Form
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR |
For the transition period from to
ACAMAR PARTNERS ACQUISITION CORP.
Delaware | 83-2456129 | ||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification |
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611 Bainbridge Street, Suite 100 | Richmond | Virginia | 23224 | ||||||||||
(Address of principal executive offices) |
number, including area code
:(804) 728-3833Title of | Trading Symbol(s) | Name of | ||||||||
Class A common stock, par value $0.0001 per share | LOTZ | The Nasdaq | ||||||||
Redeemable | LOTZW | The Nasdaq |
Securities registered pursuant to Section 12(g) of the Act: None
Yes
x No ¨Large accelerated filer | ¨ | Accelerated filer | x | ||||||||||||||
Non-accelerated filer | ¨ | Smaller reporting company | ☐ | ||||||||||||||
Emerging growth company | x |
Act
☐As of June 30, 2019, the last day of the registrant’s most recently completed second fiscal quarter, the
As$334.9 million. Shares of March 26, 2020, there were 30,557,322common stock beneficially owned by each executive officer, director, and holder of more than 10% of our common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
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CAUTIONARY NOTE REGARDING
STATEMENTS; MARKET, RANKING AND OTHER INDUSTRY DATA
· | manage our business through and following the COVID-19 pandemic and the related semi-conductor chip and labor shortages; |
· | achieve revenue growth and profitability in the future; |
· | innovate and expand our technological capabilities; |
· | effectively consolidate and optimize our reconditioning operations; |
· | grow existing vehicle sourcing accounts and key vehicle channels; |
· | add new corporate vehicle sourcing accounts and increase consumer sourcing; |
· | have sufficient and suitable inventory for resale; |
· | increase our service offerings and price optimization; |
· | effectively promote our brand and increase brand awareness; |
· | expand our product offerings and introduce additional products and services; |
· | improve future operating and financial results; |
· | acquire and protect intellectual property; |
· | attract, train and retain key personnel, including sales and customer service personnel; |
· | acquire and integrate other companies and technologies; |
· | remediate material weaknesses in internal control over financial reporting; |
· | comply with laws and regulations applicable to our business; |
· | successfully defend litigation; and |
· | successfully deploy the proceeds from the merger pursuant to that certain Agreement and Plan of Merger, dated as of October 21, 2020 (as amended by Amendment No. 1, dated December 16, 2020), by and among CarLotz, Inc. (f/k/a Acamar Partners Acquisition Corp.), Acamar Partners Sub, Inc., a wholly owned subsidiary of CarLotz, Inc., and CarLotz Group, Inc. (f/k/a CarLotz, Inc.) (“Former CarLotz”), pursuant to which Acamar Partners Sub, Inc. merged with and into Former CarLotz, with Former CarLotz surviving as the surviving company and as a wholly owned subsidiary of CarLotz, Inc. (the “Merger”). |
· | risks of the automotive and used vehicle industries, including those related to the ongoing semi-conductor chip and labor shortages; |
· | litigation, complaints, or adverse publicity; |
· | the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability, including, in each case, as a result of the ongoing COVID-19 pandemic; |
· | new entrants in the consignment-to-retail used vehicle business; |
· | technological disruptions, privacy or data breaches, the loss of data or cyberattacks; and |
· | the ability to compete successfully with new and existing market participants. |
These and other factors that could cause actual results to differ from those implied by the |
The forward-looking statements containedincluded in this reportAnnual Report on Form 10-K are basedmore fully described in “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. The risks described in “Item 1A. Risk Factors” are not exhaustive. Other sections of this Annual Report on Form 10-K describe additional factors that could adversely affect our business, financial condition and results of operations.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.
Unless otherwise stated in this report, or the context otherwise requires, references to:
Introduction
We are an early stage blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this report as our initial business combination.
We seek to capitalize on the substantial deal sourcing, investing and operating expertise of our management team to select, acquire and help operate high growth potential businesses in North America or Western Europe, with a focus on the consumer and retail sectors, including but not limited to businesses operating in travel retail, food and beverage, luxury goods, fashion, lifestyle and leisure products and services, and consumer branded products, although we may pursue acquisition opportunities in other regions or sectors.
Business Strategy
Our acquisition and value creation strategy is to identify, acquire and build a company in the consumer and retail sectors that stands to benefit from our management team’s experience and operating capabilities. We target sub-sectors of consumer and retail, including, but not limited to, travel retail, food and beverage, luxury goods, fashion, lifestyle and leisure products and services, and consumer branded products.
Investment Criteria
We have developed the following, non-exclusive investment criteria and guidelines that we use to identify and evaluate the target businesses. We seek to acquire a business that has some or all of the following characteristics:
These criteria and guidelines are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based to the extent relevant, on these general criteria and guidelines as well as on other considerations, factors and criteria that our board of directors may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our stockholder communications related to our initial business combination, which, as discussed in this report, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.
Our Acquisition Process
In evaluating a prospective target business, we conduct a thorough due diligence review which encompasses, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal and otherupon information which will be made available to us.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a business that is affiliated with our sponsor, officers or directors, we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view.
Members of our management team directly or indirectly own our securities, and accordingly, they may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
Certain of our officers and directors presently have, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties to one or more other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entities. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for one or more entities to which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations and duties to present such business combination opportunity to such entities first, and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us.
We do not believe, however, that the fiduciary, contractual or other obligations or duties of our officers or directors will materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our sponsor, officers and directors have agreed, pursuant to a written agreement, not to participate in the formation of, or become an officer or director of, any other special purpose acquisition company with a class of securities registered under the Exchange Act until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination by February 26, 2021.
Status as a Public Company
We believe our structure makes us an attractive business combination partner to target businesses. As an existing public company, we offer target businesses an alternative to the traditional initial public offering through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following February 26, 2024, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
Financial Position
With funds available for a business combination in the amount of $299,145,312 (as of December 31, 2019) assuming no redemptions and after payment of $10,695,063 associated with deferred underwriter fees, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering and the sale of the private placement warrants, our capital stock, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemption of our public shares, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds in connection with the completion of our initial business combination through a private offering of equity securities or debt securities or loans, and we may effectuate our initial business combination using the proceeds of such offerings or loans rather than using the amounts held in the trust account.
In the case of an initial business combination funded with assets other than the trust account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by applicable law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.
Selection of a Target Business and Structuring of our Initial Business Combination
The Nasdaq listing rules require that our initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, with respect to the satisfaction of such criteria. We do not currently intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination, although there is no assurance that will be the case. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be valued for purposes of the 80% of net assets test. There is no basis for investors to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management endeavors to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective target business, we conduct a thorough due diligence review which encompasses, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information which will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Our amended and restated certificate of incorporation requires the affirmative vote of a majority of our board of directors, which must include a majority of our independent directors and the two director designees of our sponsor, Juan Carlos Torres Carretero (our Chairman) and Luis Ignacio Solorzano Aizpuru (our Chief Executive Officer), to approve our initial business combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business.
Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of diversification may:
Limited Ability to Evaluate the Target’s Management Team
Although we closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is highly unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following our initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders may not have the Ability to Approve our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by applicable law or stock exchange rule, or we may decide to seek stockholder approval for business or other reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
Under Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
The decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval is not required by law will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a variety of factors, including, but not limited to:
Permitted Purchases of our Securities
In the event we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or any of their respective affiliates may purchase public shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares or warrants such persons may purchase. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. In the event our initial stockholders, directors, officers, advisors or any of their respective affiliates determine to make any such purchases at the time of a stockholder vote relating to our initial business combination, such purchases could have the effect of influencing the vote necessary to approve such transaction. None of the funds in the trust account will be used to purchase public shares in such transactions. If they engage in such transactions, they will be restricted from making any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We have adopted an insider trading policy which requires insiders to (1) refrain from purchasing securities during certain blackout periods and when they are in possession of any material non-public information and (2) to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.
In the event that our sponsor, directors, officers, advisors or any of their respective affiliates purchase public shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights or submitted a proxy to vote against our initial business combination, such selling stockholders would be required to revoke their prior elections to redeem their shares and any proxy to vote against our initial business combination. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
The purpose of such purchases could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of our initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our common stock may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors, advisors and/or any of their respective affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors, advisors or any of their respective affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors, advisors or any of their respective affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination. Such persons would select the stockholders from whom to acquire shares based on the number of shares available, the negotiated price per share and such other factors as any such person may deem relevant at the time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. Our sponsor, officers, directors, advisors or any of their respective affiliates will purchase shares only if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or any of their respective affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or any of their respective affiliates will be restricted from making purchases of common stock if such purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act.
Redemption Rights for Public Stockholders Upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of common stock upon the completion of our initial business combination at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares, subject to the limitations described herein. At completion of the business combination, we will be required to purchase any public shares properly delivered for redemption and not withdrawn. The amount in the trust account as of December 31, 2019 is approximately $10.14 per public share. The per share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our initial stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination either: (1) in connection with a stockholder meeting called to approve the business combination; or (2) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement. Under the Nasdaq listing rules, asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically require stockholder approval. If we structure a business combination transaction with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed business combination. We currently intend to conduct redemptions pursuant to a stockholder vote unless stockholder approval is not required by applicable law or stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we are required to comply with such rules.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:
Upon the public announcement of our initial business combination, we and our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 upon consummation of our initial business combination (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:
We expect that a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our Nasdaq listing or Exchange Act registration.
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders, officers and directors will count towards this quorum and have agreed to vote any founder shares and any public shares held by them in favor of our initial business combination. These quorum and voting thresholds and agreements, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction. In addition, our initial stockholders have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of a business combination.
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 upon consummation of our initial business combination (so that we do not then become subject to the SEC’s “penny stock” rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to our initial business combination. For example, the proposed business combination may require: (1) cash consideration to be paid to the target or its owners; (2) cash to be transferred to the target for working capital or other general corporate purposes; or (3) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation on Redemption upon Completion of our Initial Business Combination if we seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 10% of the shares sold in our initial public offering, without our prior consent, which we refer to as the “Excess Shares.” We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our sponsor or its affiliates to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 10% of the shares sold in our initial public offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our sponsor or its affiliates at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 10% of the shares sold in our initial public offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, rather than simply voting against the initial business combination at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two business days prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through The Depository Trust Company’s DWAC (Deposit/ Withdrawal At Custodian) System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until February 26, 2021.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have until February 26, 2021 to complete our initial business combination. If we are unable to complete our initial business combination within such period, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the applicable time period.
Our initial stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination by February 26, 2021. However, if our sponsor or any of our officers and directors acquires public shares after, it will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted applicable time period.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by February 26, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 upon consummation of our initial business combination (so that we do not then become subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the $1,600,833 of proceeds held outside the trust account (as of December 31, 2019), although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our initial public offering and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account and any tax payments or expenses for the dissolution of the trust, the per share redemption amount received by stockholders upon our dissolution would be $10.00. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per share redemption amount received by stockholders will not be substantially less than $10.00. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders (except for the independent registered public accounting firm), there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. In order to protect the amounts held in the trust account, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the trust account as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
In the event that the proceeds in the trust account are reduced below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the trust account aswe have not sought trademark registrations outside of the date of the liquidation of the trust account, if less than $10.00 per public share is then held in the trust account due to reductions in the value of the trust assets, in each case net of the amount of interest whichUnited States. We may therefore be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim,protect certain of our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in certain instances. For example, the cost of such legal action may be deemed by the independent directors to be too high relative to the amount recoverable or the independent directors may determine that a favorable outcome is not likely. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per share redemption price will not be substantially less than $10.00 per share.
We seek to reduce the possibility that our sponsor has to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businessesproprietary technology, brands or other entities with which we dointellectual property in other jurisdictions.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 26, 2021 may be considered a liquidating distribution under Delaware law. Delaware law provides that if a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 26, 2021, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination by February 26, 2021, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following February 26, 2021 and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers and auditors) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we have sought and will continue to seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account.
As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share is then held in the trust account due to reductions in the value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law,U.S. federal, state and may be includedlocal laws and regulations. The advertising, sale, purchase, financing and transportation of used vehicles is regulated by every state in our bankruptcy estatewhich we operate and by the U.S. federal government. We also are subject to the claimsstate laws related to titling and registration and wholesale vehicle sales, and our sale of third parties with priority over the claimsvalue-added products is subject to state licensing requirements, as well as federal and state consumer protection laws. These laws can vary from state to state. The applicability of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.00 per sharethese regulatory and legal compliance obligations to our public stockholders. Additionally,e-commerce business depends on evolving interpretations of these laws and regulations and how our operations are, or are not, subject to them, and we may face regulatory action if regulators believe that we file a bankruptcy petitionare not in compliance with such obligations.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (1) the completion of our initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem,consumer personal information. Additionally, we are subject to regulation by individual state dealer licensing authorities, state consumer protection agencies and state financial regulatory agencies. We also are subject to audit by such state regulatory authorities.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our initial public offering that apply to us until the consummation of our initial business combination. Ifdealer licenses. As we seek to amend any provisions ofexpand our amendedoperations and restated certificate of incorporation relating to stockholders’ rights or pre-business combination activity, we will provide public stockholders with the opportunity to redeem their public shares in connection with any such vote. Our initial stockholders, officers and directors have agreed to waive any redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination. Specifically, our amended and restated certificate of incorporation provides, amongpresence into other things, that:
These provisions cannot be amended without the approval of holders of 65% of our common stock. In the eventother licenses, and we seek stockholder approval in connection with our initial business combination, our amended and restated certificate of incorporation provides that we may consummate our initial business combination only if approved by a majority of the shares of common stock voted by our stockholders at a duly held stockholders meeting.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we have encountered and may continue to encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses is limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Sponsor Indemnity
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share is then held in the trust account due to reductions in the value of the trust assets, in each case, net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company and, therefore, our sponsor may not be able to satisfy those obligations.obtain such licenses within the timeframe we expect or at all.
Employees
We currently have four officers and do not intend to have any full-time employees prior to the completionsupply of our initialvehicles;
Periodic Reporting and Financial Information
Our units, Class A common stock and warrants are registered under the Exchange Act and we have reporting obligations, including the requirement thatwebsite at www.carlotz.com as soon as reasonably practicable after we file annual, quarterlysuch material with the Securities and currentExchange Commission (the “SEC”). The SEC also maintains an Internet website that contains reports and other information regarding issuers, such as CarLotz, that file electronically with the SEC. In accordance with the requirements of the Exchange Act, this report contains financial statements audited and reported on by our independent registered public accounting firm.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. These financial statements may be required to be prepared in accordance with, or be reconciled to, GAAP or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
We are required to evaluate our internal control procedures for the fiscal year ending December 31, 2020 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer an emerging growth company, will we be required to have our internal control procedures audited. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationSEC’s Internet website is located at http://www.sec.gov.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following February 26, 2024, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
risk. You should consider carefully the risks and uncertainties described below, together with all of the following risk factors and all the other information contained in this report,Annual Report on Form 10-K, including theour consolidated financial statements.statements and related notes, before deciding to invest in our securities. If any of the following risksevents occur, our business, financial condition orand results of operations may be materially and adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risk factorsrisks and uncertainties described below are not necessarily exhaustivethe only ones we face. Additional risks and youuncertainties that we are encouragedunaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.
We are an early stage company with no operating history and no revenues, and you have no basis on which to evaluateimpact, our ability to achieveexecute on our business objective.
We are an early stage company with no operating results. Becausevehicle sourcing plans and have reduced, and may continue to reduce,
Ourindependent registered public accounting firmand economic conditions, and risk to the larger automotive ecosystem, including consumer demand, could adversely affect the market for used vehicles, which could reduce our revenue and profitability.
In its report onprivate company. As a result of these increased expenditures, we will have to generate and sustain increased revenue to achieve profitability.
Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination In the future, even if a majorityour revenue increases, our rate of our public stockholders do not support such a combination.
Wegrowth may choose not hold a stockholder vote to approve our initial business combination unless the business combination would require stockholder approval under applicable law or stock exchange listing requirements or ifdecelerate. In any event, we decide to hold a stockholder vote for business or other reasons. For instance, the Nasdaq listing rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange rules, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate our initial business combination even if holders of a majority of our outstanding public shares do not approve of the business combination we consummate.
If we seek stockholder approval of our initial business combination, after approval of our board, our sponsor, officers and directors have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.
Our initial stockholders, officers and directors have agreed (and their permitted transferees will agree) to vote any founder shares and any public shares held by them in favor of our initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need only 11,458,997, or 37.5%, of the 30,557,322 public shares sold in our initial public offering to be voted in favor of our initial business combination (assuming all issued and outstanding shares are voted) in order to have such initial business combination approved. We expect that our initial stockholders and their permitted transferees will own at least 20% of our outstanding shares of common stock at the time of any such stockholder vote. Accordingly, if we seek stockholder approval of our initial business combination, after approval by our board, it is more likely that the necessary stockholder approval will be received than would be the case if our initial stockholders and their permitted transferees agreed to vote their founder shares in accordance with the majority of the votes cast by our public stockholders.
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of such business combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of any target businesses. Additionally, since our board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with a business combination and such amount of deferred underwriting discount is not available for us to use as consideration in an initial business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 upon consummation of our initial business combination (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us. If we are able to consummate an initial business combination, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights and, therefore, we will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements or arrange for third-party financing. In addition, if a larger number of shares is submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B common stock result in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock at the time of our business combination. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful increases. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination by February 26, 2021. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our initial business combination within the prescribed time frame, in which case we would ceasegrow as rapidly or at all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our sponsor, officers and directors have agreed that we must complete our initial business combination by February 26, 2021. We may not be able to find a suitable target business and complete our initial business combination by such date. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. If we have not completed our initial business combination by such date, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may receive only $10.00 per share, or less than $10.00 per share, on the redemption of their shares, and our warrants will expire worthless.
If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors or any of their respective affiliates may elect to purchase shares or warrants from the public, which may influence a vote on a proposed business combination and reduce the public “float” of our common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or any of their respective affiliates may purchase public shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation or other duty to do so. Such a purchase may include a contractual acknowledgement that such public stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, officers, advisors or any of their respective affiliates purchase public shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling public stockholders would be required to revoke their prior elections to redeem their shares. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. The purpose of such purchases could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of our initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our Class A common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. For example, we may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.
You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (1) the completion of our initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein; (2) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by February 26, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3) the redemption of all of our public shares if we are unable to complete our initial business combination by February 26, 2021, subject to applicable law and as further described herein. In addition, if we are unable to complete an initial business combination by February 26, 2021 for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to the distribution of the proceeds heldnot:
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securitiespast and subject us to additional trading restrictions.
Our securities are currently listed on Nasdaq. However, we cannot assure you that our securities will continue to be listed on Nasdaq in the future or prior to our initial business combination. In order to continue listing our securities on Nasdaq prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. In general, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 round-lot holders). Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, our stock price would generally be required to be at least $4 per share and our stockholders’ equity would generally be required to be at least $5 million. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If Nasdaq delists any of our securities from trading on its exchange andthese objectives in the future. As we are not ablecontinue to list such securities on another national securities exchange,grow, we expect such securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our units, Class A common stock and warrants are listed on Nasdaq, our units, Class A common stock and warrants are covered securities under such statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not qualify as covered securities under such statute and we would be subject to regulation in each state in which we offer our securities.
You will not be entitled to protections normally afforded to investors of some other blank check companies.
Since the net proceeds of our initial public offering and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business that has not been selected, we may be deemed to be a “blank check” company under the U.S. securities laws. However, because we have net tangible assets in excess of $5,000,000, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors are not afforded the benefits or protections of those rules. Among other things, this means that we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if our initial public offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with the completion of our initial business combination.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 10% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 10% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides thatbeing a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 10% of the shares sold in our initial public offering, without our prior consent, which we refer to as the “Excess Shares.” However, our amendedcompany.
Becausefocus on enhancing the efficiency of our limited resources and the significant competition for business combination opportunities, it may becurrent hubs. Our organizational structure has become more difficult for us to complete our initial business combination. Ifcomplex as we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on our redemption of their stock, and our warrants will expire worthless.
We have encountered and expect to continue to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources are relatively limited when contrasted with those of many of these competitors. While we believe there will be numerous target businesses we could potentially acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable is limited by our available financial resources. Our sponsor or any of its affiliates may make additional investments in us, although our sponsor and its affiliates have no obligation or other duty to do so. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, in the event we seek stockholder approval of our initial business combination and we are obligated to pay cash for public shares that are redeemed, it will potentially reduce the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating and completing a business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
If the funds not being held in the trust account are insufficient to allow us to operate until February 26, 2021 following the closing of our initial public offering, we may be unable to complete our initial business combination.
The funds available to us outside of the trust account may not be sufficient to allow us to operate until February 26, 2021, assuming that our initial business combination is not completed during that time. We expect to continue to incur significant costs in pursuit of our acquisition plans. However, our affiliates are not obligated to make loans to us in the future, and we may not be able to raise additional financing from unaffiliated parties necessary to fund our expenses. Any such event in the future may negatively impact our ability to continue as a going concern at such time. We believe that the funds available to us outside of the trust account ($1,600,833 as of December 31, 2019) are sufficient to allow us to operate until February 26, 2021; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
If the net proceeds of our initial public offering and the sale of the private placement warrants not being held in the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combinationhired staff, and we will depend on loans from our sponsor or management team to fund our search and to complete our initial business combination. If we are unable to obtain such loans, we may be unable to complete our initial business combination.
Of the net proceeds of our initial public offering and the sale of the private placement warrants, only approximately $1,600,833 (as of December 31, 2019) is available to us outside the trust account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds fromimprove our sponsor,operational, legal, financial and management team or other third parties to operate or may be forced to liquidate. Neither our sponsor, members of our management team nor any of their respective affiliates is under any obligation or other duty to loan funds to us in such circumstances. Any such loans would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In such case, our public stockholders may receive only $10.00 per share, or less in certain circumstances, and our warrants will expire worthless.
Subsequent to the completion of our initial business combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will identify all material issues that may be present with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Although these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.
Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims,controls as well as claims challenging the enforceabilityour reporting systems and procedures. We continue to develop in these areas while seeking to preserve our corporate culture of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claimsrapid innovation, teamwork and attention to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Making such a request of potential target businesses may make our acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that we might pursue. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholders could be less than the $10.00 per share initially held in the trust account, due to claims of such creditors. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share is then held in the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. We have not asked our sponsor to reserve for such obligations. As a result, if any such claims were successfully made against the trust account, the funds available for our initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our independent directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.
In the event that the proceeds in the trust account are reduced below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per public share is then held in the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in certain instances. For example, the cost of such legal action may be deemed by the independent directors to be too high relative to the amount recoverable or the independent directors may determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.00 per share.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith by paying public stockholders from the trust account prior to addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per share amount that would otherwise be received by our public stockholders in connection with our liquidation would be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
In addition, we may have imposed upon us burdensome requirements, including:
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our principal activities subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than oncar buying and selling businesses inexperience for our corporate vehicle sourcing partners, retail sellers and customers. A failure to manage our growth effectively to maintain the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaningquality and efficiency of the Investment Company Act. The trust account is intended as a holding placecar selling experience for funds pendingour corporate vehicle sourcing partners, retail sellers and the earliest to occur of: (i) the completion of our primary business objective, which is a business combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by February 26, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (iii) absent a business combination, our returnquality of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. Ifvehicles we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our trust account and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.00 per share on the redemption of their shares.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changessell, could have a material adverse effect on our business, investmentsfinancial condition and results of operations.
Our stockholders
Under the DGCL, stockholders may be held liable for claims by third parties against a corporationvehicles stored at our locations, due to the extent of distributions received by themnatural disasters, like hail, or man-made disasters, such as theft or vandalism, arsons, accidents or otherwise, would result in a dissolution. The pro rata portion of our trust account distributedliability to our public stockholders uponcorporate vehicle sourcing partners, retail sellers, or us (if we own the redemptionvehicle) for the expected value of the damaged or destroyed vehicle and, depending on the scale of damage, a significant disruption to our public shares in the event we do not complete our initial business combination within by February 26, 2021,business. In addition, we may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intendedsubject to ensure that it makes reasonable provisionclaims by employees, corporate vehicle sourcing partners, retail sellers, customers and third parties for personal injury or property damage.
Because we do not intend to comply with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, consultants and auditors) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by February 26, 2021 is not considered a liquidating distribution under Delaware law and such redemption distribution is deemedcontinue to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, asavailable on commercially reasonable terms and, in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after we consummate our initial business combination and you will not be entitled to any of the corporate protections provided by such a meeting.
We may not hold an annual meeting of stockholders until after we consummate our initial business combination (unless required by Nasdaq) and thusevent, may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance with a company’s bylaws unless such election is made by written consent in lieu of such a meeting. Therefore, ifadequate to cover all possible losses that our stockholders want us to hold an annual meeting prior to our consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We have not registered the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a “cashless basis” and potentially causing such warrants to expire worthless.
We have not registered the shares of Class A common stock issuable upon exercise of the warrants issued in our initial public offering under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our reasonable best efforts to file with the SEC, and within 60 business days following our initial business combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants issued in our initial public offering are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.could suffer. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we suffer a catastrophic loss to one or more of our retail hubs or to the vehicles stored at our retail hubs, our liabilities may exceed the maximum insurance coverage amount, which could have a material adverse effect on our business, financial condition and results of operations.
The grant of registration rights to our initial stockholders and their permitted transferees may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market pricequality of our Class A common stock.
Pursuantservices.
Because we are not limited to evaluating target businesses in a particular industry, you will be unable to ascertain the merits or risks of any particular target business’s operations.
Although we expect to focus on the consumer and retail sectors for our initial business combination, we may seek to complete a business combination with an operating company in any industry or sector. However, we are not, under our amended and restated certificate of incorporation, permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. Consequently, there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
We may seek acquisition opportunities in industries or sectors that may be outside of our management team’s areas of expertise.
We will consider a business combination outside the consumer and retail sectors, which may be outside of our management’s areas of expertise if such business combination candidate is presented to us and we determine that such candidate offers an attractive acquisition opportunity for our company. In the event we elect to pursue an acquisition outside of the areas of our management team’s expertise, our management team’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this report regarding the areas of our management team’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors relevant to such acquisition. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these criteria and guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines.services. If we are unable to completemaintain our initial business combination,relationship with our public stockholders may receive only approximately $10.00 per share,third-party service providers, such service providers could cease to provide the services we need or lesssuch service providers are unable to effectively deliver services to our standards on timelines and at the prices we have negotiated, and we are unable to contract with alternative vendors or replace such service providers with our in certain circumstances, onhouse reconditioning specialists, we could experience delivery delays, a decrease in the liquidationquality of our trust accountreconditioning services, delays in listing vehicles consigned to us for sale and our warrants will expire worthless.
We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established recordincreased time to sale, additional expenses and loss of revenue or earnings,potential and existing corporate vehicle sourcing partners and retail sellers and subsequent revenues, which could have a material adverse effect on our business, financial condition and results of operations.
To the extent we complete our initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by numerous risks inherentexperience additional claims in the future.
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. In addition, if our board of directors is not able to determine the fair market value of the target business or businesses, in accordance with the Nasdaq listing rules that require that our initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payablelimitations on interest earned) at the time of our signing a definitive agreement in connection with our initial business combination, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm with respect to the satisfaction of such criteria.
Other than the two circumstances described above, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial business combination.
We may issue additional shares of Class A common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions described herein. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation authorizes the issuance of up to 200,000,000 shares of Class A common stock, par value $0.0001 per share, and 15,000,000 shares of Class B common stock, par value $0.0001 per share and 5,000,000 shares of undesignated preferred stock, par value $0.0001 per share. There are 169,442,678 and 7,360,670 authorized but unissued shares of Class A and Class B common stock available, respectively, for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding warrants but not upon the conversion of the Class B common stock. Shares of Class B common stock are automatically convertible into shares of our Class A common stock at the time of our initial business combination, initially at a one-for-one ratio but subject to adjustment as set forth herein. There are currently no shares of preferred stock issued and outstanding.
We may issue a substantial number of additional shares of Class A common stock, and may issue shares of preferred stock, in order to complete our initial business combination or under an employee incentive plan after completion of our initial business combination (although our amended and restated certificate of incorporation provides that we may not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation). We may also issue shares of Class A common stock to redeem the warrants or upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions described herein. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (1) receive funds from the trust account or (2) vote on any initial business combination.
These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with the approval of our stockholders. However, our officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by February 26, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.
The issuance of additional shares of common or preferred stock:
Resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
The investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments requires substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
Our officers and directors may allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and do not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other responsibilities. We do not intend to have any full-time employees prior to the completion of our business combination. Each of our officers and directors may be engaged in several other business endeavors for which he or she may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs whichthese fees may have a negative impact on our abilityresults of operations. In addition, certain states require that retail installment sellers file a notice of intent or have a sales finance license or an installment sellers license in order to completesolicit or originate installment sales in that state. All vehicle sale transactions and applicable retail installment financings are conducted under our initial business combination. Additionally, no employee of any affiliate of our sponsor, including any person that receives a portion of the $37,000 monthly paymentstate dealer licenses. As we will makeseek to an affiliate of our sponsor, is required to devote any time toexpand our operations, and our search for a business combination.
We are dependent upon our officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and in particular, Juan Carlos Torres Carretero, our Chairman, Luis Ignacio Solorzano Aizpuru, our Chief Executive Officer, and Raffaele Vitale, our President. We believe that our success depends on the continued service of our officers and directors, including Messrs. Torres, Vitale and Solorzano, at least until we have completed our initial business combination. We do not have an employment agreement with, or key-man insurance on the life of, Mr. Torres, Mr. Vitale, Mr. Solorzano or any of our other directors or officers. The unexpected loss of the services of one or more of our directors or officers, including Mr. Torres, Mr. Vitale or Mr. Solorzano, could have a detrimental effect on us.
Our ability to successfully effect our initial business combination and to be successful thereafter will be dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, we do not currently know which of them will remain or in what capacities, if at all. While we intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
In addition, the officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination, and a particular business combination may be conditioned on the retention or resignation of such key personnel. These agreements may cause our key personnel to have conflicts of interest in determining whether to proceed with a particular business combination. However, we do not know which of our key personnel will remain with us, and in which capacities, if at all, after the completion of our initial business combination.
Our key personnel may be able to remain with our company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. Such negotiations also could make such key personnel’s retention or resignation a condition to any such agreement. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. The determination as to which of our key personnel will remain with us, and in which capacities, if at all, will be made at the time of our initial business combination.
We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place. As a result, we may need to reconstitute the management team of the post-transaction company in connection with our initial business combination, which may adversely impact our ability to complete an acquisition in a timely manner or at all.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity or other transaction should be presented.
Until we consummate our initial business combination, we will continue to engage in the business of identifying and combining with one or more businesses. Our sponsor and certain of officers and directors are, or may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business, although they may not participate in the formation of, or become an officer or director of, any other special purpose acquisition companies with a class of securities registered under the Exchange Act until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination by February 26, 2021. We do not have employment contracts with our officers and directors that will limit their ability to work at other businesses.
Certain of our officers and directors presently has, and any of them in the future may have additional, fiduciary, contractual or other obligations or duties to one or more other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entities. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for one or more entities to which he or she has fiduciary, contractualobtain additional finance or other obligations or duties, he or she will honor these obligationslicenses, and duties to present such business combination opportunity to such entities first, and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours. In particular, affiliates of our sponsor have invested, and may in the future invest, in a broad array of sectors, including those in which our company may invest. As a result, there may be substantial overlap between companies that would be a suitable business combination for us and companies that would make an attractive target for such other affiliates.
We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers or directors which may raise potential conflicts of interest.
In light of the involvement of our sponsor, officers and directors with other businesses, we may decide to acquire one or more businesses affiliated with or competitive with our sponsor, officers and directors and their respective affiliates. Our directors also serve as officers and board members for other entities. Such entities may compete with us for business combination opportunities. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, regarding the fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our sponsor, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
Since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to any public shares they may hold), a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
Our sponsor owns 7,639,330 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share at December 31, 2019. The founder shares will be worthless if we do not complete an initial business combination. In addition, our sponsor purchased an aggregate of 6,074,310 private placement warrants for a purchase price of $9,111,465, or $1.50 per warrant, that will also be worthless if we do not complete our initial business combination. Each private placement warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein.
The founder shares are identical to the shares of common stock included in the units being sold in our initial public offering, except that: (1) only holders of the founder shares have the right to vote on the election of directors prior to our initial business combination; (2) the founder shares are subject to certain transfer restrictions, as described in more detail below; (3) our initial stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to: (a) waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination, (b) waive their redemption rights with respect to any founder shares and public shares held by them in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we have not consummated our initial business combination by February 26, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (c) waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination by February 26, 2021 (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame); (4) the founder shares are automatically convertible into shares of our Class A common stock at the time of our initial business combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein; and (5) the holders of founder shares are entitled to registration rights. The personal and financial interests of our sponsor, officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination. This risk may become more acute as the deadline for completing our initial business combination nears.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this report to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
We may only be able to complete one business combination with the proceeds of our initial public offering and the sale of the private placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may materially negatively impact our operations and profitability.
Of the net proceeds from our initial public offering and the sale of the private placement warrants will provide us with $305,573,220 that we may use to complete our initial business combination (which includes $10,695,063 of deferred underwriting commissions being held in the trust account).
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuateobtain such licenses within the timeframe we expect or at all.
This lack of diversification may subject us to numerous economic, competitive and regulatory risks,local jurisdictions, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinderinhibit our ability to completedo business in those state and local jurisdictions, increase our initialoperating expenses and adversely affect our business, combinationfinancial condition and give riseresults of operations.
expose us to legal liability in the event we are found to have violated applicable laws.
operations could be adversely affected.
In pursuing our acquisition strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to obtain them at all. If we encounter delays in obtaining or cannot obtain the requisite approvals, permits and licenses to renovate and operate our retail hubs in desirable locations, our business, financial condition and results of operations may be adversely affected.
financial condition and results of operations.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our initial business combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 upon consummation of our initial business combination (so that we do not then become subject to the SEC’s “penny stock” rules), or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our initial business combination even if a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our sponsor, officers, directors, advisors or any of their respective affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
The exercise price for the public warrants is higher than in some other blank check company offerings, and, accordingly, the warrants are more likely to expire worthless.
The exercise price of the public warrants is higher than in some other blank check companies. For example, historically, the exercise price of a warrant was often a fraction of the purchase price of the units in the initial public offering. The exercise price for our public warrants is $11.50 per share, subject to adjustments as provided herein. As a result, the warrants are less likely to ever be in the money and more likely to expire worthless.
Our amended and restated certificate of incorporation requires the affirmative vote of a majority of our board of directors, which must include a majority of our independent directors and the two director designees of our sponsor, to approve our initial business combination, which may have the effect of delaying or preventing a business combination that our public stockholders would consider favorable.
Our amended and restated certificate of incorporation requires the affirmative vote of a majority of our board of directors, which must include a majority of our independent directors and the two directors nominated by our sponsor, initially Juan Carlos Torres Carretero (our Chairman) and Luis Ignacio Solorzano Aizpuru (our Chief Executive Officer), to approve our initial business combination. Accordingly, it is unlikely that we will be able to enter into an initial business combination unless our sponsor’s members find the target and the business combination attractive. This mayoccur, also might make it more difficult for us to approve and enter into an initial business combination than other blank check companies and could result in us not pursuing an acquisition target or other board or corporate action that our public stockholders would find, favorable.
In order to effectuate an initial business combination, blank check companies have,sell equity securities in the recent past, amended various provisions of their chartersfuture at a time and modified governing instruments, including their warrant agreements. We cannot assure youat a price that we will not seek to amend our amended and restated certificate of incorporation or governing instruments, including our warrant agreement, in a manner that will make it easier for us to complete our initial business combination that some of our stockholders or warrant holders may not support.
deem appropriate.
Certain provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account), including an amendment to permit us to withdraw funds from the trust account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated, may be amendedconnection with the approvalMerger, Acamar Partners Sponsor I LLC (the ‘Sponsor”) has agreed, subject to certain exceptions, not to dispose of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Our amended and restated certificate of incorporation provides thator hedge any of its provisions (other than amendments relating to the appointment of directors, which require the approval by a majority of at least 90% of our common stock voting at a stockholder meeting) related to pre-business combination activity (including the requirement to deposit proceeds of our initial public offering and the private placement warrants into the trust account and not release such amounts except in specified circumstances and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of at least 65% of our common stock, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock. In all other instances, our amended and restated certificate of incorporation provides that it may be amended by holders of a majority of our common stock, subject to applicable provisions of the DGCL, or applicable stock exchange rules. We may not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation or on our initial business combination. Our initial stockholders, who collectively beneficially own 20% of our common stock, may participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which will govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete our initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our sponsor, officers and directors have agreed, pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by February 26, 2021 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem theirFounder Shares (or shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
Certain agreements related to our initial public offering may be amended without stockholder approval.
Certain agreements, including the underwriting agreement relating to our initial public offering, the letter agreement among us and our sponsor, officers and directors, and the registration rights agreement among us and our initial stockholders, may be amended without stockholder approval. These agreements contain various provisions that our public stockholders might deem to be material. While we do not expect our board to approve any amendment to any of these agreements prior to our initial business combination, it may be possible that our board, in exercising its business judgment and subject to its fiduciary duties, chooses to approve one or more amendments to any such agreement in connection with the consummation of our initial business combination. Any such amendments would not require approval from our stockholders, may result in the completion of our initial business combination that may not otherwise have been possible, and may have an adverse effect on the value of an investment in our securities.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.
Although we believe that the net proceeds of our initial public offering and the sale of the private placement warrants will be sufficient to allow us to complete our initial business combination, we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of our initial public offering and the sale of the private placement warrants prove to be insufficient, either because of the size of our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination or the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account, and our warrants will expire worthless. Furthermore, as described in the risk factor entitled “If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share,” under certain circumstances our public stockholders may receive less than $10.00 per share upon the liquidation of the trust account.
Our initial stockholders will control the election of our board of directors until consummation of our initial business combination and will hold a substantial interest in us. As a result, they will elect all of our directors prior to our initial business combination and may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Our initial stockholders own 20% of our outstanding common stock. In addition, the founder shares, all of which are held by our initial stockholders, will entitle the holders to elect all of our directors prior to our initial business combination. Holders of our public shares have no right to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended by a majority of at least 90% of our common stock voting at a stockholder meeting. As a result, you will not have any influence over the election of directors prior to our initial business combination.
Neither our initial stockholders nor, to our knowledge, any of our officers or directors, have any current intention to purchase additional securities, other than as disclosed in this report. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, as a result of their substantial ownership in our company, our initial stockholders may exert a substantial influence on other actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their influence over these actions. Accordingly, our initial stockholders will exert significant influence over actions requiring a stockholder vote.
Our initial stockholders will receive additional shares of Class A common stock if we issue shares to consummate an initial business combination.
The founder shares will automatically convert into Class A common stock at the time of our initial business combination, or earlier at the option of the holders, on a one-for-one basis, subject to adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities convertible or exercisable for Class A common stock, are issued or deemed issued in excess of the amounts offered in our initial public offering and related to the closing of the initial business combination, the ratio at which founder shares shall convert into Class A common stock will be adjusted so that the number of Class A common stock issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20%its Founder Shares):
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the warrants could be converted into cash or stock (at a ratio different than initially provided), the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants are issued in registered form under a warrant agreement between American Stock Transfer & Trust Company, acting as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exerciseclosing price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00has exceeded $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) forover any 20 trading days within a 30 trading-dayany 30-trading day period ending oncommencing 150 days after January 21, 2021 (the “Closing Date”); and
In addition, we may redeem your warrants after they become exercisable for a number of shares of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. Any such redemption may have similar consequences
Our warrants and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our initial business combination.
We issued warrants to purchase 10,185,774 shares of our Class A common stock at a price of $11.50 per whole share (subject to adjustment as provided herein), as part of the units offered by our initial public offering and, simultaneously with the closing of our initial public offering, we issued in a private placement an aggregate of 6,074,310 private placement warrants, each exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. Our initial stockholders currently hold 7,639,330 founder shares subject to adjustment as set forth herein. In addition, if our sponsor, an affiliate of our sponsor or certain of our officers and directors make any working capital loans, up to $2,000,000 of such loans made to us by our sponsor, an affiliate of our sponsor or our officers and directors may be convertible into units at a price of $10.00 per unit at the option of the lender at the time of the business combination. Such units would be identical to the units sold in our initial public offering except that the warrants underlying such units would be identical to the private placement warrants issued to our sponsor.
To the extent we issue shares of Class A common stock to effectuate a business transaction, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of outstanding shares of our Class A common stock and reduce the value of the Class A common stock issued to complete the business transaction. Therefore, our warrants and founder shares may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business.
The private placement warrants are identical to the warrants sold as part of the units in our initial public offering except that, so long as they are held by our sponsor or its permitted transferees: (1) they will not be redeemable by us for cash; (2) they (including the Class A common stock issuable upon exercise of these warrants) may not,right, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days afterconditions, to require us to register the completionsale of our initial business combination; (3) they may be exercised by the holders on a cashless basis; and (4) the holders thereof (including with respect to thetheir shares of common stock issuable upon exercise of these warrants) are entitled tounder the Securities Act. By exercising their registration rights.
Because each unit contains one-third of one warrantrights and onlyselling a whole warrant may be exercised, the units may be worth less than units of other blank check companies.
Each unit contains one-third of one warrant. Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the units, and only whole units will trade. This is different from other offerings similar to ours whose units include one share of Class A common stock and one whole warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for a third of thelarge number of shares, comparedthese stockholders could cause the prevailing market price of the common stock to units that each contain a whole warrantdecline.
A provision of our warrant agreement maysell them. These factors could also make it more difficult for us to consummate an initial business combination.
raise additional funds through future offerings of shares of common stock or other securities.
A market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
The price of our securities may vary significantly due to one or more potential business combinations and general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whetheran investment or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financing reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standardsacquisition could constitute a material portion of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statements may also be required to be prepared in accordance with GAAPthen-outstanding shares of common stock. Any issuance of additional securities in connection with our current report on Form 8-K announcing the closing of our initial business combination within four business days following such closing. These financial statement requirementsinvestments or acquisitions may limit the pool of potential target businesses we may acquire because some targets may be unableresult in additional dilution to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
stockholders.
Compliance obligations under the Sarbanes-Oxley Act may
Section 404market price of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2020. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target business with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Provisions in our amended and restatedcommon stock.
Our amended and restated certificate of incorporation containsGeneral Corporation Law (“DGCL”) contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests.could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. These provisions include, two-year directoramong others, the following:
board of directors, the chair of our board of directors or our Chief Executive Officer; and
Provisions in our amended and restated certificate of incorporation and Delaware law may have the effect of discouraging lawsuits against our directors, and officers.
officers, other employees or stockholders.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of DelawareDelaware) and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholdersexcept for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) whichthat is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction or (D) any action arising under the federal securities laws, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
Ifthat the parties to the Stockholders Agreement, or any of their principals, members, directors, partners, stockholders, officers, employees, or other representatives or affiliates (other than the Company and any entity that is controlled by the Company) are not subject to the doctrine of corporate opportunity.
Location | Integrated Processing Center | Size (Sq. Ft.) | Lease Expiration Date | ||||||||
Midlothian, Virginia | 3,200 | November 2023 | |||||||||
Richmond, Virginia | 1,580 | August 2024 | |||||||||
Chesapeake, Virginia | 1,440 | October 2024 | |||||||||
Greensboro, North Carolina | * | 3,150 | January 2026 | ||||||||
Monroe (Charlotte), North Carolina | * | 13,610 | May 2024 | ||||||||
Tampa, Florida | * | 11,018 | October 2027 | ||||||||
Downers Grove (Chicago), Illinois | * | 29,823 | August 2023 | ||||||||
San Antonio, Texas | * | 21,882 | January 2024 | ||||||||
Lynnwood (Seattle), Washington | * | 33,110 | November 2025 | ||||||||
Merritt Island (Orlando), Florida | * | 13,674 | March 2031 | ||||||||
Madison (Nashville), TN | * | 42,292 | July 2031 | ||||||||
Charlottesville, VA | * | 13,816 | April 2026 | ||||||||
Highland Park, IL | * | 18,000 | August 2031 | ||||||||
Bakersfield, CA | * | 18,729 | April 2026 | ||||||||
Clearwater, FL | * | 26,885 | September 2036 | ||||||||
Denver, CO | * | 19,703 | November 2036 | ||||||||
Fairview Heights (St. Louis), IL | * | 8,541 | September 2031 | ||||||||
Stone Mountain (Atlanta), GA | * | 40,594 | December 2031 | ||||||||
Plano, TX | * | 52,735 | September 2031 | ||||||||
Pomona, CA | * | 12,502 | September 2028 | ||||||||
Mobile, AL | * | 30,079 | November 2026 | ||||||||
Huntsville, AL | * | 23,056 | December 2028 | ||||||||
Las Vegas, NV | * | 26,240 | July 2032 |
Baton Rouge, LA | * | 39,582 | December 2036 | ||||||||
Reno, NV | * | 20,074 | September 2031 | ||||||||
Irving, TX | * | 38,752 | October 2031 |
Name | Age | Position | |||||||||
Michael W. Bor | 48 | Chief Executive Officer | |||||||||
John W. Foley II | 45 | Chief Operating Officer | |||||||||
Daniel A. Valerian | 48 | Chief Technology Officer | |||||||||
Elizabeth Sanders | 31 | Chief Administrative Officer | |||||||||
Rebecca C. Polak | 51 | Chief Commercial Officer and General Counsel | |||||||||
Thomas W. Stoltz | 61 | Chief Financial Officer | |||||||||
Michael Chapman | 48 | Chief Marketing Officer |
If our management team pursues a company with operations or opportunities outsideMr. Peker’s continued employment through the first anniversary of the United StatesStart Date, (iii) a first year annual bonus with a target value of $900,000 payable based on performance for our initial business combination, we would bethe period from the Start Date to the first anniversary of the Start Date, (iv) an annual performance-based bonus with a target value of 150% of Mr. Peker’s annual base salary and a maximum value of 300% of Mr. Peker’s annual base salary for each calendar year of the employment term beginning in 2023, (v) a 2022 annual equity award of 680,000 RSUs, vesting, subject to risks associated with cross-border business combinations, includingMr. Peker’s continued employment through the applicable vesting date, in equal annual installments over four years, (vi) a sign-on time-based equity award of 2,820,000 RSUs to compensate Mr. Peker for time-based equity awards forfeited from his former employer, vesting, subject to Mr. Peker’s continued employment through the applicable vesting date, in various installments through 2025 that are intended to approximate the vesting schedule of his forfeited equity and (vii) a sign-on performance equity award of 3,500,000 performance RSUs to compensate Mr. Peker for time-based equity awards forfeited from his former employer. The sign-on performance equity award will vest, subject to Mr. Peker’s continued employment through the applicable vesting date, as follows: (x) one-third of the shares will vest on the first day the Company’s stock achieves a 20 trading-day volume weighted average price of $4.00 (threshold); (y) one-third of the shares will vest on the first day the Company’s stock achieves a 20 trading-day volume weighted average price of $8.00 (target); and (z) one-third of the shares will vest on the first day the Company’s stock achieves a 20 trading-day volume weighted average price of $12.00 (maximum). Mr. Peker will also be eligible to participate in the Company’s health and other benefit plans and to receive future customary equity award grants.
If we effect our initial business combination with such a company, we would be subject to any special considerations or risks associated with companies operating in an international setting, including anygeneral release of the following:
We may$100 on January 21, 2021 including reinvestment of dividends where applicable. The results presented below are not be ablenecessarily indicative of future performance.
If our management, following our initial business combination, is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.
Following our initial business combination, any or all of our management could resign from their positions as officers of the Company, and the management of the target business at the time of the business combination could remain in place. Management of the target business may not be familiar with U.S. securities laws. If new management is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
We may face risks related to consumer and retail sectors.
Business combinations with companies in the consumer and retail sectors entail special considerations and risks. If we are successful in completing a business combination with such a target business, we may be subject to, and possibly adversely affected by, the following risks:
Any of the foregoing could have an adverse impact on our operations following a business combination. However, our efforts in identifying prospective target businesses will not be limited to consumer and retail sectors. Accordingly, if we acquire a target business in another industry, these risks will likely not affect us and we will be subject to other risks attendant with the specific industry in which we operate or target business which we acquire, none of which can be presently ascertained.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) outbreak.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
|
None.
We do not own any real estate or other physical properties materially important to our operation. We currently maintain our principal executive offices at 1450 Brickell Avenue, Suite 2130, Miami, Florida 33131. The cost for this space is included in the $37,000 per month fee that we pay Enso Advisory LLC, or Enso Advisory, an affiliate of our sponsor, for office space, administrative, support and salaries to be paid to employees of such affiliate for due diligence and related services in connection with our search for a target company (although no salaries or fees are paid from the monthly fee to members of our management team). We consider our current office space adequate for our current operations.
To the knowledge of our management, there is no litigation currently pending against us, any of our officers or directors in their capacity as such or against any of our property.
Not applicable.
Market Information
Our units, Class A common stock and warrants are each traded on the Nasdaq Capital Market under the symbols “ACAMU,” “ACAM” and “ACAMW,” respectively. Our units commenced public trading on February 22, 2019, and our Class A common stock and warrants commenced public trading on April 15, 2019.
Holders
On March 26, 2020, there was one holder of record of our units, one holder of record of our Class A common stock and one holder of record of our warrants.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Not required for smaller reporting companies.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our auditedthe consolidated financial statements and notes thereto contained herein. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actualheading “Risk Factors”. Actual results may differ materially from those anticipatedcontained in any forward-looking statements. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our” and the “Company” are intended to mean the business and operations of CarLotz, Inc. and its consolidated subsidiaries.
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Retail vehicles sold | 9,748 | 6,215 | 6,435 | ||||||||||||||
Number of hubs | 22 | 8 | 8 | ||||||||||||||
Average monthly unique visitors | 237,673 | 66,505 | 57,151 | ||||||||||||||
Vehicles available for sale | 2,113 | 2,019 | 1,061 | ||||||||||||||
Retail gross profit per unit | $ | 1,208 | $ | 1,797 | $ | 1,393 | |||||||||||
Percentage of unit sales sourced non-competitively (1) | 72 | % | 89 | % | 89 | % | 61 | % |
Overview
Wethe spread between the interest rate on leases we enter into with our B2B lease customers and the related leases we enter into with third party lessors, as well as revenue earned on our owned vehicles leased to B2B lease customers.
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Revenues: | |||||||||||||||||
Retail vehicle sales | $ | 217,439 | $ | 104,253 | $ | 90,382 | |||||||||||
Wholesale vehicle sales | 31,759 | 9,984 | 8,454 | ||||||||||||||
Finance and insurance, net | 8,844 | 3,898 | 3,117 | ||||||||||||||
Lease income, net | 492 | 490 | 533 | ||||||||||||||
Total Revenues | 258,534 | 118,625 | 102,486 | ||||||||||||||
Cost of sales (exclusive of depreciation) | 247,946 | 107,369 | 93,780 | ||||||||||||||
Gross Profit | 10,588 | 11,256 | 8,706 | ||||||||||||||
Operating Expenses: | |||||||||||||||||
Selling, general and administrative | 93,076 | 17,507 | 18,192 | ||||||||||||||
Stock based compensation expense | 51,121 | 45 | 113 | ||||||||||||||
Depreciation and amortization expense | 3,363 | 341 | 504 | ||||||||||||||
Management fee expense – related party | 2 | 215 | 250 | ||||||||||||||
Impairment expense | 108 | — | — | ||||||||||||||
Total Operating Expenses | 147,670 | 18,108 | 19,059 | ||||||||||||||
Loss from Operations | (137,082) | (6,852) | (10,353) | ||||||||||||||
Interest expense | 1,590 | 518 | 651 | ||||||||||||||
Other Income (Expense), net | |||||||||||||||||
Change in fair value of Merger warrants liability | 32,733 | — | — | ||||||||||||||
Change in fair value of redeemable convertible preferred stock tranche obligation | — | 923 | (1,396) | ||||||||||||||
Change in fair value of earnout provision | 66,605 | — | — | ||||||||||||||
Other (expense) income | (535) | (95) | (267) | ||||||||||||||
Total Other Income, net | 98,803 | 828 | (1,663) | ||||||||||||||
Loss Before Income Tax Expense | (39,869) | (6,542) | (12,667) | ||||||||||||||
Income tax expense | 10 | 10 | 11 | ||||||||||||||
Net Loss | $ | (39,879) | $ | (6,552) | $ | (12,678) |
Year Ended December 31, | |||||||||||||||||||||||||||||
2021 | 2020 | Change | 2019 | Change | |||||||||||||||||||||||||
($ in thousands, except per unit metrics) | |||||||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||||
Retail vehicle sales | $ | 217,439 | $ | 104,253 | 108.6 | % | $ | 90,382 | 15.3 | % | |||||||||||||||||||
Wholesale vehicle sales | 31,759 | 9,984 | 218.1 | % | 8,454 | 18.1 | % | ||||||||||||||||||||||
Finance and insurance, net | 8,844 | 3,898 | 126.9 | % | 3,117 | 25.1 | % | ||||||||||||||||||||||
Lease income, net | 492 | 490 | 0.4 | % | 533 | (8.1) | % | ||||||||||||||||||||||
Total revenues | 258,534 | 118,625 | 117.9 | % | 102,486 | 15.7 | % | ||||||||||||||||||||||
Cost of sales: | |||||||||||||||||||||||||||||
Retail vehicle cost of sales | 214,512 | 96,983 | 121.2 | % | 84,534 | 14.7 | % | ||||||||||||||||||||||
Wholesale vehicle cost of sales | 33,434 | 10,386 | 221.9 | % | 9,246 | 12.3 | % | ||||||||||||||||||||||
Total cost of sales | $ | 247,946 | $ | 107,369 | 130.9 | % | $ | 93,780 | 14.5 | % | |||||||||||||||||||
Gross profit: | |||||||||||||||||||||||||||||
Retail vehicle gross profit | $ | 2,927 | $ | 7,270 | (59.7) | % | $ | 5,848 | 24.3 | % | |||||||||||||||||||
Wholesale vehicle gross loss | (1,675) | (402) | (316.7) | % | (792) | 49.2 | % | ||||||||||||||||||||||
Finance and insurance gross profit | 8,844 | 3,898 | 126.9 | % | 3,117 | 25.1 | % | ||||||||||||||||||||||
Lease income, net | 492 | 490 | 0.4 | % | 533 | (8.1) | % | ||||||||||||||||||||||
Total gross profit | $ | 10,588 | $ | 11,256 | (5.9) | % | $ | 8,706 | 29.3 | % | |||||||||||||||||||
Retail gross profit per unit(1): | |||||||||||||||||||||||||||||
Retail vehicle gross profit | 2,927 | 7,270 | (59.7) | % | 5,848 | 24.3 | % | ||||||||||||||||||||||
Finance and insurance gross profit | 8,844 | 3,898 | 126.9 | % | 3,117 | 25.1 | % | ||||||||||||||||||||||
Total retail vehicle and finance and insurance gross profit | 11,771 | 11,168 | 5.4 | % | 8,965 | 24.6 | % | ||||||||||||||||||||||
Retail vehicle units sold | 9,748 | 6,215 | 56.8 | % | 6,435 | (3.4) | % | ||||||||||||||||||||||
Retail vehicle gross profit per unit | $ | 1,208 | $ | 1,797 | (32.8) | % | $ | 1,393 | 29.0 | % | |||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||||
2021 | 2020 | Change | 2019 | Change | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||
Compensation and benefits(1) | $ | 29,218 | $ | 7,864 | 271.5 | % | $ | 8,879 | (11.4) | % | ||||||||||||||||
Marketing | 21,804 | 2,808 | 676.5 | % | 3,803 | (26.2) | % | |||||||||||||||||||
Technology | 9,238 | 651 | 1319.0 | % | 577 | 12.8 | % | |||||||||||||||||||
Accounting and Legal | 11,442 | 1,838 | 522.7 | % | 520 | 253.1 | % | |||||||||||||||||||
Insurance | 7,219 | 478 | 1411.7 | % | 391 | 22.2 | % | |||||||||||||||||||
Occupancy | 8,101 | 2,722 | 197.6 | % | 2,917 | (6.7) | % | |||||||||||||||||||
Other costs(2) | 6,054 | 1,146 | 428.1 | % | 1,105 | 3.7 | % | |||||||||||||||||||
Total selling, general and administrative expenses | $ | 93,076 | $ | 17,507 | 431.7 | % | $ | 18,192 | (3.8) | % |
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
($ in thousands) | |||||||||||||||||
Net Loss | $ | (39,879) | $ | (6,552) | $ | (12,678) | |||||||||||
Adjusted to exclude the following: | |||||||||||||||||
Interest expense | 1,590 | 518 | 651 | ||||||||||||||
Income tax expense | 10 | 10 | 11 | ||||||||||||||
Depreciation and amortization expense | 3,363 | 341 | 504 | ||||||||||||||
EBITDA | $ | (34,916) | $ | (5,683) | $ | (11,512) | |||||||||||
Other expense | 535 | 95 | 267 | ||||||||||||||
Stock compensation expense | 51,121 | 45 | 113 | ||||||||||||||
Management fee expense - related party | 2 | 215 | 250 | ||||||||||||||
Change in fair value of warrants liability | (32,733) | — | — | ||||||||||||||
Change in fair value of redeemable convertible preferred stock tranche obligation | — | (923) | 1,396 | ||||||||||||||
Change in fair value of earnout provision | (66,605) | — | — | ||||||||||||||
Adjusted EBITDA | $ | (82,596) | $ | (6,251) | $ | (9,486) |
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Adjusted retail gross profit per unit(1): | |||||||||||||||||
Retail vehicle gross profit | $ | 2,927 | $ | 7,270 | $ | 5,848 | |||||||||||
Finance and insurance gross profit | 8,844 | 3,898 | 3,117 | ||||||||||||||
Total retail gross profit | 11,771 | 11,168 | 8,965 | ||||||||||||||
Change in inventory reserve(2) | 806 | (50) | 80 | ||||||||||||||
Total adjusted retail gross profit | 12,577 | 11,118 | 9,045 | ||||||||||||||
Retail vehicle units sold | 9,748 | 6,215 | 6,435 | ||||||||||||||
Retail vehicle adjusted gross profit per unit | $ | 1,290 | $ | 1,789 | $ | 1,406 |
The issuancebetween Acamar Partners Acquisition Corp. (“Acamar Partners”) and certain strategic and accredited investors (the “PIPE Investors”), with respect to a private placement of additional shares of Acamar Partners Class A common stock, the Company issued and sold 12.5 million shares of Acamar Partners Class A common stock to the PIPE Investors at a price per share of $10.00 and an aggregate purchase price of $125.0 million.
Similarly, if we issue debtavailable cash, restricted cash, short-term marketable securities or otherwise incur significant debtand liquidity available under the Ally Facility are sufficient to bank or other lenders orfund our operations for at least the owners of a target, it could result in:
next 12 months. We expect to continue to incur significant costsoperate at a loss until we bring our hubs to maturity, achieve scale and are able to leverage our operating costs. Our hubs opened in 2021 have not been ramping to expected results and consequently have not provided the expected contribution to unit sales, revenue and gross profit. We may also seek additional funds as needed through alternative sources of liquidity, including equity or debt financings or other arrangements. However, additional funds may not be available when we need them on terms that are acceptable to us, or at all.
Resultspurchase up to $5.0 million in notes, with the initial tranche equal to $3.0 million issued at closing and two additional tranches of Operations
We have neither engaged in any operations nor generated any revenuesat least $1.0 million on or prior to date. Our only activities from inceptionSeptember 20, 2021, of which $0.5 million was issued prior to December 31, 2019 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of the Merger. The notes were converted into Former CarLotz common stock immediately prior to the consummation of the Merger and received the Merger consideration.
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
($ in thousands) | |||||||||||||||||
Cash Flow Data: | |||||||||||||||||
Net cash (used in) operating activities | $ | (111,281) | $ | (4,592) | $ | (5,473) | |||||||||||
Net cash (used in) investing activities | (146,515) | (1,227) | (487) | ||||||||||||||
Net cash provided by financing activities | 334,348 | 4,530 | 8,492 |
amortization expense of property and equipment and lease vehicles of $0.2 million and $0.1 million, respectively.
For the period from November 7, 2018 (inception) through December 31, 2018, we had net loss of $2,750, which consisted$(12.7) million adjusted for non-cash charges of $2.3 million and net changes in our operating costs.
Liquidityassets and Capital Resources
Untilliabilities of $4.9 million. The non-cash adjustments primarily related to change in fair value of redeemable convertible preferred stock tranche obligation of $1.4 million, depreciation and amortization of $0.5 million, loss due to disposition of property and equipment of $0.3 million and share-based compensation expense of $0.1 million. The changes in operating assets and liabilities were primarily driven by a decrease in inventories of $2.9 million, an increase in accounts payable of $1.4 million, an increase in accrued expenses of $0.5 million and an increase in other current and non-current liabilities of $0.8 million, partially offset by an increase in accounts receivable of $0.8 million.
On February 26, 2019, we consummated the Initial Public Offeringyear ended December 31, 2020, net cash used in investing activities of 30,000,000 Units at a price$(1.2) million was primarily driven by purchases of $10.00 per Unit, generating gross proceedsmarketable securities of $300,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,000,000 Private Placement Warrants to the Sponsor at a price of $1.50 per unit, generating gross proceeds of $9,000,000.
On April 9, 2019, in connection with the underwriters’ election to partially exercise of their option to purchase additional Units, we consummated the sale of an additional 557,322 Units and the sale of an additional 74,310 Private Placement Warrants, generating total gross proceeds of $5,684,685.
Following the Initial Public Offering, including the exercise of the option to purchase additional Units and the sale of the Private Placement Warrants, a total of $305,573,220 was placed in the Trust Account. We incurred $17,437,018 in transaction costs, including $6,111,465 of underwriting fees, $10,695,063 of deferred underwriting fees and $630,490 of other costs, inclusive of $111,465 in cash underwriting fees and $195,063 of additional deferred underwriting fees incurred upon the underwriters’ election to partially exercise their option to purchase additional Units on April 9, 2019.
$(1.0) million.
consideration on options of $(2.5) million.
As of December 31, 2019, we had cash and marketable securities held in the Trust Account of $309,840,375. Interest income$4.5 million, primarily driven by borrowings on the balance infloorplan facility of $24.2 million and long-term debt borrowings of $5.3 million, partially offset by repayment of the Trust Account may be used by us to pay taxes. Duringfloorplan note payable of $(25.0) million.
long-term cash requirements. As of December 31, 2019, we had $1,600,8332021, the Company has total outstanding debt of cash held outside of$27.8 million under the Trust Account. We will use these funds primarily to identify and evaluate target businesses, perform businessfloorplan facility, which represents the principal amount outstanding due diligence on prospective target businesses, travel to and from the offices or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination, and to pay taxes to the extentuncertainty of forecasting the timing of expected variable interest earned onrate payments. Borrowings under the Trust Accountfloorplan facility are payable when the underlying vehicle is not sufficientsold, which is expected to pay our taxes. A portion of these funds will also be used to pay our obligations pursuant to the administrative services agreement described below.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $2,000,000 of such loans may be convertible into units identical to the Placement Units, at a price of $10.00 per unit at the option of the lender.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Going Concern
2022.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2019. We do not participate$56.8 million in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations,total operating lease obligations, or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $37,000 for office space, administrative support and salaries to be paid to employees of such affiliate forwhich $6.8 million are due diligence and related services in connection with the Company’s search for a target company (although no salaries or fees will be paid from the monthly fee to members of the Company’s management team). We began incurring these fees on February 21, 2019 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,695,063 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. Of such amount, up to approximately $0.10 per Unit, or up to $3,055,732, may be paid to third parties not participating in Initial Public Offering (but who are members of FINRA) that assist us in consummating a Business Combination. The election to make such payments to third parties will be solely at our discretion, and such third parties will be selected by us in its sole discretion.
and Estimates
Recent accounting pronouncements
Management doesentered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, we do not believe that any recently issued, but not yet effective, accounting standards, if currently adopted,an immediate one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and therefore, we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.
impact. As of December 31, 2019,2021, we were not subject to any market or interest rate risk. Following the consummationhad total outstanding debt of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
This information appears following Item 15 of this report and is included herein by reference.
None.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed$27.8 million under the Exchange Act, such as this report, is recorded, processed, summarized,floorplan facility.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Controls Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
Directors and Executive Officers
As of the date of this report, our directors and officers are as follows:
Juan Carlos Torres Carretero has served as our Chairman since inception. Mr. Torres began his career in the petroleum industry before working as a consultant at McKinsey & Co. for five years. Mr. Torres subsequently became CEO and President of Seapharm Inc. and founded Pharmamar, a company that explored marine organic pharmaceutical agents. In 1988, he joined Advent International, first working in their Boston office and then in Madrid. In 1995, Mr. Torres moved to Mexico City as Managing Partner and Co-CEO of Advent Latin American Private Equity Fund until 2015. He has served as the Executive Chairman of Dufry since 2004. He also serves on the board of various public companies such as Dufry and Hudson (of which he is also Chairman) and has served on the board of other public companies such as Moncler, International Meal Company Alimentaçao S.A. and Dufry South America Ltd. Mr. Torres earned a MSc. in Physics from Universidad Complutense de Madrid and a MSc. in Management from MIT Sloan School of Management. We believe that Mr. Torres is qualified to serve as a member of our board of directors because of his extensive background in the consumer and retail sectors, coupled with his broad investment and operational experience.
Luis Ignacio Solorzano Aizpuru has served as our Chief Executive Officer and director since inception. Mr. Solorzano began his career with BankBoston Capital, where he spent four years making private equity investments and corporate loans across Latin America. In 2001, Mr. Solorzano joined Advent International becoming a Partner and Managing Director in 2008. He became head of the Mexico office in 2012 and served as Chairman of the Latin America’s Investment Committee from 2013 to 2017. He is a co-founder of Brabex Capital, an investment management firm. Since 2019, Mr. Solorzano has served as a member of Enso Advisory. Mr. Solorzano obtained an Economics degree (cum laude) from the Instituto Tecnologico Autonomo de Mexico (ITAM) and an MBA from Harvard Business School. Mr. Solorzano has served on the boards of various public and private companies, including Dufry, Grupo Aeroportuario del Centro Norte S.A.B. (OMA), Latin American Airport Holdings, Aerodom, InverCap Holdings, Grupo Financiero Mifel and Viakem. We believe that Mr. Solorzano is qualified to serve as a member of our board of directors because of his extensive investment experience across various sectors in the Americas and Europe, and his experience supporting portfolio companies in the design and implementation of strategic, operating and financial value creation initiatives.
Raffaele R. Vitale has served as our President since inception. Mr. Vitale began his career in the Corporate Finance department of Chase Manhattan Bank, where he worked in a variety of roles, including commercial lending, leveraged finance, M&A and technology, media and telecom banking coverage in New York, London and Milan. In 1993, he was one of the founding partners of Vitale Borghesi & C. S.p.A., an independent financial advisory company that became part of the Lazard Group in 1998. Throughout his tenure at Chase Manhattan Bank, Vitale Borghesi & C. and Lazard Group, Mr. Vitale was deeply involved in numerous M&A transactions. In 2002, Mr. Vitale joined PAI Partners, where he was responsible for investments in Italy and, starting in 2016, he started and ran the US business. Mr. Vitale has been a member of PAI’s Investment Committee from 2006 to 2018 and Executive Committee, from 2009 to 2017. Mr. Vitale currently serves on the board of Marcolin S.p.A. and has additionally served on the boards of Saeco Group S.p.A., Gruppo Coin S.p.A. and Nuance AG. Mr. Vitale graduated with a degree in Business Administration from Rollins College.
Joseba Asier Picaza Ucar has served as our Chief Financial Officer since inception. Mr. Picaza began his career with JPMorgan’s Corporate Derivatives team in London, providing tailored derivative solutions to Spanish and Portuguese corporate, institutional and HNWI clients. In 2010, Mr. Picaza joined Morgan Stanley’s Strategic Equity Derivatives team, part of the Global Capital Markets division, expanding his coverage to Southern European, German, Swiss, Scandinavian and financial sponsor clients. As part of this role, Mr. Picaza was often involved in M&A and/or capital market transactions that required addressing specific economic, accounting, tax, legal and/or regulatory matters. Since 2019, Mr. Picaza has served as a partner of Enso Advisory. From 2015 to 2019, Mr. Picaza ran his own financial advisory and structuring firm, High Seven Ltd. Mr. Picaza obtained a degree in Management and Business Administration (majoring in Finance and Marketing) from Universidad de Deusto in Spain.
Juan Duarte Hinterholzer has served as our Chief Operating Officer since inception. Mr. Duarte started his career with Procter & Gamble as a financial analyst. In 2002, he joined the Boston Consulting Group, working on strategy, cost reduction and operational efficiency projects for multiple clients across a broad range of sectors. In 2006, Mr. Duarte joined JPMorgan as an Associate working in corporate finance and business development functions in the New York and Tokyo offices. In 2007, Mr. Duarte joined Advent International where he worked until 2017. Since 2019, Mr. Duarte has served as a member of Enso Advisory. Mr. Duarte has served on the boards of various public and private companies such as Inmobiliaria Fumisa, Latin American Airport Holdings, InverCap Holdings, Viakem and Grupo Gayosso. He is also co-founder of Brabex Capital, an investment management firm. Mr. Duarte graduated as an Industrial and Systems engineer (magna cum laude) from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and with an MBA (with honors) from Cornell University Graduate School of Management.
Domenico De Sole has served as our Director since February 2019. Mr. De Sole is a member of our board of directors as of the date hereof. Mr. De Sole is the co-founder of luxury retailer Tom Ford International, LLC and has been the Chairman of its board of directors since its formation in 2005. During this time, Mr. De Sole also advised TPG Capital Advisors, LLC in connection with the repositioning and sale of Bally International AG and advised Sandbridge Capital, LLC in connection with the purchase, repositioning and sale of Thom Browne, Inc. From 1984 to 1994, Mr. De Sole served as President and Chief Executive Officer of Gucci America, and, from 1994 to 2004, he served as the President and Chief Executive Officer of Gucci Group, a company he helped transform from an almost bankrupt monobrand company into one of the largest and most profitable luxury groups in the world which included brands such as Bottega Veneta, Yves Saint Laurent, Balenciaga, Stella McCartney, Alexander McQueen and Sergio Rossi. Previously, Mr. De Sole practiced law at the firm Patton, Boggs and Blow. Mr. De Sole has served on numerous public and private company boards of directors, including his current roles as Chairman of Tom Ford International, LLC, director of Pirelli & C. S.p.A. and director of Ermenegildo Zegna. He formerly served as a Chairman of Sotheby’s and as director of Bausch & Lomb Incorporated, Delta Airlines, Inc., Gap, Inc., Newell Brands Inc., Procter & Gamble and Telecom Italia S.p.A. Mr. De Sole graduated from the University of Rome with a law degree and received an LLM from Harvard Law School where he served as a member of the Dean’s Advisory Board. We believe that Mr. De Sole is well qualified to serve as a member of our board of directors based on his extensive background in the consumer and retail sectors, along with his broad operational experience.
Kenneth Suslow has served as our Director since February 2019. Mr. Suslow is a Founding Managing Partner of Sandbridge Capital, LLC, a private equity firm focused on high-growth consumer and retail market leading brands, and has served as the Chairman of their Investment Committee since 2013. From 2012 to 2013, Mr. Suslow was Managing Director at The Strand Partners, LLC, a Los Angeles based family office vehicle, where he advised and invested in privately held consumer companies. Prior to that, Mr. Suslow was a Partner of Jeereddi Partners, LLC (2011-2012), where he managed consumer investments, a Senior Consumer Analyst at JMB Capital Partners, L.P. (2009-2011), and a Partner at Palmyra Captial Advisors LLC (2004-2009), where he managed the fund’s consumer sector coverage. Mr. Suslow is a lead director of Derek Lam International LLC and a director of ILIA, Inc. and Peach & Lily, Inc., serves on the Board of Youth of the People, Inc., is a Board Advisor to Rossignol Apparel and is the former Chairman and current board advisor of Thom Browne, Inc. Mr. Suslow received a BA from Pomona College and an MBA from the Stanford Graduate School of Business. Mr. Suslow is well qualified to serve as a member the Board based on his extensive background and investment experience in the consumer and retail sectors.
James Skinner has served as our Director since February 2020. Mr. Skinner has held various senior management positions with Neiman Marcus Group, Inc. and its related and predecessor companies from June 2001 until his retirement in February 2016, including serving as Vice Chairman between July 2015 and February 2016, Executive Vice President, Chief Operating Officer and Chief Financial Officer between October 2010 and July 2015, and serving as Executive Vice President and Chief Financial Officer from 2007 to 2010. Mr. Skinner served as Senior Vice President and Chief Financial Officer of CapRock Communications Corp. in 2000 and from 1991 until 2000, Mr. Skinner served in several positions with CompUSA Inc., including Executive Vice President and Chief Financial Officer beginning in 1994. Mr. Skinner also served as a partner with Ernst & Young from 1987 until 1991. Mr. Skinner serves on the board of directors of (i) Fossil Group, Inc. (NASDAQ:FOSL), a global design, marketing and distribution company of consumer fashion accessories, (ii) Hudson Ltd. (NYSE: HUD), one of the largest travel retailers in North America, and (iii) Ares Commercial Real Estate Corporation (NYSE: ACRE), a specialty finance company that originates and invests in commercial real estate loans and related investments. Mr. Skinner holds a B.B.A. from Texas Tech University and is a certified public accountant in Texas. Mr. Skinner provides the Board with extensive leadership experience obtained from his service as a chief financial officer of large organizations and his extensive knowledge in accounting, finance, capital markets, strategic planning and risk management. Mr. Skinner is well qualified to serve as a member the Board based on his extensive background and investment experience in the consumer and retail sectors.
Number and Terms of Office of Officers and Directors
Our board of directors consists of five members. Holders of our founder shares have the right to electaccounts receivable. Substantially all of our directors priorcash and cash equivalents were deposited in accounts at one financial institution, and account balances may at times exceed federally insured limits. Management believes that we are not exposed to consummation of our initial business combination and holders of our public shares do not havesignificant credit risk due to the right to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended if approved by a majority of at least 90% of our common stock voting at a stockholder meeting. Approval of our initial business combination will require the affirmative vote of a majority of our board directors and a majority of our independent directors. Our board of directors is divided into two classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a two-year term. The term of officefinancial strength of the first classdepository institution in which the cash is held.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws will provide that our officers may consist of a Chief Executive Officer, a President, a Chief Financial Officer, a Chief Operating Officer, Vice Presidents, a Secretary, Assistant Secretaries, a Treasurer, Assistant Treasurers and such other offices as may be determined by the board of directors.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent within one year of our initial public offering. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have three “independent director” as defined in the Nasdaq listing standards and applicable SEC rules. Our board has determined that Messrs. De Sole, Suslow and Skinner are independent directors under applicable SEC and Nasdaq listing rules.
Availability of Documents
We have filed a copy of our form of Code of Ethics, our audit committee charter, our nominating committee charter and compensation committee charter as exhibits to the registration statement filed in connection with our initial public offering. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all reports applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act.
Executive Officer and Director Compensation
None of our officers has received any cash compensation for services rendered to us. We pay an affiliate of our sponsor a total of $37,000 per month for office space, administrative, support and salaries to be paid to employees of such affiliate for due diligence and related services in connection with our search for a target company (although no salaries or fees are paid from the monthly fee to members of our management team). Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 26, 2020 based on information obtained from the persons named below,credit risk with respect to trade receivables are limited due to the beneficial ownership of shares of our common stock, by:
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
Class A Common Stock | Class B Common Stock | |||||||
Name and Address of Beneficial Owner (1) | Number of Shares Beneficially Owned | % of Class | Number of Shares Beneficially Owned (2) | % of Class | ||||
Acamar Partners Sponsor I LLC (our sponsor) (3) | -- | -- | 7,639,330 | 100.0% | ||||
Juan Carlos Torres Carretero (3) | -- | -- | 7,639,330 | 100.0% | ||||
Luis Ignacio Solorzano Aizpuru (3) | -- | -- | 7,639,330 | 100.0% | ||||
Raffaele R. Vitale (3) | -- | -- | 7,639,330 | 100.0% | ||||
Joseba Asier Picaza Ucar (3) | -- | -- | 7,639,330 | 100.0% | ||||
Juan Duarte Hinterholzer (3) | -- | -- | 7,639,330 | 100.0% | ||||
Domenico de Sole (4) | -- | -- | -- | -- | ||||
Kenneth Suslow (4) | -- | -- | -- | -- | ||||
James E. Skinner (4) | -- | -- | -- | -- | ||||
All director and executive officers as a group (8 individuals) | -- | -- | 7,639,330 | 100.0% | ||||
Governors Lane LP (5) | 2,201,000 | 7.2% | -- | -- | ||||
Deutsche Bank AG (6) | 2,356,896 | 7.7% | -- | -- | ||||
UBS O’Connor LLC (7) | 2,074,000 | 6.8% | -- | -- | ||||
Manulife Financial Corporation (8) | 2,255,181 | 7.4% | -- | -- |
* Less than one percent.
Changes in Control
Not applicable.
Certain Relationships and Related Party Transactions
In November 2018, our sponsor purchased an aggregate of 8,625,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. On April 9, 2019, 985,670 founder shares were returned by our sponsor to us for no consideration and cancelled because the underwriters’ over-allotment option in connection with our initial public offering was not exercised in full. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% ofcustomers comprising our outstanding shares of common stock.
Our sponsor purchased an aggregate of 6,074,310 private placement warrants for a purchase price of $1.50 per warrant in a private placement that will occur simultaneously with the closing of our initial public offering. As such, our sponsor’s interest in this transaction is valued at $9,111,465. Each private placement warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. The private placement warrants (including the Class A common stock issuable upon exercise of the private placement warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days after the completion of our initial business combination.
If any of our officers or directors become aware of a business combination opportunity which is suitable for one or more entities to which he or she has fiduciary, contractual or other obligations or duties, he or she will honor these obligations
We entered into an Administrative Services Agreement pursuant to which we pay Enso Advisory, an affiliate of our sponsor, a total of $37,000 per month for office space, administrative, support and salaries to be paid to employees of Enso Advisory for due diligence and related services in connection with our search for a target company. Juan Duarte Hinterholzer, our Chief Operating Officer and a managing member of our sponsor, and Joseba Asier Picaza Ucar, our Chief Financial Officer and Secretary and a managing member of our sponsor, are the managing members of Enso Advisory. Messrs. Duarte and Picaza are employees of Enso Advisory. Juan Carlos Torres Carretero, our Chairman and a managing member of our sponsor, Raffaele R. Vitale, our President and a managing member of our sponsor, and Mr. Solorzano, our Chief Executive Officer and Director and a managing member of our sponsor,are advisors to Enso Advisory. None of these individuals are paid from the monthly fee we pay Enso Advisory. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. Accordingly, in the event the consummation of our initial business combination takes the maximum 24 months, Enso Advisory will be paid a total of $888,000 ($37,000 per month) for office space, administrative, support and due diligence and related services in connection with our search for a target company.
Our sponsor, officers and directors or any of their respective affiliates are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
Our sponsor (directly or through its affiliates) agreed to loan us up to $400,000 under an unsecured promissory note to be used for a portion of the expenses of our initial public offering. These loans were non-interest bearing, unsecured and are due at the earlier of June 30, 2019 and the closing of the initial public offering. These loans were repaid upon completion of our initial public offering.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor, an affiliate of our sponsor or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $2,000,000 of such loans made to us by our sponsor, an affiliate of our sponsor or our officers and directors may be convertible into units at a price of $10.00 per unit at the option of the lender at the time of the business combination. Such units would be identical to the units sold in the initial public offering except that the warrants underlying such units would be identical to the private placement warrants issued to our sponsor. The terms of such loans by our sponsor, an affiliate of our sponsor or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor, an affiliate of our sponsor or our officers and directors, if any, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team who remain with us, if any, may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive officer and director compensation.
We have entered into a registration rights agreement with respect to the founder shares, private placement warrants and warrants issued upon conversion of working capital loans (if any).
Related Party Policy
Our audit committee must review and approve any related person transaction we propose to enter into. Our audit committee charter details the policies and procedures relating to transactions that may present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of our company and our stockholders. A summary of such policies and procedures is set forth below.
Any potential related party transaction that is brought to the audit committee’s attention will be analyzed by the audit committee, in consultation with outside counsel or members of management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related party transaction. At its meetings, the audit committee will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction and the benefits to us and to the relevant related party.
In determining whether to approve a related party transaction, the audit committee must consider, among other factors, the following factors to the extent relevant:
Any member of the audit committee who has an interest in the transaction under discussion must abstain from any voting regarding the transaction, but may, if so requested by the chairman of the audit committee, participate in some or all of the audit committee’s discussions of the transaction. Upon completion of its review of the transaction, the audit committee may determine to permit or to prohibit the transaction.
The firm of WithumSmith+Brown, PC (“Withum”), acts as our independent registered public accounting firm. The following is a summary of fees paid to Withum for services rendered.
Audit Fees. During year ended December 31, 2019 and the period from November 7, 2018 (inception) through December 30, 2018, fees for our independent registered public accounting firm were approximately $54,785 and $18,000, respectively, for the services Withum performed in connection with our Initial Public Offering and the audit of our December 31, 2019 financial statements included in this Annual Report on Form 10-K.
Audit-Related Fees. During year ended December 31, 2019 and the period from November 7, 2018 (inception) through December 30, 2018, our independent registered public accounting firm did not render assurance and related services related to the performance of the audit or review of financial statements.
Tax Fees. During year ended December 31, 2019 and the period from November 7, 2018 (inception) through December 30, 2018, fees for our independent registered public accounting firm were approximately $3,000 and $-0-, respectively, for the services related to the performance of tax compliance, tax advice and tax planning.
All Other Fees. During year ended December 31, 2019 and the period from November 7, 2018 (inception) through December 30, 2018, there were no fees billed for products and services provided by our independent registered public accounting firm other than those set forth above.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
None.
We hereby file as part of this report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
Not applicable.
ACAMAR PARTNERS ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholdersstockholders and the Board of Directors of
Acamar Partners Acquisition Corp.
CarLotz, Inc.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to complete a Business Combination by February 26, 2021, then the Company will cease all operations except for the purpose of liquidating. This date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
New York, New York
March 27,2020.
ACAMAR PARTNERS ACQUISITION CORP.
BALANCE SHEETS
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 1,600,833 | $ | 12,000 | ||||
Prepaid income taxes | 120,579 | — | ||||||
Prepaid expenses | 96,208 | — | ||||||
Total Current Assets | 1,817,620 | 12,000 | ||||||
Deferred offering costs | — | 294,004 | ||||||
Cash and marketable securities held in Trust Account | 309,840,375 | — | ||||||
Total Assets | $ | 311,657,995 | $ | 306,004 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accrued expenses | $ | 214,813 | $ | — | ||||
Promissory note – related party | — | 283,754 | ||||||
Total Current Liabilities | 214,813 | 283,754 | ||||||
Deferred underwriting fee payable | 10,695,063 | — | ||||||
Total Liabilities | 10,909,876 | 283,754 | ||||||
Commitments and contingencies (Note 5) | ||||||||
Common stock subject to possible redemption, 29,574,811 shares at $10.00 per share as of December 31, 2019 | 295,748,110 | — | ||||||
Stockholders’ Equity | ||||||||
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, none issued and outstanding | — | — | ||||||
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 982,511 and no shares issued and outstanding (excluding 29,574,811 and no shares subject to possible redemption) as of December 31, 2019 and 2018, respectively | 98 | — | ||||||
Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 7,639,330 and 8,625,000(1) shares issued and outstanding at December 31, 2019 and 2018, respectively | 764 | 863 | ||||||
Additional paid in capital | 1,523,695 | 24,137 | ||||||
Retained earnings/(Accumulated deficit) | 3,475,452 | (2,750 | ) | |||||
Total Stockholders’ Equity | 5,000,009 | 22,250 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 311,657,995 | $ | 306,004 |
The
2021 | 2020 | ||||||||||
Assets | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 75,029 | $ | 2,208 | |||||||
Restricted cash | 4,336 | 605 | |||||||||
Marketable securities – at fair value | 116,589 | 1,032 | |||||||||
Accounts receivable, net | 8,206 | 4,132 | |||||||||
Inventories | 40,985 | 11,202 | |||||||||
Other current assets | 4,705 | 6,679 | |||||||||
Total Current Assets | 249,850 | 25,858 | |||||||||
Marketable securities – at fair value | 1,941 | — | |||||||||
Property and equipment, net | 22,628 | 1,868 | |||||||||
Capitalized website and internal-use software costs, net | 13,716 | — | |||||||||
Lease vehicles, net | 1,596 | 173 | |||||||||
Other assets | 558 | 299 | |||||||||
Total Assets | $ | 290,289 | $ | 28,198 | |||||||
Liabilities, Redeemable Convertible Preferred Stock, Stockholders’ Equity (Deficit) | |||||||||||
Current Liabilities: | |||||||||||
Long-term debt, current | $ | 509 | $ | 6,370 | |||||||
Floorplan notes payable | 27,815 | 6,039 | |||||||||
Accounts payable | 6,352 | 6,283 | |||||||||
Accrued transaction expenses | — | 6,052 | |||||||||
Accrued expenses | 14,428 | 3,563 | |||||||||
Accrued expenses – related party | — | 5,082 | |||||||||
Other current liabilities | 754 | 256 | |||||||||
Total Current Liabilities | 49,858 | 33,645 | |||||||||
Long-term debt, less current portion | 12,206 | 2,999 | |||||||||
Redeemable convertible preferred stock tranche obligation | — | 2,832 | |||||||||
Earnout shares liability | 7,679 | — | |||||||||
Merger warrants liability | 6,291 | — | |||||||||
Other liabilities | 744 | 1,959 | |||||||||
Total Liabilities | 76,778 | 41,435 | |||||||||
Commitments and Contingencies (Note 15) | — | — | |||||||||
Stockholders’ Equity (Deficit): | |||||||||||
Common stock, $0.0001 par value; 500,000,000 authorized shares, 113,996,401 and 58,621,042 shares issued and outstanding at December 31, 2021 and December 31, 2020 | 11 | 6 | |||||||||
Additional paid-in capital | 287,509 | 20,779 | |||||||||
Accumulated deficit | (73,916) | (34,037) | |||||||||
Accumulated other comprehensive (loss) income | (93) | 15 | |||||||||
Total Stockholders’ Equity (Deficit) | 213,511 | (13,237) | |||||||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 290,289 | $ | 28,198 |
2021 | 2020 | 2019 | |||||||||||||||
Revenues: | |||||||||||||||||
Retail vehicle sales | $ | 217,439 | $ | 104,253 | $ | 90,382 | |||||||||||
Wholesale vehicle sales | 31,759 | 9,984 | 8,454 | ||||||||||||||
Finance and insurance, net | 8,844 | 3,898 | 3,117 | ||||||||||||||
Lease income, net | 492 | 490 | 533 | ||||||||||||||
Total Revenues | 258,534 | 118,625 | 102,486 | ||||||||||||||
Cost of sales (exclusive of depreciation) | 247,946 | 107,369 | 93,780 | ||||||||||||||
Gross Profit | 10,588 | 11,256 | 8,706 | ||||||||||||||
Operating Expenses: | |||||||||||||||||
Selling, general and administrative | 93,076 | 17,507 | 18,192 | ||||||||||||||
Stock-based compensation expense | 51,121 | 45 | 113 | ||||||||||||||
Depreciation and amortization expense | 3,363 | 341 | 504 | ||||||||||||||
Management fee expense – related party | 2 | 215 | 250 | ||||||||||||||
Impairment expense | 108 | — | — | ||||||||||||||
Total Operating Expenses | 147,670 | 18,108 | 19,059 | ||||||||||||||
Loss from Operations | (137,082) | (6,852) | (10,353) | ||||||||||||||
Interest expense | 1,590 | 518 | 651 | ||||||||||||||
Other Income, net | |||||||||||||||||
Change in fair value of Merger warrants liability | 32,733 | — | — | ||||||||||||||
Change in fair value of redeemable convertible preferred stock tranche obligation | — | 923 | (1,396) | ||||||||||||||
Change in fair value of earnout shares | 66,605 | — | — | ||||||||||||||
Other income (expense), net | (535) | (95) | (267) | ||||||||||||||
Total Other Income (Expense), net | 98,803 | 828 | (1,663) | ||||||||||||||
Loss Before Income Tax Expense | (39,869) | (6,542) | (12,667) | ||||||||||||||
Income tax expense | 10 | 10 | 11 | ||||||||||||||
Net Loss | $ | (39,879) | $ | (6,552) | $ | (12,678) | |||||||||||
Net Loss per Share, basic and diluted | $ | (0.36) | $ | (0.11) | $ | (0.22) | |||||||||||
Weighted-average Shares used in Computing Net Loss per Share, basic and diluted | 110,574,519 | 58,621,042 | 56,475,860 |
2021 | 2020 | 2019 | ||||||||||||
Net loss | $ | (39,879) | $ | (6,552) | $ | (12,678) | ||||||||
Other Comprehensive (Loss) Income, net of tax: | ||||||||||||||
Unrealized (losses) gains on marketable securities arising during the period | (101) | 16 | — | |||||||||||
Tax effect | — | — | — | |||||||||||
Unrealized (losses) gains on marketable securities arising during the period, net of tax | (101) | 16 | — | |||||||||||
Reclassification adjustment for realized gains | (7) | (1) | — | |||||||||||
Tax effect | — | — | — | |||||||||||
Reclassification adjustment for realized gains, net of tax | (7) | (1) | — | |||||||||||
Other Comprehensive (Loss) Income, net of tax | (108) | 15 | — | |||||||||||
Total Comprehensive (Loss) | $ | (39,987) | $ | (6,537) | $ | (12,678) |
Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2019 | 1,220,851 | $ | 8,670 | 37,881,435 | $ | 4 | $ | 6,526 | $ | (14,807) | $ | — | $ | (8,277) | ||||||||||||||||||||||||||||||||||||
Retroactive application of recapitalization | (1,220,851) | $ | (8,670) | 12,443,768 | $ | 1 | $ | 8,669 | $ | — | $ | — | $ | 8,670 | ||||||||||||||||||||||||||||||||||||
Adjusted balance, beginning of period | — | $ | — | 50,325,203 | $ | 5 | $ | 15,195 | $ | (14,807) | $ | — | $ | 393 | ||||||||||||||||||||||||||||||||||||
Net loss | — | $ | — | — | $ | — | $ | — | $ | (12,678) | $ | — | $ | (12,678) | ||||||||||||||||||||||||||||||||||||
Redeemable convertible preferred stock issuance, shown as if recapitalized | — | $ | — | 8,295,840 | $ | 1 | $ | 8,889 | $ | — | $ | — | $ | 8,890 | ||||||||||||||||||||||||||||||||||||
Accrued dividends on redeemable convertible preferred stock | — | $ | — | — | $ | — | $ | (1,579) | $ | — | $ | — | $ | (1,579) | ||||||||||||||||||||||||||||||||||||
Stock based compensation | — | $ | — | — | $ | — | $ | 113 | $ | — | $ | — | $ | 113 | ||||||||||||||||||||||||||||||||||||
Balance December 31, 2019 | — | $ | — | 58,621,042 | $ | 6 | $ | 22,618 | $ | (27,485) | $ | — | $ | (4,861) | ||||||||||||||||||||||||||||||||||||
Net loss | — | $ | — | — | $ | — | $ | — | $ | (6,552) | $ | — | $ | (6,552) | ||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | $ | — | — | $ | — | $ | — | $ | — | $ | 15 | $ | 15 | ||||||||||||||||||||||||||||||||||||
Accrued dividends on redeemable convertible preferred stock | — | $ | — | — | $ | — | $ | (1,884) | $ | — | $ | — | $ | (1,884) | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | $ | — | — | $ | — | $ | 45 | $ | — | $ | — | $ | 45 | ||||||||||||||||||||||||||||||||||||
Balance December 31, 2020 | — | $ | — | 58,621,042 | $ | 6 | $ | 20,779 | $ | (34,037) | $ | 15 | $ | (13,237) | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (39,879) | — | (39,879) | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | — | (108) | (108) | ||||||||||||||||||||||||||||||||||||||||||
Accrued dividends on redeemable convertible preferred stock | — | — | — | — | (20) | — | — | (20) | ||||||||||||||||||||||||||||||||||||||||||
PIPE issuance | — | — | 12,500,000 | 1 | 124,999 | — | — | 125,000 | ||||||||||||||||||||||||||||||||||||||||||
Merger financing | — | — | 38,194,390 | 4 | 309,995 | — | — | 309,999 | ||||||||||||||||||||||||||||||||||||||||||
Consideration to existing shareholders of Former CarLotz, net of accrued dividends | — | — | — | — | (62,693) | — | — | (62,693) | ||||||||||||||||||||||||||||||||||||||||||
Transaction costs and advisory fees | — | — | — | — | (47,579) | — | — | (47,579) | ||||||||||||||||||||||||||||||||||||||||||
Settlement of redeemable convertible preferred stock tranche obligation | — | — | — | — | 2,832 | — | — | 2,832 | ||||||||||||||||||||||||||||||||||||||||||
Cashless exercise of options | — | — | 54,717 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Cash consideration paid to Former CarLotz optionholders | — | — | — | — | (2,465) | — | — | (2,465) | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 51,121 | — | — | 51,121 | ||||||||||||||||||||||||||||||||||||||||||
Earnout liability | — | — | — | — | (74,284) | — | — | (74,284) | ||||||||||||||||||||||||||||||||||||||||||
Merger warrants liability | — | — | — | — | (39,024) | — | — | (39,024) | ||||||||||||||||||||||||||||||||||||||||||
KAR/AFC note payable conversion | — | — | 3,546,984 | — | 3,625 | — | — | 3,625 | ||||||||||||||||||||||||||||||||||||||||||
KAR/AFC warrant exercise | — | — | 752,927 | — | 144 | — | — | 144 | ||||||||||||||||||||||||||||||||||||||||||
Net issuance of Class A common stock to settle vested restricted stock units | — | — | 71,523 | — | (84) | — | — | (84) | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | 254,818 | — | 163 | — | — | 163 | ||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2021 | — | $ | — | 113,996,401 | $ | 11 | $ | 287,509 | $ | (73,916) | $ | (93) | $ | 213,511 |
2021 | 2020 | 2019 | |||||||||||||||
Cash Flow from Operating Activities | |||||||||||||||||
Net loss | $ | (39,879) | $ | (6,552) | $ | (12,678) | |||||||||||
Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||||||||
Depreciation and amortization – property and equipment and capitalized software | 3,257 | 195 | 260 | ||||||||||||||
Impairment – property and equipment | 108 | — | — | ||||||||||||||
Amortization and accretion - marketable securities | 2,465 | — | — | ||||||||||||||
Depreciation – lease vehicles | 106 | 146 | 244 | ||||||||||||||
Loss on disposition of property and equipment | — | — | 321 | ||||||||||||||
Gain on marketable securities | — | (36) | — | ||||||||||||||
Provision for doubtful accounts | 233 | 40 | (14) | ||||||||||||||
Stock-based compensation expense | 51,121 | 45 | 113 | ||||||||||||||
Change in fair value of Merger warrants liability | (32,733) | — | — | ||||||||||||||
Change in fair value of historic warrants liability | — | 14 | (24) | ||||||||||||||
Change in fair value of earnout shares | (66,605) | — | — | ||||||||||||||
Change in fair value of debt issuance costs and stock warrant | — | 25 | — | ||||||||||||||
Change in fair value of redeemable convertible preferred stock tranche obligation | — | (923) | 1,396 | ||||||||||||||
Unpaid interest expense on capital lease obligations | 340 | — | — | ||||||||||||||
Change in Operating Assets and Liabilities: | |||||||||||||||||
Accounts receivable | (4,307) | (916) | (830) | ||||||||||||||
Inventories | (29,519) | (3,333) | 2,883 | ||||||||||||||
Other current assets | (3,918) | (6,445) | (6) | ||||||||||||||
Other assets | (259) | 44 | (38) | ||||||||||||||
Accounts payable | 69 | 4,149 | 1,392 | ||||||||||||||
Accrued expenses | 9,041 | 8,039 | 525 | ||||||||||||||
Accrued expenses – related party | (229) | 96 | 172 | ||||||||||||||
Other current liabilities | 498 | (178) | 229 | ||||||||||||||
Other liabilities | (1,070) | 998 | 582 | ||||||||||||||
Net Cash Used in Operating Activities | (111,281) | (4,592) | (5,473) | ||||||||||||||
Cash Flows from Investing Activities | |||||||||||||||||
Purchase of property and equipment | (10,148) | (154) | (235) | ||||||||||||||
Capitalized website and internal-use software costs | (14,609) | — | — | ||||||||||||||
Purchase of marketable securities | (359,896) | (1,049) | — | ||||||||||||||
Proceeds from sales of marketable securities | 239,931 | 68 | — | ||||||||||||||
Purchase of lease vehicles | (1,793) | (92) | (252) | ||||||||||||||
Net Cash Used in Investing Activities | (146,515) | (1,227) | (487) | ||||||||||||||
Cash Flows from Financing Activities | |||||||||||||||||
Issuance of redeemable convertible preferred stock | — | — | 7,988 | ||||||||||||||
Payments made on long-term debt | (153) | (9) | (8) | ||||||||||||||
Advance from holder of marketable securities | 4,722 | — | — | ||||||||||||||
Repayment of advance from marketable securities | (4,722) | — | — | ||||||||||||||
PIPE issuance | 125,000 | — | — | ||||||||||||||
Merger financing | 309,999 | — | — | ||||||||||||||
Payment made on accrued dividends | (4,853) | — | — | ||||||||||||||
Payments to existing shareholders of Former CarLotz | (62,693) | — | — |
Transaction costs and advisory fees | (47,579) | — | — | ||||||||||||||
Payments made on cash considerations associated with stock options | (2,465) | — | — | ||||||||||||||
Repayment of Paycheck Protection Program loan | (1,749) | — | — | ||||||||||||||
Payments made on note payable | (3,000) | — | (418) | ||||||||||||||
Payments of debt issuance costs | — | (10) | (112) | ||||||||||||||
Borrowings on long-term debt | — | 5,249 | 3,000 | ||||||||||||||
Payments on floor plan notes payable | (150,090) | (24,948) | (41,711) | ||||||||||||||
Borrowings on floor plan notes payable | 171,866 | 24,248 | 39,753 | ||||||||||||||
Employee stock option exercise | 404 | — | — | ||||||||||||||
Payments made for tax on equity award transactions | (339) | — | — | ||||||||||||||
Net Cash Provided by Financing Activities | 334,348 | 4,530 | 8,492 | ||||||||||||||
Net Change in Cash and Cash Equivalents Including Restricted Cash | 76,552 | (1,289) | 2,532 | ||||||||||||||
Cash and cash equivalents and restricted cash, beginning | 2,813 | 4,102 | 1,570 | ||||||||||||||
Cash and cash equivalents and restricted cash, ending | $ | 79,365 | $ | 2,813 | $ | 4,102 | |||||||||||
Supplemental Disclosure of Cash Flow Information | |||||||||||||||||
Cash paid for interest | $ | 1,743 | $ | 346 | $ | 684 | |||||||||||
Supplementary Schedule of Non-cash Investing and Financing Activities: | |||||||||||||||||
Transfer from property and equipment to inventory | $ | — | $ | 27 | $ | 53 | |||||||||||
Transfer from lease vehicles to inventory | $ | 264 | $ | 217 | $ | 295 | |||||||||||
Redeemable convertible preferred stock distributions accrued | — | 1,884 | 1,579 | ||||||||||||||
Issuance of common stock warrants | — | 15 | 72 | ||||||||||||||
KAR/AFC exercise of stock warrants | (144) | — | — | ||||||||||||||
KAR/AFC conversion of notes payable | (3,625) | — | — | ||||||||||||||
Convertible redeemable preferred stock tranche obligation expiration | (2,832) | — | — | ||||||||||||||
Capitalized website and internal use software costs accrued | (790) | — | — | ||||||||||||||
Purchase of property and equipment costs accrued | (1,034) | — | — | ||||||||||||||
Purchases of property under capital lease obligation | (11,261) | 1,305 | — | ||||||||||||||
Settlement of redeemable convertible preferred stock tranche obligation | — | — | (902) | ||||||||||||||
ACAMAR PARTNERS ACQUISITION CORP.
STATEMENTS OF OPERATIONS
For the Period | ||||||||
Year Ended December 31, | From November 7, 2018 (Inception) Through December 31, | |||||||
2019 | 2018 | |||||||
Operating costs | $ | 932,834 | $ | 2,750 | ||||
Loss from operations | (932,834 | ) | (2,750 | ) | ||||
Other income: | ||||||||
Interest earned on marketable securities held in Trust Account | 5,531,557 | — | ||||||
Income (loss) before provision for income taxes | 4,598,723 | (2,750 | ) | |||||
Provision for income taxes | (1,120,521 | ) | — | |||||
Net income (loss) | $ | 3,478,202 | $ | (2,750 | ) | |||
Weighted average shares outstanding of Class A redeemable common stock | 30,479,514 | — | ||||||
Basic and diluted net income per share, Class A | $ | 0.14 | — | |||||
Weighted average shares outstanding of Class B non-redeemable common stock | 7,601,435 | 7,500,000 | ||||||
Basic and diluted net loss per share, Class B | $ | (0.10 | ) | $ | (0.00 | ) |
The accompanying notes are an integral part of the financial statements.
ACAMAR PARTNERS ACQUISITION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Class A Common Stock | Class B Common Stock | Additional Paid in | Retained Earnings (Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||||||||
Balance – November 7, 2018 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B common stock to Sponsor | 8,625,000 | 863 | 24,137 | — | 25,000 | |||||||||||||||||||||||
Net loss | — | — | — | (2,750 | ) | (2,750 | ) | |||||||||||||||||||||
Balance – December 31, 2018 | — | — | 8,625,000 | 863 | 24,137 | (2,750 | ) | 22,250 | ||||||||||||||||||||
Sale of 30,557,322 Units, net of underwriting discount and offering costs | 30,557,322 | 3,056 | — | — | 288,133,146 | — | 288,136,202 | |||||||||||||||||||||
Sale of 6,074,310 Private Placement Warrants | — | — | — | — | 9,111,465 | — | 9,111,465 | |||||||||||||||||||||
Forfeiture of Class B common stock by Sponsor | — | — | (985,670 | ) | (99 | ) | 99 | — | — | |||||||||||||||||||
Common stock subject to possible redemption | (29,574,811 | ) | (2,958 | ) | — | — | (295,745,152 | ) | — | (295,748,110 | ) | |||||||||||||||||
Net income | — | — | — | — | — | 3,478,202 | 3,478,202 | |||||||||||||||||||||
Balance – December 31, 2019 | 982,511 | $ | 98 | 7,639,330 | $ | 764 | $ | 1,523,695 | $ | 3,475,452 | $ | 5,000,009 |
The accompanying notes•references to “Acamar Sponsor” are an integral part of the financial statements.
ACAMAR PARTNERS ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
Year Ended December 31, 2019 | For the Period From November 7, 2018 (Inception) Through December 31, 2018 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | 3,478,202 | $ | (2,750 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Interest earned on marketable securities held in Trust Account | (5,531,557 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid income taxes | (120,579 | ) | — | |||||
Prepaid expenses | (96,208 | ) | — | |||||
Accrued expenses | 214,813 | — | ||||||
Net cash used in operating activities | (2,055,329 | ) | (2,750 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Investment of cash into Trust Account | (305,573,220 | ) | — | |||||
Cash withdrawn from Trust Account | 1,264,402 | — | ||||||
Net cash used in investing activities | (304,308,818 | ) | — | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of Class B common stock to Sponsor | — | 25,000 | ||||||
Proceeds from sale of Units, net of underwriting discounts paid | 299,461,755 | — | ||||||
Proceeds from sale of Private Placement Warrants | 9,111,465 | — | ||||||
Repayment of advances from related party | (77,389 | ) | — | |||||
Proceeds from promissory note – related party | 79,500 | 70,000 | ||||||
Repayment of promissory note – related party | (400,000 | ) | — | |||||
Payment of offering costs | (222,351 | ) | (80,250 | ) | ||||
Net cash provided by financing activities | 307,952,980 | 14,750 | ||||||
Net Change in Cash | 1,588,833 | 12,000 | ||||||
Cash – Beginning of period | 12,000 | — | ||||||
Cash – End of period | $ | 1,600,833 | $ | 12,000 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for income taxes | $ | 1,241,100 | — | |||||
Non-Cash investing and financing activities: | ||||||||
Initial classification of common stock subject to possible redemption | $ | 292,267,800 | $ | — | ||||
Change in value of common stock subject to possible redemption | $ | 3,480,310 | $ | — | ||||
Deferred underwriting fee payable | $ | 10,695,063 | $ | — | ||||
Payment of offering costs through promissory note and advances | $ | 114,135 | $ | 213,754 |
The accompanying notes are an integral part of the financial statements.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Acamar Partners Acquisition Corp. (the “Company”) was incorporated in Delaware on November 7, 2018. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on companies in the consumer and retail sectors. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2019, the Company had not commenced any operations. All activity for the period from November 7, 2018 (inception) through December 31, 2019 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on February 21, 2019. On February 26, 2019, the Company consummated the Initial Public Offering of 30,000,000 units (“Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $300,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,000,000 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrants in a private placement to Acamar Partners Sponsor I LLC, a Delaware limited liability company (the “Sponsor”LLC; and
FollowingMerger Sub merged with and into Former CarLotz, with Former CarLotz surviving as the closingsurviving company and as a wholly owned subsidiary of the Initial Public Offering on February 26, 2019,Company.
On April 9, 2019,Company and Former CarLotz following the Merger on January 21, 2021, (iii) the assets and liabilities of Former CarLotz at their historical cost and (iv) the Company’s equity structure for all periods presented. The recapitalization of the number of shares of common stock attributable to the purchase of Former CarLotz in connection with the underwriters’ electionMerger is reflected retroactively to partially exercise their optionthe earliest period presented and will be utilized for calculating earnings per share in all prior periods presented. No step-up basis of intangible assets or goodwill was recorded in the Merger transaction consistent with the treatment of the transaction as a reverse recapitalization of Former CarLotz.
Offering costs amounted to $17,437,018, consisting of $6,111,465 of underwriting fees, $10,695,063 of deferred underwriting fees and $630,490 of other offering costs. As of December 31, 2019, $1,600,833 of cash was held outside of the Trust Account (as defined below) and is available for working capital purposes.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company must complete a Business Combination with one or more target businesses that together have a fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on interest earnedMerger, based on the Trust Account) at the time of the agreement to enter intoCompany’s business activities, it was a Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register“shell company” as an investment company under the Investment Company Act. There is no assurance that the Company will be able to complete a Business Combination successfully.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor, officers and directors (the “Initial Stockholders”) have agreed to vote their Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to an aggregate of 10% or more of the Public Shares, without the prior consent of the Company.
.
The Company will have until February 26, 2021 to complete a Business Combination (the “Combination Period”). However, if the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders or any of their respective affiliates acquire Public Shares after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, except as to any claims by a third party that executed a waiver of any and all rights to funds held in the Trust Account (whether or not such waiver is enforceable) and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern
In connection with the Company's assessment of going concern considerationsbeen prepared in accordance with Financial Accounting Standard Board's Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern,” the Company has until February 26, 2021 to consummate a business combination. It is uncertain that the Company will be able to consummate a business combination by this time. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 26, 2021.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements are presented in conformity withU.S. generally accepted accounting principles generally accepted in the United States of America (“GAAP”)(U.S. GAAP) and pursuant to theapplicable rules and regulations of the SEC.
Emerging growth company
U.S. Securities and Exchange Commission (“SEC”) regarding financial reporting.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’sconsolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted outinclude the accounts of using the extended transition period difficult or impossible because of the potential differencesCarLotz, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in accounting standards used.
consolidation.
Estimates
Making estimates requires managementclosing of the Merger are accounted for as freestanding financial instruments. These warrants are classified as liabilities on the Company’s consolidated balance sheets and are recorded at their estimated fair value. The estimated fair value of the warrants is determined by using the market value in an active trading market. See Note 6 — Fair Value of Financial Instruments.
Company may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer behavior in response to the pandemic and other economic and operational conditions the Company may face.
The Company considers all short-term
Common stock subject to possible redemption
December 31, 2020, restricted cash included approximately $4,336 and $605, respectively. The restricted cash is legally and contractually restricted as collateral for lines of credit, including floorplan, and for the payment of claims on the reinsurance companies.
Offering Costs
Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directlylosses related to the Initial Public Offering. Offering costs amounting to $17,437,018 were charged to stockholders’ equity upon the completion of the Initial Public Offering.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Income taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable incomechanges in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2019 and 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 16,260,084 shares of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive under the treasury stock method.
The Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account of $5,531,557 (net of applicable franchise and income taxes of approximately $1,321,000 for the year ended December 31, 2019) by the weighted average number of shares of Class A redeemable common stock outstanding since original issuance. Net loss per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository Insurance Coverage of $250,000. At December 31, 2019 and 2018, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Fair value of financial instruments
The fair value of equity securities are recognized in other income (expense) in the Company’s assetsconsolidated statements of operations. Unrealized gains and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts representedlosses related to changes in the accompanying balance sheets, primarily due to their short-term nature.
Recently issued accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect onfair value of debt securities are recognized in Accumulated Other Comprehensive Income in the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant toconsolidated balance sheets. Changes in the Initial Public Offering, the Company sold 30,557,322 Units at a purchase pricefair value of $10.00 per Unit, inclusive of 557,322 Units sold to the underwriters on April 9, 2019 upon the underwriters’ election to partially exercise their option to purchase additional Units. Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 6).
NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares
On November 15, 2018, the Sponsor purchased 8,625,000 shares (the “Founder Shares”) ofavailable-for-sale debt securities impact the Company’s Class B common stock for an aggregate price of $25,000. The Founder Shares will automatically convert into Class A common stock upon consummation of a Business Combinationnet income only when such securities are sold or when other-than-temporary impairment is recognized. Realized gains and losses on a one-for-one basis, subject to certain adjustments, as described in Note 6.
The Founder Shares included an aggregate of up to 1,125,000 shares subject to forfeiture to the extent that the underwriters’ option to purchase additional Units was not exercised in full or in part, so that the Initial Stockholders would own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Initial Stockholders did not purchase any Public Shares in the Initial Public Offering). On April 9, 2019, as a result of the underwriters’ election to partially exercise their option to purchase additional Units, 985,670 Founder Shares were forfeited and 139,330 Founder Shares are no longer subject to forfeiture, resulting in an aggregate of 7,639,330 Founder Shares issued and outstanding.
The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 6,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $9,000,000. On April 9, 2019, in connection with the underwriters’ election to partially exercise their option to purchase additional Units, the Company sold an additional 74,310 Private Placement Warrants to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $111,465. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemptionsecurities are determined by specific identification of the Public Shares (subject to the requirements of applicable law),each security’s cost basis and the Private Placement Warrants will expire worthless.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Advance from Related Party
The Sponsor advanced the Company an aggregate of $77,389 to cover expenses related to the Initial Public Offering. The advances were non-interest bearing and due on demand. The advances were repaid on February 27, 2019.
Promissory Note – Related Party
On November 19, 2018, the Sponsor agreed to loan the Company an aggregate of up to $400,000 to cover expenses related to the Initial Public Offering (the “Promissory Note”). The Promissory Note was non-interest bearing and payableare recognized on the earliertrade date.
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, orCompany may sell certain of the Company’s officersmarketable securities prior to their stated maturities for strategic reasons, including, but not limited to, anticipation of credit deterioration and directors may, but areduration management. The Company reviews its debt securities on a regular basis to evaluate whether or not obligatedany security has experienced an other-than-temporary decline in fair value. The Company considers factors such as the length of time and extent to loanwhich the Company funds as may be required (“Working Capital Loans”). Ifmarket value has been less than the Company completes a Business Combination,cost, the Company would repay the Working Capital Loans outfinancial condition and near-term prospects of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determinedissuer and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $2,000,000 of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. The units would be identical to the Units sold in the Initial Public Offering except that the warrants underlying such units would be identical to the Private Placement Warrants. As of December 31, 2019, the Company had no outstanding balance under the Working Capital Loans.
Administrative Support Agreement
The Company entered into an agreement whereby, commencing on the February 21, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company agreedintent to pay an affiliate of the Sponsor a total of $37,000 per month for office space, administrative support and salaries to be paid to employees of such affiliate for due diligence and related services in connection with the Company’s search for a target company (although no salariessell, or fees will be paid from the monthly fee to members of the Company’s management team). For the year ended December 31, 2019, the Company incurred $370,000 in fees for these services. At December 31, 2019, $37,000 of such fees is included in accrued expenses in the accompanying balance sheet.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on February 21, 2019, the holders of the Founder Shares, Private Placement Warrants and securities that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants or warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the Initial Public Offering to purchase up to 4,500,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. On April 9, 2019, the underwriters elected to partially exercise their option to purchase 557,322 Units at a purchase price of $10.00 per Unit.
In connection with the closing of the Initial Public Offering and the option to purchase additional Units, the underwriters were paid a cash underwriting discount of $0.20 per Unit, or $6,111,465 in the aggregate. In addition, the underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,695,063 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. Of such amount, up to approximately $0.10 per Unit, or up to $3,055,732, may be paid to third parties not participating in the Initial Public Offering (but who are members of FINRA) that assist the Company in consummating a Business Combination. The election to make such payments to third parties will be solely at the discretion of the Company, and such third parties will be selected by the Company in its sole discretion.
NOTE 6. STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2019 and 2018, there were no shares of preferred stock issued or outstanding.
Common Stock
Class A Common Stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2019 and 2018, there were 982,511 and -0- of Class A common stock issued or outstanding, excluding 29,574,811 and -0- shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock — The Company is authorized to issue 15,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At December 31, 2019 and 2018, there were 7,639,330 and 8,625,000 shares of Class B common stock issued and outstanding, respectively. As of December 31, 2018, 1,125,000 shares were subject to forfeiture.
Holders of Class B common stock will have the right to elect all of the Company’s directors prior to a Business Combination. Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, any private placement securities issued upon conversion of loans made to the Company. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its reasonable best efforts to file with the SEC, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its reasonable best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.
In addition, if the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “newly issued price”), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the newly issued price.
Redemptions of Warrants for Cash — Once the warrants become exercisable, the Company may redeem the Public Warrants:
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Redemption of Warrants for Shares of Class A Common Stock — Commencing ninety days after the warrants become exercisable, the Company may redeem the outstanding warrants (including both Public Warrants and Private Placement Warrants):
If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 7. INCOME TAX
The Company’s net deferred tax assets are as follows:
December 31, 2019 | ||||
Deferred tax asset | ||||
Organizational costs/Startup expenses | $ | 153,773 | ||
Total deferred tax asset | 153,773 | |||
Valuation allowance | (153,773 | ) | ||
Deferred tax asset, net of allowance | $ | — |
The income tax provision consists of the following:
December 31, 2019 | ||||
Federal | ||||
Current | $ | 1,120,521 | ||
Deferred | (153,773 | ) | ||
State | ||||
Current | — | |||
Deferred | — | |||
Change in valuation allowance | 153,773 | |||
Income tax provision | $ | 1,120,521 |
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
As of December 31, 2019, the Company did not have any U.S. federal and state net operating loss carryovers available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of allthe Company will be required to sell the investment before recovery of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent uponinvestment’s amortized cost basis. If the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, managementCompany believes that significant uncertaintyan other-than-temporary decline exists in one of these securities, the Company will write down these investments to fair value through earnings.
Leasehold Improvements | Lesser of 15 years or underlying lease terms | ||||
Equipment, Furniture and Fixtures | 1 – 5 years | ||||
Corporate Vehicles | 5 years |
A reconciliationlowest level for which identifiable cash flows are largely independent of the federal income tax ratecash flows of other assets and liabilities. For example, long-lived assets deployed at hub locations are reviewed for impairment at the individual hub level, which involves comparing the net carrying value of all assets to the Company’s effective tax ratenet cash flow projections for each hub. In addition, we conduct separate impairment reviews at December 31, 2019 isother levels as follows:
appropriate, for example, to evaluate potential impairment of assets shared by several areas of operations, such as information technology systems.
NOTE 8. FAIR VALUE MEASUREMENTS
lease vehicles is calculated using the straight-line method over the estimated useful life.
At December 31, 2019, assets heldeach reporting period, changes in the Trust Account were comprised of $152,096 in cash and $309,688,279 in U.S. Treasury Bills, which are held at amortized cost.
The gross holding losses and fair value during the period are recorded in our consolidated statement of held-to-maturity securities at December 31, 2019 are as follows:
Held-To-Maturity | Amortized Cost | Gross Holding Gain | Fair Value | |||||||||||
December 31, 2019 | U.S. Treasury Securities (Mature on 2/6/2020) | $ | 309,688,279 | $ | 2,018 | $ | 309,690,297 |
operations. We will continue to adjust these liabilities for changes in fair value until the earlier of their exercise, termination or other form of settlement. The fair value of the Company’s financial assetswarrants is determined by using the market value in an active trading market.
ACAMAR PARTNERS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 9. SUBSEQUENT EVENTS
Managementstatements issued after adoption will continue to be presented in accordance with the previous lease guidance (ASC 840). At transition, we plan to elect the package of practical expedients that provides companies the ability to not reassess lease identification, lease classification or initial direct costs for contracts existing as of the transition date. We do not plan to elect the hindsight practical expedient.
Recapitalization | |||||
Cash - Acamar Partners’ trust and cash | $ | 309,999 | |||
Cash - PIPE | 125,000 | ||||
Less: consideration delivered to existing shareholders of Former CarLotz | (62,693) | ||||
Less: consideration to pay accrued dividends | (4,853) | ||||
Less: transaction costs and advisory fees paid | (47,579) | ||||
Less: payments on cash considerations associated with stock options | (2,465) | ||||
Net contributions from Merger and PIPE financing | 317,409 | ||||
Liabilities relieved: preferred stock obligation | 2,832 | ||||
Liabilities relieved: KAR/AFC note payable | 3,625 | ||||
Liabilities relieved: historic warrant liability | 144 | ||||
Less: earnout shares liability | (74,284) | ||||
Less: Merger warrants liability | (39,024) |
December 31, 2021 | |||||
Stock warrants outstanding - Public | 10,185,774 | ||||
Stock warrants outstanding - Private | 6,074,310 | ||||
Stock warrants cancelled | — | ||||
Stock warrants exercised | — | ||||
Stock warrants outstanding | 16,260,084 |
2021 | |||||||||||||||||
Vehicle Sales | Fleet Management | Total | |||||||||||||||
Retail vehicle sales | $ | 217,439 | $ | — | $ | 217,439 | |||||||||||
Wholesale vehicle sales | 31,759 | — | 31,759 | ||||||||||||||
Finance and insurance, net | 8,844 | — | 8,844 | ||||||||||||||
Lease income, net | — | 492 | 492 | ||||||||||||||
Total Revenues | $ | 258,042 | $ | 492 | $ | 258,534 |
2020 | |||||||||||||||||
Vehicle Sales | Fleet Management | Total | |||||||||||||||
Retail vehicle sales | $ | 104,253 | $ | — | $ | 104,253 | |||||||||||
Wholesale vehicle sales | 9,984 | — | 9,984 | ||||||||||||||
Finance and insurance, net | 3,898 | — | 3,898 | ||||||||||||||
Lease income, net | — | 490 | 490 | ||||||||||||||
Total Revenues | $ | 118,135 | $ | 490 | $ | 118,625 |
2019 | |||||||||||||||||
Vehicle Sales | Fleet Management | Total | |||||||||||||||
Retail vehicle sales | $ | 90,382 | $ | — | $ | 90,382 | |||||||||||
Wholesale vehicle sales | 8,454 | — | 8,454 | ||||||||||||||
Finance and insurance, net | 3,117 | — | 3,117 | ||||||||||||||
Lease income, net | — | 533 | 533 | ||||||||||||||
Total Revenues | $ | 101,953 | $ | 533 | $ | 102,486 |
2021 | 2020 | 2019 | |||||||||||||||
Retail vehicles: | |||||||||||||||||
Retail vehicle sales | $ | 217,439 | $ | 104,253 | $ | 90,382 | |||||||||||
Retail vehicle cost of sales | 214,512 | 96,983 | 84,534 | ||||||||||||||
Gross Profit – Retail Vehicles | $ | 2,927 | $ | 7,270 | $ | 5,848 | |||||||||||
Wholesale vehicles: | |||||||||||||||||
Wholesale vehicle sales | $ | 31,759 | $ | 9,984 | $ | 8,454 | |||||||||||
Wholesale vehicle cost of sales | 33,434 | 10,386 | 9,246 | ||||||||||||||
Gross Profit – Wholesale Vehicles | $ | (1,675) | $ | (402) | $ | (792) |
December 31, 2021 | |||||||||||||||||||||||
Amortized Cost/ Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
U.S. Treasuries | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Corporate bonds | 57,460 | — | (72) | 57,388 | |||||||||||||||||||
Municipal bonds | 28,325 | 5 | (10) | 28,320 | |||||||||||||||||||
Commercial paper | 19,989 | — | — | 19,989 | |||||||||||||||||||
Foreign governments | 12,291 | 2 | (18) | 12,275 | |||||||||||||||||||
Total Fixed Maturity Debt Securities | $ | 118,065 | $ | 7 | $ | (100) | $ | 117,972 |
December 31, 2020 | |||||||||||||||||||||||
Amortized Cost/ Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
U.S. Treasuries | $ | 240 | $ | 6 | $ | — | $ | 246 | |||||||||||||||
Corporate bonds | 261 | 5 | (1) | 265 | |||||||||||||||||||
U.S. states, territories and political subdivisions | 141 | 5 | — | 146 | |||||||||||||||||||
Total Fixed Maturity Debt Securities | $ | 642 | $ | 16 | $ | (1) | $ | 657 |
Amortized Cost | Fair Value | ||||||||||
Due in one year or less | $ | 116,114 | $ | 116,031 | |||||||
Due after one year through five years | 1,593 | 1,585 | |||||||||
Due after five years through ten years | 358 | 356 | |||||||||
Total | $ | 118,065 | $ | 117,972 |
December 31, 2021 | |||||||||||||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
Corporate bonds | $ | 56,902 | $ | (69) | $ | 376 | $ | (3) | $ | 57,278 | $ | (72) | |||||||||||||||||||||||
Municipal bonds | 19,945 | (7) | 340 | (3) | 20,285 | (10) | |||||||||||||||||||||||||||||
Foreign governments | 12,152 | (18) | — | — | 12,152 | (18) | |||||||||||||||||||||||||||||
Total Fixed Maturity Debt Securities | $ | 88,999 | $ | (94) | $ | 716 | $ | (6) | $ | 89,715 | $ | (100) |
December 31, 2020 | |||||||||||||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
Corporate bonds | $ | 39 | $ | (1) | $ | — | $ | — | $ | 39 | $ | (1) | |||||||||||||||||||||||
Total Fixed Maturity Debt Securities | $ | 39 | $ | (1) | $ | — | $ | — | $ | 39 | $ | (1) |
December 31, 2021 | |||||||||||
Cost | Fair Value | ||||||||||
Equity securities | $ | 432 | $ | 558 |
December 31, 2020 | |||||||||||
Cost | Fair Value | ||||||||||
Equity securities | $ | 335 | $ | 375 |
December 31, 2021 | |||||||||||||||||||||||
Proceeds | Gross Realized Gains | Gross Realized Losses | Net Realized Gain | ||||||||||||||||||||
Fixed maturity debt securities | $ | 239,930 | $ | 7 | $ | — | $ | 7 | |||||||||||||||
Equity securities | 1 | — | — | — | |||||||||||||||||||
Total Marketable Securities | $ | 239,931 | $ | 7 | $ | — | $ | 7 |
December 31, 2020 | |||||||||||||||||||||||
Proceeds | Gross Realized Gains | Gross Realized Losses | Net Realized Gain | ||||||||||||||||||||
Fixed maturity debt securities | $ | 18 | $ | — | $ | — | $ | — | |||||||||||||||
Equity securities | 50 | 1 | (2) | (1) | |||||||||||||||||||
Total Marketable Securities | $ | 68 | $ | 1 | $ | (2) | $ | (1) |
December 31, 2021 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market funds | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Equity securities | 558 | — | — | 558 | |||||||||||||||||||
Fixed maturity debt securities, including cash equivalents | — | 135,346 | — | 135,346 | |||||||||||||||||||
Total Assets | $ | 558 | $ | 135,346 | $ | — | $ | 135,904 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||
Merger warrants liability | 3,941 | 2,350 | — | 6,291 | |||||||||||||||||||
Earnout shares liability | — | — | 7,679 | 7,679 | |||||||||||||||||||
Total Liabilities | $ | 3,941 | $ | 2,350 | $ | 7,679 | $ | 13,970 |
December 31, 2020 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market funds | $ | 405 | $ | — | $ | — | $ | 405 | |||||||||||||||
Equity securities | 375 | — | — | 375 | |||||||||||||||||||
Fixed maturity debt securities | 246 | 411 | — | 657 | |||||||||||||||||||
Total Assets | $ | 1,026 | $ | 411 | $ | — | $ | 1,437 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||
Redeemable convertible preferred stock tranche obligation | $ | — | $ | — | $ | 2,832 | $ | 2,832 | |||||||||||||||
Historic warrants liability | — | — | 144 | 144 | |||||||||||||||||||
Total Liabilities | $ | — | $ | — | $ | 2,976 | $ | 2,976 |
January 1, 2021 | Issuances | Settlements | Change in fair value | December 31, 2021 | |||||||||||||||||||||||||
Redeemable convertible preferred stock tranche obligation | $ | 2,832 | $ | — | $ | (2,832) | $ | — | $ | — | |||||||||||||||||||
Historic warrants liability | 144 | — | (144) | — | — | ||||||||||||||||||||||||
Earnout shares liability | — | 74,284 | — | (66,605) | 7,679 | ||||||||||||||||||||||||
Total | $ | 2,976 | $ | 74,284 | $ | (2,976) | $ | (66,605) | $ | 7,679 |
January 1, 2020 | Issuances | Settlements | Change in fair value | December 31, 2020 | |||||||||||||||||||||||||
Redeemable convertible preferred stock tranche obligation | $ | 3,755 | $ | — | $ | — | $ | (923) | $ | 2,832 | |||||||||||||||||||
Historic warrants liability | 115 | 15 | — | 14 | 144 | ||||||||||||||||||||||||
Total | $ | 3,870 | $ | 15 | $ | — | $ | (909) | $ | 2,976 |
December 31, 2021 | January 21, 2021 | ||||||||||
Expected volatility | 80.00 | % | 80.00 | % | |||||||
Starting stock price | $2.27 | $11.31 | |||||||||
Expected term (in years) | 4.1 years | 5 years | |||||||||
Risk-free interest rate | 1.04 | % | 0.45 | % | |||||||
Earnout hurdle | $12.50-$15.00 | $12.50-$15.00 |
December 31, 2021 | December 31, 2020 | ||||||||||
Contracts in transit | $ | 7,836 | $ | 3,321 | |||||||
Trade | 386 | 240 | |||||||||
Finance commission | 284 | 132 | |||||||||
Other | — | 506 | |||||||||
Total | 8,506 | 4,199 | |||||||||
Allowance for doubtful accounts | (300) | (67) | |||||||||
Total Accounts Receivable, net | $ | 8,206 | $ | 4,132 |
December 31, 2021 | December 31, 2020 | ||||||||||
Used vehicles | $ | 40,739 | $ | 11,202 | |||||||
Parts | 246 | — | |||||||||
Total | $ | 40,985 | $ | 11,202 |
December 31, 2021 | December 31, 2020 | ||||||||||
Capital lease assets | $ | 12,566 | $ | 1,305 | |||||||
Leasehold improvements | 4,628 | 702 | |||||||||
Furniture, fixtures and equipment | 7,993 | 760 | |||||||||
Corporate vehicles | 158 | 143 | |||||||||
Total property and equipment | 25,345 | 2,910 | |||||||||
Less: accumulated depreciation | (2,609) | (1,042) | |||||||||
Less: impairment | (108) | — | |||||||||
Property and Equipment, net | $ | 22,628 | $ | 1,868 |
December 31, 2021 | December 31, 2020 | ||||||||||
Other Current Assets: | |||||||||||
Lease receivable, net | $ | 29 | $ | 36 | |||||||
Deferred acquisition costs | 46 | 72 | |||||||||
Prepaid expenses | 3,664 | 679 | |||||||||
Interest receivable | 966 | — | |||||||||
Deferred transaction costs | — | 5,892 | |||||||||
Total Other Current Assets | $ | 4,705 | $ | 6,679 | |||||||
Other Assets: | |||||||||||
Lease receivable, net | $ | 16 | $ | 16 | |||||||
Deferred acquisition costs | 35 | 48 | |||||||||
Security deposits | 507 | 235 | |||||||||
Total Other Assets | $ | 558 | $ | 299 |
December 31, 2021 | December 31, 2020 | ||||||||||
Capital lease obligation | $ | 12,715 | $ | 1,305 | |||||||
Promissory note | — | 2,990 | |||||||||
Convertible notes payable, net | — | 3,325 | |||||||||
Paycheck Protection Program loan | — | 1,749 | |||||||||
12,715 | 9,369 | ||||||||||
Current portion of long-term debt | (509) | (6,370) | |||||||||
Long-term Debt | $ | 12,206 | $ | 2,999 |
December 31, 2021 | December 31, 2020 | ||||||||||
License and title fees | $ | 903 | $ | 785 | |||||||
Payroll and bonuses | 2,047 | 837 | |||||||||
Deferred rent | 1,636 | 199 | |||||||||
Technology | 1,127 | — | |||||||||
Inventory | 2,542 | 1 | |||||||||
Other | 6,173 | 1,741 | |||||||||
Total Accrued Expenses | $ | 14,428 | $ | 3,563 |
December 31, 2021 | December 31, 2020 | ||||||||||
Other Current Liabilities | |||||||||||
Unearned insurance premiums | $ | 754 | $ | 256 | |||||||
Other Liabilities | |||||||||||
Unearned insurance premiums | 622 | 1,680 | |||||||||
Other long-term liabilities | 122 | 135 | |||||||||
Historic warrants liability | — | 144 | |||||||||
Other Liabilities, Long-term | $ | 744 | $ | 1,959 |
Total Per Year | Total Capital Leases | ||||||||||
2022 | 6,788 | 1,643 | |||||||||
2023 | 6,931 | 1,669 | |||||||||
2024 | 6,657 | 1,695 | |||||||||
2025 | 6,832 | 1,721 | |||||||||
2026 | 5,884 | 1,766 | |||||||||
Thereafter | 23,715 | 14,322 | |||||||||
Total | $ | 56,807 | $ | 22,816 | |||||||
Less: amount representing interest | (10,101) | ||||||||||
Present value of minimum lease payments | 12,715 | ||||||||||
Less: current obligation | (509) | ||||||||||
Long-term obligations under capital lease | $ | 12,206 |
Payments Due to Third-Parties | Future Receipts | ||||||||||
2022 | $ | 1,435 | $ | 1,721 | |||||||
2023 | 1,017 | 1,205 | |||||||||
2024 | 605 | 716 | |||||||||
2025 | 180 | 216 | |||||||||
2026 | 55 | 69 | |||||||||
Total | 3,292 | 3,927 |
Number of Stock Options | Weighted Average Exercise Price | ||||||||||
Balance (Balance January 1, 2019) | 1,647,650 | $0.60 | |||||||||
Granted | — | — | |||||||||
Forfeited | (76,445) | 0.67 | |||||||||
Balance (December 31, 2019) | 1,571,205 | 0.59 | |||||||||
Granted | — | — | |||||||||
Forfeited | — | — | |||||||||
Balance (December 31, 2020) | 1,571,205 | 0.59 | |||||||||
Granted | — | — | |||||||||
Exercised | (310,877) | 0.57 | |||||||||
Forfeited | — | — | |||||||||
Balance (December 31, 2021) | 1,260,328 | 0.56 | |||||||||
Vested (as of December 31, 2021) | 1,260,328 | $0.56 |
Number of Stock Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||||||||||
Outstanding | 1,260,328 | 0.67 years | $0.56 | ||||||||||||||
Exercisable | 1,260,328 | 0.67 years | $0.56 |
Number of Stock Options | Weighted Averaged Exercise Price | ||||||||||
Balance (Balance January 1, 2019) | 2,599,669 | $0.92 | |||||||||
Granted | 1,569,676 | 0.92 | |||||||||
Forfeited | (1,323,787) | 0.92 | |||||||||
Balance (December 31, 2019) | 2,845,557 | 0.92 | |||||||||
Granted | 1,116,101 | 0.92 | |||||||||
Forfeited | — | — | |||||||||
Balance (December 31, 2020) | 3,961,658 | 0.92 | |||||||||
Granted | — | — | |||||||||
Forfeited | (25,482) | 0.92 | |||||||||
Balance (December 31, 2021) | 3,936,176 | 0.92 | |||||||||
Vested (as of December 31, 2021) | 3,538,672 | $0.92 |
Number of Stock Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||||||||||
Outstanding | 3,936,176 | 7.55 years | $0.92 | ||||||||||||||
Exercisable | 3,538,672 | 7.43 years | $0.92 |
Balance (Expected volatility) | 80.00 | % | |||
Expected dividend yield | — | % | |||
Expected term (in years) | 3.5 - 4.7 years | ||||
Risk-free interest rate | 0.32% - 0.45% |
Balance (Number of Units | Weighted Averaged Exercise Price | ||||||||||
Balance (December 31, 2020) | — | $ | — | ||||||||
Granted | 1,490,519 | 11.02 | |||||||||
Forfeited | (21,222) | 4.31 | |||||||||
Balance (December 31, 2021) | 1,469,297 | $ | 11.12 | ||||||||
Exercisable | — | $ | — |
Number of Stock Options | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||||||||||
Outstanding | 1,469,297 | 8.96 years | $11.12 | ||||||||||||||
Exercisable | — | — | $— |
Balance (Expected volatility) | 80% - 85% | ||||
Expected dividend yield | — | % | |||
Expected term (in years) | 6.25 years | ||||
Risk-free interest rate | 0.62% - 1.34% |
Number of Units | Weighted Average Grant Date Fair Value | ||||||||||
Balance (December 31, 2020) | — | $ | — | ||||||||
Granted | 710,993 | 5.58 | |||||||||
Forfeited | (18,884) | 4.32 | |||||||||
Vested (as of December 31, 2021) | (94,370) | 5.87 | |||||||||
Balance (December 31, 2021) | 597,739 | $ | 5.57 |
Number of Units | Weighted Average Grant Date Fair Value | ||||||||||
Balance (December 31, 2020) | — | $ | — | ||||||||
Granted | 640,421 | 10.70 | |||||||||
Forfeited | (19,221) | 10.70 | |||||||||
Balance (December 31, 2021) | 621,200 | $ | 10.70 |
Expected volatility | 80.00 | % | |||
Starting stock price | $ | 11.31 | |||
Expected term (in years) | 5 years | ||||
Risk-free interest rate | 0.45 | % | |||
Earnout hurdle | $12.50-$15.00 |
EXHIBIT INDEX
2021 | 2020 | 2019 | |||||||||||||||
Current Income Tax Expense: | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
State and local | 10 | 10 | 11 | ||||||||||||||
Total Current Income Tax Expense | 10 | 10 | 11 | ||||||||||||||
Deferred Income Tax Expense: | |||||||||||||||||
Federal | — | — | — | ||||||||||||||
State and local | — | — | — | ||||||||||||||
Total Income Tax Expense | $ | 10 | $ | 10 | $ | 11 |
2021 | 2020 | ||||||||||
Deferred Tax Assets: | |||||||||||
Net operating losses | $ | 27,794 | $ | 7,042 | |||||||
Accrued expenses | — | 109 | |||||||||
Unearned premiums | 339 | 466 | |||||||||
Contract expense | 2,188 | 332 | |||||||||
Intangible assets | 188 | 204 | |||||||||
Equity awards | 2,199 | 189 | |||||||||
Other | 1,532 | 217 | |||||||||
Total deferred tax assets | 34,240 | 8,559 | |||||||||
Less: valuation allowance | (34,138) | (8,559) | |||||||||
Net Deferred Tax Assets | 102 | — | |||||||||
Deferred Tax Liabilities | |||||||||||
Fixed assets | (102) | — | |||||||||
Total deferred tax liabilities | (102) | — | |||||||||
Net Deferred Tax Liabilities | (102) | — | |||||||||
Net Deferred Tax Assets/Liabilities | $ | — | $ | — |
2021 | 2020 | 2019 | |||||||||||||||
January 1, | $ | 8,559 | $ | 6,910 | $ | 3,986 | |||||||||||
Additions – Charged | 25,579 | 1,649 | 2,924 | ||||||||||||||
Deductions – Charged | — | — | — | ||||||||||||||
Other | — | — | — | ||||||||||||||
December 31, | $ | 34,138 | $ | 8,559 | $ | 6,910 |
2021 | 2020 | 2019 | |||||||||||||||
Loss Before Income Tax Expense | $ | (39,869) | $ | (6,542) | $ | (12,667) | |||||||||||
Income tax benefit at federal statutory rates | (8,372) | (1,372) | (2,660) | ||||||||||||||
State and local income taxes | (3,634) | (79) | (471) | ||||||||||||||
Valuation allowances | 24,391 | 1,649 | 2,924 | ||||||||||||||
Change in fair value of redeemable convertible preferred stock tranche obligation | — | (194) | 293 | ||||||||||||||
Executive compensation | 8,690 | — | — | ||||||||||||||
Change in fair value of Merger warrants liability | (6,874) | — | — | ||||||||||||||
Change in fair value of earnout shares | (13,987) | — | — | ||||||||||||||
Other | (204) | 6 | (75) | ||||||||||||||
Total Income Tax Expense | $ | 10 | $ | 10 | $ | 11 | |||||||||||
Effective Tax Rate | (0.03) | % | (0.15) | % | (0.09) | % |
2021 | 2020 | 2019 | |||||||||||||||
Numerator: | |||||||||||||||||
Net Loss | $ | (39,879) | $ | (6,552) | $ | (12,678) | |||||||||||
Denominator: | |||||||||||||||||
Weighted average common shares outstanding, basic and diluted | 110,574,519 | 58,621,042 | 56,475,860 | ||||||||||||||
Net Loss per Share Attributable to Common Stockholders, basic and diluted | $ | (0.36) | $ | (0.11) | $ | (0.22) |
2021 | 2020 | 2019 | |||||||||||||||
Public warrants | 10,185,774 | — | — | ||||||||||||||
Private warrants | 6,074,310 | — | — | ||||||||||||||
Earnout RSUs | 630,810 | — | — | ||||||||||||||
Earnout shares | 6,945,732 | — | — | ||||||||||||||
Convertible notes payable | — | 3,556,335 | 2,876,492 | ||||||||||||||
Historic warrants | — | 777,265 | 699,025 | ||||||||||||||
Stock options outstanding to purchase shares of common stock | 6,665,801 | 5,532,863 | 4,416,762 | ||||||||||||||
Unvested RSUs | 597,139 | — | — | ||||||||||||||
Total | 31,099,566 | 9,866,463 | 7,992,279 |
Total vehicle purchases from vendor to total vehicle purchases for the year ended December 31, | |||||||||||
Vendor | 2021 | 2020 | 2019 | ||||||||
Vendor A | 24% | 33% | —% | ||||||||
Vendor B | 11% | —% | —% | ||||||||
Vendor C | 10% | —% | —% | ||||||||
Vendor D | —% | 13% | 12% |
Balance at beginning of the period | Bad debt expense | Write-offs | Balance at the end of period | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Allowance for doubtful accounts: | |||||||||||||||||||||||
Year ended December 31, 2021 | 67 | 731 | (498) | 300 | |||||||||||||||||||
Year ended December 31, 2020 | 27 | 44 | (4) | 67 | |||||||||||||||||||
Year ended December 31, 2019 | 41 | 44 | (58) | 27 |
Exhibit No. | Description | |||||||
2.1 |
3.1 |
3.2 | ||||||||
4.1 | ||||||||
4.2 | ||||||||
4.3 | ||||||||
4.4 | ||||||||
10.1 | ||||||||
Exhibit No. | Description | |||||||
10.2 | ||||||||
10.3 | ||||||||
10.4† |
10.12† | ||||||||
10.13† | ||||||||
10.14† | ||||||||
10.15† |
10.16+ | ||||||||
10.16.1 |
Exhibit No. | Description | |||||||
10.17† | ||||||||
10.18† | ||||||||
10.18.1† | ||||||||
10.19† | ||||||||
10.20† | ||||||||
10.21† | ||||||||
10.22+ | ||||||||
10.22.1 | ||||||||
10.23 | ||||||||
10.24† | ||||||||
10.25†* | ||||||||
10.26†* | ||||||||
21.1* | ||||||||
23.1* | ||||||||
24.1* | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
32.2* | ||||||||
101.INS* | XBRL Instance Document | |||||||
Exhibit No. | Description | |||||||
101.SCH* | XBRL Taxonomy Extension Schema Document | |||||||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
CarLotz, Inc. | |||||||
By: | /s/ | Thomas W. Stoltz | |||||
| |||||||
| |||||||
(Duly Authorized Officer and
|
Signature | Title | Date | |||||||||||||||
Chief Executive Officer (Principal Executive Officer) | March 15, 2022 | ||||||||||||||||
Michael W. Bor | |||||||||||||||||
/s/ Thomas W. Stoltz | Chief Financial Officer (Principal Financial and Accounting Officer) | March 15, 2022 | |||||||||||||||
Thomas W. Stoltz | |||||||||||||||||
/s/ Luis Ignacio Solorzano Aizpuru | March | ||||||||||||||||
Luis Ignacio Solorzano Aizpuru | |||||||||||||||||
/s/ | March | ||||||||||||||||
/s/ | Director | March | |||||||||||||||
|
|
| |||||||||||||||
Director | March 15, 2022 | ||||||||||||||||
Steven G. Carrel | |||||||||||||||||
/s/ James E. Skinner | Director | March | |||||||||||||||
James E. Skinner | |||||||||||||||||
/s/ Linda B. Abraham | Director | March 15, 2022 | |||||||||||||||
Linda B. Abraham | |||||||||||||||||
/s/ Sarah M. Kauss | Director | March 15, 2022 | |||||||||||||||
Sarah M. Kauss | |||||||||||||||||