plus forward purchase agreement liability expense of $1.50 million for Q2 and $1.20 million year to date. No operating margins are available because the company had no revenue.
At June 30, cash outside the trust was $704,009; trust cash and marketable securities were $250.11 million. Total assets were $251.08 million, total liabilities $41.50 million, and shareholders’ equity $5.00 million. Class A shares subject to possible redemption, shown as temporary equity, totaled $204.57 million. The filing reported no long-term debt or lease obligations at quarter-end. It said cash outside the trust was sufficient through the July 16 closing; afterward management expected liquidity from cash on hand, operations, and borrowings under a revolving credit facility, without giving a facility amount here.
Changes and significant events
- There is no prior-year comparable income statement in the filing; results reflect the SPAC’s formation, IPO, and business-combination activities. Compared with December 31, 2020, accrued expenses rose to $4.27 million from $174,000, warrant liabilities rose to $25.23 million from $15.09 million, and the forward purchase liability increased to $3.25 million from $2.05 million.
- At the July 16 closing, the company completed the business combination, changed its name to Holley Inc., and domesticated as a Delaware corporation. The transaction included a 24 million-share PIPE at $10 per share ($240 million) and a forward purchase of 5 million units for $50 million, as described in the filing.
- The filing records a material weakness in internal controls over accounting for warrants and the forward purchase agreement, following a restatement to reclassify those instruments as liabilities. Disclosure controls were deemed ineffective as of June 30. Management described remediation efforts but said it could not assure they would be effective.
Outlook, risks, and contingencies
Management stated that it expected post-combination liquidity needs to be funded by cash, operating cash generation, and revolving-credit borrowings. This SPAC-period filing provides no Holley operating guidance or revenue forecast. The company noted that COVID-19 could negatively affect its financial position, results, or business-combination search, but that the impact was not determinable. Warrant and forward purchase liabilities are remeasured at fair value, with changes flowing through earnings; some valuations use Level 3 inputs. No legal proceedings were reported.
Important facts for investors to verify
- Review the subsequent business-combination filings for final transaction proceeds, redemption levels, share count, debt paydown, and revolving-credit terms.
- Check Holley’s post-combination operating results and guidance separately; this 10-Q contains no operating-company revenue or margin data.
- Monitor remediation of the material weakness and any further accounting or control disclosures.
- Assess warrant dilution, earn-out share conditions, and the effect of fair-value changes; the filing describes founder-share earn-outs tied to $13 and $15 share-price targets.
- Reconcile the filing’s stated post-closing liquidity expectations with actual cash, debt, and borrowing availability in subsequent reports.