References in this report to "we," "us" or the "Company" refer to
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section
and elsewhere in this Quarterly Report on Form 10-Q 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
Overview
We are a blank check company incorporated on
We have not selected any specific business combination target and we have not,
nor has anyone on our behalf, initiated any substantive discussions, directly or
indirectly, with any business combination target. However, our management team
had been actively in discussions with potential business combination partners in
their capacity as officers of
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
? may significantly dilute the equity interest of investors in this offering,
which dilution would increase if the anti-dilution provisions in the Class B
common stock resulted in the issuance of Class A shares on a greater than
one-to-one basis upon conversion of the Class B common stock;
? may subordinate the rights of holders of our common stock if preferred stock is
issued with rights senior to those afforded our common stock;
? could cause a change in control if a substantial number of shares of our
common stock is issued, which may affect, among other things, our ability to
use our net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors;
? may have the effect of delaying or preventing a change of control of us by
diluting the stock ownership or voting rights of a person seeking to obtain
control of us; and 16
? may adversely affect prevailing market prices for our Class A common stock
and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; ? acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; ? our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; ? our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; ? our inability to pay dividends on our common stock; ? using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; ? limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; ? increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; ? limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and ? other purposes and other disadvantages compared to our competitors who have less debt.
As indicated in the accompanying financial statements, at
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from
For the period from
For the three months ended
After Public Offering, we are incurring increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after the closing of this offering.
17
Liquidity and Capital Resources
In
The net proceeds from the Public Offering and Private Placement were
approximately
For the period from
In the three months ended
We intend to use substantially all of the funds held in the Trust account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions), to complete our Initial Business Combination. We may withdraw interest income (if any) to pay income taxes, if any. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We do not expect the interest income earned on the amount in the Trust Account (if any) will be sufficient to pay our income and franchise taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our Initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We expect to account for all of the Class A common stock issued in our Public Offering as redeemable stock and not permanent equity and so we expect to report negative stockholders' equity.
Subsequent to our Public Offering and prior to the completion of our Initial
Business Combination, we currently have available to us approximately
Liquidity and Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with ASU 2014-15, "Disclosures of Uncertainties about an Entity's
Ability to Continue as a Going Concern," as of
We do not believe we will need to raise additional funds following our Public Offering in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our Initial Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such business combination.
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Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate 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 entered into any agreements for non-financial assets.
Contractual Obligations
In
Critical Accounting Estimates and Policies
The preparation of financial statements and related disclosures in conformity
with
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Net Loss Per Common Share:
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." Net income or loss per common share is computed by dividing net income or loss applicable to common shareholders by the weighted average number of common shares outstanding during the period plus, to the extent dilutive, the incremental number of common shares to settle warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 18,999,705 Class A common shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per common share is the same as basic income (loss) per common share for the period presented.
19
The Company has two classes of shares, which are referred to as Class A common shares and Class B common shares. Income and losses are shared pro rata among the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding during the respective period.
The following table reflects the net loss per share for the three months ended
Class A Class B
Numerator:
Basic and diluted net income per common share: Allocation of net loss - basic and diluted$ (369,000 ) $ (92,000 ) Denominator: Basic and diluted weighted average common shares: 19,490,000 4,872,000 Basic and diluted net loss per common share$ (0.02 ) $ (0.02 )
The Company did not have two classes of stock outstanding during the three
months ended
Accounting for Warrants:
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the instruments'
specific terms and applicable authoritative guidance in
Management has concluded that the Public Warrants and Private Warrants issued in
connection with the Public Offering in
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with original maturities of
three months or less when acquired, to be cash equivalents. The Company had no
cash equivalents at
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash accounts in a financial institution, which at times,
may exceed the
Financial Instruments:
The fair value of the Company's assets and liabilities, which qualify as financial instruments under FASB ASC 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the condensed balance sheets primarily due to their short-term nature.
20 Use of Estimates:
The preparation of financial statements in conformity with
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 as of
Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and
Class A Common Stock Subject to Possible Redemption:
All of the 19,490,000 shares of Class A common stock sold as part of of a Unit
in the Public Offering discussed in Note 3 contain a redemption feature which
allows for the redemption of common shares under the Company's liquidation or
tender offer/stockholder approval provisions. In accordance with FASB ASC 480,
redemption provisions not solely within the control of the Company require the
security to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity's
equity instruments, are excluded from the provisions of FASB ASC 480. Although
the Company did not specify a maximum redemption threshold, its articles of
association provide that in no event will it redeem its Public Shares in an
amount that would cause its net tangible assets (tangible assets less intangible
assets and liabilities) to be less than
The Company recognizes changes immediately as they occur and adjusts the
carrying value of the securities at the end of each reporting period. Increases
or decreases in the carrying amount of redeemable Class A common stock are
affected by adjustments to additional paid-in capital. Accordingly, at
Gross proceeds of Public Offering$ 194,900,000 Less: Offering costs (32,347,000 )
Plus: Accretion of carrying value to redemption value 34,296,000 Class A common shares subject to redemption
$ 196,849,000 Income Taxes:
The Company follows the asset and liability method of accounting for income taxes under FASB 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.
21
The Company's currently taxable income consists of interest income on the Trust
Account net of taxes. The Company's general and administrative costs are
generally considered start-up costs and are not currently deductible. During the
three months ended
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing
authorities. There were no unrecognized tax benefits as of
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