Attached files
| file | filename |
|---|---|
| EX-32.2 - CERTIFICATION - SOC Telemed, Inc. | f10q0920ex32-2_soctelemed.htm |
| EX-32.1 - CERTIFICATION - SOC Telemed, Inc. | f10q0920ex32-1_soctelemed.htm |
| EX-31.2 - CERTIFICATION - SOC Telemed, Inc. | f10q0920ex31-2_soctelemed.htm |
| EX-31.1 - CERTIFICATION - SOC Telemed, Inc. | f10q0920ex31-1_soctelemed.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2020
☐ 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: 001-39160
| SOC TELEMED, INC. |
| (Exact Name of Registrant as Specified in Its Charter) |
| Delaware | 84-3131208 | |
(State
or other jurisdiction of |
(I.R.S.
Employer |
1768 Business Center Drive, Suite 100
Reston, Virginia 20190
(Address of principal executive offices)
(866) 483-9690
(Issuer’s telephone number)
Healthcare Merger Corp.
623 Fifth Avenue, 14th Floor
New York, NY 10022
Telephone: (646) 975-6581
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name
of each exchange on which registered | ||
| Class A Common Stock, par value of $0.0001 per share | TLMD | The Nasdaq Stock Market LLC | ||
| Warrants, each exercisable for one share of Class A Common Stock for $11.50 per share | TLMDW | The Nasdaq Stock Market LLC |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 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 ☐
As of November 13, 2020, there were 76,773,862 shares of Class A common stock of the registrant issued and outstanding.
SOC TELEMED, INC.
(successor to Healthcare Merger Corp.)
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2020
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
(successor to Healthcare Merger Corp.)
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2020 | December 31, 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 293,044 | $ | 1,149,011 | ||||
| Prepaid expenses | 182,506 | 258,404 | ||||||
| Prepaid income taxes | 6,559 | — | ||||||
| Total Current Assets | 482,109 | 1,407,415 | ||||||
| Deferred tax asset | — | 2,723 | ||||||
| Marketable securities held in Trust Account | 252,039,116 | 250,124,562 | ||||||
| Total Assets | $ | 252,521,225 | $ | 251,534,700 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 1,993,631 | $ | 83,405 | ||||
| Income taxes payable | — | 8,756 | ||||||
| Total Current Liabilities | 1,993,631 | 92,161 | ||||||
| Deferred tax liability | 527 | — | ||||||
| Deferred underwriting fee payable | 8,750,000 | 8,750,000 | ||||||
| Total Liabilities | 10,744,158 | 8,842,161 | ||||||
| Commitments | ||||||||
| Common stock subject to possible redemption, 23,497,390 and 23,763,667 shares at redemption value at September 30, 2020 and December 31, 2019, respectively | 236,777,061 | 237,692,534 | ||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued and outstanding | — | — | ||||||
| Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 2,202,610 and 1,936,333 issued and outstanding (excluding 23,497,390 and 23,763,667 shares subject to possible redemption) at September 30, 2020 and December 31, 2019, respectively | 220 | 194 | ||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 6,250,000 shares issued and outstanding at September 30, 2020 and December 31, 2019 | 625 | 625 | ||||||
| Additional paid-in capital | 5,892,361 | 4,976,914 | ||||||
| (Accumulated)/Retained earnings | (893,200 | ) | 22,272 | |||||
| Total Stockholders’ Equity | 5,000,006 | 5,000,005 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 252,521,225 | $ | 251,534,700 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
(successor to Healthcare Merger Corp.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | |||||||
| Operating costs | $ | 2,336,187 | $ | 2,826,776 | ||||
| Loss from operations | (2,336,187 | ) | (2,826,776 | ) | ||||
| Other income: | ||||||||
| Interest earned on marketable securities held in Trust Account | 87,397 | 1,912,044 | ||||||
| Unrealized gain on marketable securities held in Trust Account | 230 | 2,510 | ||||||
| Other income, net | 87,627 | 1,914,554 | ||||||
| Loss before provision for income taxes | (2,248,560 | ) | (912,222 | ) | ||||
| Benefit (provision) from income taxes | 277,505 | (3,250 | ) | |||||
| Net loss | $ | (1,971,055 | ) | $ | (915,472 | ) | ||
| Weighted average shares outstanding, basic and diluted (1) | 8,226,913 | 8,209,618 | ||||||
| Basic and diluted net loss per common share (2) | $ | (0.24 | ) | $ | (0.31 | ) | ||
| (1) | Excludes an aggregate of up to 23,497,390 shares subject to possible redemption. |
| (2) | Excludes interest income and unrealized gains of $34,402 and $1,610,360 attributable to shares subject to possible redemption for the three and nine months ended September 30, 2020, respectively (see Note 2). |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
(successor to Healthcare Merger Corp.)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
| Class A Common Stock | Class B Common Stock | Additional Paid in | Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
| Balance – January 1, 2020 | 1,936,333 | $ | 194 | 6,250,000 | $ | 625 | $ | 4,976,914 | $ | 22,272 | $ | 5,000,005 | ||||||||||||||||
| Change in value of common stock subject to possible redemption | 29,084 | 3 | — | — | (1,235,064 | ) | — | (1,235,061 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 1,235,061 | 1,235,061 | |||||||||||||||||||||
| Balance – March 31, 2020 | 1,965,417 | 197 | 6,250,000 | 625 | 3,741,850 | 1,257,333 | 5,000,005 | |||||||||||||||||||||
| Change in value of common stock subject to possible redemption | 11,496 | 1 | — | — | 179,481 | — | 179,482 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (179,478 | ) | (179,478 | ) | |||||||||||||||||||
| Balance – June 30, 2020 | 1,976,913 | 198 | 6,250,000 | 625 | 3,921,331 | 1,077,855 | 5,000,009 | |||||||||||||||||||||
| Change in value of common stock subject to possible redemption | 225,697 | 22 | — | — | 1,971,030 | — | 1,971,052 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (1,971,055 | ) | (1,971,055 | ) | |||||||||||||||||||
| Balance – September 30, 2020 | 2,202,610 | $ | 220 | 6,250,000 | $ | 625 | $ | 5,892,361 | $ | (893,200 | ) | $ | 5,000,006 | |||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
(successor to Healthcare Merger Corp.)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | (915,472 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | (1,912,044 | ) | ||
| Unrealized gain on marketable securities held in Trust Account | (2,510 | ) | ||
| Deferred tax provision | 3,250 | |||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | 75,898 | |||
| Prepaid income taxes | (6,559 | ) | ||
| Accounts payable and accrued expenses | 1,910,226 | |||
| Income taxes payable | (8,756 | ) | ||
| Net cash used in operating activities | (855,967 | ) | ||
| Net Change in Cash | (855,967 | ) | ||
| Cash – Beginning of period | 1,149,011 | |||
| Cash – End of period | $ | 293,044 | ||
| Supplementary cash flow information: | ||||
| Cash paid for income taxes | $ | 15,315 | ||
| Non-Cash investing and financing activities: | ||||
| Change in value of common stock subject to possible redemption | $ | (915,473 | ) | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
SOC Telemed, Inc., formerly known as Healthcare Merger Corp. (the “Company”), was incorporated in Delaware on September 19, 2019. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an “Acquisition Transaction”). The Business Combination (defined below) qualified as an Acquisition Transaction for purposes of these notes to consolidated financial statements.
Business Combination
On October 30, 2020 (the “Closing Date”), the Company consummated the previously announced transactions (the “Business Combination”) pursuant to the Agreement and Plan of Merger, dated July 29, 2020 (the “Merger Agreement”), by and among the Company, Sabre Merger Sub I, Inc. (“First Merger Sub”), a wholly owned subsidiary of the Company, Sabre Merger Sub II, LLC (“Second Merger Sub”), a wholly owned subsidiary of the Company, and Specialists On Call, Inc. (“Legacy SOC Telemed”). As a result of the Business Combination and the other transactions contemplated by the Merger Agreement, First Merger Sub merged with and into Legacy SOC Telemed, with Legacy SOC Telemed being the surviving corporation, immediately followed by Legacy SOC Telemed merging with and into Second Merger Sub, with Second Merger Sub surviving the merger as a wholly owned subsidiary of the Company (the “Mergers”). In connection with the consummation of the Business Combination (the “Closing”), the registrant changed its name from Healthcare Merger Corp. to SOC Telemed, Inc.
Prior to and in connection with the Closing, holders of 18,606,033 shares of the Company’s Class A common stock, par value $0.0001 per share (“Class A common stock” or “common stock”), sold in its initial public offering exercised their right to redeem those shares for cash at a price of $10.06 per share, for an aggregate of approximately $187.2 million. The per share redemption price of $10.06 for public stockholders electing redemption was paid out of the Company’s Trust Account (as defined below), which after taking into account the redemptions, had a balance immediately prior to the Closing of approximately $64.3 million. In addition, approximately $0.3 million remained in the Company’s operating account immediately prior to the Closing and approximately $168.0 million in proceeds from the PIPE Investment, as described below, remained in escrow immediately prior to the Closing, which, together with the approximately $3.3 million of cash of Legacy SOC Telemed, was used to pay the approximately $75.1 million cash component of the Merger Consideration to former stockholders, vested option holders and warrant holders of Legacy SOC Telemed in connection with the Closing.
In connection with the execution of the Merger Agreement, the Company entered into subscription agreements, each dated July 29, 2020 (the “Subscription Agreements”), with certain investors pursuant to which the investors agreed to purchase an aggregate of 16,500,000 shares of Class A common stock in a private placement for an aggregate purchase price of $165.0 million (the “PIPE Investment”). Also as previously disclosed, on October 22, 2020, and October 23, 2020, the Company entered into Subscription Agreements with additional investors pursuant to which the investors agreed to purchase an aggregate of 300,000 shares of Class A common stock in a private placement for an aggregate purchase price of $3.0 million, increasing the aggregate PIPE Investment to $168.0 million. The PIPE Investment was consummated concurrently with the Closing.
Immediately after giving effect to the Business Combination (including as a result of the redemptions described above, the conversion of 4,375,000 outstanding Founder Shares (as defined in Note 5) into shares of Class A common stock on a one-for-one basis, the forfeiture by HCMC Sponsor LLC, a Delaware limited liability company (the “Sponsor”) of 1,875,000 Sponsor Contingent Closing Shares, the issuance of 16,800,000 shares of Class A common stock in the PIPE Investment and the issuance of 48,504,895 shares of Class A common stock to pay the stock component of the Merger Consideration to former stockholders, vested option holders and warrant holders of Legacy SOC Telemed in connection with the Closing), there were 76,773,862 shares of Class A common stock issued and outstanding and warrants to purchase 12,850,000 shares of Class A common stock of the Company issued and outstanding.
Business Prior to the Business Combination
Prior to the Business Combination, the Company’s subsidiaries were comprised of Sabre Merger Sub I, Inc. and Sabre Merger Sub II, LLC.
All activity through September 30, 2020 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, identifying a target company for an Acquisition Transaction and consummating the Business Combination.
5
SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The registration statements for the Company’s Initial Public Offering were declared effective on December 12, 2019. On December 17, 2019, the Company consummated the Initial Public Offering of 25,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which included the partial exercise by the underwriter of the over-allotment option to purchase an additional 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $250,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 700,000 units (each, a “Placement Unit” and collectively, the “Placement Units”) at a price of $10.00 per Placement Unit in a private placement to the Sponsor, generating gross proceeds of $7,000,000, which is described in Note 4.
Transaction costs amounted to $14,354,733 consisting of $5,000,000 of underwriting fees, $8,750,000 of deferred underwriting fees and $604,733 of other offering costs. On September 22, 2020, the underwriter agreed to reduce the deferred fee to $5,000,000 if the Business Combination was consummated.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 25, 2020, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2019 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The interim results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (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 independent registered public accounting firm 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) 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 statement 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.
6
SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires 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 revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2020 and December 31, 2019.
Marketable Securities Held in Trust Account
At September 30, 2020 and December 31, 2019, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheets.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable 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.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2020 and December 31, 2019. 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 federal, New York and New York City taxing authorities since inception.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions.
7
SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Net Loss per Common Share
Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September 30, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase 12,850,000 shares of common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted net income per common share is the same as basic net income per common share for the period presented.
Reconciliation of Net Loss per Common Share
The Company’s net loss is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2020 | 2020 | |||||||
| Net loss | $ | (1,971,055 | ) | $ | (915,472 | ) | ||
| Less: Income attributable to common stock subject to possible redemption | (34,402 | ) | (1,610,360 | ) | ||||
| Adjusted net loss available to common shares | $ | (2,005,457 | ) | $ | (2,525,832 | ) | ||
| Weighted average shares outstanding, basic and diluted | 8,226,913 | 8,209,618 | ||||||
| Basic and diluted net loss per common share | $ | (0.24 | ) | $ | (0.31 | ) | ||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 25,000,000 Units, at $10.00 per Unit, which included the partial exercise by the underwriter of its option to purchase an additional 3,000,000 Units. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
8
SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 700,000 Placement Units at a price of $10.00 per Placement Unit, for an aggregate purchase price of $7,000,000. Each Placement Unit consists of one share of Class A common stock (“Placement Share”) and one-half of one redeemable warrant (each, a “Placement Warrant”). Each whole Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. The proceeds from the Placement Units were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete an Acquisition Transaction within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Placement Units and all underlying securities will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In October 2019, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. On December 12, 2019, the Company effected a 1.1 for 1 stock dividend for each Founder Share outstanding, resulting in the Sponsor holding an aggregate of 6,325,000 Founder Shares. All share and per-share information has been retroactively restated to reflect the stock dividend.
The Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the Sponsor would own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering and excluding the Placement Shares underlying the Placement Units). As a result of the underwriter’s election to partially exercise their over-allotment option, 75,000 Founder Shares were forfeited and 750,000 Founder Shares are no longer subject to forfeiture.
The Founder Shares automatically converted into common stock upon the consummation of the Business Combination on a one-for-one basis.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of an Acquisition Transaction or (B) subsequent to an Acquisition Transaction, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after an Acquisition Transaction, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
On September 19, 2019, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Promissory Note”). The Promissory Note was non-interest bearing and payable on the earlier of March 31, 2020 or the completion of the Initial Public Offering. The outstanding balance under the Promissory Note of $273,436 was repaid on December 23, 2019.
Related Party Loans
In order to finance transaction costs in connection with an Acquisition Transaction, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes an Acquisition Transaction, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that an Acquisition Transaction does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of an Acquisition Transaction, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into units upon consummation of the Acquisition Transaction at a price of $10.00 per unit. The units would be identical to the Placement Units. No Working Capital Loans were made to the Company prior to, and no Working Capital Loans were converted into units in connection with, the consummation of the Business Combination.
Administrative Support Agreement
The Company entered into an agreement whereby, commencing on December 13, 2019 through the earlier of the Company’s consummation of an Acquisition Transaction and its liquidation, the Company would pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For the three and nine months ended September 30, 2020, the Company incurred $30,000 and $90,000, respectively, of such fees, of which $25,000 and $5,000 are included in accrued expenses in the accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively. The Company ceased paying these monthly fees upon the Closing.
9
SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
MTS Agreement
The Company agreed to pay MTS Health Partners L.P., an affiliate of the Sponsor, a fee in an amount equal to $1,750,000 for financial advisory services rendered in connection with the Company’s identification, negotiation and consummation of the Business Combination, the payment of which was payable upon the consummation of the Business Combination. Charles Ditkoff, the Company’s president and a member of the board of directors of the Company prior to the Closing, is a senior advisor to MTS Health Partners, L.P., and Dennis Conroy, the Company’s Chief Financial Officer prior to the Closing, serves as Chief Operating and Financial Officer for MTS Health Partners, L.P. The Company paid the fee to MTS Health Partners L.P. upon the consummation of the Business Combination.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on December 12, 2019, the holders of the Founder Shares, Placement Units (including securities contained therein) and units (including securities contained therein) that may be issued upon conversion of Working Capital Loans, and any shares of Class A common stock issuable upon the exercise of the Placement Warrants and any shares of Class A common stock and warrants (and underlying Class A common stock) that may be issued upon conversion of units issued as part of the Working Capital Loans and Class A common stock issuable upon conversion of the Founder Shares, are entitled to registration rights, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
In connection with the Closing, the Company, the Sponsor and SOC Holdings LLC entered into an Amended and Restated Registration Rights Agreement, dated as of October 30, 2020 (the “Amended and Restated Registration Rights Agreement”). Under the Amended and Restated Registration Rights Agreement, the Company is obligated to file a registration statement to register the resale of up to approximately 39.0 million shares of the Company’s Class A common stock held by the Sponsor and SOC Holdings LLC in addition to the Placement Warrants held by the Sponsor and the up to 350,000 shares of the Company’s Class A common stock issuable upon the exercise of the Placement Warrants. In addition, pursuant to the terms of the Amended and Restated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the Sponsor and SOC Holdings LLC and their respective permitted transferees may demand at any time or from time to time, that the Company file a registration statement on Form S-1, or any similar long-form registration statement, or, if available, on Form S-3, to register the shares of the Company’s Class A common stock, including the Placement Warrants and shares of Class A common stock issuable upon exercise of the Placement Warrants, held by such stockholders. The Amended and Restated Registration Rights Agreement also provides “piggy-back” registration rights to such stockholders, subject to certain requirements and customary conditions. The Amended and Restated Registration Rights Agreement further provides that the Founder Shares and the Placement Shares held by the Sponsor or its permitted transferees will be locked-up for certain time periods ranging from between 30 days after the Closing for the Placement Shares to one year after the Closing for the Founder Shares, subject to certain exceptions.
Underwriting Agreement
The underwriter of the Initial Public Offering was entitled to a deferred fee of $0.35 per Unit of the gross proceeds from the Units sold in the Initial Public Offering, or $8,750,000 in the aggregate. On September 22, 2020, the underwriter agreed to reduce the deferred fee to $5,000,000 if the Business Combination was consummated. The adjusted deferred fee was paid in cash upon the closing of the Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
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SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 2,202,610 and 1,936,333 shares of Class A common stock issued and outstanding, excluding 23,497,390 and 23,763,667 shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 6,250,000 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock automatically converted into shares of Class A common stock upon the consummation of the Business Combination on a one-for-one basis.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $0.01 per warrant; | |
| ● | upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable; and | |
| ● | if, and only if, the reported 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 commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
11
SOC TELEMED, INC.
(successor
to Healthcare Merger Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the shares of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement Warrants and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | September 30, 2020 | December 31, 2019 | |||||||
| Assets: | ||||||||||
| Marketable securities held in Trust Account | 1 | $ | 252,039,116 | $ | 250,124,562 | |||||
NOTE 9. SUBSEQUENT EVENTS
As described in Note 1, the Company completed the Business Combination and changed its name from Healthcare Merger Corp. to SOC Telemed, Inc. on October 30, 2020.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Capitalized terms used but not defined in the following discussion and analysis shall have the meanings ascribed to them in the notes to the unaudited condensed consolidated financial statements contained elsewhere in this report.
Cautionary Note Regarding Forward-looking Statements
All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
Overview
We are a former blank check company incorporated on September 19, 2019 under the name Healthcare Merger Corp. as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We completed our Initial Public Offering on December 19, 2019 and completed the Business Combination on October 30, 2020.
Recent Developments
On October 30, 2020 (the “Closing Date”), the Company consummated the Business Combination pursuant to the Merger Agreement by and among the Company, First Merger Sub, Second Merger Sub, and Legacy SOC Telemed. As a result of the Business Combination and the other transactions contemplated by the Merger Agreement, First Merger Sub merged with and into Legacy SOC Telemed, with Legacy SOC Telemed being the surviving corporation, immediately followed by Legacy SOC Telemed merging with and into Second Merger Sub, with Second Merger Sub surviving the merger as a wholly owned subsidiary of the Company (the “Mergers”). In connection with the Closing, the registrant changed its name from Healthcare Merger Corp. to SOC Telemed, Inc.
Results of Operations
Our entire activity from inception up to December 17, 2019 was in preparation for our Initial Public Offering. From the consummation of our Initial Public Offering through September 30, 2020, our activity was limited to the evaluation of business combination candidates and consummating the acquisition of Legacy SOC Telemed.
For the three months ended September 30, 2020, we had a net loss of $1,971,055, which consists of operating costs of $2,336,187, offset by interest income on marketable securities held in the Trust Account of $87,397, an unrealized gain on marketable securities held in our Trust Account of $230 and a benefit from income taxes of $277,505.
For the nine months ended September 30, 2020, we had a net loss of $915,472, which consists of operating costs of $2,826,776 and a provision for income taxes of $3,250, offset by interest income on marketable securities held in the Trust Account of $1,912,044 and an unrealized gain on marketable securities held in our Trust Account of $2,510.
Liquidity and Capital Resources
As of September 30, 2020, we had marketable securities held in the Trust Account of $252,039,116 (including approximately $2,039,000 of interest income and unrealized gains) consisting of U.S. Treasury Bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2020, we have not withdrawn any interest earned on the Trust Account.
For the nine months ended September 30, 2020, cash used in operating activities was $855,967. Net loss of $915,472 was affected by interest earned on marketable securities held in the Trust Account of $1,912,044, an unrealized gain on marketable securities held in our Trust Account of $2,510 and a deferred tax provision of $3,250. Changes in operating assets and liabilities provided $1,970,809 of cash for operating activities.
We used substantially all of the funds held in the Trust Account to complete the Business Combination.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2020.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support services to the Company. We began incurring these fees on December 13, 2019 and will continue to incur these fees monthly until the earlier of the completion of our initial Acquisition Transaction or the Company’s liquidation.
In addition, we agreed to pay the underwriter of the Initial Public Offering a deferred fee of $0.35 per unit of the gross proceeds from the Units sold in our initial Business Combination, or $8,750,000 in the aggregate. On September 22, 2020, the underwriter agreed to reduce the deferred fee to $5,000,000 if the Business Combination was consummated. The adjusted deferred fee was paid in cash upon the closing of the Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
We have agreed to pay MTS Health Partners L.P., an affiliate of members of the Sponsor, a fee in an amount equal to $1.75 million for financial advisory services rendered in connection with our identification, negotiation and consummation of the Business Combination, the payment of which was payable upon the consummation of the Business Combination. The Company paid the fee to MTS Health Partners L.P. upon the consummation of the Business Combination.
Critical Accounting Policies
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed consolidated balance sheet.
Net Loss per Common Share
We apply the two-class method in calculating earnings per share. Common stock subject to possible redemption which is not currently redeemable and is not redeemable at fair value, has been excluded from the calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed consolidated financial statements.
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Following the consummation of our Initial Public Offering, we invested the funds held in the Trust Account in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2020, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter of 2020 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Business Combination was consummated in the quarter ending December 31, 2020.
15
None.
As a result of the closing of the Business Combination on October 30, 2020, the risk factors previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 25, 2020, no longer apply. For risk factors relating to the Company’s business following the Business Combination, please refer to the section entitled “Risk Factors” in the Company’s definitive proxy statement/definitive consent solicitation statement/final prospectus dated October 14, 2020, and filed by the Company with the SEC on October 15, 2020, which is incorporated by reference into the Company’s Current Report on Form 8-K filed on November 5, 2020. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
None.
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The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| † | Schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon its request. |
| * | Filed herewith. |
| ** | Furnished herewith. |
17
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SOC TELEMED, INC. | ||
| Date: November 16, 2020 | By: | /s/ John W. Kalix |
| Name: | John W. Kalix | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 16, 2020 | By: | /s/ Hai Tran |
| Name: | Hai Tran | |
| Title: | Chief Financial Officer and Chief Operating Officer | |
| (Principal
Financial Officer and Principal Accounting Officer) | ||
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