UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2019

 

☐ 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: 001-38271

 

SENTINEL ENERGY SERVICES INC.

(Exact name of registrant as specified in its charter)

 

Delaware		98-1370747
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

 

700 Louisiana Street, Suite 2700 Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number: (281) 407-0686

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of Each Class:

Class A Common Stock, par value $0.0001 per share

Warrants to purchase one share of Class A Common Stock

Units, each consisting of one share of Class A Common Stock and one-third of one Warrant

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

 

The aggregate market value of the common stock held by non-affiliates of the registrant, computed as of June 28, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $350,175,000.

 

As of March 16, 2020, no shares of Class A common stock, par value $0.0001 per share (“Class A Common Stock”), and 862,500 shares of Class B common stock, par value $0.0001 per share (“Class B Common Stock”) were issued and outstanding.

 

 

TABLE OF CONTENTS

 

Cautionary Note Regarding Forward-Looking Statements	iii
PART I	1
Item 1. Business	1
Item 1A. Risk Factors	2
Item 1B. Unresolved Staff Comments	6
Item 2. Properties	6
Item 3. Legal Proceedings	6
Item 4. Mine Safety Disclosures	6
PART II	7
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	7
Item 6. Selected Financial Data	7
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	11
Item 8. Financial Statements and Supplementary Data	F-1
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	12
Item 9A. Controls and Procedures.	12
Item 9B. Other Information	12
PART III	13
Item 10. Directors, Executive Officers and Corporate Governance	13
Item 11. Executive Compensation	15
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	16
Item 13. Certain Relationships and Related Transactions, and Director Independence	17
Item 14. Principal Accountant Fees and Services.	18
PART IV	19
Item 15. Exhibits, Financial Statement Schedules	19

 

 

Unless otherwise stated in this Annual Report on Form 10-K (this “Report”), references to:

 

●

“we,” “us,” “company,” “Sentinel,” “Company” or “our company” are to Sentinel Energy Services Inc.;

 

●

“common stock” are to our Class A common stock and Class B common stock, collectively;

 

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“Companies Law” are to the Companies Law (2018 Revision) of the Cayman Islands as the same may be amended from time to time;

 

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“CSL” are to CSL Capital Management, L.P., an SEC-registered private equity firm headquartered in Houston, Texas;

 

●

“CSL Funds” are to CSL Energy Opportunities Fund III, L.P. and CSL Energy Holdings III, Corp, LLC. The CSL Funds are managed by CSL;

 

●

“DGCL” are to the General Corporation Law of the State of Delaware as the same may be amended from time to time;

 

●

“Domestication” are to the Company’s change of jurisdiction from the Cayman Islands to the State of Delaware on December 28, 2018;

 

●

“equity-linked securities” are to any securities of our company or any of our subsidiaries which are convertible into, or exchangeable or exercisable for, equity securities of our company or such subsidiary, including any securities issued by our company or any of our subsidiaries which are pledged to secure any obligation of any holder to purchase equity securities of our company or any of our subsidiaries;

 

●

“founder shares” are to our Class B common stock, 862,500 of which are currently outstanding;

 

●

“initial stockholders” are to holders of our founder shares; and

 

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“management” or our “management team” are to our executive officers and directors;

 

●

“ordinary shares” are to our Class A ordinary shares and Class B ordinary shares collectively, which were outstanding prior to the Domestication. In connection with the Domestication, each of our then currently issued and outstanding Class A ordinary shares and Class B ordinary shares automatically converted, on a one-for-one basis, by operation of law, into one share of Class A common stock and one share of Class B common stock, respectively;

 

●

“private placement warrants” are to the warrants issued to our Sponsor in a private placement simultaneously with the closing of our initial public offering;

 

●

“public shares” are to our shares of Class A common stock initially sold as part of the units in our initial public offering. As a result of the Domestication, each of our issued and outstanding Class A ordinary shares automatically converted by operation of law into one share of Class A common stock of the Company;

 

●

“public stockholders” are to the holders of our public shares;

 

●

“Sponsor” are to Sentinel Management Holdings, LLC, a Delaware limited liability company;

 

 

Cautionary Note Regarding Forward-Looking Statements

 

This Annual Report on Form 10-K (this “Annual Report”), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:

 

●

our inability to complete our initial business combination;

 

●

the lack of a market for our securities;

 

●

the trust account not being subject to claims of third parties; or

 

●

our financial performance.

 

The forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of results or developments in subsequent periods. 

 

 

PART I

 

Item 1. Business

 

Introduction

 

We are a blank check company incorporated on June 5, 2017 as a Cayman Islands exempted company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On December 28, 2018, we changed our jurisdiction of incorporation from the Cayman Islands to the State of Delaware. Our management team is led by Andrew Gould, our Chairman, who has more than 41 years’ experience in global energy and related business, and Krishna Shivram, our Chief Executive Officer, who has 30 years’ experience in the oil and gas business. To date, our efforts have been limited to organizational activities as well as activities related to the initial public offering and the identification and evaluation of prospective acquisition targets for a business combination.

 

Redemption of public shares and liquidation

 

We were not able to consummate a business combination prior to the November 7, 2019 deadline under our certificate of incorporation (the “Charter”). As a result, and after careful consideration, we determined to liquidate the trust account that we established in connection with our initial public offering (the “trust account”) and return the funds held therein to our public stockholders in accordance with our Charter, which completely extinguished the public stockholders’ rights as stockholders. There were no redemption rights or liquidating distributions with respect to our warrants, which expired worthless as a result of our failure to complete a business combination by November 7, 2019.

 

Pursuant to our Charter, we: (i) ceased all operations except for the purpose of winding up, (ii) redeemed the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay income taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption completely extinguished public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) liquidated the trust account, subject in the case of clauses (ii) and (iii), to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In connection with the redemption of the public shares, each stockholder received approximately $10.30 per share on November 18, 2019. We withheld approximately $1,300,000 from the distribution and once our income tax liability is finalized for the year ended December 31, 2019, we will distribute the remaining proceeds to the public stockholders.

 

Employees

 

We currently have three officers. These individuals are not obligated to devote any specific number of hours to our matters. The amount of time that they will devote in any time period will vary.

 

Available Information

 

We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material events (e.g., changes in corporate control, acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business and bankruptcy) in a Current Report on Form 8-K. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website is located at http://www.sec.gov. In addition, the Company will provide copies of these documents without charge upon request in writing at 700 Louisiana Street, Suite 2700, Houston, Texas 77002 or by telephone at (281) 407-0686.

 

Recent Events

 

On November 6, 2019, board of directors (our "Board") announced that it cancelled the special meeting of stockholders relating to extending the time by which we had to complete our initial business combination that was scheduled to take place that day and had determined to redeem all of our outstanding public shares, effective as of the close of business on November 7, 2019, because we did not consummate an initial business combination within the time period required by our Charter. Public shares ceased trading as of the open of business on November 8, 2019 in order to allow time for the settlement of trades.

 

 

As of the close of business on November 7, 2019, the public shares were deemed cancelled and represented only the right to receive a per-share redemption price determined by the net of taxes and dissolution expenses, determined to be approximately $10.30 (the “Redemption Amount”). There were no redemption rights or liquidating distributions with respect to our warrants. Our initial stockholders waived their redemption rights with respect to the outstanding common stock issued prior to our initial public offering. Nasdaq Stock Market LLC (“Nasdaq”) filed a Form 25 with the United States Securities and Exchange Commission (“SEC”) to delist our securities on November 7, 2019.

 

On December 9, 2019, we held a special meeting of public warrantholders. The holders of warrants sold as part of the units sold in our initial public offering (the “Public Warrants”) voted to amend the Warrant Agreement, dated as of November 2, 2017, by and among the Company and Continental Stock Transfer & Trust Company (the “Warrant Agreement”) so that all of the Public Warrants were automatically converted into the right to receive $0.02 per whole Public Warrant, payable in cash. Only the Public Warrants were converted into the right to receive cash. In addition, Sentinel Management Holdings, LLC agreed to forfeit (i) all of the 5,933,333 private placement warrants and (ii) 90% of the 8,550,000 founder shares held by it to us for no consideration. Additionally, each of Jon A. Marshall and Marc Zenner agreed to forfeit 90% of the 37,500 founder shares held by him.

 

On December 19, 2019, each of Ronald Steger and Craig Levering submitted his resignation from our Board.

 

Item 1A. Risk Factors

 

You should carefully consider all of the following risk factors and all the other information contained in this Annual Report, including the financial statements. If any of the following risks occur, our business, financial condition or results of operations may be materially and adversely affected. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.

 

Nasdaq delisted our securities from trading on its exchange, which may limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

 

Our Class A common stock, warrants and units were listed on Nasdaq. We cannot assure you that our securities will be listed on Nasdaq in the future.

   

We may not have sufficient funds to satisfy indemnification claims of our directors and officers.

 

We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.

 

 

If, after we distribute the proceeds in the trust account to our public stockholders, we file a winding up petition or a winding up petition is filed against us that is not dismissed, a liquidator may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby potentially exposing the members of our board of directors and us to claims of punitive damages.

 

If, after we distribute the proceeds in the trust account to our public stockholders, we file a winding up petition or a winding up petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or insolvency laws as a “voidable preference”. As a result, a liquidator could seek to challenge the transaction and recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.

   

If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted.

 

If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:

 

●

restrictions on the nature of our investments; and

 

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restrictions on the issuance of securities, each of which may make it difficult for us to complete our business combination.

 

In addition, we may have imposed upon us burdensome requirements, including:

 

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registration as an investment company;

 

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adoption of a specific form of corporate structure; and

 

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reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

 

In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.

 

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.

 

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business.

 

 

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

 

If we are forced to enter into an insolvent liquidation, any distributions received by stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by our stockholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby exposing themselves and our company to claims, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.

 

We may not hold an annual meeting of stockholders, which could delay the opportunity for our stockholders to elect directors.

 

There is no requirement under the DGCL for us to hold annual or general meetings to elect directors. Until we hold an annual meeting of stockholders, public stockholders may not be afforded the opportunity to elect directors and to discuss company affairs with management. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. 

  

The past performance of CSL, Mr. Gould, Mr. Shivram and other members of our management team may not be indicative of future performance of an investment in the Company.

 

Information regarding performance by, or businesses associated with, CSL and its affiliates, Mr. Gould, and Mr. Shivram is presented for informational purposes only. Past performance by CSL, Mr. Gould, Mr. Shivram and other members of our management team is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of CSL’s or, Mr. Gould’s, Mr. Shivram’s or other members of our management team’s performance as indicative of our future performance of an investment in the company or the returns the company will, or is likely to, generate going forward. None of our officers or directors have had experience with blank check companies or special purpose acquisition companies in the past.

  

We are dependent upon our officers and directors, and their loss could adversely affect our ability to operate.

 

Our operations are dependent upon a relatively small group of individuals and, in particular, our officers and directors. We believe that our success depends on the continued service of our officers and directors. In addition, our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, may have conflicts of interest in allocating their time among various business activities. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.

  

Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.

 

We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.

 

 

Our initial stockholders control a substantial interest in us and thus may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.

 

The founder shares, all of which are held by our initial stockholders, will entitle the holders to elect all of our directors prior to our initial business combination. Holders of our public shares will have no right to vote on the election of directors during such time. This provision of our Charter may only be amended by a resolution passed by a majority of at least two-thirds of our common stock entitled to vote on such amendment. As a result, you will not have any influence over the election of directors prior to our initial business combination. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our Charter and approval of major corporate transactions. If our initial stockholders purchase any additional common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Neither our initial stockholders nor, to our knowledge, any of our officers or directors have any current intention to purchase additional securities. In addition, our board of directors, whose members were elected by our initial stockholders, is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our business combination, in which case all of the current directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome.

 

We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

 

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, 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 our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

  

Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.

 

We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.

 

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

We do not own any real estate or other physical properties materially important to our operation. Our executive office is located at 700 Louisiana Street, Suite 2700, Houston, Texas 77002. We consider our current office space adequate for our current operations.

 

Item 3. Legal Proceedings

 

To the knowledge of our management, there is no material litigation, arbitration, bankruptcy, receivership, governmental proceeding or other proceeding currently pending against us or any members of our management team in their capacity as such.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

 

Market Information

 

Our securities ceased trading on The Nasdaq Capital Market on November 6, 2019.

 

Holders

 

On March 13, 2020, there were no holders of record of our units, no holders of record of our Class A common stock, 3 holders of record of our Class B common stock and no holders of record of our warrants.

 

Item 6. Selected Financial Data

 

As a “smaller reporting company,” we are not required to provide disclosure pursuant to this Item.

 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Please see “Cautionary Note Regarding Forward-Looking Statements.”

 

Overview

 

We are a blank check company originally incorporated in the Cayman Islands on June 5, 2017 for the purpose of effecting a merger, amalgamation, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On December 28, 2018, we changed our jurisdiction of incorporation from the Cayman Islands to the State of Delaware (the “Domestication”). As a result, on the effective date of the Domestication, each of our issued and outstanding units, Class A ordinary shares and Class B ordinary shares automatically converted by operation of law into units of the post-Domestication company, one share of Class A common stock and one share of Class B common stock, respectively, and each of our outstanding warrants became warrants to acquire the corresponding number of shares of Class A common stock.

 

At December 31, 2019, we held cash of $161,286 and current liabilities of $5,862,863.

 

Recent Events

 

On November 6, 2019, our board of directors announced that it cancelled its special meeting of stockholders relating to extending the time by which we had to complete our initial business combination that was scheduled to take place that day and had determined to redeem all of our outstanding public shares (as defined below), effective as of the close of business on November 7, 2019, because we did not consummate an initial business combination within the time period required by our certificate of incorporation (our “Charter”). Public shares ceased trading as of the open of business on November 8, 2019, in order to allow time for the settlement of trades. We liquidated the trust account that we established in connection with our initial public offering (the “Trust Account”) in order to redeem all shares of Class A common stock, par value $0.0001 per share (“Class A common stock”) included in the units sold at our initial public offering (the “public shares”).

 

As of the close of business on November 7, 2019, the public shares were deemed cancelled and represented only the right to receive a per-share redemption price determined by the net of taxes and dissolution expenses, determined to be approximately $10.30 (the “Redemption Amount”). We withheld approximately $1,300,000 from the distribution and once income tax liability is finalized for the year ended December 31, 2019, we will distribute the remaining proceeds to the public stockholders. There were no redemption rights or liquidating distributions with respect to our warrants. Our initial stockholders waived their redemption rights with respect to the outstanding common stock issued prior to our initial public offering. Nasdaq filed a Form 25 with the United States Securities and Exchange Commission to delist its securities on November 7, 2019.

 

On December 9, 2019, we held a special meeting of public warrantholders. The holders of the warrants that were issued as part of the units in our initial public offering (the “Public Warrants”) voted to amend the Warrant Agreement, dated as of November 2, 2017, by and among the Company and Continental Stock Transfer & Trust Company (the “Warrant Agreement”), so that all of the Public Warrants were automatically converted into the right to receive $0.02 per whole Public Warrant, payable in cash. Only the Public Warrants were converted into the right to receive cash. In addition, Sentinel Management Holdings, LLC (our “Sponsor”) agreed to forfeit (i) all of the 5,933,333 private placement warrants held by it and (ii) 90% of the 8,550,000 shares of our Class B common stock (the “founder shares”) held by it to us for no consideration. In addition, each of Jon A. Marshall and Marc Zenner agreed to forfeit 90% of the 37,500 founder shares held by him to us for no consideration.

 

On December 19, 2019, each of Ronald Steger and Craig Levering submitted his resignation from our Board, as of the date thereof. The resignations of Messrs. Steger and Levering were not due to any disagreement with us.

 

 

Results of Operations

 

We have not generated any revenues to date, and we will not be generating any operating revenues until the closing and completion of our initial business combination. Our entire activity up to December 31, 2019 was related to our Company’s formation, the initial public offering, and since the closing of the initial public offering, a search for a business combination candidate.

 

For the year ended December 31, 2019, we had net income of $3,764,677, which consisted of $2,866,675 of general administrative expenses, offset by $6,890,275 of investment income on the Trust Account and an expense of $258,923 for income taxes. For the year ended December 31, 2018, we had net income of $1,485,308, which consisted of $3,628,857 of general administrative expenses, offset by $5,123,005 of investment income on the Trust Account and an expense of $8,840 for income taxes.

 

Liquidity and Capital Resources

 

Until the consummation of the initial public offering, our only source of liquidity was an initial sale of the founder shares to our Sponsor, and the proceeds of loans and advances from the Sponsor in the amount of $115,236. Upon the closing of the initial public offering, we repaid our Sponsor $115,236 in settlement of the outstanding loan and advances.

 

On November 7, 2017, we consummated our initial public offering of 30,000,000 units at a price of $10.00 per unit generating gross proceeds of $300,000,000 before underwriting discounts and expenses. On November 7, 2017, simultaneously with the consummation of our initial public offering, we completed the private sale of 5,333,333 private placement warrants at a purchase price of $1.50 per private placement warrant to our Sponsor, generating gross proceeds to the Company of approximately $8,000,000. In connection with the initial public offering, the underwriters were granted an option to purchase up to 4,500,00 over-allotment units. On November 9, 2017, we consummated the closing of the sale of 4,500,000 additional units upon receiving notice of the underwriters’ election to fully exercise their over-allotment option, generating additional gross proceeds of approximately $45,000,000. Simultaneously with the exercise of the over-allotment option, we consummated the private sale of an additional 600,000 private placement warrants to our Sponsor, generating gross proceeds of approximately $900,000.

 

An aggregate of $345,000,000 of the net proceeds from the initial public offering (including the over-allotment units) and the private placement of the private placement warrants with the Sponsor was deposited in the trust account. The $345,000,000 of net proceeds previously held in the trust account included $12,075,000 of deferred underwriting discounts and commissions that would have be released to the underwriters of the initial public offering upon completion of our initial business combination. Because we have failed to complete our initial business combination by the November 7, 2019 deadline in our Charter, the underwriters forfeited all of the deferred underwriting commission. Of the gross proceeds from the initial public offering that were not deposited in the trust account, $6,900,000 was used to pay underwriting discounts and commissions in the initial public offering, $115,236 was used to repay loans and advances from our Sponsor, and the balance was reserved to pay accrued offering and formation costs, business, legal and accounting due diligence expenses on prospective acquisitions and continuing general and administrative expenses.

 

We presently have no revenue; our net income was $3,764,677 and $1,485,308 for the years ended December 31, 2019 and 2018, respectively, and consist primarily of professional fees and costs related to our search for a business combination. Through December 31, 2019, our liquidity needs were satisfied through funding from our Sponsor.

 

 

On March 1, 2019, we issued a convertible promissory note in the amount of up to $1,500,000 to our Sponsor to fund our ongoing expenses, which is convertible into warrants of the post-business combination entity to purchase shares, at a price of $1.50 per warrant at the option of the lender. Such warrants are identical to the private placement warrants. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. As of December 31, 2019, the Company has drawn $999,640 on the convertible promissory note.

 

On November 7, 2019, because we did not consummate an initial business combination within the time period required by our Charter, the public shares were deemed cancelled and represented only the right to receive the Redemption Amount. As a result, we liquidated the Trust Account in order to redeem all public shares. Our public shares ceased trading as of the open of business on November 8, 2019, in order to allow time for the settlement of trades.

 

In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we determined that we do not have sufficient liquidity to meet our future obligations. As of December 31, 2019, we had a working capital deficit of approximately $5.7 million, current liabilities of approximately $5.8 million and had cash of approximately $160,000. Subsequent to year end, the Sponsor funded us approximately $1,800,000 through March 16, 2020 in order for us to pay down our obligations as of December 31, 2019. The Sponsor intends to convert the $3,379,283 owed as of December 31, 2019 and all new borrowings in 2020 into equity of the Company. In addition, the Sponsor intends to financially support us sufficient for us to satisfy our working capital needs through one year from the date of the issuance of the financial statements.

 

Critical Accounting Policies

 

Advances from Related Parties

 

During the year ended December 31, 2019, the Sponsor or an affiliate of the Sponsor incurred certain administrative expenses on our behalf in the amount of $15,858. During the year ended December 31, 2019, the Sponsor also advanced $2,379,643 to fund our ongoing operations. During the year ended December 31, 2018, the Sponsor or an affiliate of the Sponsor incurred certain administrative expenses on our behalf in the amount of $94,168. These advances were due on demand and were non-interest bearing. As of December 31, 2019 and 2018, the outstanding balance on the advances was $2,379,643 and $0, respectively.

 

Common stock subject to possible redemption

 

The Company has no outstanding public shares. As of the close of business on November 7, 2019, the public shares were deemed cancelled and represented only the right to receive the Redemption Amount.

 

 

Recent Accounting Pronouncements

  

We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.

 

JOBS Act

 

The Jumpstart Our Business Startups Act (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 elected 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, our 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 independent registered public accounting firm’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 PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’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 CEO’s compensation to median employee compensation. These exemptions are applicable to us for a period of five years from the date of completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of December 31, 2019.

 

Contractual Obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

 

The underwriters were entitled to deferred underwriting commissions of $12,075,000. The deferred underwriting commissions would have 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. The underwriters were not entitled to any interest accrued on the deferred underwriting commissions. Because we failed to complete an initial business combination under the November 7, 2019 deadline under our Charter, the underwriters will not receive the deferred underwriting commission.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

As a “smaller reporting company,” we are not required to provide disclosure pursuant to this Item.

 

 

Item 8. Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and the Board of Directors of

Sentinel Energy Services Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Sentinel Energy Services Inc. (the “Company”) as of December 31, 2019 and 2018, the related statements of income, changes in stockholders’ equity (deficit) and cash flows, for the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Emphasis of Matter

 

As discussed in Note 1 to the financial statements, on November 8, 2019, the Company liquidated the Trust Account and redeemed all Class A Stockholders. Our report is not modified with respect to this matter.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ WithumSmith+Brown, PC

 

We have served as the Company's auditor since 2017.

 

Whippany, New Jersey

 

March 16, 2020

 

 

Sentinel Energy Services Inc.

BALANCE SHEETS

 

		December 31, 2019				December 31, 2018
ASSETS
Current assets:
Cash		$	161,286			$	145,699
Cash segregated for final distribution to Class A Stockholders (See Note 1)			1,252,386				-
Prepaid expenses			37,397				92,500
Total current assets			1,451,069				238,199
Investments held in Trust Account			-				350,123,005
Total assets		$	1,451,069			$	350,361,204
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses		$	2,221,167			$	2,811,661
Accrued income and franchise taxes			262,413				8,840
Distribution to Class A Stockholders (See Note 1)			1,252,386				-
Promissory note payable - Sponsor			999,640				-
Advances from Sponsor			2,379,643				-
Total current liabilities			7,115,249				2,820,501
Deferred underwriting compensation			-				12,075,000
Total liabilities			7,115,249				14,895,501
Class A common stock subject to possible redemption (0 and 33,046,570 shares at approximately $10.00 per share as of December 31, 2019 and 2018, respectively)			-				330,465,700
Stockholders’ Equity (Deficit):
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding			-				-
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 0 and 1,453,430 shares issued and outstanding (excluding 0 and 33,046,570 shares subject to possible redemption) at December 31, 2019 and 2018, respectively			-				145
Class B common stock, $0.0001 par value, 20,000,000 shares authorized, 862,500 and 8,625,000 shares issued and outstanding at December 31, 2019 and 2018, respectively			86				863
Additional paid-in capital			-				3,600,071
Retained earnings (accumulated deficit)			(5,664,266	)			1,398,924
Total stockholders’ equity (deficit)			(5,664,180	)			5,000,003
Total liabilities and stockholders’ equity (deficit)		$	1,451,069			$	350,361,204

 

See accompanying notes to financial statements

 

 

Sentinel Energy Services Inc.
StatementS of INCOME

 

		For the Year Ended December 31, 2019				For the Year Ended December 31, 2018
Revenue		$	—			$	—
EXPENSES
General and administrative (1)			2,866,675				3,628,857
TOTAL EXPENSES			2,866,675				3,628,857
OTHER INCOME
Investment income on Trust Account			6,890,275				5,123,005
TOTAL OTHER INCOME			6,890,275				5,123,005
INCOME BEFORE INCOME TAX PROVISION			4,023,600				1,494,148
Income tax provision			258,923				8,840
Net income attributable to common stock		$	3,764,677			$	1,485,308
Two Class Method:
Weighted average number of Class A common stock outstanding, basic and diluted			29,301,376				34,500,000
Basic and diluted net income per Class A common stock		$	0.23			$	0.15
Weighted average number of Class B common stock outstanding, basic and diluted			8,305,993				8,625,000
Basic and diluted net loss per Class B common stock		$	(0.35	)		$	(0.42	)

 

(1)

See Note 5.

 

See accompanying notes to financial statements

 

 

Sentinel Energy Services Inc.

StatementS of Changes in STOCKHOLDERS’ Equity (DEFICIT)

 

		Class A Common Stock								Class B Common Stock								Additional Paid-in				Retained Earnings (Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Deficit)				Equity (Deficit)
Balances as of January 1, 2018			1,601,961			$	160				8,625,000			$	863			$	5,085,366			$	(86,384	)		$	5,000,005
Shares subject to possible redemption			(148,531	)			(15	)			-				-				(1,485,295	)			-				(1,485,310	)
Change in common stock subject to possible redemption
Redemption of Class A shares
Cash paid for redemption of warrants
Forfeiture and cancellation of 7,695,000 Founders’ shares
Forfeiture of underwriter discount
Net income			-				-				-				-				-				1,485,308				1,485,308
Balances as of December 31, 2018			1,453,430				145				8,625,000				863				3,600,071				1,398,924				5,000,003
Balances as of December 31, 2018			1,453,430				145				8,625,000				863				3,600,071				1,398,924				5,000,003
Shares subject to possible redemption
Change in common stock subject to possible redemption			33,046,570				3,305				-				-				330,462,395				-				330,465,700
Redemption of Class A shares			(34,500,000	)			(3,450	)			-				-				-				(356,740,120	)			(356,743,570	)
Cash paid for redemption of warrants			-				-				-				-				-				(225,990	)			(225,990	)
Forfeiture and cancellation of 7,695,000 Founders’ shares			-				-				(7,762,500	)			(777	)			777				-				-
Forfeiture of deferred underwriter discount			-				-				-				-				12,075,000				-				12,075,000
Reclass additional paid-in capital to retained earnings			-				-				-				-				(346,138,243	)			346,138,243				-
Net income			-				-				-				-				-				3,764,677				3,764,677
Balances as of December 31, 2019			-			$	-				862,500			$	86			$	-			$	(5,664,266	)		$	(5,664,180	)

 

 See accompanying notes to financial statements.

 

 

Sentinel Energy Services Inc.

StatementS of Cash Flows

 

		For the Years Ended December 31,
		2019				2018
Cash Flows From Operating Activities:
Net income		$	3,764,677			$	1,485,308
Adjustments to reconcile net income to net cash used in operating activities:
Investment income earned on marketable securities held in Trust Account			(6,890,275	)			(5,123,005	)
Changes in operating assets and liabilities:
Prepaid expenses			55,103				90,833
Accounts payable and accrued expenses			(590,494	)			2,791,771
Accrued income and franchise taxes			253,573				8,840
Net Cash Used In Operating Activities			(3,407,416	)			(746,253	)
Cash Flows From Investing Activities:
Redemption of Trust Account			355,491,184				-
Investment income released from Trust Account for dissolution expenses			100,000				-
Investment income released from Trust Account to pay taxes			1,422,096				-
Net Cash Provided By Investing Activities			357,013,280				-
Cash Flows From Financing Activities:
Redemption of Class A common stock			(355,491,184	)
Proceeds from convertible promissory note payable - Sponsor			999,640				-
Proceeds from advances - Sponsor			2,379,643				-
Payment for the redemption of warrants			(225,990	)			-
Net Cash Used In Financing Activities			(352,337,891	)			-
Net increase (decrease) in cash and cash segregated for final distribution to Class A stockholders			1,267,973				(746,253	)
Cash and cash segregated for final distribution to Class A stockholders at beginning of year			145,699				891,952
Cash and cash segregated for final distribution to Class A stockholders at end of year		$	1,413,672			$	145,699
Supplemental disclosure of cash flow activities:
Cash paid for income taxes		$	8,691			$	-
Supplemental disclosure of non-cash financing activities:
Forfeiture and cancellation of Founders’ shares		$	770			$	-
Forfeiture of deferred underwriters’ discount		$	12,075,000			$	-
Change in value of common stock subject to possible redemption		$	-			$	1,485,310
Payment to related parties for general and administrative expenses paid on behalf of the Company		$	-			$	94,168
Distribution due to Class A Stockholders		$	1,252,386			$	-

 

See accompanying notes to financial statements

 

 

SENTINEL ENERGY SERVICES INC.

NOTES TO FINANCIAL STATEMENTS

 

1. Description of Organization and Business Operations

 

Organization and General

 

Sentinel Energy Services Inc. (the “Company”) was incorporated in the Cayman Islands on June 5, 2017 (date of inception). The Company was formed for the purpose of effecting a merger, amalgamation, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

 

On December 28, 2018, the Company changed its jurisdiction of incorporation from the Cayman Islands (“Sentinel Cayman”) to the State of Delaware (“Sentinel Delaware”), as described further below (the “Domestication”) and continued to be named Sentinel Energy Services Inc. As a result of the Domestication, each of Sentinel Cayman’s issued and outstanding Class A ordinary shares (the “Class A ordinary shares”) and Class B ordinary shares (the “Class B ordinary shares”) automatically converted by operation of law into one share of Class A common stock (“Class A common stock”) and Class B common stock (“Class B common stock”), of Sentinel Delaware, respectively. Similarly, each of Sentinel Cayman’s outstanding units and warrants automatically converted by operation of law, on a one-for-one basis, into units of Sentinel Delaware and warrants to acquire the corresponding number of shares of Class A common stock, respectively. Accordingly, all references to the Company’s capital stock both before and after the Domestication are referred to as shares of “common stock” in this filing.

 

The registration statement for the Company’s Public Offering (Note 3) was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on November 2, 2017.

 

At December 31, 2019, the Company had not yet commenced operations. All activity through December 31, 2019 relates to the Company’s formation and initial public offering (the “Public Offering”) described below, and since the closing of the Public Offering, a search for a business combination candidate, including activities in connection with the announced and subsequently terminated proposed business combination with Strike Capital, LLC (“Strike”) (as described in Note 5). The Company did not generate any operating revenues since inception. The Company generated non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering.

 

The Company intended to finance its initial business combination with proceeds from the Public Offering (Note 3) and sale of the Private Placement Warrants (as defined in Note 3), the Company’s capital stock, debt or a combination of the foregoing. Upon the closings of the Public Offering and the sale of the Private Placement Warrants, approximately $345,000,000 was placed in a trust account (the “Trust Account”) (discussed below). The Company was not able to consummate a business combination prior to the November 7, 2019 deadline under its Charter. As a result, the Company commenced the liquidation of the Trust Account and returned the funds held therein to its public stockholders by redeeming 100% of the Company’s shares of Class A common stock included in the Units (as defined in Note 3) sold in the Public Offering (the “Public Shares”) in accordance with the Charter, which completely extinguished the public stockholders’ rights in the Company. In connection with the redemption of the Public Shares, each stockholder received approximately $10.30 per share on November 18, 2019. The Company has withheld approximately $1,300,000 from the distribution and once income tax liability is finalized for the year ended December 31, 2019, it will distribute the remaining proceeds to the public stockholders.

 

Trust Account

 

The proceeds held in the Trust Account were invested only in U.S. government treasury bills with a maturity of one hundred eighty (180) days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds were to remain in the Trust Account until the earlier of (i) the consummation of an 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.

 

In accordance with the terms of the Investment Management Trust Agreement entered into by the Company in connection with the Public Offering, other than the withdrawal of interest to pay income taxes, if any, none of the funds held in the Trust Account were to be released until the earlier of: (i) the completion of an initial business combination; (ii) the redemption of any Public Shares that have been properly tendered in connection with a stockholder vote to amend the Company’s certificate of incorporation (the “Charter”) to modify the substance or timing of its obligation to redeem 100% of such shares of Class A common stock if it does not complete an initial business combination by November 7, 2019; and (iii) the redemption of 100% of the Class A common stock included in the Units sold in the Public Offering if the Company is unable to complete an initial business combination by November 7, 2019 (subject to the requirements of law). 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. The Company was unable to complete an initial business combination by the November 7, 2019 deadline under its Charter and so it commenced the liquidation of the assets in the Trust Account on November 8, 2019 (See below).

 

 

Initial Business Combination

 

The Company’s management had broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering were intended to be generally applied toward consummating an initial business combination.

 

The Charter and the prospectus that the Company filed in connection with its initial public offering provided that the Company had 24 months after the closing of its initial public offering, or until November 7, 2019, to complete a business combination. During the period since the Company’s initial public offering, the Company diligently searched for a business to combine with in a transaction that would generate value for the Company’s stockholders; however, over the same period, the energy sector experienced significant headwinds, which increased the challenges faced by the Company in sourcing a compelling target business. Despite the Company’s best efforts, it was not able to consummate a business combination prior to the November 7, 2019 deadline under its Charter. As a result, the Company commenced the liquidation of the Trust Account and returned the funds held therein to its public stockholders by redeeming 100% of the Company’s Public Shares in accordance with the Charter, which extinguished the public stockholders’ rights in the Company. 

 

Liquidation

 

As discussed above, the Company was not able to consummate a business combination prior to the November 7, 2019 deadline under its Charter. As a result, the Company commenced the liquidation of the Trust Account and returned the funds held therein of approximately $355.5 million to its public stockholders by redeeming 100% of the Company’s shares of Class A common stock included in the Units (as defined in Note 3 below) sold in the Public Offering (the “Public Shares”) in accordance with the Charter, which completely extinguished the public stockholders’ rights in the Company. In connection with the redemption of the public shares, each stockholder received approximately $10.30 per share on November 18, 2019. During the liquidation period the Company and the holders of its Public Warrants executed an amendment to the Warrant Agreement, dated as of November 2, 2017 (the “Warrant Agreement”), between the Company and Continental Stock Transfer & Trust Company, to automatically convert each of the Company’s 11,500,000 outstanding Public Warrants into the right to receive $0.02 per whole Public Warrant, payable in cash. In December 2019, the Company paid $225,990 to its warrant holders in relation to the automatic redemption of the warrants.

 

Upon closing of the closing of the Public Offering, the Company paid an underwriting discount of 2.0% of the per Unit offering price to the underwriters at the with an additional fee (the “Deferred Discount”) of 3.5% ($12,075,000) of the gross offering proceeds payable upon the Company’s completion of an initial business combination. In accordance with the terms of the underwriting agreement entered into in connection with the Public Offering, the underwriters forfeited any rights or claims to the Deferred Discount because the Company was unable to consummate an initial business combination by the November 7, 2019 deadline under its Charter.

 

The Company withheld approximately $1,300,000 from the distribution in order to pay the income tax liability for the year ended December 31, 2019, after which, the Company will distribute the remaining proceeds to the public stockholders.

  

Mandatory Liquidation, Going Concern and Liquidity

 

In accordance with the terms of its Charter, the Company was unable to complete an initial business combination by November 7, 2019, The Company ceased all operations except for the purpose of winding up; (ii) redeemed 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 income taxes of approximately $10.30 per share (less up to $100,000 of such net interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption extinguished public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as 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 letter agreements with the Company, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company failed to complete the initial business combination by November 7, 2019. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquire shares of Class A common stock in or after the Public Offering, they were entitled to liquidating distributions from the Trust Account with respect to such shares if the Company failed to complete the initial business combination within the prescribed time period. The Company was unable to complete an initial business combination by the November 7, 2019 deadline under its Charter and so it commenced the liquidation of the assets in the Trust Account on November 8, 2019.

 

 

In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company determined that it does not have sufficient liquidity to meet its future obligations; however, management has determined that it has access to funds from Sponsor that alleviate going concern. As of December 31, 2019, the Company had a working capital deficit of approximately $5.7 million, current liabilities of approximately $5.8 million and had cash of approximately $160,000 (excluding amounts related to the Class A distribution liability and its related cash).

 

Subsequent to year end, the Sponsor funded the Company approximately $1,800,000 through March 16, 2020 in order for the Company to pay down its obligations as of December 31, 2019. The Sponsor intends to convert the $3,379,283 owed as of December 31, 2019 and all new borrowings in 2020 into equity of the Company. In addition, the Sponsor intends to financially support the Company sufficient for the Company to satisfy its working capital needs through one year from the date of the issuance of the financial statements.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC.

 

Emerging Growth Company

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.

  

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At December 31, 2019 and 2018, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

 

 

Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

 

Redeemable Common Stock

 

As discussed in Note 1, all of the 34,500,000 Public Shares contain a redemption feature which allows for the redemption of such shares under the Company’s Charter. In accordance with FASB ASC Topic 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the Company’s equity instruments, are excluded from the provisions of FASB ASC Topic 480. Although the Company has not specified a maximum redemption threshold, its Charter provides that 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.

    

The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of Class A common stock shall be affected by charges against additional paid in capital.

 

At December 31, 2019 and 2018, nil and 33,046,570, respectively, of the 34,500,000 shares of Class A common stock were classified outside of permanent equity.

 

Net Income (Loss) Per Share of Common Stock

 

Net income (loss) per share of common stock is computed by dividing net income (loss) applicable to the shares of common stock by the weighted average number of shares outstanding for the period. As of December 31, 2019, the Company has not considered the effect of the warrants sold in the Public Offering and private placement to purchase an aggregate of 17,433,333 shares of Class A common stock in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the Treasury Stock method. As a result, diluted net income (loss) per share of common stock is the same as basic net income per share of common stock as of December 31, 2019.

 

The Company’s statements of operations include a presentation of income (loss) per share for Class A 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 investment income earned on the Trust Account of $6,890,275 and $5,123,005, respectively, net of applicable taxes of $263,011 and $10,484, respectively, by the weighted average number of shares of Class A common stock outstanding for the years ended December 31, 2019 and 2018, respectively. Net loss per share, basic and diluted for Class B common stock is calculated by dividing the net income, less income attributable to Class A common stock of $6,631,652 and $5,114,165, respectively, by the weighted average number of shares of Class B common stock outstanding for the years ended December 31, 2019 and 2018, respectively.

 

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

FASB Topic ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2019 and 2018. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2019 and 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

 

The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

As a result of the Domestication that took place on December 28, 2018 (as discussed in Note 1), the Company became subject to federal and state income tax purposes starting with the 2018 taxable year.

 

In connection with the Domestication and the termination of the proposed business combination with Strike (as discussed in Note 5), the Company may utilize certain previously recorded start-up costs as a deduction to their taxable income.

 

The Company’s current year taxable income consists of interest income on the Trust Account net of franchise taxes and expenses of approximately $5.7 million related to the terminated business combination with Strike effective as of February 12, 2019 (as discussed in Note 5) and other tax deductible expenses in conjunction with the Company’s search for another business combination candidate. The Company’s costs are generally considered start-up costs and are not currently deductible. During the year ended December 31, 2019, the Company recorded income tax expense of approximately $259,000.

 

Related Parties

 

The Company follows FASB ASC 850-10 for the identification of related parties and disclosure of related party transactions.

 

Pursuant to ASC 850-10-20, the Company’s related parties include: (a) affiliates of the Company (“Affiliate” means, with respect to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. 

 

Subsequent Events

 

The Company evaluates subsequent events and transactions that occur after the balance sheet date for potential recognition or disclosure. Any material events that occur between the balance sheet date and the date that the financial statements were issued are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet date.

 

 

Recent Accounting Pronouncements

  

The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Company’s financial statements.

 

3. Public Offering

 

In November 2017, the Company closed its Public Offering of 34,500,000 units at a price of $10.00 per unit (the “Units”), with gross proceeds of $345,000,000 from the sale of Units. The closings occurred on November 7, 2017 with respect to 30,000,000 Units and on November 9, 2017 with respect to 4,500,000 Units related to the exercise of the underwriters’ overallotment option. 

 

Each Unit consists of one share of Class A common stock, $0.0001 par value, and one-third of one warrant (each, a “Public Warrant” and, collectively, the “Public Warrants”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. No fractional shares will be issued upon separation of the Units and only whole Public Warrants trade. Each Public Warrant will become exercisable on the later of 30 days after the completion of the Company’s initial business combination or 12 months from the closing of the Public Offering and will expire five years after the completion of the Company’s initial business combination or earlier upon redemption or liquidation. Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per Public Warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the Public Warrant holders.

 

During the liquidation period the Company and the holders of its Public Warrants executed an amendment to the Warrant Agreement, dated as of November 2, 2017 (the “Warrant Agreement”), between the Company and Continental Stock Transfer & Trust Company, to automatically convert each of the Company’s 11,500,000 outstanding Public Warrants into the right to receive $0.02 per whole Public Warrant, payable in cash. In December 2019, the Company paid $225,990 to its warrant holders in relation to the automatic redemption of the warrants.

  

Simultaneous with the closing of the Public Offering on November 7, 2017, Sentinel Management Holdings, LLC (the “Sponsor”) purchased an aggregate of 5,333,333 private placement warrants at a price of $1.50 per whole warrant (approximately $8,000,000 in the aggregate) in a private placement (the “Private Placement Warrants”). Simultaneously with the closing of the overallotment, the Company consummated the private placement of an additional 600,000 Private Placement Warrants to the Sponsor, generating gross proceeds of approximately $900,000.

 

The Company paid an underwriting discount of 2.0% of the per Unit offering price to the underwriters at the closing of the Public Offering, with the Deferred Discount payable upon the Company’s completion of an initial business combination. The Deferred Discount was payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completed its initial business combination. In accordance with the terms of the underwriting agreement entered into in connection with the Public Offering, the underwriters forfeited any rights or claims to the Deferred Discount because the Company was unable to consummate an initial business combination by the November 7, 2019 deadline under its Charter.

 

4. Related Party Transactions

 

Founder Shares

 

In June 2017, the Sponsor entered into an Amended and Restated Securities Purchase Agreement, for the purchase of 14,375,000 shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.002 per share. As used herein, unless the context otherwise requires, “Founder Shares” shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Sponsor is a portfolio company of CSL Capital Management, L.P., an energy services-focused private equity fund.

 

 

The Founder Shares are identical to the shares of Class A common stock included in the Units sold in the Public Offering except that (1) holders of the Founder Shares have the right to vote on the election of directors prior to an initial business combination, (2) the Founder Shares are subject to certain transfer restrictions, as described in more detail below, (3) holders of the Founder Shares entered into letter agreements with the Company pursuant to which they agreed to waive their redemption rights with respect to any Founder Shares held by them in connection with the completion of an initial business combination, (4) the Founder Shares are shares of Class B common stock that will automatically convert into shares of Class A common stock at the time of an initial business combination and (5) the Founder Shares are subject to registration rights, as described below.

 

In August 2017, the Sponsor surrendered 5,750,000 shares of its Class B common stock for no consideration, resulting in the Sponsor holding an aggregate of 8,625,000 shares of Class B common stock. This forfeiture also adjusted the shares subject to forfeiture from 1,875,000 to 1,125,000, to the extent that the over-allotment option is not exercised in full by the underwriters so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding shares after the Public Offering. As described above, the underwriters exercised their overallotment option in connection with the Public Offering in full, and therefore none of the Founder Shares were forfeited.

 

The Company’s initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of an initial business combination or (B) subsequent to an initial business combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after an initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.

 

In October 2017 and April 2018, the Sponsor transferred 37,500 Founder Shares to Marc Zenner and Jon A. Marshall, respectively, both of whom are independent directors of the Company, at the original purchase price. The Sponsor forfeited 90% of the 8,550,000 Founder Shares and all of the 5,933,333 Private Placement Warrants held by it for no consideration because the Company was unable to consummate an initial business combination by the November 7, 2019 deadline under its Charter. As a result of these transfers, the Sponsor holds 855,000 Founder Shares and Marc Zenner and Jon A. Marshall hold 3,750 Founder Shares each.

 

Private Placement Warrants

 

Upon the closing of the Public Offering on November 7, 2017 and November 9, 2017, the Sponsor purchased an aggregate of 5,933,333 Private Placement Warrants at a price of $1.50 per whole warrant (approximately $8,900,000 in the aggregate) in a private placement that occurred simultaneously with the closing of the Public Offering. Each whole Private Placement Warrant is exercisable to purchase one share of 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 Public Offering held in the Trust Account. The remaining portion of the purchase price was held outside the Trust Account for transaction and working capital expenses.

 

An initial business combination was not completed by November 7, 2019, and therefore, 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 expired worthless. The Private Placement Warrants were non-redeemable and exercisable on a cashless basis so long as they were 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 the Private Placement Warrants until 30 days after the completion of an initial business combination. See Founder shares above for forfeiture of private placement warrants.

  

 

Registration Rights

 

The holders of Founder Shares may be entitled to registration rights pursuant to a registration rights agreement signed in connection with the Public Offering. These holders are entitled to certain demand and “piggyback” registration rights.

 

However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements. 

 

Advances from Related Parties

 

During the year ended December 31, 2019, the Sponsor or an affiliate of the Sponsor incurred certain administrative expenses on behalf of the Company in the amount of $15,858. During the year ended December 31, 2019, the Sponsor also advanced $2,379,643 to fund ongoing operations of the Company. During the year ended December 31, 2018, the Sponsor or an affiliate of the Sponsor incurred certain administrative expenses on behalf of the Company in the amount of $94,168. These advances were due on demand and were non-interest bearing. As of December 31, 2019 and 2018, the outstanding balance on the advances was $2,379,643 and $0, respectively.

 

Subsequent to December 31, 2019, the Sponsor funded approximately $1,800,000 in order for the Company to pay down its liabilities as of December 31, 2019. (See Note 9).

 

Administrative Support Agreement

 

Commencing on the date the Units were first listed on the Nasdaq, the Company agreed to pay an affiliate of the Sponsor up to $10,000 per month for office space, utilities and secretarial and administrative support. Since the Company was unable to complete its initial business combination prior to the November 7, 2019 deadline in our Charter, pursuant to the Administrative Support Agreement, the Company ceased paying these monthly fees.

 

The Company incurred $27,535 and $17,447 for such expenses under the administrative service agreement for the years ended December 31, 2019 and 2018, respectively.

  

Option Agreement

 

On November 2, 2017, the Company entered into an option agreement (“Option Agreement”) pursuant to which CSL Energy Opportunities Fund III, L.P. and CSL Energy Holdings III, Corp, LLC (“Option Holders”) agreed to purchase an aggregate of up to 10,000,000 units (the “Co-Investment Units”), consisting of one share of Class A common stock (the “Co-Investment Shares”) and one-third of one warrant to purchase one share of Class A common stock (the “Co-Investment Warrants,” and together with the Co-Investment Shares, the “Co-Investment Securities”), for $10.00 per unit (the “Exercise Price”), or an aggregate maximum amount of $100,000,000, immediately prior to the closing of the Company’s initial business combination.

 

The Co-Investment Warrants will have the same terms as the Private Placement Warrants so long as they are held by the Option Holders or its permitted transferees, and the Co-Investment Shares will be identical to the shares of Class A common stock included in the Units, except that the Co-Investment Shares will be subject to transfer restrictions and certain registration rights, as described herein. Any Co-Investment Warrant held by a holder other than the Option Holders or their permitted transferees will have the same terms as the Public Warrants.

 

The Option Holders will have the right to transfer a portion of their option to purchase the Co-Investment Securities to third parties, subject to compliance with applicable securities laws. The Option Agreement also provides that the Option Holders and any permitted transferees will be entitled to certain registration rights with respect to their Co-Investment Securities, including the shares of Class A common stock underlying their Co-Investment Warrants.

 

Pursuant to the Option Agreement, since the Company was unable to complete an initial business combination by the November 7, 2019 deadline, the option automatically terminated.

 

Convertible Promissory Note Payable

 

On March 1, 2019, the Company issued a convertible promissory note in the amount of up to $1,500,000 with the Sponsor to fund the Company’s ongoing expenses. The convertible promissory note does not bear interest and all unpaid principal was due and payable in full on the earlier of November 7, 2019 or the consummation of an initial business combination by the Company. The Sponsor had the option to convert any amounts outstanding under the convertible promissory note into warrants of the post-business combination entity to purchase shares, at a conversion price of $1.50 per warrant. As of December 31, 2019, the outstanding balance on convertible promissory note was 999,640.

 

 

5. Termination of Proposed Business Combination

 

On October 18, 2018, the Company entered into a transaction agreement and plan of merger (the “Transaction Agreement”) with Strike, OEP Secondary Fund (Strike), LLC, One Equity Partners Secondary Fund, L.P., the other equityholders of Strike party thereto, OEP-Strike Seller Representative, LLC and SES Blocker Merger Sub, LLC, relating to the proposed acquisition by the Company of a majority of the equity interests of Strike. For more information on the proposed transaction, please see the Definitive Proxy Statement filed by the Company with the SEC on January 18, 2019. On February 12, 2019, the Company and Strike entered into a termination agreement (the “Termination Agreement”), pursuant to which the parties agreed to mutually terminate the Transaction Agreement, effective as of February 12, 2019.

 

As a result of the termination of the Transaction Agreement, each of (i) the purchase and contribution agreement, dated as of October 18, 2018 (the “Contribution Agreement”), by and among the Company, Strike, LLC, a wholly owned subsidiary of Strike, CSL Energy Holdings III Corp, LLC and Invacor Pipeline and Process Solutions, LLC, (ii) the subscription agreements, dated as of October 18, 2018, between the Company and each of CSL Capital Management, L.P. and certain funds and accounts managed by Fidelity Management & Research Company, and (iii) the Voting and Support Agreement, dated as of October 18, 2018, by and among the Company, the Sponsor and certain stockholders of the Company party thereto, which the Company entered into in connection with the proposed acquisition, was automatically terminated in accordance with its terms.

 

Pursuant to the Termination Agreement, all costs and expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of the Transaction Agreement, the Contribution Agreement or the Termination Agreement and the transactions contemplated thereby are to be paid by the party incurring such expenses. The Company incurred approximately $4.2 million of costs related to the proposed business combination. For more information, please see the Current Report on Form 8-K filed by the Company with the SEC on February 13, 2019 relating to the termination of the proposed business combination.

 

Of the approximate $5.7 million in costs related to the various business combination candidates, the Company negotiated with certain vendors to reduce the amounts due. Accordingly, the Company recorded a reduction in accrued expenses of $1.9 million and reversed approximately $1.9 million of general and administrative expenses during the year ended December 31, 2019.

 

6. Stockholders’ Equity

 

Common Stock

 

The authorized common stock of the Company includes up to 200,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock. If the Company entered into an initial business combination, it may (depending on the terms of such an initial business combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on an initial business combination to the extent the Company seeks stockholder approval in connection with an initial business combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock held by them. The Sponsor forfeited 90% of the 8,550,000 Founder Shares and all of the 5,933,333 Private Placement Warrants held by it for no consideration because the Company was unable to consummate an initial business combination by the November 7, 2019 deadline under its Charter. As a result of these transfers, the Sponsor holds 855,000 Founder Shares and each of Jon A. Marshall and Marc Zenner hold 3,750 Founder Shares, resulting in a total of 862,500 Founder Shares outstanding.

 

At December 31, 2019 and 2018, there were nil and 34,500,000 shares of Class A issued and outstanding, respectively, of which nil and 33,046,570, respectively, were classified outside of permanent equity, and 862,500 and 8,625,000 shares of Class B common stock issued and outstanding, respectively.

 

Preferred Stock

 

The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2019 and December 31, 2018, there were no shares of preferred stock issued or outstanding. 

 

 

7. Fair Value Measurements

 

The following table presents information about the Company’s assets that are measured on a recurring basis as of December 31, 2019 and 2018 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

 

Schedule of information about company's assets that are measured on a recurring basis
Description		Fair Value				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Other Unobservable Inputs (Level 3)
Investments held in Trust Account
December 31, 2019		$	—			$	—			$	—			$	—
December 31, 2018		$	350,123,005			$	350,123,005			$	—			$	—

 

8. Income Taxes

 

The Company’s deferred tax assets are as follows at December 31, 2019 and 2018:

 

Schedule of company’s net deferred tax assets
		December 31, 2019				December 31, 2018
Deferred tax asset
Startup expenses/Organizational costs		$	691,601				16,916
Valuation Allowance			(691,601	)			(16,916	)
Deferred tax asset, net of allowance		$	-				-

 

The income tax provision (benefit) consists of the following for the years ended December 31, 2019 and 2018:

 

Schedule of income tax provision consists
		Year Ended December 31, 2019				Year Ended December 31, 2018
Federal
Current		$	258,923			$	8,840
Deferred			(691,601	)			(16,916	)
State and Local
Current			-				-
Deferred			-				-
Change in valuation allowance			691,601				16,916
Income tax provision		$	258,923			$	8,840

  

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended December 31, 2019 and 2018, the change in the valuation allowance was $691,601 and $16,916, respectively.

 

A reconciliation of the statutory tax rate to the Company’s effective tax rates for the years ended December 31, 2019 and 2018 is as follows:

 

Schedule of reconciliation of the federal income tax rate to the Company’s effective tax rate
		Year Ended December 31, 2019				Year Ended December 31, 2018
Statutory federal income tax rate			21.0	%			21.00	%
State taxes, net of federal tax benefit			8.45	%			6.19	%
Other			(2.70	)%			(1.09	)%
Change in valuation allowance			(56.09	)%			(40.19	)%
Income tax provision (benefit)			29.34	%			14.09	%

 

9. Subsequent Events

 

Subsequent to December 31, 2019, the Sponsor funded approximately $1,800,000 in order for the Company to pay down its liabilities as of December 31, 2019. 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.

 

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Controls Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f ) and 15d-15(f ). Under the supervision of our Co-Chief Executive Officers and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.” Based on that evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2019.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Directors and Executive Officers

 

As of the date of this Annual Report, our directors and officers are as follows:

 

Name		Age		Title
Krishna Shivram		57		Chief Executive Officer and Director
Gerald Cimador		47		Chief Financial Officer and Chief Accounting Officer
Kent Jamison		61		General Counsel and Secretary
Andrew F. J. Gould		73		Chairman of the Board of Directors
Charles S. Leykum		42		Director
Jon A. Marshall		68		Director
Marc Zenner		56		Director

 

Krishna Shivram — Chief Executive Officer and Director. Krishna Shivram has served as our Chief Executive Officer since June 16, 2017. He was most recently interim Chief Executive Officer and Chief Financial Officer of Weatherford International plc, a provider of oil and gas services. He was previously appointed Executive Vice President and Chief Financial Officer of Weatherford International plc in November 2013. He has over 29 years of financial and operational management experience in the oilfield service industry and previously worked for Schlumberger Ltd. in a variety of roles across the globe. Immediately prior to joining Weatherford, Mr. Shivram served as Vice President and Treasurer of Schlumberger Ltd. since January 2011. During his tenures with Weatherford and Schlumberger, Mr. Shivram either directly or as part of a team effected M&A transactions valued at over $15 billion, creating significant shareholder value in the process. Mr. Shivram currently also serves on the board of directors of Ranger Energy Services, Inc.

 

Gerald Cimador — Chief Financial Officer and Chief Accounting Officer. Gerald Cimador has served as our Chief Financial Officer and Chief Accounting officer since June 16, 2017. He is currently serving as the Chief Financial Officer of CSL. From 1999 to 2008 Mr. Cimador was Controller of Moore Capital Management LP, a private investment management firm. Prior to that, from 1997 to 1999, Mr. Cimador served as Audit Manager of Ernst & Young LLP. Mr. Cimador started his career as Audit Senior for Goldstein Golub Kessler & Co. from 1994-1997. He has a BBA in Accounting from Hofstra University.

 

Kent Jamison — General Counsel and Secretary. Kent Jamison has served as our General Counsel and Secretary since June 16, 2017 and served as a member of our board of directors from January 2, 2018 until November 7, 2018. Mr. Jamison joined CSL in May 2015 as General Counsel. His responsibilities included overseeing legal and related compliance matters for the Investment Manager and the Portfolio Companies. Before joining the Investment Manager, Mr. Jamison was a senior partner at Locke Lord LLP, focusing primarily on private equity and merger and acquisition transactions and securities compliance matters. Mr. Jamison holds a B.A. cum laude from Davidson College and a J.D. cum laude from Wake Forest University.

 

Andrew F. J. Gould — Director. Andrew Gould has served as Chairman of our board of directors since June 30, 2017. Mr. Gould served as the Chairman of the Board of Directors and Chief Executive Officer of Schlumberger Limited from 2003 until his retirement in 2011. Mr. Gould started his career at Schlumberger in 1975 and held various leadership roles throughout the world before his appointment as the Chief Executive Officer. Mr. Gould currently serves as an independent director of Saudi Aramco and as a director of BJS LLC. He previously served as a non-executive director of Rio Tinto, a resources and mining corporation, from 2002 until 2012, and a non-executive director and Chairman of BG Group, an international exploration and production company, from 2011 until 2016. Mr. Gould has a Bachelor’s degree in Economic History from Cardiff University and qualified as a chartered accountant in the United Kingdom.

 

 

Charles S. Leykum — Director. Charles S. Leykum has served as a member of our board of directors since June 16, 2017. Mr. Leykum founded CSL, an energy services-focused private equity firm in 2008. Prior to founding CSL, Mr. Leykum was a Portfolio Manager at Soros Fund Management LLC. Before his time at Soros, he worked in the Principal Investment Area and the Investment Banking Division of Goldman Sachs & Co. Mr. Leykum currently also serves on the board of directors of Ranger Energy Services, Inc. Mr. Leykum graduated with a Bachelor of Arts in Economics from Columbia University and a Master of Business Administration from Harvard Business School.

 

Jon A. Marshall – Director. Jon A. Marshall has served as a member of our board of directors since January 31, 2018. Mr. Marshall, served as President and Chief Operating Officer of Transocean Inc. from November 2007 to May 2008 and as Chief Executive Officer of GlobalSantaFe Corporation from May 2003 until November 2007, when GlobalSantaFe Corporation merged with Transocean Inc. Mr. Marshall currently serves as a director for Noble Corporation plc, Cobalt International Energy, Inc., Southwestern Energy Company and various other private companies and non-profit organizations. Mr. Marshall has a Bachelor of Science in Engineering from the United States Military Academy of West Point.

 

Marc Zenner — Director. Marc Zenner has served as a member of our board of directors since November, 2017. Mr. Zenner recently retired as Global co-head of Corporate Finance Advisory within J.P. Morgan’s Investment Bank where he was a managing director from 2007 to 2017. Before joining J.P. Morgan in 2007, Mr. Zenner was managing director and Global Head of the Financial Strategy Group (FSG), a corporate finance advisory group within the Investment Banking Division of Citi’s Global Markets. From 2000 to 2003, Mr. Zenner was a Director in the Financial Strategy Group at Citi. Prior to his career in investment banking, Mr. Zenner was the Chairman of the Finance and Economics Area and a Professor of Finance at The University of North Carolina’s Kenan-Flagler Business School (in Chapel Hill).  

 

Number and Terms of Office of Executive Officers and Directors

 

Our board of directors is divided into three classes, each of which serves for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. The term of office of the first class of directors, consisting of Mr. Marshall will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Messrs. Zenner and Shivram, will expire at the second annual meeting of stockholders. The term of office for the third class of directors, consisting of Messrs. Leykum and Gould, will expire at the third annual meeting of stockholders. We do not currently intend to hold an annual meeting of stockholders.

 

Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our Charter as it deems appropriate. Our Charter provides that our officers may consist of a Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Treasurer and such other offices as may be determined by the board of directors.

 

Director Independence

 

An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Mr. Zenner and Mr. Marshall are “independent directors” as defined in applicable SEC rules.

 

Committees of the Board of Directors

 

In connection with our liquidation due to our failure to complete an initial business combination prior to the November 7, 2019 deadline in our Charter, we have disbanded the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee in order to consolidate our operations and implement cost-saving measures.

 

 

Compensation Committee Interlocks and Insider Participation

 

None of our executive officers currently serves, and in the past year has not served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors.

 

Code of Ethics

 

We have adopted a Code of Ethics applicable to our directors, executive officers and employees. We filed copies of our form of Code of Ethics, audit committee charter and compensation committee charter as exhibits to our registration statement in connection with our initial public offering. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. 

 

Limitation on Liability and Indemnification of Officers and Directors

 

Our Charter provides for the indemnification of our officers and directors by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our Charter provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.

 

We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our Charter. Our bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.

 

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.

 

We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.

 

Item 11. Executive Compensation

 

None of our executive officers or directors have received any cash compensation for services rendered to us. Our Sponsor, executive officers, directors, or any of their respective affiliates, are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to our Sponsor, executive officers, directors and our or their affiliates. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth information available to us at March 13, 2020 regarding the beneficial ownership of our common stock held by:

 

●

each person known by us to be the beneficial owner of more than 5% of our outstanding common stock;

 

●

each of our executive officers and directors that beneficially owns our common stock; and

 

●

all our executive officers and directors as a group.

 

In the table below, percentage ownership is based on 862,500 shares of Class B common stock issued and outstanding as of March 13, 2020. Voting power represents the combined voting power of Class B common stock owned beneficially by such person. On all matters to be voted upon, the holders of the Class B common stock vote together as a single class. Currently, all of the Class B common stock is convertible into Class A common stock on a one-for-one basis.

 

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all common stock beneficially owned by them.

 

Name of Beneficial Owners(1)		Number of Shares Beneficially Owned				Approximate Percentage of Outstanding Common Stock
Sentinel Management Holdings, LLC (2)			855,000	(3)			99.1	%
CSL Sentinel Holdings, LLC (2)			855,000	(3)			99.1	%
Charles S. Leykum (2)			855,000	(3)			99.1	%
Andrew F.J. Gould			—				—
Jon A. Marshall			3,750	(3)			0.4	%
Marc Zenner			3,750	(3)			0.4	%
Krishna Shivram			—				—
Gerald Cimador			—				—
All directors and executive officers as a group (6 individuals)			862,500	(3)			100.0	%

 

(1)

Unless otherwise noted, the business address of each of the following entities or individuals is 700 Louisiana Street, Suite 2700, Houston, Texas, 77002.

 

(2)

Sentinel Management Holdings, LLC is the record holder of the shares reported herein. Mr. Leykum is the managing member of CSL Sentinel Holdings, LLC and CSL Sentinel Holdings, LLC is the managing member of Sentinel Management Holdings, LLC. As such, Mr. Leykum and CSL Sentinel Holdings, LLC may be deemed to have or share beneficial ownership of the shares of common stock held directly by Sentinel Management Holdings, LLC. Mr. Leykum and CSL Sentinel Holdings, LLC disclaim beneficial ownership of these shares in excess of their pecuniary interest, if any, therein.

 

(3)

Interests shown consist solely of founder shares, classified as Class B Common Stock.

 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Certain Relationships and Related Transactions

 

Founder Shares

 

In June 2017, the Sponsor entered into an Amended and Restated Securities Purchase Agreement, for the purchase of 14,375,000 shares of Class B ordinary shares for $25,000, or approximately $0.002 per share. As used herein, unless the context otherwise requires, “founder shares” shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. In August 2017, the Sponsor surrendered 5,750,000 shares of its Class B common stock for no consideration, resulting in the Sponsor holding an aggregate of 8,625,000 shares of Class B common stock. This forfeiture also adjusted the shares subject to forfeiture of 1,125,000, so that the founder shares would represent 20.0% of the Company’s issued and outstanding shares after our initial public offering. No founder shares were forfeited following the underwriters’ exercise of the over-allotment option on November 9, 2017. The Sponsor transferred 37,500 founder shares to Marc Zenner in October 2017 and, in January 2018, to Jon Marshall, both of whom are independent directors of the Company, at the original purchase price. 

 

The founder shares are identical to the Class A common stock included in the units sold in our initial public offering except that the founder shares are shares of Class B common stock which automatically convert into shares of Class A common stock at the time of the Company’s initial business combination and are subject to certain transfer restrictions, as described in more detail below.

 

The Company’s initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of the initial business combination or (B) subsequent to the initial business combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.

 

On December 9, 2019, because the Company failed to complete an initial business combination under the deadline provided in the Charter, (i) the Sponsor agreed to forfeit 90% of the 8,550,000 founder shares held by it for no consideration. and (ii) each of Marc Zenner and Jon Marshall agreed to forfeit 90% of the 37,500 founder shares held by him for no consideration, resulting in 862,500 founder shares outstanding.

 

Registration Rights

 

The holders of founder shares, private placement warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the founder shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement. These holders are be entitled to certain demand and “piggyback” registration rights.

 

 

However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Advances from Related Party

 

During the year ended December 31, 2019, the Sponsor or an affiliate of the Sponsor incurred certain administrative expenses on behalf of the Company in the amount of $15,858. During the year ended December 31, 2019, the Sponsor also advanced $2,379,643 to fund ongoing operations of the Company. During the year ended December 31, 2018, the Sponsor or an affiliate of the Sponsor incurred certain administrative expenses on behalf of the Company in the amount of $94,168. These advances were due on demand and were non-interest bearing. As of December 31, 2019 and 2018, the outstanding balance on the advances was $2,379,643 and $0, respectively. Subsequent to December 31, 2019, the Sponsor funded approximately $1,800,000 in order for the Company to pay down its liabilities as of December 31, 2019.

 

Related Party Loans

 

On March 1, 2019, we issued a convertible promissory note in the amount of up to $1,500,000 in favor of our Sponsor to fund our ongoing expenses. The convertible promissory note does not bear interest and all unpaid principal will be due and payable in full on the earlier of November 7, 2019 and the consummation of an initial business combination by the Company. As of March 16, 2020, the Company has drawn $999,640 on the convertible promissory note.

 

Administrative Support Agreement

 

We agreed to pay our Sponsor a total of up to $10,000 per month for office space, utilities and secretarial and administrative support, commencing on the date the units were first listed on Nasdaq. Because we were unable to complete our initial business combination prior to the November 7, 2019 deadline in our Charter, pursuant to the Administrative Support Agreement, we ceased paying these monthly fees.

 

Item 14. Principal Accountant Fees and Services.

 

The firm of WithumSmith+Brown, PC acts as our independent registered public accounting firm. The following is a summary of fees paid to WithumSmith+Brown, PC for services rendered.

 

Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by WithumSmith+Brown, PC in connection with regulatory filings. The aggregate fees billed by WithumSmith+Brown, PC for professional services rendered for the audit of our annual financial statements, and other required filings with the SEC for the year ended December 31, 2019 and 2018 totalled approximately $52,000 and $50,000, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.

 

Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the years ended December 31, 2019 and 2018, we paid nil and nil for consultations concerning financial accounting and reporting standards.

 

Tax Fees. We paid nil and $4,000, respectively, to WithumSmith+Brown, PC for tax planning and tax compliance for the years ended December 31, 2019 and 2018.

 

All Other Fees. We did not pay WithumSmith+Brown, PC for other services for the years ended December 31, 2019 and 2018.

 

Pre-Approval Policy

 

Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).

 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

(a) The following documents are filed as part of this Annual Report:

 

(1) Financial Statements

 

(2) Financial Statements Schedule

 

All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto in is Item 15 of Part IV below.

 

(3) Exhibits

 

EXHIBIT INDEX

 

Exhibit Number		Description
3.1		Certificate of Incorporation (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 333-38271), filed with the SEC on December 28, 2018).
3.2		Bylaws (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 333-38271), filed with the SEC on December 28, 2018).
4.1		Specimen Unit Certificate (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 333-38271), filed with the SEC on December 28, 2018).
4.2		Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.5 filed with Amendment No. 1 to the Company’s Registration Statement on Form S-4 (File no. 333-228366), filed with the SEC on November 29, 2018).
4.3		Specimen Warrant Certificate (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 333-38271), filed with the SEC on December 28, 2018).
4.4		Warrant Agreement, dated November 2, 2017, between the Company and Continental Stock Transfer & Trust Company (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 7, 2017).
4.5		Amendment to the Warrant Agreement, dated as of December 9, 2019, between the Company and Continental Stock Transfer and Trust Company (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 12, 2019).
4.6		Description of Capital Stock.
10.1		Amended and Restated Securities Purchase Agreement, dated June 30, 2017, between the Company and the Sponsor (incorporated by reference to the Company’s Registration Statement on Form S-1 (File no. 333-220584), filed with the SEC on September 22, 2017).
10.2		Letter Agreement, dated November 2, 2017, by and between the Company, the Sponsor, Krishna Shivram, Andrew F. J. Gould, Charles S. Leykum, Vivek Raj, Gerald Cimador, Kent Jamison and Marc Zenner (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 001-38271), filed with the SEC on November 7, 2017).
10.3		Registration Rights Agreement, dated November 2, 2017, between the Company, the Sponsor and certain other security holders (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 001-38271), filed with the SEC on November 7, 2017).
10.4		Form of Indemnity Agreement (incorporated by reference to the Company’s Registration Statement on Form S-1 (File no. 333-220584), filed with the SEC on September 22, 2017).

 

 

10.5		Letter Agreement, dated January 31, 2018, by and between the Company and Jon A. Marshall (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 001-38271), filed with the SEC on February 5, 2018).
10.6		Indemnification Agreement, dated January 31, 2018, by and between the Company and Jon A. Marshall (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 001-38271), filed with the SEC on February 5, 2018).
10.7		Convertible Promissory Note, dated as of March 1, 2019, issued to the Sponsor (incorporated by reference to the Company’s Current Report on Form 8-K (File no. 001-38271), filed with the SEC on March 6, 2019).
14		Code of Ethics (incorporated by reference to the Company’s Registration Statement on Form S-1 (File no. 333-220584), filed with the SEC on September 22, 2017).
24.1		Power of Attorney (included in the signature pages herein)*
31.1		Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
31.2		Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
32.1		Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*
32.2		Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350*
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema*
101.CAL		XBRL Taxonomy Calculation Linkbase*
101.LAB		XBRL Taxonomy Label Linkbase*
101.PRE		XBRL Definition Linkbase Document*
101.DEF		XBRL Definition Linkbase Document*

 

*	Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	SENTINEL ENERGY SERVICES INC.
March 16, 2020	By:	/s/ Krishna Shivram
		Name: Krishna Shivram
		Title: Chief Executive Officer and Director (Principal Executive Officer)

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Krishna Shivram and Kent Jamison and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name		Position		Date
/s/ Krishna Shivram		Chief Executive Officer and Director
Krishna Shivram		(Principal Executive Officer)		March 16, 2020
/s/ Gerald Cimador		Chief Financial Officer and Chief Accounting Officer
Gerald Cimador		(Principal Financial and Accounting Officer)		March 16, 2020
/s/ Andrew F.J. Gould		Chairman of the Board of Directors
Andrew F.J. Gould				March 16, 2020
/s/ Charles S. Leykum		Director
Charles S. Leykum				March 16, 2020
/s/ Jon A. Marshall		Director
Jon A. Marshall				March 16, 2020
/s/ Marc Zenner		Director
Marc Zenner				March 16, 2020

 

 

21