☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☐TRANSITION REPORT PURSUANT TO SECTION 13 March 31, 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Delaware | 85-2749902 | |||||||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification | ||||||
2877 Paradise Rd. #702
Las Vegas, NV89109
650-618-2524
(Issuer’s telephone number)
| Title of each class | Trading Symbol |
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Class A Common Stock, $0.0001 par value |
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| The Nasdaq | ||||||||
Redeemable Warrants, each whole warrant exercisable for |
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| The Nasdaq | ||||||||
Check
| Large accelerated filer | ☐ | Accelerated filer |
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Non-accelerated filer |
| Smaller reporting company | ☒ | |||||||||
Emerging growth company | ☒ | |||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).: Yes ☐ No ☒ No ☐
ROMAN DBDR TECH ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
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ROMAN DBDR TECH ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| | | | | | |
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| September 30, |
| December 31, | ||
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| 2021 |
| 2020 | ||
| | (Unaudited) | | (Restated) | ||
ASSETS | | | | | | |
Current assets | | | | | | |
Cash | | $ | 15,158 | | $ | 603,615 |
Prepaid expenses | | | 225,388 | | | 434,689 |
Total Current Assets | | | 240,546 | | | 1,038,304 |
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Cash and marketable securities held in Trust Account | | | 236,289,574 | | | 236,215,089 |
TOTAL ASSETS | | $ | 236,530,120 | | $ | 237,253,393 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT | |
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Current liabilities | |
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Accounts payable and accrued expenses | | $ | 2,470,093 | | $ | 98,112 |
Advance from related parties | | | 168,400 | | | — |
Total Current Liabilities | |
| 2,638,493 | | | 98,112 |
Derivative Liability – Private Placement Warrants | | | 18,098,458 | | | 13,330,002 |
Derivative Liability – Public Warrants | | | 18,640,580 | | | 14,125,160 |
Deferred underwriting fee payable | | | 8,104,600 | | | 8,104,600 |
TOTAL LIABILITIES | |
| 47,482,131 | | | 35,657,874 |
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Commitments and Contingencies | |
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Class A common stock subject to possible redemption 23,156,000 shares at redemption value at September 30, 2021 and December 31, 2020 | | | 236,191,200 | | | 236,191,200 |
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Stockholders' Deficit | |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding | |
| 0 | | | 0 |
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,789,000 shares issued and outstanding, at September 30, 2021 and December 31, 2020 | |
| 579 | | | 579 |
Additional paid-in capital | |
| — | | | — |
Accumulated deficit | |
| (47,143,789) | | | (34,596,260) |
Total Stockholders' Deficit | |
| (47,143,210) | | | (34,595,681) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | | $ | 236,530,121 | | $ | 237,253,393 |
Statements
| COMPOSECURE, INC. | ||
| Consolidated Balance Sheets | ||
| ($ in thousands, except par value and share amounts) | ||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Unaudited | |||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | 15,478 | $ | 21,944 | |||||||
| Accounts receivable, net | 38,584 | 27,925 | |||||||||
| Inventories | 27,198 | 25,806 | |||||||||
| Prepaid expenses and other current assets | 7,019 | 2,596 | |||||||||
| Total current assets | 88,279 | 78,271 | |||||||||
| Property and equipment, net | 21,246 | 22,177 | |||||||||
| Right of use asset, net | 4,979 | 5,246 | |||||||||
| Deferred tax asset | 24,941 | 25,650 | |||||||||
| Derivative asset - interest rate swap | 4,036 | — | |||||||||
| Deposits and other assets | 10 | 10 | |||||||||
| Total assets | $ | 143,491 | $ | 131,354 | |||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Current portion of long-term debt | $ | 14,063 | $ | 12,500 | |||||||
| Current portion of lease liabilities | 1,134 | 1,119 | |||||||||
| Accounts payable | 4,810 | 7,058 | |||||||||
| Accrued expenses | 16,642 | 13,220 | |||||||||
| Issuance costs payable | — | 23,107 | |||||||||
| Bonus payable | 1,737 | 3,512 | |||||||||
| Total current liabilities | 38,386 | 60,516 | |||||||||
| Long-term debt, net of deferred finance costs | 228,954 | 233,132 | |||||||||
| Convertible notes | 127,008 | 126,897 | |||||||||
| Derivative liability - convertible notes redemption make-whole provision | 800 | 552 | |||||||||
| Warrant liability | 36,695 | 35,271 | |||||||||
| Line of credit | 25,000 | 15,000 | |||||||||
| Lease liabilities | 4,421 | 4,709 | |||||||||
| Tax receivable agreement liability | 24,500 | 24,500 | |||||||||
| Earnout consideration liability | 34,320 | 38,427 | |||||||||
| Total liabilities | 520,084 | 539,004 | |||||||||
| Commitments and contingencies (Note 14) | 0 | 0 | |||||||||
| Redeemable non-controlling interest | 608,311 | 608,311 | |||||||||
| Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding | — | — | |||||||||
| Class A common stock, $0.0001 par value; 250,000,000 shares authorized, 14,954,982 and 14,929,982 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | 1 | 1 | |||||||||
| Class B common stock, $0.0001 par value; 75,000,000 shares authorized, 61,136,800 shares issued and outstanding as of March 31, 2022 and December 31, 2021 | 6 | 6 | |||||||||
| Additional paid-in capital | 12,541 | 12,261 | |||||||||
| Accumulated other comprehensive income | 3,869 | — | |||||||||
| Accumulated deficit | (1,001,321) | (1,028,229) | |||||||||
| Total Stockholders' deficit | (984,904) | (1,015,961) | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 143,491 | $ | 131,354 | |||||||
3
ROMAN DBDR TECH ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
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| | | | | | | | | For the | |
| | | | | | | | | Period from | |
| | | | | | | | | August 21, | |
| | | | | | | | | 2020 | |
| | Three Months | | | Nine Months | | (Inception) | |||
| | Ended | | | Ended | | through | |||
| | September 30, | | | September 30, | | September 30, | |||
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| 2021 |
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| 2021 |
| 2020 | |||
Operating and formation costs |
| $ | 498,591 |
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| $ | 3,338,138 |
| $ | 717 |
Loss from operations | | | (498,591) | | | | (3,338,138) | | | (717) |
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Other income (expense): | | | | | | | | | | |
Interest earned on marketable securities held in Trust Account | | | 3,040 | | | | 74,485 | | | — |
Change in fair value of Derivative Liability | | | 672,462 | | | | (9,283,876) | | | — |
Total other income (expense), net | | | 675,502 | | | | (9,209,391) | | | — |
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Net income (loss) | | $ | 176,911 | | | $ | (12,547,529) | | $ | (717) |
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Basic and diluted weighted average shares outstanding, Class A Common stock | |
| 22,290,037 | | |
| 22,290,037 | |
| — |
Basic and diluted net income (loss) per share, Class A Common stock | | $ | 0.01 | | | $ | (0.45) | | $ | — |
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Basic and diluted weighted average shares outstanding, Class B Common stock | | | 5,789,000 | | | | 5,789,000 | | | 5,500,000 |
Basic and diluted net income (loss) per share, Class B Common stock | | $ | 0.01 | | | $ | (0.45) | | $ | — |
| COMPOSECURE, INC. | ||
| Consolidated Statements of Operations (Unaudited) | ||
| ($ in thousands, except per share amounts) | ||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net sales | $ | 84,183 | $ | 63,722 | |||||||
| Cost of sales | 35,424 | 29,406 | |||||||||
| Gross profit | 48,759 | 34,316 | |||||||||
| Operating expenses: | |||||||||||
| General and administrative expenses | 17,715 | 8,057 | |||||||||
| Selling expenses | 1,062 | — | |||||||||
| Income from operations | 29,982 | 26,259 | |||||||||
| Other income (expense): | |||||||||||
| Revaluation of warrant liability | (1,424) | — | |||||||||
| Revaluation of earnout consideration liability | 4,107 | — | |||||||||
| Change in fair value of derivative liability - convertible notes redemption make-whole provision | (248) | — | |||||||||
| Interest expense, net | (4,334) | (2,643) | |||||||||
| Amortization of deferred financing costs | (632) | (394) | |||||||||
| Total other expenses, net | (2,531) | (3,037) | |||||||||
| Income before income taxes | 27,451 | 23,222 | |||||||||
| Provision for income taxes | (543) | — | |||||||||
| Net income | $ | 26,908 | $ | 23,222 | |||||||
| Net income attributable to redeemable non-controlling interests | $ | 22,167 | $ | — | |||||||
| Net income attributable to CompoSecure, Inc. | $ | 4,741 | $ | 23,222 | |||||||
| Net income per share attributable to Class A common stockholders - basic | $ | 0.32 | n/a | ||||||||
| Net income per share attributable to Class A common stockholders - diluted | $ | 0.16 | n/a | ||||||||
| Weighted average shares used to compute net income per share attributable to Class A common stockholders - basic (in thousands) | 14,934 | n/a | |||||||||
| Weighted average shares used to compute net income per share attributable to Class A common stockholders - diluted (in thousands) | 32,265 | n/a | |||||||||
4
ROMAN DBDR TECH ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
RESTATED
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| | | | | | | | | | | | Additional | | | | | Total | ||
| | Class A Common Stock | | Class B Common Stock | | Paid in | | Accumulated | | Stockholders' | |||||||||
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| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
Balance – January 1, 2021 |
| 0 | | $ | 0 | | 5,789,000 |
| $ | 579 |
| $ | 0 |
| $ | (34,596,260) |
| $ | (34,595,681) |
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Net income |
| 0 | | | 0 | | 0 | |
| 0 | |
| 0 | |
| 8,931,200 | |
| 8,931,200 |
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Balance – March 31, 2021 |
| — | | $ | — | | 5,789,000 | | $ | 579 | | $ | — | | $ | (25,665,060) | | $ | (25,664,481) |
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Net loss | | — | | | — | | — | | | — | | | — | | | (21,655,640) | | | (21,655,640) |
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Balance – June 30, 2021 | | — | | $ | — | | 5,789,000 | | $ | 579 | | $ | — | | $ | (47,320,700) | | $ | (47,320,121) |
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Net income | | — | | | — | | — | | | — | | | — | | | 176,911 | | | 176,911 |
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Balance – September 30, 2021 | | — | | $ | — | | 5,789,000 | | $ | 579 | | $ | — | | $ | (47,143,789) | | $ | (47,143,210) |
| COMPOSECURE, INC. | ||
| Consolidated Statements of Comprehensive Income (Unaudited) | ||
| ($ in thousands) | ||
FOR THE PERIOD FROM AUGUST 21, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
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| | Class B | | Additional | | | | | Total | |||||
| | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | ||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||
Balance – August 21, 2020 (inception) |
| 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
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Issuance of Class B common stock to Sponsor |
| 6,325,000 | |
| 633 | |
| 24,367 | |
| — | |
| 25,000 |
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Net loss |
| — | |
| — | |
| — | |
| (717) | |
| (717) |
Balance – September 30, 2020 |
| 6,325,000 | |
| 633 | | $ | 24,367 | | $ | (717) | | $ | 24,283 |
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income | $ | 26,908 | $ | 23,222 | |||||||
| Other comprehensive income, net: | |||||||||||
| Unrealized gain on derivative - interest rate swap (net of tax of $167) | 3,869 | — | |||||||||
| Total other comprehensive income, net | 3,869 | — | |||||||||
| Comprehensive income | $ | 30,777 | $ | 23,222 | |||||||
5
ROMAN DBDR TECH ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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| | | | | For The Period From | |
| | Nine Months | | August 21, 2020 | ||
| | Ended September | | (Inception) Through | ||
| | 30, | | September 30, | ||
| | 2021 | | 2020 | ||
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Cash Flows from Operating Activities: |
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Net loss | | $ | (12,547,529) | | $ | (717) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
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Interest earned on marketable securities held in Trust Account | | | (74,485) | | | — |
Change in fair value of warrant liability | | | 9,283,876 | | | — |
Changes in operating assets and liabilities: | | | | | | |
Prepaid expenses | | | 209,300 | | | — |
Accrued expenses | | | 2,371,981 | | | — |
Net cash used in operating activities | | | (756,857) | | | (717) |
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Cash Flows from Financing Activities: | | | | | | |
Proceeds from promissory note - related party | | | — | | | 13,217 |
Payment of offering costs | | | — | | | (12,500) |
Advances from related party | | | 170,000 | | | — |
Repayment of advances from related party | | | (1,600) | | | — |
Net cash provided by financing activities | | | 168,400 | | | 717 |
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Net Change in Cash | |
| (588,457) | |
| 0 |
Cash – Beginning of period | |
| 603,615 | |
| 0 |
Cash – End of period | | $ | 15,158 | | $ | 0 |
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Non-Cash investing and financing activities: | |
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Offering costs included in accrued offering costs | | $ | — | | $ | 5,000 |
Offering costs paid by Sponsor in exchange for issuance of founder shares | | $ | — | | $ | 25,000 |
| COMPOSECURE, INC. | ||
| Consolidated Statements of Stockholders' Deficit (Unaudited) | ||
| (in thousands, except share data) | ||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders' | Redeemable Non-Controlling | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Deficit | Interest | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | 14,929,982 | $ | 1 | 61,136,800 | $ | 6 | $ | 12,261 | $ | — | $ | (1,028,229) | $ | (1,015,961) | $ | 608,311 | ||||||||||||||||||||||||||||||||||||||||
| Issuance costs related to Business combination | — | — | — | — | (726) | — | — | (726) | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,006 | — | — | 1,006 | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | 4,741 | 4,741 | 22,167 | |||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units issued pursuant to equity-based plans | 25,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivative - interest rate swap | — | — | — | — | — | 3,869 | — | 3,869 | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable non-controlling interests to redemption value | — | — | — | — | — | — | 22,167 | 22,167 | (22,167) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 14,954,982 | $ | 1 | 61,136,800 | $ | 6 | $ | 12,541 | $ | 3,869 | $ | (1,001,321) | $ | (984,904) | $ | 608,311 | ||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders' | Redeemable Non-Controlling | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Deficit | Interest | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | — | $ | — | 61,136,800 | $ | 6 | $ | 6,148 | $ | — | $ | (198,708) | $ | (192,554) | $ | — | ||||||||||||||||||||||||||||||||||||||||
| Distributions | — | — | — | — | — | — | (3,276) | (3,276) | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 441 | — | — | 441 | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | 23,222 | 23,222 | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | — | $ | — | 61,136,800 | $ | 6 | $ | 6,589 | $ | — | $ | (178,762) | $ | (172,167) | $ | — | ||||||||||||||||||||||||||||||||||||||||
6
| COMPOSECURE, INC. | ||
| Consolidated Statements of Cash Flows (Unaudited) | ||
| ($ in thousands) | ||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 26,908 | $ | 23,222 | |||||||
| Adjustments to reconcile net income to net cash provided | |||||||||||
| by operating activities | |||||||||||
| Depreciation and amortization | 2,349 | 2,585 | |||||||||
| Stock-based compensation expense | 1,006 | 441 | |||||||||
| Amortization of deferred finance costs | 620 | 386 | |||||||||
| Change in fair value of earnout consideration liability | (4,107) | — | |||||||||
| Revaluation of warrant liability | 1,424 | — | |||||||||
| Change in fair value of derivative liability | 248 | — | |||||||||
| Deferred tax expense | 543 | — | |||||||||
| Changes in assets and liabilities | |||||||||||
| Accounts receivable | (10,659) | (16,677) | |||||||||
| Inventories | (1,392) | (859) | |||||||||
| Prepaid expenses and other assets | (4,423) | (377) | |||||||||
| Deposits and other assets | — | (896) | |||||||||
| Accounts payable | (2,248) | 2,483 | |||||||||
| Accrued expenses | 3,422 | (4,381) | |||||||||
| Other liabilities | (1,782) | 178 | |||||||||
| Net cash provided by operating activities | 11,909 | 6,105 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of property and equipment | (1,417) | (275) | |||||||||
| Net cash used in investing activities | (1,417) | (275) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from line of credit | 10,000 | — | |||||||||
| Payment of line of credit | — | (5,000) | |||||||||
| Payment of term loan | (3,125) | (6,000) | |||||||||
| Distributions | — | (3,276) | |||||||||
| Payment of issuance costs related to business combination | (23,833) | — | |||||||||
| Net cash used in financing activities | (16,958) | (14,276) | |||||||||
| Net decrease in cash and cash equivalents | (6,466) | (8,446) | |||||||||
| Cash and cash equivalents, beginning of period | 21,944 | 13,422 | |||||||||
| Cash and cash equivalents, end of period | $ | 15,478 | $ | 4,976 | |||||||
| Supplementary disclosure of cash flow information: | |||||||||||
| Cash paid for interest expense | $ | 4,734 | $ | 2,643 | |||||||
| Supplemental disclosure of non-cash financing activities: | |||||||||||
| Derivative asset - interest rate swap | $ | 4,036 | $ | — | |||||||
| ("$ in thousands" - except share data) | ||
As of September 30, 2021, the Company had not yet commenced any operations. All activity for the period from August 21, 2020 (inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”).
The registration statement for the Company’s Initial Public Offering was declared effective on November 5, 2020. On November 10, 2020, the Company consummated the Initial Public Offering of 22,000,000 units (the “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 $220,000,000, which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 10,375,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Roman DBDR Tech Sponsor, LLC (the “Sponsor”"Business Combination"), generating gross proceeds of $10,375,000, which is described in Note 5.
Following the closing of the Initial Public Offering on November 10, 2020, an amount of $224,400,000 ($10.20 per Unit) from the proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”),. Pursuant to be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.
On November 12, 2020, the underwriters notified the Company of their intention to partially exercise their over-allotment option. As such, on November 17, 2020, the Company consummated the sale of an additional 1,156,000 Units, at $10.00 per Unit, and the sale of an additional 462,400 Private Placement Warrants, at $1.00 per Private Placement Warrant, generating total gross proceeds of $12,022,400. A total of $11,791,200 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $236,191,200.
Transaction costs amounted to $13,206,613, consisting of $4,631,200 of underwriting fees, $8,104,600 of deferred underwriting fees and $470,813 of other offering costs.
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 the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination, must be with one or more target businesses that together have a 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 on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficientmerger was accounted for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
7
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s 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 seeking redemption rights with respect to more than 15% of the Public Shares without the Company’s prior written consent.
The public stockholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.20 per 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 stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 7). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor has agreed (a) to vote its Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of pre-Business Combination activity and (d) that the Founder Shares shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
If the Company is unable to complete a Business Combination by May 10, 2022 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no 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 and not previously released to us to pay taxes (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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations under Delaware law to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its rights to the deferred underwriting commission 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 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 amount initially deposited into the Trust Account ($10.20).
8
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Sponsor has agreed that it will 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 entered into a written letter of intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.20 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the day of liquidation of the Trust Account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriter of Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure its stockholders that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses. 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, 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.
Liquidity
As of September 30, 2021, the Company had $15,158 in its operating bank accounts, $236,289,574 in marketable securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem stock in connection therewith, and working capital deficit of $2,247,947 which excludes franchise and income taxes payable of $150,000, as such amounts may be paid from interest earned on the Trust Account. For the quarter ended September 30, 2021, interest income which is available to pay the Company’s tax obligations amounted to $98,374.
In May 2021, the Sponsor agreed to provide the Company up to $1,500,000 in loans. The loans, if issued, as well as any future loans that may be made by the Company’s officers and directors (or their affiliates), will be evidenced by notes and would either be repaid upon the consummation of a Business Combination or up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant at the option of the lender. As of September 30, 2021, the Company had 0 outstanding balances under such promissory notes.
The Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The Company’s officers and directors and the Sponsor may, but are not obligated to (except as described above), loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
On June 6, 2021 the Sponsor agreed to advance $130,000 to the Company to pay for operating expenses.
Based on the foregoing, the Company believes it will not have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or May 10, 2022. This raises substantial doubt about the Company’s ability to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
9
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s financial statements as of September 30, 2021, management identified errors made in its historical financial statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its Class A common stock subject to possible redemption. The Company previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all shares of Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in a restatement of the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
10
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| | | | | | | | | |
| | As Previously | | | | | | | |
|
| Reported |
| Adjustment |
| As Restated | |||
Balance Sheet as of November 10, 2020 (audited) |
| |
|
| |
|
| |
|
Common stock subject to possible redemption | | $ | 190,280,971 | | $ | 34,119,029 | | $ | 224,400,000 |
Common stock | | $ | 335 | | $ | (335) | | $ | — |
Additional paid-in capital | | $ | 6,303,578 | | $ | (6,303,578) | | $ | — |
Accumulated deficit | | $ | (1,304,542) | | $ | (27,815,116) | | $ | (29,119,658) |
Total Stockholders’ Equity (Deficit) | | $ | 5,000,004 | | $ | (34,119,029) | | $ | (29,119,025) |
| | | | | | | | | |
Balance Sheet as of December 31, 2020 (audited) | | | | | | | | | |
Common stock subject to possible redemption | | $ | 196,595,514 | | $ | 39,595,686 | | $ | 236,191,200 |
Common stock | | $ | 389 | | $ | (389) | | $ | — |
Additional paid-in capital | | $ | 10,339,715 | | $ | (10,339,715) | | $ | — |
Accumulated deficit | | $ | (5,340,678) | | $ | (29,255,581) | | $ | (34,596,259) |
Total Stockholders’ Equity (Deficit) | | $ | 5,000,005 | | $ | (39,595,684) | | $ | (34,595,681) |
| | | | | | | | | |
Balance Sheet as of March 31, 2021 (Unaudited) | | | | | | | | | |
Common stock subject to possible redemption | | $ | 205,526,716 | | | (30,664,484) | | | 236,191,200 |
Common Stock | | $ | 301 | | | (301) | | | — |
Additional paid-in capital | | $ | 1,408,601 | | | (1,408,601) | | | — |
Accumulated deficit | | $ | 3,590,522 | | | (29,255,581) | | | (25,665,059) |
Total Stockholders’ Equity (Deficit) | | $ | 5,000,003 | | | (30,664,483) | | | (25,664,480) |
| | | | | | | | | |
Balance Sheet as of June 30, 2021 (Unaudited) | | | | | | | | | |
Common stock subject to possible redemption | | $ | 183,871,069 | | | 52,320,131 | | | 236,191,200 |
Common Stock | | $ | 513 | | | (513) | | | — |
Additional paid-in capital | | $ | 23,064,036 | | | (23,064,036) | | | — |
Accumulated deficit | | $ | (18,065,118) | | | (29,255,581) | | | (47,320,699) |
Total Stockholders’ Equity (Deficit) | | $ | 5,000,010 | | | (52,320,131) | | | (47,320,121) |
| | | | | | | | | |
Statement of Changes in Stockholders’ Equity (Deficit) for the Period from August 21, 2020 (Inception) Through December 31, 2020 (Audited) | | | | | | | | | |
Sale of 23,156,000 Units, net of underwriting discounts and offering expenses | | | 206,911,197 | | | (206,911,197) | | | — |
Common stock subject to redemption | | | 196,595,514 | | | (196,595,514) | | | — |
Accretion for Class A common stock to redemption amount | | | — | | | (29,279,949) | | | (29,279,949) |
| | | | | | | | | |
Condensed Statement of Changes in Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2021 (Unaudited) | | | | | | | | | |
Accretion for Class A common stock to redemption amount | | | — | | | — | | | — |
Total Stockholders’ Equity (Deficit) | | | (34,595,681) | | | 8,931,200 | | | (25,664,481) |
| | | | | | | | | |
Condensed Statement of Changes in Stockholders’ Equity (Deficit) for the Three Months Ended June 30, 2021 (Unaudited) | | | | | | | | | |
Change in value of common stock subject to redemption | | | 21,655,640 | | | (21,655,640) | | | — |
Accretion for Class A common stock to redemption amount | | | — | | | — | | | — |
Total Stockholders’ Equity (Deficit) | | | (25,664,481) | | | (21,655,640) | | | (47,320,121) |
| | | | | | | | | |
Statement of Cash Flows for the Three Months Ended December 31, 2020 (Unaudited) | | | | | | | | | |
Initial classificiation of Class A common stock subject to possible redemption | | | 224,215,068 | | | 11,976,132 | | | 236,191,200 |
| | | | | | | | | |
Statement of Cash Flows for the Three Months Ended March 31, 2021 (Unaudited) | | | | | | | | | |
Initial classificiation of Class A common stock subject to possible redemption | | | — | | | — | | | — |
| | | | | | | | | |
Statement of Cash Flows for the Six Months Ended June 30, 2021 (Unaudited) | | | | | | | | | |
Initial classificiation of Class A common stock subject to possible redemption | | | 8,931,202 | | | (8,931,202) | | | — |
11
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
| | | | | | | | | |
| | As Previously | | | | | As | ||
|
| Reported |
| Adjustment |
| Restated | |||
Statement of Operations for the Period from August 14, 2020 (Inception) Through December 31, 2020 (Audited) | | | | | | | | | |
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption, Adjustment, Class A common stock |
| | 21,828,647 |
| | (2,578,538) |
| | 19,250,109 |
Basic and diluted net income per share, Class A common stock subject to possible redemption, Adjustment, Class A common stock | | $ | — | | $ | — | | $ | — |
Basic and diluted weighted average shares outstanding, Non-redeemable common stock, Adjustment, Class A common stock | |
| 6,078,552 | |
| (476,824) | |
| 5,601,728 |
Basic and diluted net loss (income) per share, Non-redeemable common stock, Adjustment, Class A common stock | | $ | (0.88) | | $ | (0.08) | | $ | (0.96) |
| | | | | | | | | |
Statement of Operations for the Three Months Ended March 31, 2021 | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 20,149,678 | |
| 2,231,858 | |
| 22,381,536 |
Basic and diluted net income (loss) per share, Class A common stock subject to possible redemption | | $ | — | | $ | 0.32 | | $ | 0.32 |
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | |
| 9,670,930 | |
| (3,881,930) | |
| 5,789,000 |
| | | | | | | | | |
Statement of Operations for the Three Months Ended June 30, 2021 | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 20,149,678 | |
| 2,231,858 | |
| 22,381,536 |
Basic and diluted net income per share, Class A common stock subject to possible redemption | | $ | — | | $ | (0.77) | | $ | (0.77) |
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | |
| 8,795,322 | |
| (3,006,322) | |
| 5,789,000 |
Basic and diluted net loss (income) per share, Non-redeemable common stock | | $ | (2.46) | | $ | 1.69 | | $ | (0.77) |
| | | | | | | | | |
Statement of Operations for the Six Months Ended June 30, 2021 | |
|
| |
|
| |
|
|
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 19,714,293 | |
| 2,667,243 | |
| 22,381,536 |
Basic and diluted net income per share, Class A common stock subject to possible redemption | | $ | — | | $ | (0.45) | | $ | (0.45) |
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | |
| 9,230,707 | |
| (3,441,707) | |
| 5,789,000 |
Basic and diluted net income (loss) per share, Non-redeemable common stock | | $ | (1.38) | | $ | 0.93 | | $ | (0.45) |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been preparedreverse recapitalization in accordance with accounting principles generally accepted in the United StatesU.S. ("U.S. GAAP"). On the Closing Date, and in connection with the closing of Americathe Business Combination, Roman DBDR changed its name to CompoSecure Inc. Holdings was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification ("ASC") 805.
| ("$ in thousands" - except share data) | ||
12
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on March 29, 2021 and as amended on May 24, 2021. The interim results for the three and nine monthsyear ended September 30, 2021December 31, 2021. The financial statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal, recurring adjustments, necessary for the fair presentation of the financial statements for the periods presented. The results disclosed in the Consolidated Statements of Operations for the three-month period ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.
| ("$ in thousands" - except share data) | ||
| ("$ in thousands" - except share data) | ||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Raw materials | $ | 28,550 | $ | 27,474 | |||||||
| Work in process | 1,359 | 582 | |||||||||
| Finished goods | 703 | 363 | |||||||||
| Inventory reserve | (3,414) | (2,613) | |||||||||
| $ | 27,198 | $ | 25,806 | ||||||||
| Useful Life | March 31, 2022 | December 31, 2021 | |||||||||||||||
| Machinery and equipment | 5 - 10 years | $ | 59,528 | $ | 59,437 | ||||||||||||
| Furniture and fixtures | 3 - 5 years | 987 | 955 | ||||||||||||||
| Computer equipment | 3 - 5 years | 936 | 925 | ||||||||||||||
| Leasehold improvements | Shorter of lease term or estimated useful life | 11,578 | 11,358 | ||||||||||||||
| Vehicles | 5 years | 264 | 264 | ||||||||||||||
| Software | 1 - 3 years | 2,889 | 2,889 | ||||||||||||||
| Construction in progress | 2,048 | 985 | |||||||||||||||
| Total | 78,230 | 76,813 | |||||||||||||||
| Less: Accumulated depreciation and amortization | (56,984) | (54,636) | |||||||||||||||
| Property and equipment, net | $ | 21,246 | $ | 22,177 | |||||||||||||
| ("$ in thousands" - except share data) | ||
| ("$ in thousands" - except share data) | ||
| ("$ in thousands" - except share data) | ||
| ("$ in thousands" - except share data) | ||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Total debt | $ | 376,875 | $ | 380,000 | |||||||
| Less: current portion of term loan (scheduled payments) | (14,063) | (12,500) | |||||||||
| Less: deferred financing costs, net | (6,850) | (7,471) | |||||||||
| Total long-term debt | $ | 355,962 | $ | 360,029 | |||||||
| Derivative liability - redemption with make-whole provision | $ | 800 | $ | 552 | |||||||
| Remainder of 2022 | $ | 9,375 | |||
| 2023 | 18,750 | ||||
| 2024 | 18,750 | ||||
| 2025 | 200,000 | ||||
| 2026 | 130,000 | ||||
| Total debt | $ | 376,875 | |||
| ("$ in thousands" - except share data) | ||
| ("$ in thousands" - except share data) | ||
| Balance Sheet Classification | March 31, 2022 | December 31, 2021 | |||||||||||||||
| Right-of-use assets | Right of use assets | $ | 4,979 | $ | 5,246 | ||||||||||||
| Current lease liabilities | Current portion of lease liabilities | 1,134 | 1,119 | ||||||||||||||
| Non-current lease liabilities | Non-current portion of lease liabilities | 4,421 | 4,709 | ||||||||||||||
| Three-month period ended March 31, 2022 | Three-month period ended March 31, 2021 | ||||||||||
| Operating lease cost | $ | 319 | $ | 319 | |||||||
| Variable lease cost | 139 | 125 | |||||||||
| Total lease cost | $ | 458 | $ | 444 | |||||||
| 2022 (excluding the three months ended March 31, 2022) | $ | 975 | |||
| 2023 | 1,298 | ||||
| 2024 | 1,263 | ||||
| 2025 | 1,302 | ||||
| 2026 | 1,096 | ||||
| Later years | 97 | ||||
| Total lease payments | 6,031 | ||||
| Less: Imputed interest | (476) | ||||
| Present value of lease liabilities | $ | 5,555 | |||
Three-month period ended March 31, 2022 | |||||
| Operating cash flow information: | |||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | 325 | |||
| Non-cash activity: | |||||
| Right-of-use assets obtained in exchange for lease obligations | $ | — | |||
| ("$ in thousands" - except share data) | ||
| Three-month period ended March 31, 2022 | Three-month period ended March 31, 2021 | ||||||||||
| Stock option expense | $ | 346 | $ | 335 | |||||||
| Restricted stock unit expense | 631 | — | |||||||||
| Incentive units | 29 | 106 | |||||||||
| Total stock-based compensation expense | $ | 1,006 | $ | 441 | |||||||
| ("$ in thousands" - except share data) | ||
| Number of Shares | Weighted Average Exercise Price Per Shares | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Outstanding at January 1, 2022 | 5,409,771 | $ | 1.27 | 4.1 | $ | 37,542 | |||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | — | — | |||||||||||||||||||||
| Forfeited | — | — | |||||||||||||||||||||
| Outstanding at March 31, 2022 | 5,409,771 | $ | 1.27 | 4.1 | $ | 34,187 | |||||||||||||||||
| Vested and expected to vest at March 31, 2022 | 5,409,771 | $ | 1.27 | 5.1 | $ | 34,187 | |||||||||||||||||
| Exercisable at March 31, 2022 | 5,040,526 | $ | 0.98 | 3.7 | $ | 33,327 | |||||||||||||||||
| Number of Shares | |||||
| Outstanding at January 1, 2022 | — | ||||
| Granted | 4,036,403 | ||||
| Vested | (25,000) | ||||
| Forfeited | — | ||||
| Nonvested at March 31, 2022 | 4,011,403 | ||||
| Number of Shares | |||||
| Outstanding at January 1, 2022 | 657,160 | ||||
| Granted | — | ||||
| Vested | — | ||||
| Forfeited | — | ||||
| Nonvested at March 31, 2022 | 657,160 | ||||
| ("$ in thousands" - except share data) | ||
| ("$ in thousands" - except share data) | ||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||
| Assets Carried at Fair Value: | ||||||||||||||||||||||||||
| Derivative asset - interest rate swap | $ | — | $ | — | $ | 4,036 | $ | 4,036 | ||||||||||||||||||
| Liabilities Carried at Fair Value: | ||||||||||||||||||||||||||
| Public warrants | 17,946 | — | — | 17,946 | ||||||||||||||||||||||
| Private warrants | — | — | 18,749 | 18,749 | ||||||||||||||||||||||
| Earnout consideration | — | — | 34,320 | 34,320 | ||||||||||||||||||||||
| Derivative liability - redemption with make-whole provision | — | — | 800 | 800 | ||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||
| Liabilities Carried at Fair Value: | ||||||||||||||||||||||||||
| Public warrants | $ | 17,714 | $ | — | $ | — | 17,714 | |||||||||||||||||||
| Private warrants | — | — | 17,557 | 17,557 | ||||||||||||||||||||||
| Earnout consideration | — | — | 38,427 | 38,427 | ||||||||||||||||||||||
| Derivative liability - redemption with make-whole provision | — | — | 552 | 552 | ||||||||||||||||||||||
| Derivative asset - interest rate swap | ||||||||
| Balance at December 31, 2021 | $ | — | ||||||
| Fair value recognized upon interest rate swap agreement | 4,036 | |||||||
| Estimated fair value at March 31, 2022 | $ | 4,036 | ||||||
| ("$ in thousands" - except share data) | ||
| Warrant Liabilities | ||||||||
| Estimated fair value at December 31, 2021 | $ | 35,271 | ||||||
| Change in estimated fair value | 1,424 | |||||||
| Estimated fair value at March 31, 2022 | $ | 36,695 | ||||||
| March 31, 2022 | ||||||||
| Exercise Price | $ | 11.50 | ||||||
| Risk-free interest rate | 2.42 | % | ||||||
| Expected volatility | 38 | % | ||||||
| Expected dividends | 0 | % | ||||||
| Expected term (years) | 4.7 years | |||||||
| Common Stock market value | $ | 7.59 | ||||||
| Earnout Consideration Liability | ||||||||
| Estimated fair value at December 31, 2021 | $ | 38,427 | ||||||
| Change in estimated fair value | (4,107) | |||||||
| Estimated fair value at March 31, 2022 | $ | 34,320 | ||||||
| ("$ in thousands" - except share data) | ||
| March 31, 2022 | ||||||||
| Valuation date share price | $ | 7.59 | ||||||
| Risk-free interest rate | 2.41% - 2.44%% | |||||||
| Expected volatility | 70.0 | % | ||||||
| Expected dividends | 0 | % | ||||||
| Expected term (years) | 2.7 - 3.7 years | |||||||
| Three months ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net sales by region: | |||||||||||
| Domestic | $ | 62,381 | $ | 55,868 | |||||||
| International | 21,802 | 7,854 | |||||||||
| Total | $ | 84,183 | $ | 63,722 | |||||||
| ("$ in thousands" - except share data) | ||
| Three-month period ended March 31, 2022 | ||||||||||||||||||||
| Basic and diluted: | ||||||||||||||||||||
| Net income | $ | 26,908 | ||||||||||||||||||
| Less: Net income attributable to non-controlling interest | (22,167) | |||||||||||||||||||
| Net income attributable to Class A Common Stockholders | $ | 4,741 | ||||||||||||||||||
| Plus: adjustment due to net effect of stock options and exchangeable notes to net income | 352 | |||||||||||||||||||
| Net income attributable to Class A Common Stockholders after adjustment | $ | 5,093 | ||||||||||||||||||
| Weighted average common shares outstanding used in computing net income per share—basic (in thousands) | 14,934 | |||||||||||||||||||
| Plus: net effect of dilutive stock options and exchangeable notes (in thousands) | 17,331 | |||||||||||||||||||
| Weighted average common shares outstanding used in computing net income per share—diluted (in thousands) | 32,265 | |||||||||||||||||||
| Net income per share—basic | $ | 0.32 | ||||||||||||||||||
| Net income per share—diluted | $ | 0.16 | ||||||||||||||||||
| ("$ in thousands" - except share data) | ||
| Three-month period ended March 31, 2022 | ||||||||||||||||||||
| Potentially dilutive securities: | ||||||||||||||||||||
| Warrants | 22,415,400 | |||||||||||||||||||
| Class B shares | 61,136,800 | |||||||||||||||||||
| Earnout consideration shares | 7,500,000 | |||||||||||||||||||
Emerging Growthcontribute to these differences include those discussed below and elsewhere particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.
provides its clients newly innovative and highly differentiated financial payment products in order to support and increase their customer acquisition, customer retention and organic customer spend. The Company’s clients consist primarily of leading international and domestic banks and other payment card issuers primarily within the United States (“U.S.”), Europe, Asia, Latin America, Canada, and the Middle East. The Company is a world-class platform for next generation payment technology, security, and Cryptocurrency solutions. For two decades, through its combination of large-scale, advanced manufacturing capabilities and deep technological expertise, the Company has driven key Payments Industry innovations in materials science, Metal Form Factor design, dual interface functionality, and security. The distinct value proposition of the Company’s products have resulted in widespread adoption by major banks, financial institutions and leading FinTech innovators to support their acquisition and retention of consumer and business card customers. The Company maintains trusted, highly-embedded and long-term customer relationships with an expanding set of global issuers. These same fundamental strengths have now enabled the Company to enter the digital asset revolution through the launch of its Arculus platform, which commenced in the third quarter of 2021 with the Arculus Key card and companion Arculus Wallet mobile application.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net sales | $ | 84,183 | $ | 63,722 | $ | 20,461 | 32% | ||||||||||||||||
| Cost of sales | 35,424 | 29,406 | 6,018 | 20% | |||||||||||||||||||
| Gross profit | 48,759 | 34,316 | 14,443 | 42% | |||||||||||||||||||
| Operating expenses | 18,777 | 8,057 | 10,720 | 133% | |||||||||||||||||||
| Income from operations | 29,982 | 26,259 | 3,723 | 14% | |||||||||||||||||||
| Other expenses, net | (2,531) | (3,037) | 506 | (17)% | |||||||||||||||||||
| Income before income taxes | 27,451 | 23,222 | 4,229 | 18% | |||||||||||||||||||
| Provision for income taxes | (543) | — | (543) | 100% | |||||||||||||||||||
| Net income | 26,908 | 23,222 | 3,686 | 16% | |||||||||||||||||||
| Net income attributable to redeemable non-controlling interests | 22,167 | — | 22,167 | 100% | |||||||||||||||||||
| Net income attributable to CompoSecure, Inc | $ | 4,741 | $ | 23,222 | $ | (18,481) | (80)% | ||||||||||||||||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Gross Margin | 58 | % | 54 | % | |||||||
| Operating margin | 36 | % | 41 | % | |||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net sales by region | |||||||||||||||||||||||
| Domestic | $ | 62,381 | $ | 55,868 | $ | 6,513 | 12 | % | |||||||||||||||
| International | 21,802 | 7,854 | 13,948 | 178 | % | ||||||||||||||||||
| Total | $ | 84,183 | $ | 63,722 | $ | 20,461 | 32 | % | |||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net sales | $ | 84,183 | $ | 75,300 | $ | 8,883 | 12 | % | |||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net income | $ | 26,908 | $ | 23,222 | |||||||||||||||||||
| Add: | |||||||||||||||||||||||
| Depreciation and amortization | 2,349 | 2,585 | |||||||||||||||||||||
| Interest expense, net | 4,966 | 3,037 | |||||||||||||||||||||
| Taxes | 543 | — | |||||||||||||||||||||
| EBITDA | $ | 34,766 | $ | 28,844 | |||||||||||||||||||
| Stock-based compensation expense | 1,006 | 441 | |||||||||||||||||||||
| Mark to market adjustments, net (1) | (2,435) | — | |||||||||||||||||||||
| Adjusted EBITDA | $ | 33,337 | $ | 29,285 | |||||||||||||||||||
| Effective Dates | Notional Amount | Fixed Rate | ||||||||||||
| ($ in thousands) | ||||||||||||||
| January 5, 2022 through December 5, 2023 | $ | 125,000 | 1.06 | % | ||||||||||
| December 5, 2023 through December 22, 2025 | $ | 125,000 | 1.90 | % | ||||||||||
Further, Section 102(b)(1) of In addition, 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 thetake advantage of an extended transition period for complying with new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards, used.
Usewhich we have elected to do.
The preparation ofa United States publicly traded company in a timely and reliable manner.
Making estimates requires managementmarket price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to exercise significant judgment. It is at least reasonably possible that the estimateoperating performance of the effectparticular companies affected. The trading prices and valuations of a condition, situation or setthese stocks, and of circumstances that existed at the dateour securities, may not be predictable. A loss of the financial statements, which management considered in formulating its estimate, could changeinvestor confidence in the near term due to onemarket for financial technology stocks or more future confirming events. Onethe stocks of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchasedother companies which investors perceive to be cash equivalents. The Company did 0t have any cash equivalents assimilar to us could depress our securities prices regardless of September 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At September 30, 2021 and December 31, 2020, substantially allour business, prospects, financial conditions or results of the assets heldoperations. A decline in the Trust Account were held in money market funds which are primarily invested in U.S. Treasury securities. Allprice of the Company’s investments heldour securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the Trust Account are classified as trading securities. Trading securities are presented onfuture.
13
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
our Class A Common Stock, Subjectwhich was $7.32 per share based on the closing price on May 5, 2022. There can be no assurance that the Public Warrants and Resale Warrants will ever be in the money prior to Possibletheir expiration and, as such, the Public Warrants and Resale Warrants may expire worthless.
The Company accounts of the outstanding Warrants could force a Warrant holder: (i) to exercise your Warrants and pay the exercise price therefore at a time when it may be disadvantageous for itsyou to do so, (ii) to sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, could be substantially less than the market value of your Warrants.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stocks to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change10,837,400 Resale Warrants originally included in the carrying value of redeemable Class A common stocks resulted in charges against additional paid-in capital and accumulated deficit.
At September 30, 2021 and December 31, 2020, the Class A common stocks reflected in the condensed balance sheets are reconciled in the following table:
| | | |
Gross proceeds |
| $ | 231,560,000 |
Less: |
| |
|
Proceeds allocated to Public Warrants | | $ | (12,156,900) |
Class A common stocks issuance costs | | $ | (12,491,903) |
Plus: | |
|
|
Accretion of carrying value to redemption value | | $ | 29,280,003 |
| | | |
Class A common stocks subject to possible redemption | | $ | 236,191,200 |
Offering Costs
The company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.” Offering costs consist of underwriting, legal, regulatory filing, accounting, and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering. The offering costs relate to the Class A Common Stock and Distributable Redeemable Warrants which comprised the Unit offered as part of the Initial Public Offering. Those costs were allocated on a relative fair value basis with the portion of the offering costs allocated to the Distributable Redeemable Warrants being charged to expense and the portion of the offering costs assigned to the Public Shares being allocated to stockholders’ equity upon the completion of the Initial Public Offering. Public Stockholders who properly redeem their Public Shares (as described in Note 1) in connection with the Initial Business Combination will not bear any of the offering costs. Total offering costs amounted to $13,206,613, which consists of $4,631,200 of upfront underwriting fees, $8,104,600 of deferred underwriting fees (further discussed in Note 7) and $470,813 of other offering costs, of which $714,710 was charged to expense and $12,491,903 was charged to Stockholders’ equity.
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
14
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants was estimated using a Monte Carlo simulation approach (see Note 9).
15
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC Topic 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, if any, as income tax expense. There were 0 unrecognized tax benefits and 0 amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. 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
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share does not consider the effect of the warrantsunits issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 22,415,400 shares of Class A common stock in the aggregate. As of September 30, 2021 and 2020, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented.
The following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
| | | | | | �� | | | | | | | | | | | | |
|
| |
| |
| For the Period from August 21, | ||||||||||||
| | Three Months Ended | | Nine Months Ended | | 2020 (Inception) Through | ||||||||||||
| | September 30, 2021 | | September 30, 2021 | | September 30, 2020 | ||||||||||||
|
| Class A |
| Class B |
| Class A |
| Class B |
| Class A |
| Class B | ||||||
Basic and diluted net loss per common stock | | | | | | | | | | | | | | | | | | |
Numerator: |
| |
| | | |
| |
| | | |
| |
| | | |
Allocation of net income (loss), as adjusted | | $ | 140,438 | | $ | 36,473 | | $ | (9,960,630) | | $ | (2,586,899) | | $ | — | | $ | — |
Denominator: | | | | | | | | | | | | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 22,290,037 | | | 5,789,000 | | | 22,290,037 | | | 5,789,000 | | | — | | | — |
Basic and diluted net income (loss) per common stock | | $ | 0.01 | | $ | 0.01 | | $ | (0.45) | | $ | (0.45) | | $ | — | | $ | — |
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 Deposit Insurance Corporation maximum of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
16
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheet, primarily due to their short-term nature, except for warrant liabilities (see Note 10).
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 22,000,000 Units at a purchase price of $10.00 per Unit. In connection with the underwriters’ partial exercise of the over-allotment option on November 17, 2020, the Company sold an additional 1,156,000 Units, at a purchase price of $10.00 per Unit.our IPO. Each Unit consists of 1 share of the Company’s Class A common stock, $0.0001 par value, and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles theits holder to purchase 1one share of Class Aour common stock at an exercise price of $11.50 per share (see Note 8).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 10,375,000 Private Placement Warrantsand will expire at a price of $1.00 per Private Placement Warrant,5:00 p.m., New York time, on December 27, 2026 or $10,375,000 in the aggregate, each exercisable to purchase 1 share of Class A common stock at a price of $11.50 per share. In connection with the underwriters’ partial exercise of the over-allotment option on November 17, 2020, the Company sold an additional 462,400 Private Placement Warrants, at a purchase price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $462,400. The proceeds from the sale of 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 from the sale of the Private Placement Warrants will be used to fund theearlier upon redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On August 26, 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 7,906,250 shares of Class B common stock (the “Founder Shares”). On October 26, 2020, the Sponsor returned to the Company, at no cost, an aggregate of 1,581,250 Founder Shares which the Company cancelled, resulting in an aggregate of 6,325,000 Founder Shares outstanding. The Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the Sponsor would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering). In connection with the underwriters’ partial exercise of the over-allotment option and the forfeiture of the remaining over-allotment option, 536,000 Founder Shares were forfeited and 289,000 Founder Shares are no longer subject to forfeiture resulting in an aggregate of 5,789,000 Founder Shares outstanding at November 17, 2020.
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) the date on which the Company completes a liquidation, merger, capital stock exchange or similar transaction that results in the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Company’s 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 the Business Combination, the Founder Shares will be released from the lock-up.
17
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Administrative Support Agreement
The Company entered into an agreement, commencing on November 6, 2020, to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 30, 2021, the Company incurred and paid $10,200 and $50,200 in fees for these services, respectively. For the period from August 21, 2020 (inception) through September 30, 2020, the Company did not incur any fees for these services.
Promissory Note — Related Party
On August 26, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and was payable on the earlier of March 31, 2021 or the completion of the Initial Public Offering. As of September 30, 2021, there was 0 balance outstanding under the Note. The outstanding balance under the Note of $95,657 was repaid at the closing of the Initial Public Offering on November 10, 2020. Borrowings under the Note are no longer available.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation of a Business Combination into warrants at a price of $1.00 per warrant. The warrants will be identical to the Private Placement Warrants. 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. As of September 30, 2021 and December 31, 2020 there were 0 amounts outstanding under the Working Capital Loans.
Advance From Related Party
On June 6, 2021, the Sponsor agreed to advance the Company $130,000 to pay for operating expenses.
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration and shareholder rights agreement entered into on November 5, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and 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 our Class A common stock). The holders of the majority of these securities are entitled to make up to 3 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 consummation 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 registration and shareholder rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters will be entitled to a deferred fee of $0.35 per Unit, or $8,104,600 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.
18
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Merger Agreement
On April 19, 2021, Roman DBDR Tech Acquisition Corp, a Delaware corporation (the “Company”), entered into a merger agreement (the “Merger Agreement”) by and among the Company, Roman Parent Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), CompoSecure Holdings, L.L.C., a Delaware limited liability company (“CompoSecure”), and LLR Equity Partners IV, L.P., a Delaware limited partnership (“Member Representative”).
The Merger Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) Merger Sub will merge with and into CompoSecure, with CompoSecure surviving as a wholly-owned subsidiary of the Company (the “Merger”); (ii) CompoSecure will amend and restate its limited liability company agreement (the “Second A&R LLCA”) to, among other things, permit the issuance and ownership of interests in CompoSecure as contemplated by the Merger Agreement; (iii) the holders of issued and outstanding equity of CompoSecure will receive a combination of cash consideration, certain newly-issued membership units of CompoSecure (each, a “CompoSecure Unit”) and shares of newly-issued Class B Common Stock of the Company (the “Class B Common Stock”), which will have no economic value, but will entitle the holder to 1 vote per issued share and will be issued on a 1-for-one basis for each CompoSecure Unit retained by the holder following the Merger; (iv) the holders of outstanding options to purchase CompoSecure equity will receive a combination of cash consideration and options to purchase shares of Class A Common Stock of the Company (the “Class A Common Stock”), and (v) the Company will acquire certain newly-issued membership units of CompoSecure. The Second A&R LLCA, together with an Exchange Agreement to be entered into at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), will provide the holders of CompoSecure Units the right to exchange the CompoSecure Units, together with the cancellation of an equal number of shares of Class B Common Stock, for Class A Common Stock, subject to certain restrictions set forth therein.
Following the Closing, the combined company will be organized in an “Up-C” structure and the Company will control CompoSecure as the managing member of CompoSecure in accordance with the terms of the Second A&R LLCA. Upon the Closing, it is anticipated that the Company will change its name to “CompoSecure, Inc.”
The aggregate consideration to be paid to the holders of CompoSecure equity pursuant to the Merger Agreement is based on an equity value of CompoSecure of approximately $853 million and will consist of:
(i) an amount of cash equal to (A) the amount of cash in the Company’s trust account established for the purpose of holding the net proceeds from its initial public offering and concurrent private placement of warrants (currently $236.2 million), net of any amounts paid to the Company’s stockholders that exercise their redemption rights in connection with the Merger (the “Remaining Trust Cash”), plus (B) the proceeds of the sale of $130 million of CompoSecure’s senior exchangeable notes and the sale of $45 million of the Company’s Class A Common Stock, each in private placements to be consummated at the Closing (together, the “PIPE Investments”, as described below), minus (C) certain transaction expenses; plus
(ii) equity consideration valued at $10.00 per share in respect of the remaining portion of CompoSecure’s enterprise value after deducting the cash consideration in clause (i); plus
(iii) the Earnout Consideration (as defined below), if payable.
In addition to the consideration to be paid at Closing as described in (i) and (ii) above, CompoSecure equity holders will have the right to receive an aggregate of up to 7.5 million additional (i) shares of Class A Common Stock or (ii) CompoSecure Units (and a corresponding number ofour liquidation. To the extent Warrants are exercised, additional shares of Class B Common Stock), as applicable, in earn-out consideration based on the achievement of certain stock price thresholds (collectively, the “Earnout Consideration”).
19
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Concurrent with Closing, the Company will enter into a tax receivable agreement (the “Tax Receivable Agreement”) with CompoSecure and holders of interests in CompoSecure. Pursuant to the Tax Receivable Agreement, the Company will be required to pay to participating holders of interests in CompoSecure 90% of the amount of savings, if any, in U.S. federal, state and local income tax that the Company actually realizes as a result of the utilization of certain tax attributes. In addition, concurrent with Closing, the Company will enter into a stockholders agreement with certain equityholders of the Company relating to the voting for directors of the Company and containing certain lock-up restrictions, as well as a registration rights agreement that will provide customary registration rights to certain equity holders of the Company.
Representations, Warranties and Covenants
The parties to the Merger Agreement have agreed to customary representations and warranties for transactions of this type. In addition, the parties to the Merger Agreement agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of CompoSecure, the Company and their respective subsidiaries during the period between execution of the Merger Agreement and the Closing. The representations, warranties, agreements and covenants of the parties set forth in the Merger Agreement will terminate at the Closing, except for those covenants and agreements that, by their terms, contemplate performance after the Closing. Each of the parties to the Merger Agreement has agreed to use its reasonable best efforts to consummate the Merger.
Conditions to Closing
Under the Merger Agreement, the obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of certain customary closing conditions, including, without limitation: (i) the approval and adoption of the Merger Agreement and transactions contemplated thereby by the requisite vote of the Company’s stockholders (the “Company Stockholder Approval”) and CompoSecure’s equity holders (the “CompoSecure Member Approval”); (ii) the shares of Class A Company Common Stock will have been approved for listing on Nasdaq, subject to official notice of issuance; (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”); (iv) the PIPE Investments will have been consummated immediately prior to the Merger; (v) after giving effect to the transactions contemplated by the Merger Agreement, the Company will have net tangible assets of at least $5,000,001; (vi) the Remaining Trust Cash plus the amount of the PIPE Investments, minus $50 million of transaction expenses shall not be less than $210 million; (vii) each Ancillary Agreement will been executed and delivered; (viii) the net indebtedness of CompoSecure (generally, indebtedness minus cash) will be no greater than $250 million; (ix) the amount of cash on hand at CompoSecure shall not be less than $5 million; and (x) the absence of a Company material adverse effect or a Material Adverse Effect with respect to CompoSecure.
Termination
The Merger Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including without limitation, (i) by mutual written consent of the Company and CompoSecure; (ii) by either the Company or CompoSecure if (a) the Closing has not occurred on or before December 31, 2021, which date may be extended to no later than January 31, 2022 if the expiration or termination of the applicable waiting period under the HSR Act remains pending, (b) if a Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law which permanently restrains, enjoins or otherwise prohibits the transaction, and (c) if the Company Stockholders’ Meeting (as defined in the Merger Agreement) has been held and the Company Stockholder Approval is not obtained; (iii) by the Company if neither it nor Merger Sub are in material breach of their obligations under the Merger Agreement and if (a) at any time any of the representations and warranties of CompoSecure become untrue or inaccurate or (b) there has been a breach on the part of CompoSecure of any of its covenants or agreements contained in the Merger Agreement, neither of which are cured and in either case such that such breach would have a material adverse effect; (iv) by CompoSecure if CompoSecure is not in material breach of its obligations under the Merger Agreement and if (a) at any time any of the representations and warranties of the Company and Merger Sub become untrue or inaccurate or (b) there has been a breach on the part of the Company or Merger Sub of any of its covenants or agreements contained in the Merger Agreement, neither of which are cured and in either case such that such breach would have a material adverse effect; or (vi) by the Company, if CompoSecure does not deliver written consent of the CompoSecure equity holders in accordance with the Merger Agreement on or prior to the applicable deadline.
20
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Voting Agreement
In connection with the execution of the Merger Agreement, certain stockholders of the Company (the “Company Stockholders”) and certain equity holders of CompoSecure (the “CompoSecure Holders”) entered into a voting agreement with the Company and CompoSecure (the “Voting Agreement”).
Under the Voting Agreement, each Company Stockholder and CompoSecure Holder agreed to vote or cause to be voted their respective equity interests for and against certain matters, including to vote in favor of the Merger Agreement and the transactions related thereto and against any competing proposals or any matters that would reasonably be expected to impede the timely consummation of the Merger.
Expense Cap and Waiver Agreement
In connection with the execution of the Merger Agreement, the Company and Roman DBDR Tech Sponsor LLC, a Delaware limited liability company (the “Sponsor”), entered into an expense cap and waiver agreement (the “Expense Cap and Waiver Agreement”). Under the terms of the Expense Cap and Waiver Agreement, Sponsor agreed that to the extent the Company’s transaction expenses exceed $35 million, then Sponsor shall, at Closing, either (i) pay any such amount in excess of $35 million to the Company in cash, or (ii) irrevocably forfeit and surrender to the Company such number of shares of Class B Common Stock held by the Sponsor that would, in the aggregate, have a value equal to such amount in excess of $35 million. In addition, the Sponsor agreed to waive any adjustment to the initial conversion ratio of the Company’s current Class B Common Stock in the Company’s certificate of incorporation resulting from the Merger.
Common Stock Subscription Agreements
In connection with the Merger, the Company entered into subscription agreements (the “Common Stock Subscription Agreements”), each dated April 19, 2021, with certain institutional investors (the “Investors”), pursuant to which the Company agreed to sell to the Investors, in private placements to close immediately prior to the closing of the Merger, an aggregate of 4,500,000 shares ofour Class A Common Stock (together, the “Subscriptions”) for a purchase price of $10.00 per share, or an aggregate purchase price of $45 million. The obligations of each party to consummate the Subscriptions are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement.
Exchangeable Note Subscription Agreements
In connection with the Merger, CompoSecure entered into subscription agreements (the “Note Subscription Agreements”), each dated April 19, 2021 with certain institutional investors (the “Note Investors”), pursuant to which CompoSecure agreed to sell to the Note Investors, in private placements to close immediately prior to the closing of the Merger, an aggregate of $130 million of senior exchangeable notes (the “Notes”),will be issued, which will bear interest at a rate of 7.00% per annum, payable semi-annually,result in dilution to our then existing stockholders and which will be exchangeable for shares of Class A Common Stock at a conversion price of $11.50 per share in accordance with the terms thereof. The obligations of each party to consummate the Note Subscriptions are conditioned upon, among other things, the entry into an indenture consistent with the terms set forth in the Note Subscription Agreement, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement.
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At September 30, 2021 and December 31, 2020, there were 0 shares of preferred stock issued or outstanding.
Class A Common Stock— The Company is authorized to issue up to 200,000,000 shares of Class A, $0.0001 par value common stock. Holders of the Company’s Class A common stock are entitled to 1 vote for each share. At September 30, 2021 and December 31, 2020, there were 23,156,000 shares of Class A common stock issued and outstanding, which are presented as temporary equity.
21
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Class B Common Stock — The Company is authorized to issue up to 20,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s Class B common stock are entitled to 1 vote for each share. As of September 30, 2021 and December 31, 2020, there were 5,789,000 shares of Class B common stock outstanding.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the Business Combination on a 1-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 adjustment with respect to any such issuance or deemed issuance) so thatincrease the number of shares of Class A Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could depress the market price of our securities.
NOTE 9. WARRANTS
Company or our officers, directors or stockholders.
The Company willChancery does not be obligatedhave subject matter jurisdiction. While this exclusive provision applies to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statementclaims under the Securities Act, coveringwe note, however, that there is uncertainty as to whether a court would enforce this provision and that stockholders cannot waive compliance with the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisablefederal securities laws and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. 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, it will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effectiverules and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance withregulations thereunder. Section 3(a)(9)22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or another exemption. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption providedliability created by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, providedrules and regulations thereunder.
Onceone or more of the Public Warrants become exercisable,specified types of actions or proceedings, the Company may redeem the Public Warrants for redemption:
22
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
If and when the Public Warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
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 share dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public 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. If the Company calls the Public Warrants for redemption, 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 common shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. 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 respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) 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”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
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 will and the shares of 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 Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable 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 10. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
23
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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|
|
|
|
|
At September 30, 2021, assets held in the Trust Account were comprised of $236,289,574 of money market funds, which are primarily invested in U.S. Treasury securities. Company did not withdraw any interest income from the Trust Account.
At September 30, 2021, there were 11,578,000 Public Warrants and 10,837,400 Private Placement Warrants outstanding.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | | | | | | | |
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| |
| September 30, |
| December 31, | ||
Description | | Level | | 2021 | | 2020 | ||
Assets: |
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|
| |
|
| |
|
Marketable securities held in Trust Account |
| 1 | | $ | 236,289,574 | | $ | 236,215,089 |
Liabilities: | | | | | | | | |
Warrant Liability - Public Warrants | | 1 | | | 18,640,580 | | | 14,125,160 |
Warrant Liability - Private Placement Warrants | | 3 | | | 18,098,458 | | | 13,330,002 |
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
Initial Measurement
The Company established the initial fair value for the Warrants on November 5, 2020, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model for the Private Placement Warrants and the Public Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of 1 share of Class A common stock and one-half of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B common stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A common stock subject to possible redemption, and Class B common stock based on their relative fair values at the initial measurement date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
24
ROMAN DBDR TECH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants and Public Warrants were as follows at initial measurement (which includes valuation for the over-allotment exercise on November 17, 2020) and for subsequent measurement (Private Placement Warrants only):
| | | | | | | | | | |
|
| November 5, |
| December 31, |
| September 30, 2021 |
| |||
| | 2020 (Initial | | 2020 (Subsequent | | (Subsequent |
| |||
Input | | Measurement) | | Measurement) | | Measurement) |
| |||
Risk-free interest rate |
| | 0.36 |
| | 0.37 |
| | 1.02 | % |
Expected term (years) |
| | 5.00 |
| | 5.05 |
| | 5.21 | |
Expected volatility |
| | 20.0 |
| | 18.5 |
| | 21.6 | % |
Exercise price | | $ | 11.50 | | $ | 11.50 | | $ | 11.50 | |
Fair value of Units | | $ | 9.48 | | $ | 10.11 | | $ | 1.61 | |
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The gross holding gains and fair value of held-to-maturity securities at September 30, 2021 are as follows:
| | | | | | | | | | | | |
| | Fair Value measured as of September 30, 2021 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash and Marketable Securities Held in Trust | | $ | 236,289,574 | | $ | — | | $ | — | | $ | 236,289,574 |
Warrant Derivative Liability: | |
| | |
|
| |
|
| |
| |
Public Warrants | | $ | 18,640,580 | | $ | — | | $ | — | | $ | 18,640,580 |
Private Placement Warrants | |
| — | |
| — | |
| 18,098,458 | |
| 18,098,458 |
Total Warrant Derivative Liability | | $ | 18,640,580 | | $ | — | | $ | 18,098,458 | | $ | 36,739,038 |
| | | | | | | | | | | | |
| | Fair Value measured as of December 31, 2020 | ||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash and Marketable Securities Held in Trust | | $ | 236,215,089 | | $ | — | | $ | — | | $ | 236,215,089 |
Warrant Derivative Liability: | |
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| |
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| |
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| |
|
|
Public Warrants | | $ | 14,125,160 | | $ | — | | $ | — | | $ | 14,125,160 |
Private Placement Warrants | |
| — | |
| — | |
| 13,330,002 | |
| 13,330,002 |
Total Warrant Derivative Liability | | $ | 14,125,160 | | $ | — | | $ | 13,330,002 | | $ | 27,455,162 |
There were 0 transfers into or out of Level 3 during the three months ended September 30, 2021.
The following table presents the changes in the fair value of warrant liabilities:
| | | | | | | | | |
|
| Private Placement |
| Public |
| Warrant Liabilities | |||
Fair value as of August 21, 2020 | | $ | — | | $ | — | | $ | — |
Initial measurement on November 6, 2020 | |
| 11,487,644 | |
| 12,156,900 | |
| 23,644,544 |
Change in valuation inputs or other assumptions | |
| 1,842,358 | |
| 1,968,260 | |
| 3,810,618 |
Fair value as of December 31, 2020 | | $ | 13,330,002 | | $ | 14,125,160 | | $ | 27,455,162 |
Change in valuation inputs or other assumptions | |
| 9,753,660 | |
| 9,841,300 | |
| 19,594,960 |
Fair value as of September 30, 2021 | | $ | 18,098,458 | | $ | 18,640,580 | | $ | 36,739,038 |
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Roman DBDR Tech Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Roman DBDR Tech Sponsor, LLC. The following discussion and analysis of the Company’s financial condition and results of operations shouldand result in a diversion of the time and resources of our management and Board.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatementbusiness of our financial statements for the periods ending December 31, 2020, March 31, 2021 and June 30, 2021. Management identified errors made in its historical financial statements where, at the closingsubsidiaries, or factors outside of our Initial Public Offering,and our subsidiaries control later arise, we improperly valuedmay be forced to later write down or write off assets, restructure our Class A common stockoperations, or incur impairment or other charges that could result in losses. Additionally, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though 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 the Company or our securities. In addition, charges of this nature may cause us to be unable to obtain future financing on favorable terms or at all.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering and the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or restate any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated under the laws of the State of Delaware on August 21, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuitmarket price of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Recent Developments
On April 19, 2021, Roman DBDR Tech Acquisition Corp,securities.
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wholly-owned subsidiary of the Company (“Merger Sub”), CompoSecure Holdings, L.L.C., a Delaware limited liability company (“CompoSecure”), and LLR Equity Partners IV, L.P., a Delaware limited partnership (“Member Representative”).
The Merger Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) Merger Sub will merge with and into CompoSecure, with CompoSecure surviving as a wholly-owned subsidiary of the Company (the “Merger”); (ii) CompoSecure will amend and restate its limited liability company agreement (the “Second A&R LLCA”) to, among other things, permit the issuance and ownership of interests in CompoSecure as contemplated by the Merger Agreement; (iii) the holders of issued and outstanding equity of CompoSecure will receive a combination of cash consideration, certain newly-issued membership units of CompoSecure (each, a “CompoSecure Unit”) and shares of newly-issued Class B Common Stock of the Company (the “Class B Common Stock”), which will have no economic value, but will entitle the holder to one vote per issued share and will be issued on a one-for-one basis for each CompoSecure Unit retained by the holder following the Merger; (iv) the holders of outstanding options to purchase CompoSecure equity will receive a combination of cash consideration and options to purchase shares of Class A Common Stock of the Company (the “Class A Common Stock”), and (v) the Company will acquire certain newly-issued membership units of CompoSecure. The Second A&R LLCA, together with an Exchange Agreement to be entered into at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), will provide the holders of CompoSecure Units the right to exchange the CompoSecure Units, together with the cancellation of an equalsubstantial number of shares of Class B Common Stock, for Class A Common Stock, subjectcommon stock in the public market could occur at any time. In addition, certain registration rights holders can request underwritten offerings to certain restrictions set forth therein.
Resultssell their securities. These sales, or the perception in the market that the holders of Operations
We have neither engaged in any operations nor generated any revenuesa large number of securities intend to date. Our only activities through September 30, 2021 were organizational activities, those necessary to prepare forsell securities, could reduce the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completionmarket price of our Business Combination. We will generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had net income of $176,911, which consists of interest income on marketable securities held in the Trust Account of $3,040 and a change in fair value of a derivative liabilities of $672,462, offset by operating costs of $498,591.
For the nine months ended September 30, 2021, we had a net loss of $12,547,529, which consists of operating costs of $3,338,138, a change in fair value of a derivative liabilities of $9,283,876, offset by interest income on marketable securities held in the Trust Account of $74,485.
For the period from August 21, 2020 (inception) through September 30, 2020, we had a net loss of $717, which consisted of operation and formation costs.
Liquidity and Capital Resources
On November 10, 2020, we consummated the Initial Public Offering of 22,000,000 Units, at $10.00 per unit, generating gross proceeds of $220,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 10,375,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $10,375,000.
On November 17, 2020, in connection with the underwriters’ partial exercise of their over-allotment option, the Company consummated the sale of an additional 1,156,000 Units, at $10.00 per Unit, and the sale of an additional 462,400 Private Placement Warrants, at $1.00 per Private Placement Warrant, generating total gross proceeds of $12,022,400.
Following the Initial Public Offering, the exercise of the over-allotment option and the sale of the Private Placement Warrants, a total of $236,191,200 was placed in the Trust Account. We incurred $13,206,613 in transaction costs, including $4,631,200 of underwriting fees, $8,104,600 of deferred underwriting fees and $470,813 of other costs.
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For the nine months ended September 30, 2021, cash used in operating activities was $756,856. Net loss of $12,547,529 was affected by interest earned on marketable securities held in the Trust Account of $74,485, a change in fair value of a derivative liabilities of $9,283,876. Changes in operating assets and liabilities provided $2,581,282 of cash for operating activities.
For the period from August 21, 2020 (inception) through September 30, 2020, cash used in operating activities was $717.
As of September 30, 2021, we had cash and marketable securities held in the Trust Account of $236,289,574. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions and income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2021, we had cash of $15,158 outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. As of September 30, 2021 there was $130,000 in Working Capital Loans issued. 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 $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.00 per warrant at the option of the lender.
We monitor the adequacy of our working capital in order to meet the expenditures required for operating our business prior to our initial Business Combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such 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.
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.
Accrued and prepaid expenses associated with the transaction have occurred in the three and nine months prior to September 30, 2021 and did not affect the total cash used by the Company.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate 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
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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, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on November 6, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,104,600 in the aggregate. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.
Warrant Liability
We account for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net Loss per Common Share
We apply the two-class method in calculating earnings per share. Net loss per common share, basic and diluted for Class A common stock subject to possible redemption is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number of shares of Class A common stock subject to possible redemption outstanding for the period. Net loss per common share, basic and diluted for and non-redeemable common stock is calculated by dividing net loss less income attributable to Class A common stock subject to possible redemption, by the weighted average number of shares of non-redeemable common stock outstanding for the period presented.
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Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity's own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. This guidance is effective as of January 1, 2022, with early adoption permitted effective January 1, 2021. The Company is currently evaluating the effect the updated standard will have on its financial position, results of operations and financial statement disclosure.
The Company's management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officers and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control over Financial Reporting
Other then as set forth above, 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As of the date of this Quarterly Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our Registration Statement and our Annual Report on Form 10-K/A, as amended, filed with the SEC on May 24, 2021. For risk factors relating to CompoSecure and the Merger, please see the preliminary proxy statement on Schedule 14A, filed by us with the SEC on July 21, 2021, and other documents filed by us from time to time with the SEC. Any of these factors could
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result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We have identified, in light of the prior reclassification of warrants from equity to liability, as well as the reclassification of our redeemable Class A common stock as temporary equity, a material weakness in our internal controls over financial reporting relating to our accounting for complex financial instruments. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Measures to remediate material weaknesses may be time-consuming and costly and there is no assurance that such initiatives will ultimately have the intended effects. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and adversely affect our business and operating results. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Proceeds
Securities
Disclosures
None.
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| 101 | The following materials from CompoSecure, Inc.'s Form 10-Q for the quarter ended March 31, 2022, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021, (ii) Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2022 and March 31, 2021, (iii) Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, 2022 and March 31, 2021 (iv) Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2022 and March 31, 2021, as well as the year ended December 31, 2021, (v) Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2022 and March 31, 2021, and (vi) Notes to Consolidated Financial Statements - Unaudited. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) | |||||||
| * Filed herewith | ||||||||
| ** In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. | ||||||||
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