References to the "Company," "EdtechX Holdings Acquisition Corp." "our," "us" or
"we" refer to EdtechX Holdings Acquisition Corp. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the financial statements and the notes thereto
contained elsewhere in this 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
All statements other than statements of historical fact included in this Form
10-K including, without limitation, statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding our
financial position, business strategy and the plans and objectives of management
for future operations, are forward looking statements. When used in this Form
10-K, words such as "may," "should," "could," "would," "expect," "plan,"
"anticipate," "believe," "estimate," "continue," or the negative of such terms
or other similar expressions, as they relate to us or our management, identify
forward looking statements. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, those described in our other SEC
filings. Such forward looking statements are based on the beliefs of management,
as well as assumptions made by, and information currently available to, our
management. No assurance can be given that results in any forward-looking
statement will be achieved and actual results could be affected by one or more
factors, which could cause them to differ materially. The cautionary statements
made in this Annual Report on Form 10-K should be read as being applicable to
all forward-looking statements whenever they appear in this Annual Report. For
these statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act. Actual
results could differ materially from those contemplated by the forward-looking
statements as a result of certain factors detailed in our filings with the SEC.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on our behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporated in Delaware on May 15, 2018 for the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more
businesses (the "Business Combination"). Although we are not limited to a
particular industry or sector for purposes of consummating a Business
Combination, we are focusing our search for target businesses in the education,
training and education technology ("edtech") industries. We are an early stage
and emerging growth company and, as such, we are subject to all of the risks
associated with early stage and emerging growth companies. Our sponsors are IBIS
Capital Sponsor LLC and IBIS Capital Sponsor II LLC, each Delaware limited
liability companies (the "Sponsors").
The registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on October 5, 2018. On October 10, 2018, we
consummated the Initial Public Offering of 5,500,000 units (each, a "Unit" and
collectively, the "Units") at $10.00 per Unit. On October 17, 2018, we
consummated the closing of an additional 825,000 Units sold pursuant to the
underwriters' over-allotment option ("Over-allotment") at $10.00 per Unit. Each
Unit consists of one share of common stock, and one redeemable warrant (each, a
"Public Warrant"). Each Public Warrant entitles the holder to purchase one share
of common stock at a price of $11.50 per share, subject to adjustment.
Simultaneously with the closing of the Initial Public Offering and the
Over-allotment, we consummated the private placement (the "Private Placement")
of 3,780,000 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 gross proceeds of $3.78 million. Each Private
Placement Warrant is exercisable for one share of common stock at a price of
$11.50 per share.
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The sale of Units and Private Placement Warrants generated gross proceeds
of $67.03 million, and we incurred offering costs of approximately $3.31
million, inclusive of $1.225 million in minimum deferred underwriting
commissions. Approximately $64.2 million ($10.15 per Unit) of the net proceeds
of the sale of the Units in the Initial Public Offering, the Over-allotment and
the sale of the Private Placement Warrants, was placed in a trust account
("Trust Account"), located in the United States, and will be invested only in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act, with a maturity of 180 days or less or in any
open-ended investment company that holds itself out as a money market fund
selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and
(d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company,
until the earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering, the Over-allotment and the
Private Placement, although substantially all of the net proceeds are intended
to be applied toward consummating an initial Business Combination.
We will have until April 10, 2020 to complete an initial Business Combination,
or July 10, 2020 if (i) we have filed proxy solicitation or tender offer
materials in compliance with Regulation 14A or Regulation 14E, respectively, of
the Securities Exchange Act of 1934, as amended, with the SEC relating to a
proposed Business Combination by April 10, 2020 and a Business Combination has
not yet been consummated by such date and (ii) the last sales price of our
common stock equals or exceeds the estimated per-share value of the amount in
the Trust Account on April 10, 2020 for any 20 trading days within the 30
trading day period ending March 10, 2020 (unless otherwise extended as described
in this annual report) (such time period referred to as the "Combination
Period"). If we do not complete a Business Combination within the Combination
Period, we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account (less up to $100,000 of
interest to pay liquidation expenses and which interest shall be net of taxes
payable), 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 our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
On December 12, 2019, we entered into the Merger Agreement by and among our
company, Holdco, EdtechX Merger Sub, Meten Merger Sub and Meten.
Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard.
On January 2, 2020, we received a notice from the Listing Qualifications
Department of The Nasdaq Stock Market ("Nasdaq") stating that we failed to hold
an annual meeting of stockholders within 12 months after our fiscal year ended
December 31, 2018, as required by Nasdaq Listing Rule 5620(a). In accordance
with Nasdaq Listing Rule 5810(c)(2)(G), the Company submitted a plan to regain
compliance and such plan was accepted by Nasaq. We now have until June 29, 2020
to regain compliance.
Liquidity and Capital Resources
As indicated in the accompanying financial statements, at December 31, 2019, we
had approximately $384,000 in cash, and working capital deficit of approximately
$82,000 (not taken into account franchise and income tax obligations), and
approximately $1.5 million of interest available to pay for our tax obligations,
if any.
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the receipt of $25,000 from the sale of the founders'
shares, the loan from our initial stockholders in an aggregate amount of
$125,000, advances of approximately $85,000 from our Sponsor for offering
related expenses. The Note of $125,000 was repaid in full on October 10, 2018,
and the advances from related party of approximately $85,000 still remains
outstanding. Subsequently, our liquidity has been satisfied through the net
proceeds from the sale of Private Placement Warrants not held in the Trust
Account, the interest withdrawn from Trust Account of approximately $295,000
since inception to pay for tax obligations, and loan proceeds from our Sponsor
for an aggregate of $270,000 under the form of a convertible promissory note
received in October 2019.
Our management believes that we have sufficient liquidity to meet our
anticipated obligations until the earlier of the consummation of initial
Business Combination or liquidation.
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Results of Operations
Our entire activity since inception up to December 31, 2019 was in preparation
for our formation and the Initial Public Offering and, since the closing of the
Initial Public Offering, a search for a business combination candidate. We will
not be generating any operating revenues until the closing and completion of our
initial Business Combination.
For the year ended December 31, 2019, we had net income of approximately
$383,000, which consisted of approximately $1.4 million in interest earned on
marketable securities held in Trust Account, net of unrealized loss on
marketable securities held in Trust Account, offset by approximately $691,000 in
general and administrative costs, approximately $90,000 in franchise tax
expenses and approximately $285,000 in income tax expenses.
For the period from May 15, 2018 (inception) through December 31, 2018, we had
net income of approximately $52,000, which consisted of approximately $318,000
in interest earned on investments and marketable securities held in Trust
Account, net of unrealized loss on marketable securities held in Trust Account,
offset by approximately $156,000 in general and administrative costs,
approximately $54,000 in franchise tax expenses and approximately $55,000 in
income tax expenses.
Related Party Transactions
Founder Shares
On May 15, 2018, IBIS Capital Sponsor LLC purchased 1,437,500 shares (the
"Founder Shares") of our common stock, par value $0.0001 for an aggregate price
of $25,000. On August 3, 2018, we effected a stock dividend of 0.1 shares for
each outstanding share, resulting in the initial stockholders holding an
aggregate of 1,581,250 founders' shares. The initial stockholders had agreed to
forfeit up to 206,250 Founder Shares to the extent that the over-allotment
option was not exercised in full by the underwriters. On October 17, 2018, the
over-allotment option was exercised in full. Accordingly, no Founder Shares will
be forfeited by the Sponsor.
The initial stockholders agreed, subject to limited exceptions, not to transfer,
assign or sell any of their Founder Shares until (1) with respect to 50% of the
Founder Shares, the earlier of six months after the completion of the initial
Business Combination and the date on which the closing price of our common stock
equals or exceeds $12.50 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing after the initial Business
Combination, and (2) with respect to the remaining 50% of the Founder Shares,
six months after the date of the consummation of the Initial Business
Combination, or earlier, in either case, if, subsequent to the Initial Business
Combination, we consummate a liquidation, merger, capital stock exchange or
other similar transaction that results in all of our stockholders having the
right to exchange their shares of common stock for cash, securities or other
property.
Private Placement Warrants
Concurrently with the closing of the Initial Public Offering and the
Over-allotment, the Sponsors, the underwriters and Azimut Investors purchased an
aggregate of 3,780,000 Private Placement for $3.78 million in the in a private
placement.
Each Private Placement Warrant is exercisable for one share of common stock at a
price of $11.50 per share. The proceeds from the Private Placement Warrants were
added to the proceeds from the Initial Public Offering held in the Trust
Account. If we do not complete a Business Combination within the Combination
Period, 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 purchasers or its permitted transferees.
The purchasers of the Private Placement Warrants have 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.
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Related Party Loans and Advances
On June 26, 2018, IBIS Capital Sponsor LLC agreed to loan us an aggregate of up
to $125,000 to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the "Note"). This loan was non-interest bearing and payable
on the earlier of December 31, 2019 or the completion of the Initial Public
Offering. In addition to this Note, we had received additional advances of
approximately $85,000 from the Sponsor for expenses. The Note of $125,000 was
repaid in full on October 10, 2018, and the advance from related party of
approximately $85,000 still remains outstanding.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsors or an affiliate of the Sponsors, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans"). If we complete a Business Combination, we
would repay the Working Capital Loans out of the proceeds of the Trust Account
released to us. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that a Business Combination
does not close, we 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 a Business Combination, without
interest, or, at the lender's discretion, up to $1.5 million of such Working
Capital Loans may be convertible into warrants of the post Business Combination
entity at a price of $1.00 per warrant. The warrants would be identical to the
Private Placement Warrants. On September 19, 2019, we issued a convertible note
("Convertible Note") to our Sponsor, pursuant to which our Sponsor agreed to
provide a Working Capital loan to us for an aggregate of $270,000. The
Convertible Note was non-interest bearing and payable upon the completion of the
initial Business Combination. We received this loan proceeds in October 2019.
Administrative Support Agreement
We agreed, commencing on the effective date of the Initial Public Offering
through the earlier of our consummation of a Business Combination and its
liquidation, to pay IBIS Capital Limited, an affiliate of certain of our
officers and directors, a total of $10,000 per month for certain general and
administrative services, including office space, utilities and administrative
support.
We incurred and paid $120,000 and $30,000 in expenses in connection with the
aforementioned arrangements with the related parties and recorded in general and
administrative expenses in the Statement of Operations for the three and nine
months ended December 31, 2019. As of December 31, 2019 and December 31, 2018,
we had $60,000 and $0 in accounts payable in connection with such agreements in
the accompanying Balance Sheets.
Forward Purchase Agreements
The Azimut Investors have also entered into a contingent forward purchase
agreement ("Forward Purchase Agreement") with us to purchase, in a private
placement to occur concurrently with the consummation of the initial Business
Combination, up to 2,000,000 Units at $10.00 per Unit (or up to an aggregate
purchase price of $20 million), on substantially the same terms as the sale of
units in the Initial Public Offering. The exact number of Units to be purchased
by the Azimut Investors will be determined by us, in our sole discretion, based
on our capital needs in connection with the Business Combination. This agreement
is independent of the percentage of stockholders electing to redeem their Public
Shares and may provide us with an increased minimum funding level for the
initial Business Combination. The contingent Forward Purchase Agreement is
subject to conditions, including the Azimut Investors giving us their
irrevocable written consent to purchase the Units no later than five days after
we notifiy them of our intention to hold a board meeting to consider entering
into a definitive agreement for a proposed Business Combination. The Azimut
Investors granting their consent to the purchase is entirely within their sole
discretion. Accordingly, if they do not consent to the purchase, they will not
be obligated to purchase the Units. In connection with the transaction with
Meten, the Azimut Investors agreed to purchase the up to 2,000,000 Units in
connection with the closing of the transactions.
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Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any, will be entitled to
registration rights (in the case of the Founder Shares, only after conversion of
such shares to shares of common stock) pursuant to a registration rights
agreement to be signed on or before the date of the prospectus for the Initial
Public Offering. These holders will be entitled to certain demand and
"piggyback" registration rights. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Agreements with Underwriters
The underwriters were entitled to an underwriting discount of $0.25 per unit, or
up to approximately $1.58 million in the aggregate, paid upon the closing of the
Initial Public Offering and the Over-allotment. In addition, $0.35 per unit, or
approximately $2.21 million in the aggregate upon closing of the underwriters'
over-allotment option will be payable to the underwriters for deferred
underwriting commissions. The deferred underwriting commissions will be subject
to reduction pro rata with conversion of Public Shares in the Business
Combination, provided that in no case shall the deferred underwriting
commissions be less than $1.225 million. The deferred fee will become payable to
the underwriters from the amounts held in the Trust Account solely in the event
that we complete a Business Combination, subject to the terms of the
underwriting agreement.
Critical Accounting Policies
Common Stock Subject to Possible Redemption
We account for its common stock subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Common stock subject to mandatory redemption (if any) is classified as a
liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as
shareholders' equity. Our 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, common stock subject to possible
redemption at the redemption amount is presented at redemption value as
temporary equity, outside of the shareholders' equity section of our balance
sheet.
Net Loss Per Share of Common Stock
Net loss per share is computed by dividing net loss by the weighted-average
number of shares of common stock outstanding during the period. An aggregate of
5,706,278 and 5,775,155 shares of common stock subject to possible redemption at
December 31, 2019 and 2018 have been excluded from the calculation of basic loss
per share of common stock, respectively, since such shares, if redeemed, only
participate in their pro rata share of the trust earnings. The Company has not
considered the effect of the warrants sold in the Initial Public Offering
(including the consummation of the Over-allotment) and Private Placement to
purchase an aggregate of 10,105,000 shares of the Company's common stock in the
calculation of diluted loss per share, since they are not yet exercisable.
Our net income is adjusted for the portion of income that is attributable to
common stock subject to redemption, as these shares only participate in the
earnings of the Trust Account and not the income or losses of our company.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.
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Off-Balance Sheet Arrangements
As of December 31, 2019, 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
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
will qualify as an "emerging growth company" and under the JOBS Act will be
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 such, our financial statements may not be comparable to companies that comply
with public company effective dates.
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EDTECHX HOLDINGS ACQUISITION CORP. 