NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
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 (the “Business Combination”).
Although
the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company
intends to focus its search on companies in the healthcare industry. The Company is an early stage and emerging growth company
and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2020, the Company had not yet commenced any operations.
All activity through June 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 a Business Combination and the proposed acquisition
of Specialists on Call, Inc., a Delaware corporation (“Specialists on Call”), as discussed in Note 9. The Company will
not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates
non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
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 includes 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 HCMC Sponsor
LLC, a Delaware limited liability company (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. In addition, at June 30, 2020, cash of $842,839 was held outside of the Trust Account (as defined below)
and is available for working capital purposes.
Following
the closing of the Initial Public Offering on December 17, 2019, an amount of $250,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering, and the sale of the Placement Units was placed in a trust account (the
“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 180 days or less, or in any open-ended investment company that holds itself out as
a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii)
the distribution of the Trust Account, as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the sale of Placement Units, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination
successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at
least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on interest
earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. The Company will only
complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an
investment company under the Investment Company Act.
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity
to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with
a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether
the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely
in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount
then in the Trust Account ($10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to public stockholders
who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters
(as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the
Company’s warrants.
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either immediately
prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the
shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does
not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated
Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant
to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with
the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or
the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder
approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined
in Note 5), Placement Shares (as defined in Note 4) and any Public Shares purchased during or after the Proposed Public Offering
in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction.
If
the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer
rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming
its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The
Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares, Placement Shares and Public Shares held
by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated
Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation to allow redemption
in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination
or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless
the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If
the Company is unable to complete a Business Combination by December 17, 2021 (the “Combination Period”), the Company
will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to
the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of
then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders
(including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s
board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to the Company’s obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails
to complete a Business Combination within the Combination Period.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares and Placement Shares if the Company fails
to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the
Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company
fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to
their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business
Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust
Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible
that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price
per Unit ($10.00)
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent
any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which
the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the
lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of
the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets. This liability
will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any
kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of
the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the
“Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party,
the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce
the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers (except the Company’s independent registered accounting firm), prospective target businesses
or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to monies held in the Trust Account.
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed 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
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 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
six months ended June 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.
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.
Use
of Estimates
The
preparation of the condensed 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 June 30, 2020 and December 31, 2019.
Marketable
Securities Held in Trust Account
At
June 30, 2020 and December 31, 2019, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
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 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 June 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.
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 June 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) 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 the income or losses of the Company.
Accordingly, basic and diluted loss per common share is calculated as follows:
|
|
Three Months
Ended
June 30,
|
|
|
Six
Months
Ended
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Net (loss) income
|
|
$
|
(179,478
|
)
|
|
$
|
1,055,583
|
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
(58,645
|
)
|
|
|
(1,334,961
|
)
|
Adjusted net loss available to common shares
|
|
$
|
(238,123
|
)
|
|
$
|
(279,378
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
8,215,417
|
|
|
|
8,200,875
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
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 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 financial statements.
NOTE
3. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 25,000,000 Units, at $10.00 per Unit, which includes the partial exercise by
the underwriters of their 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).
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 a Business Combination 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 will automatically convert into Class A common
stock upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments, as described in Note
7.
The
Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture to the extent that the underwriters’
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
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 a Business Combination or (B) subsequent to a Business Combination, (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 a Business Combination, 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.
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, 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 a Business Combination, 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 a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into units upon consummation of the Business Combination at a price of $10.00 per unit. The units would be
identical to the Placement Units.
Administrative
Support Agreement
The
Company entered into an agreement whereby, commencing on December 13, 2019 through the earlier of the Company’s consummation
of a Business Combination and its liquidation, the Company will 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 six months ended June 30, 2020, the Company
incurred $30,000 and $60,000, respectively, of such fees, of which $65,000 and $5,000 are included in accrued expenses in the
accompanying condensed balance sheets as of June 30, 2020 and December 31, 2019, respectively.
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.
Underwriting
Agreement
The
underwriter is 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. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
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 June 30, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
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 June 30, 2020 and December 31,
2019, there were 1,976,913 and 1,936,333 shares of Class A common stock issued and outstanding, excluding 23,723,087 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 June 30, 2020 and December 31,
2019, there were 6,250,000 shares of Class B common stock issued and outstanding.
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
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 will automatically convert into shares of Class A common stock at the time of a Business Combination
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business
Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted
(unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect
to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all
shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all
shares of common stock outstanding upon the completion of the Initial Public Offering (not including the shares of Class A common
stock underlying the Placement Units) plus all shares of Class A common stock and equity-linked securities issued or deemed issued
in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller
in a Business Combination, any private placement-equivalent warrants issued, or to be issued, to any seller in a Business Combination,
any private placement equivalent securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
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:
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●
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in
whole and not in part;
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●
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at
a price of $0.01 per warrant;
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●
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upon
not less than 30 days’ prior written notice of redemption given after the warrants become exercisable; and
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●
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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.
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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.
HEALTHCARE MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 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:
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Level 1:
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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.
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Level 2:
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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.
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|
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Level 3:
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Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
June 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
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Level
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June
30,
2020
|
|
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December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
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|
1
|
|
$
|
251,951,489
|
|
|
$
|
250,124,562
|
|
NOTE
9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and
transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Other
than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the condensed financial statements.
Merger Agreement
On July 29, 2020, the Company entered into
an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Sabre Merger Sub I, Inc., a Delaware
corporation (“First Merger Sub”), Sabre Merger Sub II, LLC, a Delaware limited liability company (“Second
Merger Sub”), and Specialists on Call, by which: (a) First Merger Sub will merge with and into Specialists on Call (the
“First Merger”), with Specialists on Call being the surviving corporation of the First Merger (such company, in its
capacity as the surviving corporation of the First Merger, the “Surviving Corporation”) and (b) immediately following
the First Merger and as part of the same overall transaction as the First Merger, the Surviving Corporation will merge with and
into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Mergers”),
with Second Merger Sub being the surviving company of the Second Merger.
Pursuant to the Merger Agreement, the aggregate
merger consideration payable to the stockholders of Specialists on Call will be paid in a combination of stock and cash consideration
equal to $650,000,000, minus Specialists on Call’s net indebtedness as of the closing (including estimated tax liabilities
in excess of $1,000,000) after deducting any cash and cash equivalents of Specialists on Call at the closing (the “Merger
Consideration”). The cash consideration will be an amount equal to (a) the Company’s cash and cash equivalents
as of the closing (including proceeds in connection with the Private Placement (as defined in the Merger Agreement) and the funds
in the Company’s trust account), plus (b) Specialists on Call’s cash and cash equivalents as of the closing,
minus (c) the amount of cash required to satisfy the Company’s stockholder redemptions, minus (d) the Company’s
and Specialists on Call’s transaction costs, minus (e) Specialists on Call’s indebtedness as of the closing,
minus (f) $45,000,000. The remainder of the Merger Consideration will be paid in a number of shares of newly-issued Company
Class A common stock valued at the redemption amount payable to the Company’s public stockholders that elect to redeem their
shares of Company Class A common stock in connection with the closing. In addition, the Company will pay off, or cause to
be paid off, on behalf of Specialists on Call and in connection with the closing, Specialists on Call’s outstanding indebtedness
for borrowed money.
On July 29, 2020, the Company entered into
subscription agreements with certain investors (the “Subscription Agreements”) pursuant to which the investors have
agreed to purchase an aggregate of 16,500,000 shares of Company Class A common stock in a private placement for $10.00 per share
(the “Private Placement”). The proceeds from the Private Placement will be used to partially fund the cash consideration
to be paid to the stockholders of Specialists on Call at the closing of the transactions contemplated by the Merger Agreement and
for general working capital purposes following the closing.
Concurrently with the execution of the
Merger Agreement, the Sponsor and the Company entered into a letter agreement (the “Sponsor Agreement”), pursuant to
which, among other things, Sponsor agreed to (a) waive certain anti-dilution rights set forth in Section 4.3(b)(ii) of the Company’s
Amended and Restated Certificate of Incorporation that may result from the transactions contemplated by the Merger Agreement, (b)
surrender to the Company, immediately prior to the consummation of the Mergers and for no consideration, up to 1,875,000 shares
of the Company’s Class B common stock, par value $0.0001 per share, determined based on a sliding scale of the Company’s
available cash at the closing of the transactions between $250,000,000 and $285,000,000, (c) subject to potential forfeiture 1,875,000
shares of the Company’s Class A common stock in accordance with the terms of the Merger Agreement, such that such shares
will be forfeited if certain post-closing share price targets are not satisfied prior to the seventh (7th) anniversary of the closing
and (d) support the transactions contemplated by the Merger Agreement, including agreeing to vote in favor of the adoption of the
Merger Agreement.
The Mergers will be consummated subject to the deliverables
and provisions as further described in the Merger Agreement.
MTS Agreement
The Company has agreed to pay MTS Health Partners
L.P., an affiliate of the Sponsor, a fee in an amount equal to $1.75 million for financial advisory services rendered in connection
with the Company’s identification, negotiation and consummation of the Mergers, the payment of which will be conditioned
upon the consummation of the Mergers. As such, MTS Health Partners L.P. has a financial interest in the closing of the Mergers
in addition to the financial interest of the Sponsor. In addition, Charles Ditkoff, the Company’s president and a member
of the board of directors of the Company, is a senior advisor to MTS Health Partners, L.P., and Dennis Conroy, the Company’s
Chief Financial Officer, serves as Chief Operating and Financial Officer for MTS Health Partners, L.P..