UNITED STATES
FORM 10-Q
(Mark One)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 | ||||||||||||||||||||
FORM 10-Q | ||||||||||||||||||||
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2021
OR
For the quarterly period ended March 31, 2022 | |||||||||||||||||||||
or | |||||||||||||||||||||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||||||||||||
For the transition period from ________________to________________ | |||||||||||||||||||||
Commission File Number: | 001-39739 |
For the transition period from to
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Sunlight Financial Holdings Inc. | ||||||||||||||||||||
(Exact name of registrant as specified in its charter) | ||||||||||||||||||||
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Delaware | 85-2599566 | |||||||||||||||||||
(State or other jurisdiction of |
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(Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
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(Registrant’s telephone number, including area code) | ||||||||||||||||||||
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Securities registered pursuant to Section 12(b) of the Act:
Title of each | Trading Symbol(s): | Name of each exchange on which | ||||||||||||||||||||
| SUNL |
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Warrants, each whole warrant is exercisable for one share of Class A | SUNL.WS |
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Securities registered pursuant to Section 12(g) of the Act: None |
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☒
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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SPARTAN ACQUISITION CORP. II
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| March 31, 2021 |
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| December 31, 2020 |
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| (Unaudited) |
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| (As Restated) |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
| $ | 278,465 |
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| $ | 715,580 |
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Prepaid expenses |
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| 1,624,571 |
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| 1,884,598 |
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Total current assets |
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| 1,903,036 |
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| 2,600,178 |
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Investments held in Trust Account |
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| 345,079,316 |
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| 345,010,316 |
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Total Assets |
| $ | 346,982,352 |
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| $ | 347,610,494 |
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Liabilities and Stockholders’ Equity: |
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Current liabilities: |
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Accounts payable |
| $ | 107,238 |
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| $ | 375,291 |
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Accrued expenses |
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| 5,236,246 |
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| 588,317 |
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Accrued income taxes |
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| 1,727 |
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| — |
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Franchise tax payable |
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| 71,104 |
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| 21,788 |
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Total current liabilities |
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| 5,416,315 |
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| 985,396 |
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Derivative warrant liabilities |
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| 52,456,500 |
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| 42,283,500 |
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Deferred underwriting commissions |
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| 12,075,000 |
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| 12,075,000 |
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Total Liabilities |
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| 69,947,815 |
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| 55,343,896 |
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Commitments and Contingencies |
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Class A common stock, $0.0001 par value; 27,203,453 and 28,726,659 shares subject to possible redemption at $10.00 per share as of March 31, 2021 and December 31, 2020, respectively |
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| 272,034,530 |
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| 287,266,590 |
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Stockholders’ Equity: |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding |
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| — |
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| — |
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Class A common stock, $0.0001 par value; 250,000,000 shares authorized; 7,296,547 and 5,773,341 shares issued and outstanding (excluding 27,203,453 and 28,726,659 shares subject to possible redemption) as of March 31, 2021 and December 31, 2020, respectively |
| 729 |
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| 577 |
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Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 8,625,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020 |
| 863 |
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| 863 |
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Additional paid-in capital |
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| 38,061,790 |
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| 22,829,882 |
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Accumulated deficit |
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| (33,063,375 | ) |
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| (17,831,314 | ) |
Total stockholders’ equity |
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| 5,000,007 |
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| 5,000,008 |
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Total Liabilities and Stockholders’ Equity |
| $ | 346,982,352 |
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| $ | 347,610,494 |
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Successor | |||||||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||
(Unaudited) | |||||||||||||||||
Assets | |||||||||||||||||
Cash and cash equivalents | $ | 69,574 | $ | 91,882 | |||||||||||||
Restricted cash | 2,355 | 2,018 | |||||||||||||||
Advances (net of allowance for credit losses of $505 and $238) | 86,085 | 66,839 | |||||||||||||||
Financing receivables (net of allowance for credit losses of $73 and $148) | 4,126 | 4,313 | |||||||||||||||
Goodwill | 445,756 | 445,756 | |||||||||||||||
Intangible assets, net | 344,175 | 365,839 | |||||||||||||||
Property and equipment, net | 1,723 | 4,069 | |||||||||||||||
Other assets | 24,781 | 21,531 | |||||||||||||||
Total assets | $ | 978,575 | $ | 1,002,247 | |||||||||||||
Liabilities and Stockholders' Equity | |||||||||||||||||
Liabilities | |||||||||||||||||
Accounts payable and accrued expenses | $ | 15,506 | $ | 23,386 | |||||||||||||
Funding commitments | 16,643 | 22,749 | |||||||||||||||
Debt | 20,613 | 20,613 | |||||||||||||||
Distributions payable | 1,373 | — | |||||||||||||||
Deferred tax liabilities | 34,286 | 36,686 | |||||||||||||||
Warrants, at fair value | 23,891 | 19,007 | |||||||||||||||
Other liabilities | 8,180 | 843 | |||||||||||||||
Total liabilities | 120,492 | 123,284 | |||||||||||||||
Commitments and Contingencies (Note 10) | 0 | 0 | |||||||||||||||
Stockholders' Equity | |||||||||||||||||
Preferred stock (Successor); $0.0001 par value; 35,000,000 shares authorized; none issued and outstanding as of March 31, 2022 and December 31, 2021 | — | — | |||||||||||||||
Class A common stock (Successor); $0.0001 par value; 420,000,000 shares authorized; 86,373,596 issued; and 84,790,164 and 84,803,687 outstanding as of March 31, 2022 and December 31, 2021, respectively | 9 | 9 | |||||||||||||||
Class B common stock (Successor); $0.0001 par value; 20,000,000 shares authorized; none issued and outstanding as of March 31, 2022 and December 31, 2021 | — | — | |||||||||||||||
Class C common stock (Successor); $0.0001 par value; 65,000,000 shares authorized; 47,595,455 issued and outstanding as of March 31, 2022 and December 31, 2021 | — | — | |||||||||||||||
Additional paid-in capital | 765,755 | 764,366 | |||||||||||||||
Accumulated deficit | (199,758) | (186,022) | |||||||||||||||
Total capital | 566,006 | 578,353 | |||||||||||||||
Treasury stock, at cost; 1,583,432 and 1,569,909 Class A shares as of March 31, 2022 and December 31, 2021, respectively | (15,590) | (15,535) | |||||||||||||||
Total stockholders' equity | 550,416 | 562,818 | |||||||||||||||
Noncontrolling interests in consolidated subsidiaries | 307,667 | 316,145 | |||||||||||||||
Total equity | 858,083 | 878,963 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 978,575 | $ | 1,002,247 |
SPARTAN ACQUISITION CORP. II
FOR THE THREE MONTHS ENDED MARCH 31, 2021
General and administrative expenses |
| $ | 5,047,019 |
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General and administrative expenses - related party |
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| 30,000 |
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Franchise tax expense |
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| 49,315 |
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Loss from operations |
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| (5,126,334 | ) |
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Other (expense) income: |
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Change in fair value of derivative warrant liabilities |
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| (10,173,000 | ) |
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Interest income from investments held in Trust Account |
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| 69,000 |
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Loss before income tax |
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| (15,230,334 | ) |
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Income tax expense |
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| 1,727 |
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Net loss |
| $ | (15,232,061 | ) |
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Weighted average shares outstanding of Class A common stock |
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| 34,500,000 |
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Basic and diluted net loss per share, Class A common stock |
| $ | 0.00 |
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Weighted average shares outstanding of Class B common stock |
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| 8,625,000 |
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Basic and diluted net loss per share, Class B common stock |
| $ | (1.77 | ) |
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Successor | Predecessor | ||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Revenue | $ | 28,231 | $ | 24,787 | |||||||||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||||||
Cost of revenues (exclusive of items shown separately below) | 5,229 | 4,854 | |||||||||||||||||||||||||||||||||
Compensation and benefits | 13,125 | 8,012 | |||||||||||||||||||||||||||||||||
Selling, general, and administrative | 6,472 | 1,916 | |||||||||||||||||||||||||||||||||
Property and technology | 1,928 | 1,208 | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 22,447 | 809 | |||||||||||||||||||||||||||||||||
Provision for losses | 638 | 736 | |||||||||||||||||||||||||||||||||
Management fees to affiliate | — | 100 | |||||||||||||||||||||||||||||||||
49,839 | 17,635 | ||||||||||||||||||||||||||||||||||
Operating income (loss) | (21,608) | 7,152 | |||||||||||||||||||||||||||||||||
Other Income (Expense), Net | |||||||||||||||||||||||||||||||||||
Interest income | 84 | 141 | |||||||||||||||||||||||||||||||||
Interest expense | (260) | (255) | |||||||||||||||||||||||||||||||||
Change in fair value of warrant liabilities | (4,884) | (2,614) | |||||||||||||||||||||||||||||||||
Change in fair value of contract derivatives, net | (227) | (856) | |||||||||||||||||||||||||||||||||
Realized gains on contract derivatives, net | 1,909 | 2,267 | |||||||||||||||||||||||||||||||||
Other realized losses, net | (197) | — | |||||||||||||||||||||||||||||||||
Other income | 176 | 412 | |||||||||||||||||||||||||||||||||
Business combination expenses | — | (3,587) | |||||||||||||||||||||||||||||||||
(3,399) | (4,492) | ||||||||||||||||||||||||||||||||||
Net Income (Loss) Before Income Taxes | (25,007) | 2,660 | |||||||||||||||||||||||||||||||||
Income tax benefit (expense) | 2,401 | — | |||||||||||||||||||||||||||||||||
Net Income (Loss) | (22,606) | 2,660 | |||||||||||||||||||||||||||||||||
Noncontrolling interests in loss of consolidated subsidiaries | 8,632 | — | |||||||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Class A Shareholders | $ | (13,974) | $ | 2,660 | |||||||||||||||||||||||||||||||
Loss Per Class A Share | |||||||||||||||||||||||||||||||||||
Net loss per Class A share | |||||||||||||||||||||||||||||||||||
Basic | $ | (0.16) | |||||||||||||||||||||||||||||||||
Diluted | $ | (0.16) | |||||||||||||||||||||||||||||||||
Weighted average number of Class A shares outstanding | |||||||||||||||||||||||||||||||||||
Basic | 84,798,918 | ||||||||||||||||||||||||||||||||||
Diluted | 84,798,918 |
SPARTAN ACQUISITION CORP. II
FOR THE THREE MONTHS ENDED MARCH 31, 2021
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| Common Stock |
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| Additional |
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| Total |
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| Class A |
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| Class B |
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| Paid-In |
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| Accumulated |
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| Stockholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
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Balance - December 31, 2020 (As Restated) |
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| 5,773,341 |
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| $ | 577 |
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| 8,625,000 |
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| $ | 863 |
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| $ | 22,829,882 |
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| $ | (17,831,314 | ) |
| $ | 5,000,008 |
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Common stock subject to possible redemption |
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| 1,523,206 |
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| 152 |
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| — |
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| — |
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| 15,231,908 |
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| — |
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| 15,232,060 |
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Net loss |
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| — |
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| — |
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| — |
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| — |
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| — |
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| (15,232,061 | ) |
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| (15,232,061 | ) |
Balance - March 31, 2021 (Unaudited) |
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| 7,296,547 |
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| $ | 729 |
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| 8,625,000 |
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| $ | 863 |
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| $ | 38,061,790 |
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| $ | (33,063,375 | ) |
| $ | 5,000,007 |
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Successor | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Treasury Stock | Total Stockholders' Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | Class C | Class A | Class B | Class C | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2021 | 86,373,596 | 47,595,455 | — | $ | 9 | $ | — | $ | — | $ | 764,366 | $ | (186,022) | $ | (15,535) | $ | 562,818 | $ | 316,145 | $ | 878,963 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | — | — | 1,783 | — | — | 1,783 | 1,092 | 2,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares withheld related to net share settlement of equity awards | — | — | — | — | — | — | — | — | (55) | (55) | — | (55) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dilution | — | — | — | — | — | — | (394) | — | — | (394) | 394 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distribution | — | — | — | — | — | — | — | — | — | — | (1,373) | (1,373) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative ASC 842 adoption effect | — | — | — | — | — | — | — | 238 | — | 238 | 41 | 279 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (13,974) | — | (13,974) | (8,632) | (22,606) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2022 | 86,373,596 | 47,595,455 | — | $ | 9 | $ | — | $ | — | $ | 765,755 | $ | (199,758) | $ | (15,590) | $ | 550,416 | $ | 307,667 | $ | 858,083 |
Predecessor | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Units | Temporary Equity | Units | Members' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A-3 Units | Class A-2 Units | Class A-1 Units | Common Units | Class A-3 Units | Class A-2 Units | Class A-1 Units | Common Units | Other Ownership Interests | Other Ownership Interests | Accumulated Deficit | Total Members' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2020 | 376,395 | 225,972 | 296,302 | 78,717 | $ | 260,428 | $ | 154,286 | $ | 202,045 | $ | 47,757 | 53,105 | $ | 1,439 | $ | (623,342) | $ | (621,903) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred distributions, paid in-kind | 13,457 | 8,079 | 10,593 | — | 11,037 | 6,778 | 8,882 | — | — | — | (26,697) | (26,697) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in temporary equity redemption value | — | — | — | — | 48,307 | 35,276 | 46,374 | 12,079 | — | — | (142,036) | (142,036) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | — | — | — | — | 1,762 | 11 | — | 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | 2,660 | 2,660 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2021 | 389,852 | 234,051 | 306,895 | 78,717 | $ | 319,772 | $ | 196,340 | $ | 257,301 | $ | 59,836 | 54,867 | $ | 1,450 | $ | (789,415) | $ | (787,965) |
SPARTAN ACQUISITION CORP. II
FOR THE THREE MONTHS ENDED MARCH 31, 2021
Cash Flows From Operating Activities: |
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Net loss |
| $ | (15,232,061 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Interest income from investments held in Trust Account |
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| (69,000 | ) |
Change in fair value of warrant derivative liabilities |
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| 10,173,000 |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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| 260,027 |
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Accounts payable |
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| (268,053 | ) |
Accrued expenses |
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| 4,647,929 |
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Accrued income taxes |
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| 1,727 |
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Franchise tax payable |
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| 49,316 |
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Net cash used in operating activities |
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| (437,115 | ) |
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Net change in cash and cash equivalents |
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| (437,115 | ) |
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Cash and cash equivalents - beginning of the period |
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| 715,580 |
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Cash and cash equivalents - end of period |
| $ | 278,465 |
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Supplemental disclosure of noncash financing activities: |
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Change in fair value of Class A common stock subject to possible redemption |
| $ | (15,232,060 | ) |
Successor | Predecessor | ||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Cash Flows From Operating Activities | |||||||||||||||||||||||
Net income (loss) | $ | (22,606) | $ | 2,660 | |||||||||||||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||||||||||||||
Depreciation and amortization | 22,447 | 835 | |||||||||||||||||||||
Provision for losses | 638 | 736 | |||||||||||||||||||||
Change in fair value of warrant liabilities | 4,884 | 2,614 | |||||||||||||||||||||
Change in fair value of contract derivatives, net | 227 | 856 | |||||||||||||||||||||
Other income | (176) | (412) | |||||||||||||||||||||
Share-based payment arrangements | 3,860 | 11 | |||||||||||||||||||||
Deferred income tax benefit | (2,401) | — | |||||||||||||||||||||
Increase (decrease) in operating capital: | |||||||||||||||||||||||
Decrease (increase) in advances | (19,513) | 2,771 | |||||||||||||||||||||
Increase in due from affiliates | — | (1,839) | |||||||||||||||||||||
Decrease in other assets | 3,949 | 1,665 | |||||||||||||||||||||
Increase (decrease) in accounts payable and accrued expenses | (6,052) | 571 | |||||||||||||||||||||
Decrease in funding commitments | (6,106) | (1,916) | |||||||||||||||||||||
Increase in due to affiliates | — | 1,732 | |||||||||||||||||||||
Increase (decrease) in other liabilities | (281) | 216 | |||||||||||||||||||||
Net cash provided by (used in) operating activities | (21,130) | 10,500 | |||||||||||||||||||||
Cash Flows From Investing Activities | |||||||||||||||||||||||
Return of investments in loan pool participation and loan principal repayments | 307 | 419 | |||||||||||||||||||||
Payments to acquire loans and participations in loan pools | (448) | (842) | |||||||||||||||||||||
Payments to acquire property and equipment | (645) | (709) | |||||||||||||||||||||
Net cash used in investing activities | (786) | (1,132) | |||||||||||||||||||||
Cash Flows From Financing Activities | |||||||||||||||||||||||
Payments for share-based payment tax withholding | (55) | — | |||||||||||||||||||||
Payment of capital distributions | — | (6,757) | |||||||||||||||||||||
Net cash used in financing activities | (55) | (6,757) | |||||||||||||||||||||
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | (21,971) | 2,611 | |||||||||||||||||||||
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period | 93,900 | 52,705 | |||||||||||||||||||||
Cash, Cash Equivalents, and Restricted Cash, End of Period | $ | 71,929 | $ | 55,316 | |||||||||||||||||||
Supplemental Disclosure of Cash Flow Information | |||||||||||||||||||||||
Cash paid during the period for interest | $ | 260 | $ | 229 | |||||||||||||||||||
Noncash Investing and Financing Activities | |||||||||||||||||||||||
Distributions declared, but not paid | $ | 1,373 | $ | — | |||||||||||||||||||
Preferred dividends, paid in-kind | — | 26,697 | |||||||||||||||||||||
Change in temporary equity redemption value | — | 142,036 | |||||||||||||||||||||
Capital expenditures incurred but not yet paid | 200 | — | |||||||||||||||||||||
SPARTAN ACQUISITION CORP. II
As of March 31, 2021, the Company had not commenced any operations. was changed from “SPRQ” to “SUNL.”
Initial Public Offering
The registration statementrelevant contractor. Sunlight arranges for the Company’s Initial Public Offering was declared effective on November 24, 2020. On November 30, 2020, the Company consummated its Initial Public Offeringsale of 34,500,000 units (each, a “Unit” and collectively, the “Units”certain Indirect Channel Loans, or participations therein, to third parties (“Indirect Channel Loan Purchasers”), .
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 9,900,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of $9.9 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, $345.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and of the Private Placement Warrants in the Private Placement were placed in a trust account (the “Trust Account”) (described below).
Trust Account
The proceeds held in the Trust Account were invested only in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and that invest only in direct U.S. government treasury obligations, as determined by the Company. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay franchise and income taxes (less up to $100,000 to pay dissolution expenses), none of the funds held in the Trust Account will be released until the earliest of: (i) the completion of the Initial Business Combination; (ii) the redemption of any shares of Class A common stock included in the Units (the “Public Shares”) sold in the Initial Public Offering that have been properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to affect the substance or timing of its obligation to redeem 100% of such Public Shares if it has not consummated an Initial Business Combination within 24 months from the closing of the Initial Public Offering, or November 30, 2022 (or 27 months from the closing of the Initial Public Offering, or February 28, 2023, if the Company has executed a letter of intent, agreement in principle or definitive agreement for an Initial Business Combination within 24 months from the closing of the Initial Public Offering) (the “Combination Period”); or (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an Initial Business
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SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Combination within the Combination Period. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting discounts and commissions and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter into the Initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an Initial Business Combination.
The Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their Public Shares, regardless of whether they vote for or against the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest not previously released to the Company to pay its franchise and income taxes, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest not previously released to the Company to pay its franchise and income taxes. The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under the New York Stock Exchange (“NYSE”) rules. If the Company seeks stockholder approval, it will complete its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination, a public stockholder will have the right to redeem his, her or its Public Shares for an amount in cash equal to his, her or its pro rata share of the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest not previously released to the Company to pay its franchise and income taxes. As a result, such Public Shares are recorded at redemption amount and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, 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 the Company to pay the Company’s franchise and income taxes (less up to $100,000 of such net interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which they agreed to waive their
7
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company fails to complete the Initial Business Combination within the Combination Period. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
In the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, upon the completion of the Initial Business Combination, subject to the limitations described herein.
Proposed Business Combination
On January 23, 2021, we entered into a business combination agreement (the “Business Combination Agreement”) with SL Invest I Inc., a Delaware corporation and wholly owned subsidiary of the Company (“MergerCo1”), SL Invest II LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“MergerCo2”), SL Financial Investor I LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Holdings I”), SL Financial Investor II LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Holdings II”), SLaccounting purposes, Sunlight Financial Holdings Inc., a Delaware corporation is the acquirer and wholly owned subsidiary of the Company (“Spartan Sub”), SL Financial LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“OpCo Merger Sub” and collectively with MergerCo1, MergerCo2, Holdings I, Holdings II and Spartan Sub, the “Spartan Subsidiaries”), Sunlight Financial LLC a Delaware limited liability company (“Sunlight”), FTV-Sunlight, Inc., a Delaware corporation (“FTV Blocker”)is the acquiree and Tiger Co-Invest B Sunlight Blocker, LLC, a Delaware limited liability company (“Tiger Blocker,” and collectively with FTV Blocker,accounting predecessor. The financial statement presentation includes the “Blockers”). Subject to the satisfaction or waiver of the conditions to closing of the transactions contemplated by the Business Combination Agreement (the “Transactions”), the Transactions will effect a business combination between us and Sunlight. Following the closing of the Transactions (the “Closing”), the combined company will be organized in an “Up-C” structure, meaning that all of the material assets of the combined company will be held by Sunlight, and Spartan’s only material assets will be its equity interests in Sunlight.
The boards of directors of each of the Company (acting following consultation with a duly formed Transaction committee) and Sunlight have unanimously approved the Transaction. The Transaction will require the approval of the stockholders of the Company and equity holdersfinancial statements of Sunlight the effectiveness of a registration statement to be filed with the U.S. Securities and Exchange Commission (the “SEC”) in connection with the Transaction (the “Business Combination Registration Statement”), satisfaction of the conditions stated in the definitive agreement and other customary closing conditions. The Transaction is expected to close in the second quarter of 2021.
Sunlight Support Agreement
In connection with the entry into the Business Combination Agreement, on January 23, 2021, certain members of Sunlight whose approval is sufficient to approve and adopt the Business Combination Agreement and the Transactions on behalf of Sunlight’s members (the “Requisite Sunlight Members”), entered into a support agreement, pursuant to which, among other things, the Requisite Sunlight Members agreed to execute and deliver a written consent approving the Business Combination Agreement and the Transactions within two business days after the effectiveness of the Business Combination Registration Statement and to vote in favor of the approval and adoption of the Business Combination Agreement and the Transactions.
Founders Stock Agreement
In connection with the entry into the Business Combination Agreement, but effectiveFinancial LLC as of the Closing of the Transactions, we and our initial stockholders entered into a Founders Stock Agreement (the “Founders Stock Agreement”), pursuant to which, among other things, subject to and effective immediately“Predecessor” for periods prior to the Closing of the Transactions, the Sponsor agreed to surrender up to 25% of the Class B common stock held by the Sponsor (at a 1:4
8
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ratio to the percentage, if any, of redemptions by holders of Class A common stock); provided that no such surrender shall occur unless more than 5% of the outstanding shares of Class A common stock are actually redeemed by us.
Amendment to Letter Agreement
In connection with the execution of the Business Combination Agreement, on January 23, 2021, the Company, the SponsorDate and certain other members of our board of directors and/or management team (the “Insiders”) entered into an amendment (the “Letter Agreement Amendment”) to that certain Letter Agreement (the “Existing Letter Agreement”) dated as of November 24, 2020, by and among the Company, our Sponsor and the Insiders, pursuant to which the Sponsor and each Insider will agree, effective as of the Closing and subject to certain exceptions, to modify the lock-up restrictions set forth in the Existing Letter Agreement as follows:
(i) 80% of the Class B common stock (including any shares of Class A common stock issued in respect of the conversion of such Class B common stock upon the consummation of a Business Combination (as defined in the Existing Letter Agreement)) held by it, him or her will be restricted from Transfer (as defined in the Letter Agreement Amendment) until the one-year anniversary of the date of the consummation of a Business Combination, or earlier if, subsequent to the consummation of a Business Combination, (a) the last sale price of the Class A common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-day trading period commencing at least 150 days after the consummation of a Business Combination or (b) the Company consummates a transaction which results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock and Class B common stock for cash, securities or other property; and
(ii) 20% of the Class B common stock (including any shares of Class A common stock issued in respect of the conversion of such Class B common stock upon the consummation of a Business Combination) held by it, him or her will be restricted from Transfer until the six-month anniversary of the date of the consummation of a Business Combination, or earlier if, subsequent to the consummation of a Business Combination, (a) the last sale price of the Class A common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-day trading period ending at least 90 days after the consummation of a Business Combination or (b) the Company consummates a transaction which results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock and Class B common stock for cash, securities or other property.
Subscription Agreements
In connection with the execution of the Business Combination Agreement, on January 23, 2021, we entered into separate subscription agreements (collectively, the “Subscription Agreements”) with a number of investors (collectively, the “Subscribers”), pursuant to which the Subscribers agreed to purchase, and we agreed to sell to the Subscribers, an aggregate of 25,000,000 shares of Class A common stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $250,000,000, in a private placement (the “PIPE”).
The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the concurrent consummation of the Transactions. The purpose of the PIPE is to raise additional capital for use by the combined company following the Closing.
Pursuant to the Subscription Agreements, we agreed that, within 30 calendar days after the consummation of the Transactions, we will file with the SEC (at our sole cost and expense) a registration statement registering the resale of the PIPE Shares (the “PIPE Resale Registration Statement”), and we will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Refer to the Company’s Current Report on Form 8-K, filed with the SEC on January 25, 2021, for more information.
Liquidity and Going Concern
The Company does not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these unaudited condensed consolidated financial statements. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined
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SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
that the Company has access to funds from the Sponsor that are sufficient to fund the working capital needs of the Company untilas “Successor” for the earlierperiods after the Closing Date, including the consolidation of the consummation of a business combination or one year from the date of issuance of these unaudited condensed consolidated financial statements.Sunlight Financial LLC.
Through March 31, 2021, the Company’s liquidity needs have been satisfied through a payment of $25,000 from the Sponsor to pay for certain offering costs in exchange for issuance of the Founder Shares (as defined in Note 4), the loan under the Note (see Note 4) of approximately $235,000 (see Note 4), and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on December 3, 2020. In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Company’s officers, directors and initial stockholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 4). As of March 31, 2021, there were 0 amounts outstanding under any Working Capital Loans.
Note 2 — Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company have beenrelated notes, prepared in accordance with United StatesU.S. generally accepted accounting principles (“GAAP”) for interim financial information, include the accounts of Sunlight and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP.its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal accruals) considered necessary for a fair presentation of Sunlight’s financial position, results of operations, and cash flows have been included. Operatingincluded and are of a normal and recurring nature. All intercompany balances and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidatedentire year.
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SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity
Investments Held in the Trust Account
The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed consolidated balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gainfinancial instruments into three broad levels that form a hierarchy based on investment (net), dividends and interest held in Trust Account in the accompanying unaudited condensed consolidated statementtransparency of operations. The estimated fair values of investments held ininputs to the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000, and investments held in Trust Account. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
|
11
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Level |
| Measurement | |||||||
1 |
| Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | |||||||
2 | Inputs are other than quoted prices that are observable for the asset or liability, either directly or | ||||||||
3 |
|
|
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in
The following summarizes Sunlight’s financial instruments hierarchy at March 31, 2022:
Level | Financial Instrument | Measurement | ||||||||||||
1 | Cash and cash equivalents and restricted cash | Estimates of fair value are measured using observable, quoted market prices, or Level 1 inputs | ||||||||||||
Public Warrants | Estimates of fair value are measured using observable, quoted market prices of Sunlight’s warrants. | |||||||||||||
3 | Loans and loan participations, held-for-investment | Estimated fair value is generally determined by discounting the expected future cash flows using inputs such as discount rates. | ||||||||||||
Contract derivative | Estimated fair value based upon discounted expected future cash flows arising from the contract. | |||||||||||||
Private Placement Warrants | Estimated fair value based upon quarterly valuation estimates of warrant instruments, based upon quoted prices of Sunlight’s Class A shares and warrants thereon as well as fair value inputs provided by an independent valuation firm. |
Successor | |||||||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||
Cash and cash equivalents | $ | 69,574 | $ | 91,882 | |||||||||||||
Restricted cash and cash equivalents | 2,355 | 2,018 | |||||||||||||||
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statement of Cash Flows | $ | 71,929 | $ | 93,900 |
1 | Low Risk | The counterparty has demonstrated low risk characteristics. The counterparty is a well-established company within the applicable industry, with low commercial credit risk, excellent reputational risk (e.g. online ratings, low complaint levels), and an excellent financial risk assessment. | ||||||||||||
2 | Low-to-Medium Risk | The counterparty has demonstrated low to medium risk characteristics. The counterparty is a well-established company within the applicable industry, with low to medium commercial credit risk, excellent to above average reputational risk (e.g. online ratings, lower complaint levels), and/or an excellent to above average financial risk assessment. | ||||||||||||
3 | Medium Risk | The counterparty has demonstrated medium risk characteristics. The counterparty may be a less established company within the applicable industry than risk tier "1" or "2", with medium commercial credit risk, excellent to average reputational risk (e.g., online ratings, average complaint levels), and/or an excellent to average financial risk assessment. | ||||||||||||
4 | Medium-to-High Risk | The counterparty has demonstrated medium to high risk characteristics. The counterparty is likely to be a less established company within the applicable industry than risk tiers "1" through "3," with medium to high commercial credit risk, excellent to below average reputational risk (e.g. online ratings, higher complaint levels), and/or an excellent to below average financial risk assessment. | ||||||||||||
5 | Higher Risk | The counterparty has demonstrated higher risk characteristics. The counterparty is a less established company within the applicable industry, with higher commercial credit risk, and/or below average reputational risk (e.g. online ratings, higher complaint levels), and/or below average financial risk assessment. Tier "5" advance approvals will be approved on an exception basis. |
December 31, 2021 (Successor) | ||||||||
Goodwill | $ | 670,457 | ||||||
Accumulated impairment losses | (224,701) | |||||||
445,756 | ||||||||
March 31, 2022 (Successor) | ||||||||
Goodwill | 670,457 | |||||||
Accumulated impairment losses | (224,701) | |||||||
$ | 445,756 |
Estimated Useful Life (in Years) | Carrying Value | |||||||||||||||||||||||||||||||||||||
Successor | ||||||||||||||||||||||||||||||||||||||
Asset | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||
Contractor relationships(a) | 11.5 | $ | 350,000 | $ | 350,000 | |||||||||||||||||||||||||||||||||
Capital provider relationships(b) | 0.8 | 43,000 | 43,000 | |||||||||||||||||||||||||||||||||||
Trademarks/ trade names(c) | 10.0 | 7,900 | 7,900 | |||||||||||||||||||||||||||||||||||
Developed technology(d) | 3.0 | — | 5.0 | 8,867 | 8,193 | |||||||||||||||||||||||||||||||||
409,767 | 409,093 | |||||||||||||||||||||||||||||||||||||
Accumulated amortization(e)(f)(g) | (65,592) | (43,254) | ||||||||||||||||||||||||||||||||||||
$ | 344,175 | $ | 365,839 |
Developed Technology | Other Identified Intangible Assets | Total | ||||||||||||||||||
April 1, through December 31, 2022 | $ | 1,556 | $ | 24,780 | $ | 26,336 | ||||||||||||||
2023 | 2,062 | 31,199 | 33,261 | |||||||||||||||||
2024 | 1,964 | 31,285 | 33,249 | |||||||||||||||||
2025 | 1,377 | 31,199 | 32,576 | |||||||||||||||||
2026 | 694 | 31,199 | 31,893 | |||||||||||||||||
Thereafter | — | 186,860 | 186,860 | |||||||||||||||||
$ | 7,653 | $ | 336,522 | $ | 344,175 |
Estimated Useful Life (in Years) | Carrying Value | |||||||||||||||||||||||||||||||||||||
Successor | ||||||||||||||||||||||||||||||||||||||
Asset Category | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||
Furniture, fixtures, and equipment | 5 | $ | 1,512 | $ | 1,020 | |||||||||||||||||||||||||||||||||
Computer hardware | 5 | 1,134 | 1,108 | |||||||||||||||||||||||||||||||||||
Computer software | 1 | — | 3 | 324 | 250 | |||||||||||||||||||||||||||||||||
Leasehold improvements | Shorter of life of improvement or lease term | — | 2,829 | |||||||||||||||||||||||||||||||||||
2,970 | 5,207 | |||||||||||||||||||||||||||||||||||||
Accumulated amortization and depreciation(a) | (1,247) | (1,138) | ||||||||||||||||||||||||||||||||||||
$ | 1,723 | $ | 4,069 |
Offering Costs Associatednoncontrolling interests carrying amount as additional paid-in-capital.
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering basedCompany’s Class C shares on a relative fair valueone-for-one basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses ininto the statement of operations. Offering costs associated with the shares ofCompany’s Class A common stock. Class A common stock were chargedissued upon exchange of a holder’s noncontrolling interest is accounted for at the carrying value of the surrendered limited partnership interest and the difference between the carrying value and the fair value of the Class A common stock issued is recorded to stockholders’ equityadditional paid-in-capital.
Successor | Predecessor | ||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Platform fees, net(a) | $ | 26,154 | $ | 23,662 | |||||||||||||||||||||||||||||||
Other revenues(b) | 2,077 | 1,125 | |||||||||||||||||||||||||||||||||
$ | 28,231 | $ | 24,787 |
loan. Interest income also includes discounts associated with the loans purchased as a yield adjustment using the effective interest method over the loan term. Sunlight expenses direct loan acquisition costs for loans acquired by Sunlight as incurred. Sunlight does not accrue interest on loans placed on non-accrual status or on loans where the collectability of the principal or interest of the loan are deemed uncertain.
receive Class A shares on various future dates if the applicable service conditions, if any, are met. Sunlight expenses the grant-date fair value of awards on a straight-line basis over the requisite service period. Sunlight does not estimate forfeitures, and records actual forfeitures as they occur.
Income Taxes
The Company complies with the accounting and reporting requirements of FASB ASC, 740, “Income Taxes,” (“FASB ASC 740”) which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred incomemethod. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable todetermined based on differences between the consolidated financial statement carrying amounts and tax bases of existing assets and liabilities and their respectiveoperating loss and tax bases. Deferred tax assetscredit carryforwards and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differencesthat are expected to be recovered or settled.in effect when the differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in incomethe Consolidated Statements of Operations in the period that includedincludes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to an amount that, in the amount expectedopinion of management, is more likely than not to be realized.
FASB ASC 740 prescribespositions by reporting a recognition threshold and a measurement attributeliability for the financial statement recognition and measurement ofunrecognizable tax benefits resulting from uncertain 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, if any, related to unrecognized tax benefits asin income tax expense.
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SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Net Income (Loss) Per Share
NetSunlight Financial LLC, to the extent possible without impairing its ability to continue to conduct its business and activities, and in order to permit its member to pay taxes on the taxable income (loss) per shareallocated to those members, Sunlight Financial LLC is computed by dividing net income (loss) byrequired to make distributions to the weighted-average number of common stock outstanding duringmember in the periods. The Company has not consideredamount equal to the effectestimated tax liability of the warrants soldmember computed as if the member paid income tax at the highest marginal federal and state rate applicable to a corporate entity or individual resident in the Initial Public Offering and the Private Placement to purchase up to an aggregate of 27,150,000 shares of the Company’s Class A common stock in the calculation of the diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method.
The Company’s unaudited condensed consolidated statement of operations includes a presentation of income (loss) per share for common stock subject to redemption in a manner similarNew York, New York to the two-class methodextent Sunlight’s operations generate taxable income allocable to the applicable member. Sunlight declared $1.4 million of income (loss) per share. Net income per share, basic and diluted for Class A common stock is calculated by dividing the gain on investment (net), dividends and interest held in Trust Account of approximately $69,000, net of applicable taxes available to be withdrawn from the Trust Account of approximately $51,000, by the weighted average number of Class A common stock outstandingdistributions for the three months ended March 31, 2022 and none for the three months ended March 31, 2021.
Derivative warrant liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Company accounts for its 27,150,000 warrants, which includes 17,250,000 Public Warrants (as defined below) issued in connection with its Initial Public Offeringand 9,900,000 Private Placement Warrantsissued in connection with the Private Placement,Business Combination ("PIPE Investment"). The Company received $55.1 million, which includes $5.6 million used to pay tax withholding related to cash compensation paid to the Company's employees at the closing of the Business Combination.
Amount | ||||||||
Purchase Consideration | ||||||||
Equity consideration paid to existing Sunlight Financial LLC ownership in Class A Common Stock, net(a) | $ | 357,800 | ||||||
Rollover of Sunlight Financial LLC historical warrants | 2,499 | |||||||
Cash consideration to existing Sunlight Financial LLC interests, net(b) | 296,281 | |||||||
Cash paid for seller transaction costs | 8,289 | |||||||
$ | 664,869 | |||||||
Fair Value of Net Assets Acquired | ||||||||
Cash and cash equivalents | $ | 59,786 | ||||||
Restricted cash | 3,844 | |||||||
Advances | 42,622 | |||||||
Financing receivables | 5,117 | |||||||
Goodwill(c) | 670,457 | |||||||
Intangible assets(d) | 407,600 | |||||||
Property and equipment | 1,047 | |||||||
Due from affiliates | 1,839 | |||||||
Other assets | 4,561 | |||||||
Accounts payable and accrued expenses | (19,210) | |||||||
Funding commitments | (21,485) | |||||||
Debt | (20,613) | |||||||
Due to affiliates | (761) | |||||||
Warrants, at fair value | — | |||||||
Deferred tax liability | (42,212) | |||||||
Other liabilities | (512) | |||||||
Fair value of noncontrolling interests(e) | (427,211) | |||||||
$ | 664,869 |
Common Class A shares | 38,151,192 | |||||||
Fair value per share | $ | 9.46 | ||||||
Equity consideration paid to existing Blocker Holders | $ | 360,910 | ||||||
Acceleration of post business combination expense | (3,110) | |||||||
Equity consideration paid to existing Sunlight Financial LLC members, net | $ | 357,800 |
Weighted Average Useful Lives (in Years) | Fair Value | |||||||||||||
Contractor relationships | 11.5 | $ | 350,000 | |||||||||||
Capital provider relationships | 0.8 | 43,000 | ||||||||||||
Trademarks/ trade names | 10.0 | 7,900 | ||||||||||||
Developed technology | 5.0 | 6,700 | ||||||||||||
$ | 407,600 |
Common Class EX units | 46,216,054 | |||||||
Fair value per unit | $ | 9.46 | ||||||
Fair value of Class EX units | $ | 437,204 | ||||||
Less: Postcombination compensation expenses | (9,993) | |||||||
Noncontrolling interests | $ | 427,211 |
For the Three Months Ended March 31, | ||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||
Total revenues | $ | 28,231 | $ | 24,787 | ||||||||||||||||||||||
Net income (loss) before income taxes | (1,808) | (43,744) | ||||||||||||||||||||||||
Income tax benefit | 25 | 2,163 | ||||||||||||||||||||||||
Noncontrolling interests | 630 | 15,248 | ||||||||||||||||||||||||
Net income (loss) attributable to Common Class A shareholders | (1,152) | (26,333) |
Recent Adopted Accounting Standards
In August 2020, the FASB issued extended transition period applicable to private companies.
Recent Issued Accounting Standards
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.statements of operations or statements of cash flows. Sunlight applied available practical expedient options, elected as a package whereby, among other things, Sunlight did not reassess historical conclusions related to contracts that contain leases, lease classification, and initial direct costs for leases that commenced prior to the adoption date. See Note 10 for additional information regarding Sunlight's leases.
Advances(a) | Loans and Loan Participations(b) | Total | ||||||||||||||||||||||||
March 31, 2022 (Successor) | ||||||||||||||||||||||||||
Amounts outstanding | $ | 86,590 | $ | 4,568 | $ | 91,158 | ||||||||||||||||||||
Unamortized discount | — | (369) | (369) | |||||||||||||||||||||||
Allowance for credit losses | (505) | (73) | (578) | |||||||||||||||||||||||
Carrying value | $ | 86,085 | $ | 4,126 | $ | 90,211 | ||||||||||||||||||||
December 31, 2021 (Successor) | ||||||||||||||||||||||||||
Amounts outstanding | $ | 67,077 | $ | 4,875 | $ | 71,952 | ||||||||||||||||||||
Unamortized discount | — | (414) | (414) | |||||||||||||||||||||||
Allowance for credit losses | (238) | (148) | (386) | |||||||||||||||||||||||
Carrying value | $ | 66,839 | $ | 4,313 | $ | 71,152 |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Allowance for Credit Losses — Advances | |||||||||||||||||||||||||||||||||||
Beginning Balance | $ | 238 | $ | 121 | |||||||||||||||||||||||||||||||
Provision for credit losses | 267 | (20) | |||||||||||||||||||||||||||||||||
Realized losses | — | — | |||||||||||||||||||||||||||||||||
Ending Balance | $ | 505 | $ | 101 | |||||||||||||||||||||||||||||||
Allowance for Credit Losses — Loans and Loan Participations | |||||||||||||||||||||||||||||||||||
Beginning Balance | $ | 148 | $ | 125 | |||||||||||||||||||||||||||||||
Provision for credit losses | 371 | 756 | |||||||||||||||||||||||||||||||||
Realized losses | (446) | (767) | |||||||||||||||||||||||||||||||||
Ending Balance | $ | 73 | $ | 114 | |||||||||||||||||||||||||||||||
Changes in Carrying Value — Loans and Loan Participations | |||||||||||||||||||||||||||||||||||
Beginning Balance | $ | 4,313 | $ | 5,333 | |||||||||||||||||||||||||||||||
Purchases, net(a) | 448 | 842 | |||||||||||||||||||||||||||||||||
Proceeds from principal repayments, net | (307) | (419) | |||||||||||||||||||||||||||||||||
Accretion of loan discount | 43 | 65 | |||||||||||||||||||||||||||||||||
Provision for credit losses | (371) | (756) | |||||||||||||||||||||||||||||||||
Ending Balance | $ | 4,126 | $ | 5,065 |
13
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Total | |||||||||||||||||||||||
Risk Tier(a) | Contractors | Amount Outstanding | % of Amount Outstanding | ||||||||||||||||||||
March 31, 2022 (Successor) | |||||||||||||||||||||||
1 | Low risk | 88 | $ | 12,363 | 14.3 | % | |||||||||||||||||
2 | Low-to-medium risk | 97 | 50,358 | 58.2 | |||||||||||||||||||
3 | Medium risk | 52 | 23,837 | 27.5 | |||||||||||||||||||
4 | Medium-to-high risk | 1 | 32 | — | |||||||||||||||||||
5 | Higher risk | — | — | — | |||||||||||||||||||
238 | $ | 86,590 | 100.0 | % | |||||||||||||||||||
December 31, 2021 (Successor) | |||||||||||||||||||||||
1 | Low risk | 76 | $ | 14,575 | 21.7 | % | |||||||||||||||||
2 | Low-to-medium risk | 77 | 38,955 | 58.1 | |||||||||||||||||||
3 | Medium risk | 17 | 13,547 | 20.2 | |||||||||||||||||||
4 | Medium-to-high risk | — | — | — | |||||||||||||||||||
5 | Higher risk | — | — | — | |||||||||||||||||||
170 | $ | 67,077 | 100.0 | % |
The following table presents the payment status of advances held by Sunlight:
Payment Delinquency | Amount Outstanding(a) | % of Amount Outstanding | ||||||||||||
March 31, 2022 (Successor) | ||||||||||||||
Current | $ | 67,061 | 88.1 | % | ||||||||||
Less than 30 days | 4,459 | 5.9 | ||||||||||||
30 days | 2,343 | 3.1 | ||||||||||||
60 days | 1,086 | 1.4 | ||||||||||||
90+ days(b) | 1,151 | 1.5 | ||||||||||||
$ | 76,100 | 100.0 | % | |||||||||||
December 31, 2021 (Successor) | ||||||||||||||
Current | $ | 54,586 | 94.0 | % | ||||||||||
Less than 30 days | 1,956 | 3.4 | ||||||||||||
30 days | 534 | 0.9 | ||||||||||||
60 days | 361 | 0.6 | ||||||||||||
90+ days(b) | 640 | 1.1 | ||||||||||||
$ | 58,077 | 100.0 | % |
Successor | ||||||||||||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
Contractor | Amount Outstanding | % of Total | Amount Outstanding | % of Total | ||||||||||||||||||||||||||||
1 | $ | 23,011 | 26.6 | % | $ | 12,470 | 18.6 | % | ||||||||||||||||||||||||
2 | 20,549 | 23.7 | 20,894 | 31.1 | ||||||||||||||||||||||||||||
3 | 10,227 | 11.8 | 9,496 | 14.2 | ||||||||||||||||||||||||||||
4 | 6,035 | 7.0 | 1,745 | 2.6 | ||||||||||||||||||||||||||||
5 | 3,341 | 3.9 | 2,093 | 3.1 | ||||||||||||||||||||||||||||
6 | 3,059 | 3.5 | 2,610 | 3.9 | ||||||||||||||||||||||||||||
7 | 2,705 | 3.1 | 2,571 | 3.8 | ||||||||||||||||||||||||||||
8 | 1,528 | 1.8 | — | — | ||||||||||||||||||||||||||||
9 | 745 | 0.9 | 278 | 0.4 | ||||||||||||||||||||||||||||
10 | 600 | 0.7 | 855 | 1.3 | ||||||||||||||||||||||||||||
Other(a) | 14,790 | 17.0 | 14,065 | 21.0 | ||||||||||||||||||||||||||||
$ | 86,590 | 100.0 | % | $ | 67,077 | 100.0 | % |
Payment Delinquency(a) | Loan Participations | Bank Partner Loans | Total | |||||||||||||||||||||||||||||||||||||||||
Loans | UPB | Loans | UPB | Loans | UPB | % of UPB | ||||||||||||||||||||||||||||||||||||||
March 31, 2022 (Successor) | ||||||||||||||||||||||||||||||||||||||||||||
Current | 3,622 | $ | 4,137 | 16 | $ | 288 | 3,638 | $ | 4,425 | 96.9 | % | |||||||||||||||||||||||||||||||||
Less than 30 days | 82 | 109 | — | — | 82 | 109 | 2.4 | |||||||||||||||||||||||||||||||||||||
30 days | 14 | 16 | — | — | 14 | 16 | 0.4 | |||||||||||||||||||||||||||||||||||||
60 days | 4 | 4 | — | — | 4 | 4 | 0.1 | |||||||||||||||||||||||||||||||||||||
90+ days | 7 | 14 | — | — | 7 | 14 | 0.2 | |||||||||||||||||||||||||||||||||||||
3,729 | $ | 4,280 | 16 | $ | 288 | 3,745 | $ | 4,568 | 100.0 | % | ||||||||||||||||||||||||||||||||||
December 31, 2021 (Successor) | ||||||||||||||||||||||||||||||||||||||||||||
Current | 3,780 | $ | 4,442 | 14 | $ | 268 | 3,794 | $ | 4,710 | 96.6 | % | |||||||||||||||||||||||||||||||||
Less than 30 days | 73 | 96 | 1 | 11 | 74 | 107 | 2.2 | |||||||||||||||||||||||||||||||||||||
30 days | 15 | 23 | — | — | 15 | 23 | 0.5 | |||||||||||||||||||||||||||||||||||||
60 days | 10 | 14 | — | — | 10 | 14 | 0.3 | |||||||||||||||||||||||||||||||||||||
90+ days | 7 | 9 | 1 | 12 | 8 | 21 | 0.4 | |||||||||||||||||||||||||||||||||||||
3,885 | $ | 4,584 | 16 | $ | 291 | 3,901 | $ | 4,875 | 100.0 | % |
Successor | |||||||||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||
State | UPB | % of Total | UPB | % of Total | |||||||||||||||||||||||||
Texas | $ | 870 | 19.0 | % | $ | 930 | 19.1 | % | |||||||||||||||||||||
California | 819 | 17.9 | 867 | 17.8 | |||||||||||||||||||||||||
Florida | 391 | 8.6 | 423 | 8.7 | |||||||||||||||||||||||||
New York | 305 | 6.7 | 325 | 6.7 | |||||||||||||||||||||||||
New Jersey | 284 | 6.2 | 302 | 6.2 | |||||||||||||||||||||||||
Arizona | 205 | 4.5 | 220 | 4.5 | |||||||||||||||||||||||||
Massachusetts | 194 | 4.2 | 201 | 4.1 | |||||||||||||||||||||||||
Pennsylvania | 186 | 4.1 | 202 | 4.1 | |||||||||||||||||||||||||
South Carolina | 166 | 3.6 | 178 | 3.7 | |||||||||||||||||||||||||
Missouri | 129 | 2.8 | 135 | 2.8 | |||||||||||||||||||||||||
Other(a) | 1,019 | 22.4 | 1,092 | 22.3 | |||||||||||||||||||||||||
$ | 4,568 | 100.0 | % | $ | 4,875 | 100.0 | % |
Successor | |||||||||||||||||||||||
Balance Sheet Location | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||
Contract derivative 1 | Other assets | $ | 655 | $ | 1,076 | ||||||||||||||||||
Contract derivative 2 | Other assets | 529 | 335 | ||||||||||||||||||||
$ | 1,184 | $ | 1,411 |
Successor | |||||||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||
Contract derivative 1(a) | $ | 24,376 | $ | 38,879 | |||||||||||||
Contract derivative 2(b) | 46,980 | 37,891 |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Change in fair value of contract derivatives, net | |||||||||||||||||||||||||||||||||||
Contract derivative 1 | $ | (421) | $ | (1,048) | |||||||||||||||||||||||||||||||
Contract derivative 2 | 194 | 192 | |||||||||||||||||||||||||||||||||
$ | (227) | $ | (856) | ||||||||||||||||||||||||||||||||
Realized gains on contract derivatives, net | |||||||||||||||||||||||||||||||||||
Contract derivative 1 | $ | 1,831 | $ | 2,267 | |||||||||||||||||||||||||||||||
Contract derivative 2 | 78 | — | |||||||||||||||||||||||||||||||||
$ | 1,909 | $ | 2,267 |
Successor | |||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Month Issued | Outstanding Face Amount | Carrying Value | Maximum Facility Size | Final Stated Maturity | Weighted Average | Carrying Value(a) | |||||||||||||||||||||||||||||||||||||||||||||||
Funding Cost | Life (Years) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving credit facility(a) | Apr 2021 | $ | 20,613 | $ | 20,613 | $ | 30,000 | Apr 2023 | 5.3 | % | 1.1 | $ | 20,613 |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Beginning Balance | $ | 20,613 | $ | 14,625 | |||||||||||||||||||||||||||||||
Borrowings | — | — | |||||||||||||||||||||||||||||||||
Repayments | — | — | |||||||||||||||||||||||||||||||||
Amortization of deferred financing costs(a) | — | — | |||||||||||||||||||||||||||||||||
Ending Balance | $ | 20,613 | $ | 14,625 |
Each IPO Unit consistsconsisted of 1 share of the Company’s Class A common stock $0.0001 par value per share, and one-half of one warrant (each, a “Public(“Public Warrant” and, together). Simultaneously with the closing of the IPO, the Company consummated the private placement (the “Private Placement”) of 9,900,000 warrants (“Private Placement Warrants,Warrant”), at a price of $1.00 per Private Placement Warrant to Sponsor, generating proceeds of $9.9 million.
Note 4 — Related Party Transactions
Founder Shares
In August 2020, 11,500,000 purchased an aggregate of 25,000,000 shares of the Company’s Class BA common stock, par value $0.0001 per share (“Class A common stock” and such shares purchased by the Subscribers, the “PIPE Shares”), at a purchase price of $10.00 per share for an aggregate purchase price of $250.0 million in a private placement, pursuant to separate subscription agreements, dated as of January 23, 2021 (collectively, the “Subscription Agreements”). Pursuant to the Subscription Agreements, Sunlight gave certain registration rights to the Subscribers with respect to the PIPE Shares.
Private Placement Warrants
Simultaneously
Each whole Private Placement Warrant is exercisable for 1 whole share of the Company’s Class A common stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Initial Business Combination is not completed within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial Business Combination.
14
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Related Party Loans
On August 17, 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 an unsecured promissory note (the “Note”). This Note was non-interest bearing and payable upon the closing date of the Initial Public Offering. As of November 30, 2020Shares.
In addition, in orderis authorized to finance transaction costs in connectionissue 35,000,000 shares of preferred stock, par value $0.0001 per share, with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officerssuch designations, voting and directors may, but are not obligated to, loan the Company fundsother rights and preferences as may be required (“Working Capital Loans”). Ifdetermined from time to time by the Company completes an Initial Business Combination,Sunlight’s board of directors. Sunlight’s board of directors is able, without stockholder approval, to issue Preferred Stock with voting and other rights that could adversely affect the Company will repay the Working Capital Loans outvoting power and other rights of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that an Initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of an Initial Business Combination or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Initial Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company had 0 borrowings under the Working Capital Loans.
Administrative Support Agreement
Commencing on the date the Units were first listed on the NYSE, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. The Company paid the Sponsor $30,000 for such services for the period ended March 31, 2021.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Warrantscommon stock and Warrants that may becould have anti-takeover effects. The Company has not issued upon conversionany shares of Working Capital Loans, if any, (and anypreferred stock.
Type | Date of Issuance | Exercise Price per Share | Shares | |||||||||||||||||||||||||||||||||||||||||||||||
Public Warrants | Nov-20 | $ | 11.50 | 17,250,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Private Placement Warrants | Nov-20 | 11.50 | 9,900,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Other | Feb-21 | 7.72 | 627,780 |
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the final prospectus to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters fully exercised the over-allotment option on November 30, 2020.
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $6.9 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Unit, or approximately $12.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. 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 an Initial Business Combination, subject to the terms of the underwriting agreement for the Initial Public Offering.
15
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry 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 unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 6 — Derivative Warrant Liabilities
Warrants
Redemption The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
|
|
•in whole and not in part; |
|
•at a price of $0.01 per warrant; |
|
•upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period, to each warrant holder; and |
|
16
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
and when the warrants become redeemable by the Company, it may exercise its redemption right even if the it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
|
|
•in whole and not in part; |
|
•at a price of $0.10 per warrant, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined in part by the redemption date and the “fair market value” of the Class A common stock except as otherwise described below; |
|
•upon a minimum of 30 days’ prior written notice to each warrant holder; and |
|
Month of Issuance | Class A-3 Units | Class A-2 Units | Class A-1 Units | |||||||||||||||||
Units at December 31, 2020 (Predecessor) | 376,395 | 225,972 | 296,302 | |||||||||||||||||
March 2021 | 13,457 | 8,079 | 10,593 | |||||||||||||||||
Units at March 31, 2021 (Predecessor) | 389,852 | 234,051 | 306,895 | |||||||||||||||||
NaN fractionala long-term incentive plan. In December 2017, Sunlight Financial LLC, at the direction of its board of directors, amended and restated its long-term incentive plan to provide clarity around certain items and to allow for the issuance of various classes of LTIP Units. All LTIP units issued between February 2018 and the Closing Date of the Business Combination were economically equivalent to corresponding classes of Class C units. At the Closing of the Business Combination, holders of vested LTIP Units received cash and Class A Shares. Holders of unvested LTIP Units received awards of Class A Shares and cash subject to time vesting.
Successor | ||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Sunlight Financial LLC net income (loss) before income taxes | $ | (24,617) | ||||||||||||||||||||||||||||||
Sunlight Financial LLC as a percent of total(a) | 35.1 | % | ||||||||||||||||||||||||||||||
Sunlight Financial LLC net income (loss) attributable to the Class EX unitholders | $ | (8,632) |
Successor | ||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Transfers (to) from noncontrolling interests: | ||||||||||||||||||||||||||||||||
Decrease in Sunlight's shareholders' equity for the delivery of Class EX Units primarily in connection with vested provisionally-vested Class EX Units | $ | (394) | ||||||||||||||||||||||||||||||
Dilution impact of equity transactions | (394) | |||||||||||||||||||||||||||||||
Net income (loss) attributable to Class A shareholders | (13,974) | |||||||||||||||||||||||||||||||
Change from transfers (to) from noncontrolling interests and from net income (loss) attributable to Class A shareholders | $ | (14,368) |
Service (in Years)(b) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Award Class(a) | Minimum | Maximum | Awards(c) | |||||||||||||||||||||||||||||||||||||||||||||||
Provisionally-Vested Class A Shares | 1.9 | 3.6 | 267,731 | |||||||||||||||||||||||||||||||||||||||||||||||
Provisionally-Vested Class EX Units | 1.9 | 1.9 | 710,550 | |||||||||||||||||||||||||||||||||||||||||||||||
Director RSUs | 1.0 | 1.0 | 75,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Employee RSUs(d) | 3.0 | 4.0 | 1,792,868 | |||||||||||||||||||||||||||||||||||||||||||||||
2,846,149 |
Provisionally-Vested | RSUs | |||||||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | Class EX Units | Directors | Employees(a) | |||||||||||||||||||||||||||||||||||||||||||||||
Per Share | Shares | Per Unit | Units | Per Unit | Units | Per Unit | Units | |||||||||||||||||||||||||||||||||||||||||||
December 31, 2021 (Successor) | $ | 9.46 | 337,193 | $ | 9.46 | 974,447 | $ | 9.46 | 75,000 | $ | 8.97 | 2,136,129 | ||||||||||||||||||||||||||||||||||||||
Issued | — | — | 5.04 | 70,991 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Vested | 9.46 | (38,547) | 9.46 | (171,959) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Forfeited or Cancelled | 9.46 | (30,915) | 9.46 | (162,929) | — | — | 9.22 | (343,261) | ||||||||||||||||||||||||||||||||||||||||||
March 31, 2022 (Successor) | 9.46 | 267,731 | 9.02 | 710,550 | 9.46 | 75,000 | 8.92 | 1,792,868 |
Class C | LTIP | |||||||||||||||||||||||||
Per Unit | Units | Per Unit | Units | |||||||||||||||||||||||
December 31, 2020 (Predecessor) | $ | 14.51 | 234,403 | $ | 20.06 | 71,060 | ||||||||||||||||||||
Converted to Class C-1 Units | 16.19 | (136) | 18.80 | (231) | ||||||||||||||||||||||
Converted to Class C-2 Units | 11.12 | (756) | 15.64 | (639) | ||||||||||||||||||||||
March 31, 2021 (Predecessor) | 14.52 | 233,511 | 20.10 | 70,190 | ||||||||||||||||||||||
Type(a) | Weighted Average Recognition Period | Awards | Amount | |||||||||||||||||||||||||||||
Provisionally-Vested Class A Shares | 1.1 years | 267,731 | $ | 2,893 | ||||||||||||||||||||||||||||
Provisionally-Vested Class EX Units | 0.6 years | 710,550 | 6,408 | |||||||||||||||||||||||||||||
Director RSUs | 0.2 years | 75,000 | 192 | |||||||||||||||||||||||||||||
Employee RSUs | 1.5 years | 1,792,868 | 12,849 | |||||||||||||||||||||||||||||
2,846,149 | $ | 22,342 |
In no event willgross number of shares are issued and calculate any related effects on net income available for shareholders (the if-converted and two-class methods). Sunlight has applied these methods as prescribed by the Company be requiredrules to net cash settle any warrant. Ifeach of its outstanding equity instruments as shown below.
Successor | ||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Net Income (Loss) Per Class A Shareholders, Basic | ||||||||||||||||||||||||||||||||
Net income (loss) available to Class A shareholders | $ | (13,756) | ||||||||||||||||||||||||||||||
Total weighted average shares outstanding | 84,798,918 | |||||||||||||||||||||||||||||||
Net Income (Loss) Per Class A Shareholders, Basic | $ | (0.16) | ||||||||||||||||||||||||||||||
Net Income (Loss) Per Class A Shareholders, Diluted | ||||||||||||||||||||||||||||||||
Net income (loss) available to Class A shareholders | $ | (13,756) | ||||||||||||||||||||||||||||||
Total weighted average shares outstanding | 84,798,918 | |||||||||||||||||||||||||||||||
Net Income (Loss) Per Class A Shareholders, Diluted | $ | (0.16) | ||||||||||||||||||||||||||||||
Net income (loss) available to Class A shareholders | ||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | (22,606) | ||||||||||||||||||||||||||||||
Noncontrolling interests in loss of consolidated subsidiaries | 8,632 | |||||||||||||||||||||||||||||||
Other weighting adjustments | 218 | |||||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Class A Shareholders | (13,756) | |||||||||||||||||||||||||||||||
Noncontrolling interests in income (loss) of Sunlight Financial LLC, net of assumed corporate income taxes at enacted rates, attributable to Class EX units exchangeable into Sunlight Financial Holdings Inc. Class A shares(a) | — | |||||||||||||||||||||||||||||||
Net income (loss) available to Class A shareholders, diluted | $ | (13,756) | ||||||||||||||||||||||||||||||
Weighted Average Units Outstanding | ||||||||||||||||||||||||||||||||
Class A shares outstanding | 84,798,918 | |||||||||||||||||||||||||||||||
Class EX units exchangeable into Sunlight Financial Holdings Inc. Class A shares(a) | — | |||||||||||||||||||||||||||||||
Incremental Class A Shares attributable to dilutive effect of warrants(b) | — | |||||||||||||||||||||||||||||||
Total weighted average shares outstanding, diluted | 84,798,918 |
Note 7 — Stockholders’ Equity
exercisable in Sunlight’s Class A Common StockShares. Such warrants were out-of-the-money during the three months ended March 31, 2022.
Successor | ||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
Common Shares From | 2022 | |||||||||||||||||||||||||||||||
Class EX Units | 46,628,474 | |||||||||||||||||||||||||||||||
Warrants(a) | 27,150,000 | |||||||||||||||||||||||||||||||
Other warrants | 627,780 | |||||||||||||||||||||||||||||||
Unvested Class EX Units | 966,981 | |||||||||||||||||||||||||||||||
RSUs(b) | 1,904,217 | |||||||||||||||||||||||||||||||
ESPP(c) | 4,355 | |||||||||||||||||||||||||||||||
77,281,807 |
Principal Balance or Notional Amount | Carrying Value | Fair Value | ||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||
March 31, 2022 (Successor) | ||||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||
Financing Receivables: | ||||||||||||||||||||||||||||||||||||||
Loan participations, held-for-investment | $ | 4,280 | $ | 3,869 | $ | — | $ | — | $ | 3,770 | $ | 3,770 | ||||||||||||||||||||||||||
Loans, held-for-investment | 288 | 257 | — | — | 240 | 240 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 69,574 | 69,574 | 69,574 | — | — | 69,574 | ||||||||||||||||||||||||||||||||
Restricted cash | 2,355 | 2,355 | 2,355 | — | — | 2,355 | ||||||||||||||||||||||||||||||||
Contract derivatives | 71,356 | 1,184 | — | — | 1,184 | 1,184 | ||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||
Debt | 20,613 | 20,613 | — | — | 20,613 | 20,613 | ||||||||||||||||||||||||||||||||
Warrants | 312,225 | 23,891 | — | — | 23,891 | 23,891 | ||||||||||||||||||||||||||||||||
Guarantee obligation | n.a. | 408 | — | — | 408 | 408 | ||||||||||||||||||||||||||||||||
December 31, 2021 (Successor) | ||||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||||
Financing Receivables: | ||||||||||||||||||||||||||||||||||||||
Loan participations, held-for-investment | 4,584 | 4,051 | — | — | 4,260 | 4,260 | ||||||||||||||||||||||||||||||||
Loans, held-for-investment | 291 | 262 | — | — | 250 | 250 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 91,882 | 91,882 | 91,882 | — | — | 91,882 | ||||||||||||||||||||||||||||||||
Restricted cash | 2,018 | 2,018 | 2,018 | — | — | 2,018 | ||||||||||||||||||||||||||||||||
Contract derivatives | 76,770 | 1,411 | — | — | 1,411 | 1,411 | ||||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||||
Debt | 20,613 | 20,613 | — | — | 20,613 | 20,613 | ||||||||||||||||||||||||||||||||
Warrants | 312,225 | 19,007 | — | — | 19,007 | 19,007 | ||||||||||||||||||||||||||||||||
Guarantee obligation | n.a. | 418 | — | — | 418 | 418 |
Assets | Liabilities | |||||||||||||
Contract Derivatives | Warrants | |||||||||||||
December 31, 2021 (Successor) | $ | 1,411 | $ | 19,007 | ||||||||||
Transfers(a) | ||||||||||||||
Transfers to Level 3 | — | — | ||||||||||||
Transfers from Level 3 | — | — | ||||||||||||
Gains (losses) included in net income(b) | ||||||||||||||
Included in change in fair value of warrant liabilities | — | 4,884 | ||||||||||||
Included in change in fair value of contract derivatives, net | (227) | — | ||||||||||||
Included in realized gains on contract derivatives, net | 1,909 | — | ||||||||||||
Payments, net | (1,909) | — | ||||||||||||
March 31, 2022 (Successor) | $ | 1,184 | $ | 23,891 | ||||||||||
December 31, 2020 (Predecessor) | $ | 1,435 | $ | 5,643 | ||||||||||
Transfers(a) | ||||||||||||||
Transfers to Level 3 | — | — | ||||||||||||
Transfers from Level 3 | — | — | ||||||||||||
Gains (losses) included in net income(b) | ||||||||||||||
Included in change in fair value of warrant liabilities | — | 2,614 | ||||||||||||
Included in change in fair value of contract derivatives, net | (856) | — | ||||||||||||
Included in realized gains on contract derivatives, net | 2,267 | — | ||||||||||||
Payments, net | (2,267) | — | ||||||||||||
March 31, 2021 (Predecessor) | $ | 579 | $ | 8,257 |
Contract Derivative | Significant Inputs | |||||||
1 | Inputs include expected cash flows from the financing and sale of applicable Indirect Channel Loans and discount rates that market participants would expect for the Indirect Channel Loans. Significant increases (decreases) in the discount rates in isolation would result in a significantly lower (higher) fair value measurement. | |||||||
2 | Inputs include expected prepayment rate of applicable Indirect Channel Loans sold to the Indirect Channel Loan Purchaser. Significant increases (decreases) in the expected prepayment rate in isolation would result in a significantly higher (lower) fair value measurement. |
Successor | |||||||||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||||||||
Contract Derivative 1 | |||||||||||||||||
Discount rate | 10.4 | % | 10.0 | % | |||||||||||||
Weighted average life (in years) | 0.2 | 0.2 | |||||||||||||||
Contract Derivative 2 | |||||||||||||||||
Expected prepayment rate | 75.0 | % | 75.0 | % |
Successor | ||||||||||||||
Assumption | March 31, 2022 | |||||||||||||
Class A common share value per share(a) | $ | 5.04 | ||||||||||||
Implied volatility(a) | 53.9 | % | ||||||||||||
Dividend yield(b) | — | % | ||||||||||||
Time to expiry (in years)(a) | 4.3 | |||||||||||||
Risk free rate(a) | 2.5 | % |
Unaudited Condensed Consolidated Balance Sheets, and Sunlight did not have any material uncertain tax positions. Any uncertain tax position taken by any of the Class B Common StockEX unitholders is not an uncertain tax position of Sunlight Financial LLC.
17
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
nominees), resulting in an aggregate of 8,625,000 shares of Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share surrender and the stock dividend. Of the 8,625,000 shares of Class B common stock outstanding, up to 1,125,000 shares were subject to forfeiture to the Company by the initial stockholders for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part so that the Founder Shares would collectively represent 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On December 31, 2020, the underwriters fully exercised the over-allotment option; thus, these 1,125,000 shares were no longer subject to forfeiture.
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders, except as required by law. Each share of common stock will have one vote on all such matters.
The Class B common stock will automatically convert into Class A common stock at the time of the Initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to further adjustment as provided herein. 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 sold in the Initial Public Offering and related to the closing of the Initial 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 that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Initial Business Combination).
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2021, there were 0 shares of preferred stock issued or outstanding.
Note 8 — Fair Value Measurements
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
|
| Fair Value Measured as of March 31, 2021 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in Trust Account - U.S. Treasury Securities(1) |
| $ | 345,000,000 |
|
|
| - |
|
|
| - |
|
|
| 345,000,000 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public warrants |
|
| 31,567,500 |
|
|
| - |
|
|
| - |
|
|
| 31,567,500 |
|
Derivative warrant liabilities - Private placement warrants |
|
| - |
|
|
| - |
|
|
| 20,889,000 |
|
|
| 20,889,000 |
|
Total fair value |
| $ | 376,567,500 |
|
| $ | - |
|
| $ | 20,889,000 |
|
| $ | 397,456,500 |
|
(1)Excludes approximately $79,316 of investments held in cash and cash equivalents within the Trust Account.
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The Company transferred $31,567,500 of Public Warrants out of Level 3 to Level 1 due to the use of a quoted price in an active market. There were no other transfers between levels for the three months ended March 31, 2021.
The Company utilizes the Black-Scholes option pricing model and a quoted price in an active market to estimate the fair value of the Private Placement Warrants and Public Warrants, respectively, as of March 31, 2021, with changes
18
SPARTAN ACQUISITION CORP. II
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
in fair value recognized in the unaudited condensed consolidated statement of operations. For the three months ended March 31, 2021, the Company recognized a change from an increase in the fair value of liabilities of approximately $10,173,000 presented on the accompanying unaudited condensed consolidated statement of operations.
The change in the fair value of the derivative warrant liabilities for three months ended March 31, 2021 is summarized as follows:
Derivative warrant liabilities as of January 1, 2021 |
| $ | 42,283,500 |
|
Change in fair value of derivative warrant liabilities |
|
| 10,173,000 |
|
Derivative warrant liabilities as of March 31, 2021 |
| $ | 52,456,500 |
|
The estimated fair value of the derivative warrant liabilities is determined using Level 3 inputs. Inherent in a Black-Scholes option pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at 0.
The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
| ||||
|
| |||
|
| |||
|
|
| ||
|
|
| ||
|
|
| ||
|
|
|
Note 9 — Income Taxes
The Company’s taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative expenses are generally considered start-up costs and are not currently deductible. Approximately $1,727 was recorded as accrued income tax for the three months ended March 31, 2021. The Company’s effective tax rate for the three months ended March 31, 2021 was a negative 0.01%, which differs from the expected income tax rate due to the start-up costs and the change in fair value of derivative warrant liabilities which are not deductible.
Note 10 — Subsequent Events
As described in Note 1 “Description of Organization and Business Operations” above, on January 23, 2021, the Company entered into a business combination agreement and plan of reorganization with Sunlight Financial LLC.
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed consolidated financial statements were issued and determined that there have been no other events that have occurred that would require adjustments to or disclosure in the unaudited condensed consolidated financial statements.
|
|
References to the “Company,” “Spartan,” “our,” “us” or “we” refer to Spartan Acquisition Corp. II. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “expect,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” or the negative of such terms or other similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Quarterly Report. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings. Forward-looking statements relate to the future and are subject to many risks, assumptions and uncertainties, including those risks set forth in this Quarterly Report and as described in Part I, Item 1A. “Risk Factors” of our Amendment No. 1 on Form 10-K/A for the period ended December 31, 2020, filed with the SEC on May 11, 2021 (the “2020 Annual Report Amendment”).
Overview
We are a blank check company incorporated on August 17, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Initial Business Combination”).
Our registration statement for our initial public offering (“Initial Public Offering”) became effective on November 24, 2020. On November 30, 2020, we consummated the Initial Public Offering of 34,500,000 units (“Units”), including the issuance of 4,500,000 Units as a result of the underwriters’ exercise in full of its over-allotment option, at $10.00 per Unit, generating gross proceeds of approximately $345.0 million, and incurring offering costs of approximately $19.7 million, inclusive of approximately $12.1 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 9,900,000 warrants (the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant to Spartan Acquisition Sponsor II LLC (our “Sponsor”), generating additional gross proceeds of $9.9 million.
Upon the closing of the Initial Public Offering, the Private Placement, and the over-allotment option on November 30, 2020, $345.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in the trust account (the “Trust Account”) located in the United States at J.P. Morgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of an Initial Business Combination and (ii) the distribution of the assets held in the Trust Account as described below.
Our amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay franchise and income taxes (less up to $100,000 to pay dissolution expenses), none of the funds held in the Trust
Account will be released until the earliest of: (i) the completion of the Initial Business Combination; (ii) the redemption of any shares of Class A common stock included in the Units (the “Public Shares”) sold in the Initial Public Offering that have been properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation to affect the substance or timing of our obligation to redeem 100% of such Public Shares if we have not consummated an Initial Business Combination within 24 months from the closing of the Initial Public Offering, or November 30, 2022 (or 27 months from the closing of the Initial Public Offering, or February 28, 2023, if we have executed a letter of intent, agreement in principle or definitive agreement for a business combination within 24 months from the closing of the Initial Public Offering) (the “Combination Period”); or (iii) the redemption of 100% of the Public Shares we are unable to complete an Initial Business Combination within the Combination Period. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
Proposed Business Combination
On January 23, 2021, we entered into a business combination agreement (the “Business Combination Agreement”) with SL Invest I Inc., a Delaware corporation and wholly owned subsidiary of the Company (“MergerCo1”), SL Invest II LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“MergerCo2”), SL Financial Investor I LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Holdings I”), SL Financial Investor II LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Holdings II”), SL Financial Holdings Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Spartan Sub”), SL Financial LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“OpCo Merger Sub” and collectively with MergerCo1, MergerCo2, Holdings I, Holdings II and the Company, the “Spartan Subsidiaries”), Sunlight Financial LLC, a Delaware limited liability company (“Sunlight”), FTV-Sunlight, Inc., a Delaware corporation (“FTV Blocker”) and Tiger Co-Invest B Sunlight Blocker, LLC, a Delaware limited liability company (“Tiger Blocker,” and collectively with FTV Blocker, the “Blockers”). Subject to the satisfaction or waiver of the conditions to closing of the transactions contemplated by the Business Combination Agreement (the “Transactions”), the Transactions will effect an Initial Business Combination between us and Sunlight. Following the closing of the Transactions (the “Closing”), the combined company will be organized in an “Up-C” structure, meaning that all of the material assets of the combined company will be held by Sunlight, and Spartan’s only material assets will be its equity interests in Sunlight.
The boards of directors of each of the Company (acting following consultation with a duly formed Transaction committee) and Sunlight have unanimously approved the Transaction. The Transaction will require the approval of the stockholders of the Company and equity holders of Sunlight, the effectiveness of a registration statement to be filed with the SEC in connection with the Transaction (the “Business Combination Registration Statement”), satisfaction of the conditions stated in the definitive agreement and other customary closing conditions. The Transaction is expected to close in the second quarter of 2021.
Sunlight Support Agreement
In connection with the entry into the Business Combination Agreement, on January 23, 2021, certain members of Sunlight whose approval is sufficient to approve and adopt the Business Combination Agreement and the Transactions on behalf of Sunlight’s members (the “Requisite Sunlight Members”), entered into a support agreement, pursuant to which, among other things, the Requisite Sunlight Members agreed to execute and deliver a written consent approving the Business Combination Agreement and the Transactions within two business days after the effectiveness of the Business Combination Registration Statement and to vote in favor of the approval and adoption of the Business Combination Agreement and the Transactions.
Founders Stock Agreement
In connection with the entry into the Business Combination Agreement, but effective as of the Closing of the Transactions, we and our initial stockholders entered into a Founders Stock Agreement (the “Founders Stock Agreement”), pursuant to which, among other things, subject to and effective immediately prior to the closing of the Transactions, the Sponsor agreed to surrender up to 25% of the Class B common stock held by the Sponsor (at a 1:4 ratio to the percentage, if any, of redemptions by holders of Class A common stock); provided that no such surrender shall occur unless more than 5% of the outstanding shares of Class A common stock are actually redeemed by us.
Amendment to Letter Agreement
In connection with the execution of the Business Combination Agreement, on January 23, 2021, the Company, the Sponsor and certain other members of our board of directors and/or management team (the “Insiders”) entered into an amendment (the “Letter Agreement Amendment”) to that certain Letter Agreement (the “Existing Letter Agreement”) dated as of November 24, 2020, by and among the Company, our Sponsor and the Insiders, pursuant to which the Sponsor and each Insider will agree, effective as of the closing and subject to certain exceptions, to modify the lock-up restrictions set forth in the Existing Letter Agreement as follows:
(i) 80% of the Class B common stock (including any shares of Class A common stock issued in respect of the conversion of such Class B common stock upon the consummation of a Business Combination (as defined in the Existing Letter Agreement)) held by it, him or her will be restricted from Transfer (as defined in the Letter Agreement Amendment) until the one-year anniversary of the date of the consummation of a Business Combination, or earlier if, subsequent to the consummation of a Business Combination, (a) the last sale price of the Class A common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-day trading period commencing at least 150 days after the consummation of a Business Combination or (b) the Company consummates a transaction which results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock and Class B common stock for cash, securities or other property; and
(ii) 20% of the Class B common stock (including any shares of Class A common stock issued in respect of the conversion of such Class B common stock upon the consummation of a Business Combination) held by it, him or her will be restricted from Transfer until the six-month anniversary of the date of the consummation of a Business Combination, or earlier if, subsequent to the consummation of a Business Combination, (a) the last sale price of the Class A common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-day trading period ending at least 90 days after the consummation of a Business Combination or (b) the Company consummates a transaction which results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock and Class B common stock for cash, securities or other property.
Subscription Agreements
In connection with the execution of the Business Combination Agreement, on January 23, 2021, we entered into separate subscription agreements (collectively, the “Subscription Agreements”) with a number of investors (collectively, the “Subscribers”), pursuant to which the Subscribers agreed to purchase, and we agreed to sell to the Subscribers, an aggregate of 25,000,000 shares of Class A common stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $250,000,000, in a private placement (the “PIPE”).
The closing of the sale of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the concurrent consummation of the Transactions. The purpose of the PIPE is to raise additional capital for use by the combined company following the Closing.
Pursuant to the Subscription Agreements, we agreed that, within 30 calendar days after the consummation of the Transactions, we will file with the SEC (at our sole cost and expense) a registration statement registering the resale of the PIPE Shares (the “PIPE Resale Registration Statement”), and we will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Results of Operations
Our entire activity since inception through March 31, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective Initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our Initial Business Combination. We will generate non-operating income in the form of gain on investment (net), dividends and interest held in Trust Account. We have incurred increased 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 March 31, 2021, we had a net loss of approximately $15,232,000, which consisted of approximately $5,077,000 in general and administrative expenses (including approximately $4,310,000 of merger-
related expenses), $50,000 in franchise tax expenses, $10,173,000 in change in the fair value of warrant liabilities and $2,000 in income tax expense, which was partially offset by approximately $69,000 net gain on investments held in the Trust Account.
Liquidity and Capital Resources
As of March 31, 2021, we had approximately $279,000 in our operating bank account, approximately $79,000 of interest income available in the Trust Account to pay for taxes and working capital deficit of $3.5 million. Further, we have incurred and expect to continue to incur significant costs in pursuit of its acquisition plans.
Through March 31, 2021, our liquidity needs have been satisfied through a payment of $25,000 from our Sponsor to pay for certain offering costs in exchange for issuance of shares of our Class B common stock, par value $0.0001 per share (“Class B common stock” or “Founder Shares”), a loan under an unsecured promissory note (the “Note”) of approximately $235,000, and the net proceeds from the consummation of the Private Placement not held in the Trust Account. We repaid the Note on December 3, 2020. In addition, in order to finance transaction costs in connection with an Initial Business Combination, our officers, directors and initial stockholders may, but are not obligated to, loan us funds (the “Working Capital Loans”). As of March 31, 2021, there were no amounts outstanding under any Working Capital Loans.
The Company does not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these unaudited condensed consolidated financial statements. In connection with the Company's assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern,” management has determined that the Company has access to funds from the Sponsor that are sufficient to fund the working capital needs of the Company until the earlier of the consummation of the Initial Business Combination or one year from the date of issuance of these unaudited condensed consolidated financial statements.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
Registration Rights
The initial stockholders and holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement. The initial stockholders and holders of the Private Placement Warrants are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by us. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final prospectus to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters fully exercised the over-allotment option on November 30, 2020.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $6.9 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $12.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination, subject to the terms of the underwriting agreement for the Initial Public Offering.
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay administrative services fees to our Sponsor that total $10,000 per month for office space, secretarial and administrative services provided to members of our
management team, pursuant to that certain administrative services agreement entered into in connection with the Initial Public Offering.
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. Our investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these investments are included in interest income from investments held in Trust Account in the statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information, other than for investments in open-ended money market funds with published daily net asset values (“NAV”), in which case the Company uses NAV as a practical expedient to fair value. The NAV on these investments is typically held constant at $1.00 per unit.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature 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) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2021, 27,203,453 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our balance sheet.
Net Loss Per Common Share
We comply with accounting and disclosure requirements of Financial Accounting Standards Board Accounting Standards Codification Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. We have not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 27,150,000 shares of Class A common stock in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted earnings per share is the same as basic earnings per share for the period.
Our statement of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share, basic and diluted for Class A common stock is calculated by dividing the interest income from investments held in the Trust Account of approximately $69,000, net of applicable taxes of approximately $51,000 for the three months ended March 31, 2021, by the weighted average number of shares of Class A common stock outstanding for the period. Net loss per share,
basic and diluted for Class B common stock is calculated by dividing the general and administration expenses of approximately $5,077,000 and the Change in fair value of derivative warrant liabilities of approximately $10,173,000, resulting in a net loss of approximately $15,250,000, by the weighted average number of Class B common stock outstanding for the period.
Recent Accounting Pronouncements
Our management does not believe there are any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a material effect on our financial statements.
Off-Balance Sheet Arrangements and Contractual Obligations
As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (United States) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
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We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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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 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 officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were not effective as of March 31, 2021, due solely to the material weakness in our internal control over financial reporting described below in “Changes in Internal Control Over Financial Reporting.” In light of this material weakness, 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 unaudited condensed consolidated financial statements included in this Quarterly Report on 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
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 quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the restatement of our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 had not yet been identified.
Our internal control over financial reporting did not result in the proper classification of our warrants. Since issuance on November 30, 2020, our warrants were accounted for as equity within our balance sheet. On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. After discussion and evaluation, taking into consideration the SEC Staff Statement, including with our independent auditors, we have concluded that our warrants should be presented as liabilities with subsequent fair value remeasurement.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
PART II – OTHER INFORMATION
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There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
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In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks discussed in Part I, Item 1A. “Risk Factors” in our 2020 Annual Report Amendment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in the risk factors discussed in Part I, Item 1A. “Risk Factors” in the 2020 Annual Report Amendment.
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Unregistered Sales
In August 2020, 11,500,000 Founder Shares were issued to our Sponsor in exchange for the payment of $25,000 of certain offering costs on behalf of the Company, or approximately $0.002 per share. In October 2020, our Sponsor transferred 50,000 Founder Shares to each of the two independent director nominees at their original purchase price. In November 2020, our Sponsor returned to us at no cost an aggregate of 4,312,500 Founder Shares, which we cancelled. Also in November 2020, we effected a stock dividend on the Class B common stock, (which receipt of such dividends was waived by the independent director nominees) resulting in an aggregate of 8,625,000 shares of Class B common stock outstanding. All shares and associated amounts had been retroactively restated to reflect the share surrender and the stock dividend. Of the 8,625,000 Founder Shares outstanding, up to 1,125,000 shares were subject to forfeiture to the extent that the over-allotment option was not exercised by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On November 30, 2020, the underwriters fully exercised the over-allotment option; thus, these 1,125,000 shares were no longer subject to forfeiture. Such securities were issued in connection with the Company’s organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
No underwriting discounts or commissions were paid with respect to such sales.
Use of Proceeds
On November 30, 2020, we consummated the Initial Public Offering of 34,500,000 Units, including 4,500,000 Units that were issued pursuant to the underwriters’ full exercise of their over-allotment option. The Units were soldCompany’s Class A common stock at a price of $10.00$11.50 per Unit, generating gross proceeds to us of $345,000,000.
On November 30, 2020, simultaneously with the consummation of the Initial Public Offering, we completed the Private Placement of 9,900,000 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant to the Sponsor, generating gross proceeds to us of approximately $9,900,000.
Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Cowen and Company, LLC acted as book-running managers and representatives served as underwriters for the Initial Public Offering. The securities sold in the Initial Public Offering were registered under the Securities Act on registration statements on Form S-1 (Registration No. 333-249430 and 333-250942) (together, the “IPO Registration Statements”). The SEC declared the IPO Registration Statements effective on November 24, 2020.
From August 17, 2020 (inception) through November 30, 2020 (closing date), we incurred approximately $19,700,000 for costs and expenses related to the Initial Public Offering. In connection with the closing of the Initial
Public Offering, we paid a total of $6,900,000 in underwriting discounts and commissions. In addition, the underwriters agreed to defer $12,075,000 in underwriting discounts and commissions, which amount will be payable upon consummation of the Initial Business Combination. Prior to the closing of the Initial Public Offering, an affiliate of the Sponsor advanced us approximately $235,000 to be used for ashare. A portion of the expenses of the Initial Public Offering. A total of approximately $235,000 was repaid upon completion of the Initial Public Offering out of the $1,000,000 of Initial Public Offering proceeds that were allocated for the payment of offering expenses other than underwriting discounts and commissions. There has been no material change in the planned use of proceeds from the Initial Public Offering as described in our final prospectus filed with the SEC on November 27, 2020.
After deducting the underwriting discounts and commissions (excluding the deferred portion of $12,075,000, which amount will be payable upon consummation of the Initial Business Combination) and offering expenses, the total net proceeds from our Initial Public Offering and the salepurchase price of the Private Placement Warrants were $348,000,000, of which $345,000,000 (or $10.00 per share sold in the Initial Public Offering) was placed in the Trust Account.
There has been no material change in the planned use ofadded to the proceeds from the Initial Public Offering andheld in the Trust Account. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
Successor | ||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Lease cost | ||||||||||||||||||||||||||||||||
Operating | $ | 533 | ||||||||||||||||||||||||||||||
$ | 533 | |||||||||||||||||||||||||||||||
Other information | ||||||||||||||||||||||||||||||||
Operating leases | ||||||||||||||||||||||||||||||||
Operating cash flows | $ | 281 | ||||||||||||||||||||||||||||||
Right-of-use assets obtained in exchange for new lease liabilities | ||||||||||||||||||||||||||||||||
Operating leases | 7,643 | |||||||||||||||||||||||||||||||
Weighted-average remaining lease term (in years) | ||||||||||||||||||||||||||||||||
Operating leases | 7.1 | |||||||||||||||||||||||||||||||
Weighted-average discount rate | ||||||||||||||||||||||||||||||||
Operating leases | 7.2 | % |
April 1, through December 31, 2022 | $ | 1,375 | ||||||
2023 | 1,510 | |||||||
2024 | 1,553 | |||||||
2025 | 1,672 | |||||||
2026 | 1,790 | |||||||
Thereafter | 4,856 | |||||||
Total future minimum lease payments | 12,756 | |||||||
Less: imputed interest | (5,257) | |||||||
Present value of future minimum lease payments | $ | 7,499 |
Successor(a) | Predecessor | ||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | Percentage Change | |||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Funded Loans(b) | $ | 592,831 | $ | 581,059 | 2.0 | % | |||||||||||||||||||||||||||||||||||||||||||||||
Direct Channel Funded Loans | 428,204 | 496,546 | (13.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Indirect Channel Funded Loans | 164,627 | 84,513 | 94.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Platform Fee Loans(c) | 592,540 | 622,640 | (4.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Direct Channel Platform Fee Loans | 428,204 | 496,546 | (13.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Indirect Channel Platform Fee Loans | 164,336 | 126,094 | 30.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 28,231 | 24,787 | 13.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income | (22,606) | 2,660 | n.m. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted Net Income (Loss) | 4,877 | 9,305 | (47.6) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | 7,809 | 11,490 | (32.0) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Successor | Predecessor | ||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||
Average Loan Characteristics | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||
Solar | |||||||||||||||||||||||||||||||||||||||||
Loan Term (in months) | 244 | 235 | |||||||||||||||||||||||||||||||||||||||
Customer Interest Rate | 2.0 | % | 2.4 | % | |||||||||||||||||||||||||||||||||||||
Customer FICO Score | 756 | 751 | |||||||||||||||||||||||||||||||||||||||
Loan Balance | $ | 44 | $ | 39 | |||||||||||||||||||||||||||||||||||||
Solar Maxx®(a) | |||||||||||||||||||||||||||||||||||||||||
Loan Term (in months) | 286 | n.a. | |||||||||||||||||||||||||||||||||||||||
Customer Interest Rate | 6.3 | % | n.a. | ||||||||||||||||||||||||||||||||||||||
Customer FICO Score | 633 | n.a. | |||||||||||||||||||||||||||||||||||||||
Loan Balance | $ | 41 | n.a. | ||||||||||||||||||||||||||||||||||||||
Home Improvement | |||||||||||||||||||||||||||||||||||||||||
Loan Term (in months) | 114 | 116 | |||||||||||||||||||||||||||||||||||||||
Customer Interest Rate | 10.9 | % | 9.6 | % | |||||||||||||||||||||||||||||||||||||
Customer FICO Score | 758 | 757 | |||||||||||||||||||||||||||||||||||||||
Loan Balance | $ | 17 | $ | 17 | |||||||||||||||||||||||||||||||||||||
Home Improvement Maxx®(b) | |||||||||||||||||||||||||||||||||||||||||
Loan Term (in months) | 106 | n.a. | |||||||||||||||||||||||||||||||||||||||
Customer Interest Rate | 18.6 | % | n.a. | ||||||||||||||||||||||||||||||||||||||
Customer FICO Score | 626 | n.a. | |||||||||||||||||||||||||||||||||||||||
Loan Balance | $ | 10 | n.a. |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 28,231 | $ | 24,787 | $ | 3,444 | 13.9 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenues (exclusive of items shown separately below) | 5,229 | 4,854 | 375 | 7.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and benefits | 13,125 | 8,012 | 5,113 | 63.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling, general, and administrative | 6,472 | 1,916 | 4,556 | 237.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and technology | 1,928 | 1,208 | 720 | 59.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 22,447 | 809 | 21,638 | 2,674.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for losses | 638 | 736 | (98) | (13.3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management fees to affiliate | — | 100 | (100) | (100.0) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
49,839 | 17,635 | 32,204 | 182.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | (21,608) | 7,152 | (28,760) | n.m. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income (Expense), Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 84 | 141 | (57) | (40.4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (260) | (255) | (5) | 2.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of warrant liabilities | (4,884) | (2,614) | (2,270) | 86.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of contract derivatives, net | (227) | (856) | 629 | (73.5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gains on contract derivatives, net | 1,909 | 2,267 | (358) | (15.8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other realized losses, net | (197) | — | (197) | n.m. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other income | 176 | 412 | (236) | (57.3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination expenses | — | (3,587) | 3,587 | (100.0) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3,399) | (4,492) | 1,093 | (24.3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Before Income Taxes | (25,007) | 2,660 | (27,667) | n.m. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax benefit (expense) | 2,401 | — | 2,401 | n.m. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) | (22,606) | 2,660 | (25,266) | n.m. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interests in loss of consolidated subsidiaries | 8,632 | — | 8,632 | n.m. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Class A Shareholders | $ | (13,974) | $ | 2,660 | $ | (16,634) | n.m. |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||
Direct Channel Platform Fees, net | $ | 22,698 | $ | 21,846 | $ | 852 | 3.9 | % | |||||||||||||||||||||||||||||||||
Indirect Channel Platform Fees, net | 3,456 | 1,816 | 1,640 | 90.3 | |||||||||||||||||||||||||||||||||||||
Other revenues | 2,077 | 1,125 | 952 | 84.6 | |||||||||||||||||||||||||||||||||||||
Total | $ | 28,231 | $ | 24,787 | $ | 3,444 | 13.9 |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | Change in Average | |||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Solar Total - Capital Provider Discount | 16.3 | % | 16.7 | % | (0.4) | % | |||||||||||||||||||||||||||||
Solar Total - Contractor Fee | 21.4 | 21.0 | 0.4 | ||||||||||||||||||||||||||||||||
Solar Total - Platform Fee | 5.1 | 4.3 | 0.8 | ||||||||||||||||||||||||||||||||
Solar Direct Channel - Capital Provider Discount | 15.1 | 17.0 | (1.9) | ||||||||||||||||||||||||||||||||
Solar Direct Channel - Contractor Fee | 20.4 | 21.4 | (1.0) | ||||||||||||||||||||||||||||||||
Solar Direct Channel - Platform Fee | 5.3 | 4.4 | 0.9 | ||||||||||||||||||||||||||||||||
Solar Indirect Channel - Capital Provider Discount | 22.4 | 13.8 | 8.6 | ||||||||||||||||||||||||||||||||
Solar Indirect Channel - Contractor Fee | 26.4 | 17.2 | 9.2 | ||||||||||||||||||||||||||||||||
Solar Indirect Channel - Platform Fee | 4.0 | 3.4 | 0.6 |
Successor | Predecessor | ||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (21,130) | $ | 10,500 | |||||||||||||||||||||||||
Net cash used in investing activities | (786) | (1,132) | |||||||||||||||||||||||||||
Net cash used in financing activities | (55) | (6,757) |
Successor | Predecessor | ||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | (22,606) | $ | 2,660 | |||||||||||||||||||||||||||||||||||||
Adjustments for adjusted net income (loss) | |||||||||||||||||||||||||||||||||||||||||
Amortization of Business Combination intangibles | 22,199 | — | |||||||||||||||||||||||||||||||||||||||
Non-cash change in financial instruments | 4,935 | 3,058 | |||||||||||||||||||||||||||||||||||||||
Expenses from the Business Combination and Other | 349 | 3,587 | |||||||||||||||||||||||||||||||||||||||
Adjusted Net Income (Loss) | 4,877 | 9,305 | |||||||||||||||||||||||||||||||||||||||
Adjustments for adjusted EBITDA | |||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 248 | 809 | |||||||||||||||||||||||||||||||||||||||
Interest expense | 260 | 255 | |||||||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | (2,401) | — | |||||||||||||||||||||||||||||||||||||||
Equity-based compensation | 3,860 | 11 | |||||||||||||||||||||||||||||||||||||||
Fees paid to brokers | 965 | 1,110 | |||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | 7,809 | 11,490 | |||||||||||||||||||||||||||||||||||||||
Adjustments for net cash provided by (used in) operating activities | |||||||||||||||||||||||||||||||||||||||||
Interest expense | (260) | (255) | |||||||||||||||||||||||||||||||||||||||
Fees paid to brokers | (965) | (1,110) | |||||||||||||||||||||||||||||||||||||||
Expenses from the Business Combination and Other | (349) | (3,587) | |||||||||||||||||||||||||||||||||||||||
Provision for losses | 638 | 736 | |||||||||||||||||||||||||||||||||||||||
Changes in advances, net of funding commitments | (25,619) | 855 | |||||||||||||||||||||||||||||||||||||||
Changes in operating capital and other | (2,384) | 2,371 | |||||||||||||||||||||||||||||||||||||||
Net Cash Provided by (Used in) Operating Activities | (21,130) | 10,500 | |||||||||||||||||||||||||||||||||||||||
Adjustments for free cash flow | |||||||||||||||||||||||||||||||||||||||||
Capital expenditures | (845) | (709) | |||||||||||||||||||||||||||||||||||||||
Changes in advances, net of funding commitments | 25,619 | (855) | |||||||||||||||||||||||||||||||||||||||
Changes in restricted cash | 336 | (1,040) | |||||||||||||||||||||||||||||||||||||||
Payments of Business Combination costs | — | 4,470 | |||||||||||||||||||||||||||||||||||||||
Other changes in working capital | 2,473 | 367 | |||||||||||||||||||||||||||||||||||||||
Free Cash Flow | $ | 6,453 | $ | 12,733 |
Successor | |||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
2022 | |||||||||||||||||||||||||||||||||||
Adjusted Net Income (Loss) | $ | 4,877 | |||||||||||||||||||||||||||||||||
Adjusted Net Income (Loss) per Class A Share, Diluted | $ | 0.03 | |||||||||||||||||||||||||||||||||
Weighted-average Class A Shares | |||||||||||||||||||||||||||||||||||
Class A Shares | 86,373,596 | ||||||||||||||||||||||||||||||||||
Class EX Units | 47,595,455 | ||||||||||||||||||||||||||||||||||
Restricted Stock Units | 1,904,217 | ||||||||||||||||||||||||||||||||||
Warrants | 27,777,780 | ||||||||||||||||||||||||||||||||||
163,651,048 |
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Periods | (a) Total Number of Shares Purchased(1) | (b) Average Price Paid per Share | (c)Total Number of Shares Purchased as Part of Publicly Announced Programs | (d) Maximum Number of Shares That May Yet be Purchased Under the Programs | ||||||||||||||||||||||
January 1 to January 31, 2022 | 4,960 | $ | 2.94 | — | — | |||||||||||||||||||||
February 1 to February 28, 2022 | 4,251 | 4.07 | — | — | ||||||||||||||||||||||
March 1 to March 31, 2022 | 4,312 | 5.04 | — | — | ||||||||||||||||||||||
Total for Quarter Ended March 31, 2022 | 13,523 | 3.96 | — | — |
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| Description | ||||||||||
2.1** | |||||||||||
3.1** | |||||||||||
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3.2** | |||||||||||
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4.1** | |||||||||||
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4.2** | |||||||||||
4.3** | |||||||||||
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10.2**† | |||||||||||
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10.3**† | Advisory Services Agreement, effective as of March 31, 2022, by and between Barry Edinburg and Sunlight Financial Holdings Inc. and each of its subsidiaries (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-39739) filed with the SEC on | ||||||||||
10.4**† | |||||||||||
| Director Fee Agreement, effective as of March 29, 2022, by and among Sunlight Financial Holdings Inc., Tiger Infrastructure Partners LP and Emil W. Henry, Jr. (incorporated by reference to Exhibit 10.48 to the Company’s post-effective amendment no. 2 to the registration statement on Form S-1(File No. 001-39739) filed with the SEC on April 12, 2022). | ||||||||||
10.6**† | |||||||||||
31.1* | |||||||||||
31.2* | |||||||||||
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32.1* | |||||||||||
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32.2* | |||||||||||
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101 | The following materials from Sunlight Financial Holdings Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Changes in Equity, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Financial Statements. | ||||||||||
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| Cover Page Interactive |
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SIGNATURE
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SUNLIGHT FINANCIAL HOLDINGS INC. | ||||||||
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By: |
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Chief Executive Officer | ||||||||
(Principal Executive Officer) | ||||||||
May 16, 2022 | ||||||||
By: | /s/ Rodney Yoder | |||||||
Rodney Yoder | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) | ||||||||
May 16, 2022 |
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