CLOVER HEALTH INVESTMENTS, CORP. /DE 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Class A common stock and public warrants are currently listed on the Nasdaq Global Select Market under the symbols “CLOV” and “CLOVW,” respectively. Prior to the closing of the Business Combination, our Class A common stock and public warrants were listed on the New York Stock Exchange under the symbols “IPOC” and “IPOC.WS,” respectively. We do not currently intend to list the private placement warrants or the Class B common stock on any securities exchange. Holders of Record As of March 24, 2021, there were 10 holders of record of our Class A common stock, 237 holders of record of our Class B common stock and 2 holders of record of the public warrants. Such numbers do not include beneficial owners holding our securities through nominee names. 69 Table of Contents Index to Financial Statements Dividend Policy We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our Class A common stock will be at the discretion of our board of directors and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our board of directors may deem relevant. Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. 70 Table of Contents Index to Financial Statements Item 6. Selected Financial Data Not applicable. 71 Table of Contents Index to Financial Statements Item 7. 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 our audited consolidated financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. Overview We are a former blank check company incorporated in the Cayman Islands on October 18, 2019 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We completed our Initial Public Offering on April 24, 2020 and the Mergers on January 7, 2021. Recent Developments On January 7, 2021, we consummated the previously announced transactions contemplated by the Merger Agreement, dated October 5, 2020, with Clover and Merger Sub. In connection with the closing of the Mergers, we changed our name to Clover Health Investments, Corp. Results of Operations Our only activities from inception through December 31, 2020 were organizational activities, those necessary to prepare for the Initial Public Offering, described further below, and activities in connection with the acquisition of Clover. We generated non-operating income in the form of interest income on marketable securities held in a trust account (the “Trust Account”). We incurred expenses as a result of being a public company (including for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and other merger and acquisition expenses in connection with searching for, and completing, a business combination. For the year ended December 31, 2020, we had a net loss of $6,744,840, which consisted of operating costs of $6,862,095, offset by interest income on cash and marketable securities held in the Trust Account of $117,255. For the period from October 18, 2019 (inception) through December 31, 2019, we had a net loss of $17,631, which consisted of formation and operating costs. Liquidity and Going Concern For the year ended December 31, 2020, cash used in operating activities was $2,227,118. Our net loss of $6,744,840 was impacted by interest earned on cash and marketable securities held in the Trust Account of $117,255 and changes in operating assets and liabilities, which provided $4,634,977 of cash. As of December 31, 2020, we had cash and marketable securities held in the Trust Account of $828,117,255. In connection with the Closing, at the Special Meeting, holders of 24,892 Class A ordinary shares exercised their right to redeem those shares for cash at a price of $10.00141613 per share, for an aggregate of $248,955. The per share redemption price of $10.00141613 for public shareholders electing redemption was paid out of the Trust Account, which after taking into account the redemptions, had a balance immediately prior to the Closing of $827,868,300, which cash balance was used to pay the $499,751,045 cash component of the merger consideration. Pursuant to the subscription agreements entered into on October 5, 2020 by and among SCH and the PIPE Investors, Clover Health issued and sold to the PIPE Investors (substantially concurrently with the consummation 72 Table of Contents Index to Financial Statements of the Mergers) an aggregate of 40,000,000 shares of Class A Common Stock for an aggregate purchase price equal to $400 million (the “PIPE Investment”), of which 15,200,000 shares were purchased by affiliates of the Sponsor. As of December 31, 2020, we had cash of $28,003,240 held outside the Trust Account, of which $27,999,990 represented the amount received in advance from the PIPE Investors in connection with the closing of the PIPE Investment. We used the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination. On October 19, 2020, we issued a Promissory Note to SCH Sponsor III LLC, pursuant to which we were able to borrow up to an aggregate principal amount of $2,500,000. On October 19, 2020, the Company borrowed $806,208 under the Promissory Note. The Promissory Note was repaid at the closing of the Mergers. Off-Balance Sheet Financing Arrangements We had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2020. We have not participated in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets. 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 and administrative and support services provided to the Company. We began incurring these fees on April 22, 2020. Upon the Closing of the Mergers, we ceased incurring these monthly fees. The underwriters in connection with SCH’s initial public offering were entitled to a deferred fee of $0.35 per unit, or $28,980,000 in the aggregate. The deferred fee was paid upon the closing of the Mergers from the amounts held in the Trust Account. Critical Accounting Policies The preparation of 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: Class A Ordinary Shares Subject to Redemption We account for our Class A ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as 73 Table of Contents Index to Financial Statements shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our consolidated balance sheets. Net Income (Loss) per Ordinary Share We apply the two-class method in calculating earnings per share. Net income (loss) per ordinary share, basic and diluted for Class A ordinary shares subject to possible redemption is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number of shares of Class A ordinary shares subject to possible redemption outstanding for the period. Net income (loss) per ordinary share, basic and diluted for non-redeemable ordinary shares is calculated by dividing net loss less income attributable to Class A ordinary shares subject to possible redemption, by the weighted average number of shares of non-redeemable ordinary shares outstanding for the period presented. 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 consolidated financial statements.