CLOVER HEALTH INVESTMENTS, CORP. /DE - POS AM filing on 2021-06-21

Schedule I

12 Months Ended

Dec. 31, 2020

Schedule I - Condensed Financial Statements

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED BALANCE SHEETS (PARENT COMPANY)

(Dollars in thousands, except share amounts)


	As of December 31,
	2020			2019
Assets:
Cash and cash equivalents	$	5,432		$	4,569
Other assets		102			342
Intercompany interest receivable		4,958			3,750
Intercompany note receivable		40,000			40,000
Investments in consolidated subsidiaries		77,212			158,159

Total assets	$	127,704		$	206,820

Liabilities and stockholders’ deficit
Liabilities:
Accounts payable and accrued expenses	$	13,140		$	5,471
Accrued salaries and benefits		229			—
Intercompany payable		27,251			4,093
Notes payable, net of discount and deferred issuance costs		107,674			76,758
Derivative liabilities		44,810			138,561
Warrants payable		97,782			17,672

Total liabilities		290,886			242,555


Convertible Preferred stock (Series Seed A, A-1, B, C, and D), $0.0001 par value; 155,387,025 shares authorized as of December 31, 2020 and 2019; 139,444,346 shares; after reverse capitalization, shares issued and outstanding as of December 31, 2020 and 2019; aggregate liquidation preference of $470,256 as of December 31, 2020		447,747			447,747
Stockholders’ deficit:
Common stock, $0.0001 par value, 351,572,668 shares authorized; 89,972,184 and 88,674,206 issued; and 89,206,266 and 88,279,119; after reverse capitalization, outstanding as of December 31, 2020 and 2019, respectively		9			9
Additional paid-in capital		411,843			403,041
Accumulated deficit		(1,022,781	)		(886,532	)

Total stockholders’ deficit		(610,929	)		(483,482	)

Total liabilities, convertible preferred stock, and stockholders’ deficit	$	127,704		$	206,820

(1)	Amounts in the above table have been adjusted to reflect the exchange of Legacy Clover’s common stock at an exchange ratio of approximately 2.0681 in January 2021 as a result of the application of reverse capitalization. See Note 3, “Reverse Capitalization,” for details.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED STATEMENTS OF OPERATIONS (PARENT COMPANY)

(Dollars in thousands, except share amounts)


	Years ended December 31,
	2020			2019
Revenues:
Other income	$	3,685		$	3,396
Investment income, net		—			46

Total revenues		3,685			3,442

Expenses:
General and administrative expenses		4,831			79
Other expense		—			363

Total expenses		4,831			442

Loss from operations		(1,146	)		3,000
Change in fair value of warrants expense		80,328			2,909
Interest expense		35,556			23,155
Amortization of notes discount		21,118			15,913
(Gain) loss on derivative		(93,751	)		138,561
Equity in net losses of consolidated subsidiaries		91,995			186,199

Net loss	$	(136,392	)	$	(363,737	)

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY)

(Dollars in thousands, except share amounts)


	Years ended December 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(136,392	)	$	(363,737	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of notes discount		21,084			15,807
Stock-based compensation expense		7,078			3,301
Paid in kind interest		28,334			11,633
Change in fair value of warrants		80,110			2,836
Change in derivative liabilities		(93,751	)		138,561
Amortization of warrants		218			73
Amortization of debt issuance costs		34			506
Changes in operating assets and liabilities:
Other assets		214			(391	)
Accounts payable and accrued expenses		7,669			5,728
Accrued salaries and benefits		229			(169	)
Intercompany interest receivable		(1,208	)		(1,200	)
Intercompany payable		23,158			(23,921	)

Net cash used in operating activities		(63,223	)		(210,973	)

Cash flows from investing activities:
Investments in consolidated subsidiaries		82,047			(154,469	)

Net cash provided (used in) by investing activities		82,047			(154,469	)

Cash flows from financing activities:
Proceeds from issuance of convertible securities		—			343,410
Deferred financing costs		—			(363	)
Payment of notes payable principal		(18,752	)		(9,670	)
Issuance of common stock, net of early exercise liability		1,748			601
Buyback and subsequent cancellation of common stock		(957	)		—

Net cash (used in) provided by financing activities		(17,961	)		333,978

Net increase (decrease) in cash and cash equivalents		863			(31,464	)
Cash and cash equivalents, beginning of year		4,569			36,033

Cash and cash equivalents, end of year	$	5,432		$	4,569

CLOVER HEALTH INVESTMENTS, CORP.

Notes to Condensed Financial Statements (Parent Company)

1. Organization and operations

Clover Health Investments, Corp. (the “Corporation) is a holding company incorporated on July 17, 2014 in the state of Delaware.

2. Summary of significant accounting policies

The accompanying condensed financial statements have been prepared using the equity method. Under the equity method, the investment in consolidated subsidiaries is stated at cost plus equity in undistributed earnings of consolidated subsidiaries since the date of acquisition. These condensed financial statements should be read in conjunction with the Corporation’s consolidated financial statements.

Use of estimates

The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.

Reclassifications

Certain amounts in the prior years’ Condensed Statements of Cash Flows have been reclassified to conform to the current year’s presentation, primarily related to the amortization of warrants, amortization of debt issuance costs, and paid in kind interest. These reclassifications had no effect on the previously reported Condensed Financial Statements.

3. Insurance Subsidiaries

Investments in consolidated subsidiaries include regulated insurance subsidiaries and unregulated subsidiaries. The Corporation holds $50.0 million and $156.0 million of cash, cash equivalents, short term investments and investment securities at the parent and unregulated subsidiaries as of December 31, 2020 and 2019, respectively. The Corporation holds $101.1 million and $107.3 million of cash, cash equivalents, short term investments and investment securities in regulated insurance subsidiaries as of December 31, 2020 and 2019, respectively.

4. Surplus Note

Effective December 22, 2016, the Corporation contributed $40.0 million to Clover Health Insurance Company, a wholly owned subsidiary, in exchange for a surplus note. The outstanding balance, including accrued interest, was due and payable on December 31, 2020 but remains unpaid with the payment terms under review for extension until December 31, 2024. The Commissioner of Banking and Insurance of the State of New Jersey must approve any interest and principal payments associated with the note before they are paid.