Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
☐
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: 001-38302
BIG ROCK PARTNERS ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware
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82-2844431
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2645 N. Federal Highway, Suite 230
Delray Beach, Florida 33483
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (310)
734-2300
Securities registered pursuant to Section 12(b) of the
Act:
Title of each class
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Name of each exchange on which registered
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Units, each consisting of one share of Common Stock, one Right
and
one-half of one Warrant
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The NASDAQ Stock Market LLC
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Common Stock, par value $0.001 per share
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The NASDAQ Stock Market LLC
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Rights, exchangeable into one-tenth of one share of Common
Stock
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The NASDAQ Stock Market LLC
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Warrants, each whole warrant exercisable for one share of
Common
Stock at an exercise price of $11.50
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities
Act. Yes ☐
No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐
No ☒
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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
and posted on its corporate Website, if any, every Interactive Data
file required to be submitted and posted 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 and post such
files). Yes ☒ No
☐
Indicate
by check mark if disclosure of delinquent filers pursuant to
item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ☐
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 the 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
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
(Do not check if a smaller
reporting company)
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Smaller reporting company
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☒
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Emerging
growth company
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☒
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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
Act) Yes ☒ No
☐
The
Registrant was formed on September 18, 2017 and its fiscal year
ended December 31, 2017. Accordingly, the Registrant was not
in existence as of the last business day of the second fiscal
quarter of 2017.
The
number of shares outstanding of the registrant’s common
stock, as of March 21, 2018, was 9,035,500.
BIG ROCK PARTNERS ACQUISITION
CORP.
TABLE OF CONTENTS FOR FORM 10-K
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F-1
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This business description should be read in conjunction with our
audited consolidated financial statements and accompanying notes
thereto appearing elsewhere in this Annual Report on Form 10-K for
the year ended December 31, 2017 (the “2017 Form
10-K”), which are incorporated herein by this
reference.
References in this 2017 Form 10-K to “we,”
“us” or “our company” refer to Big Rock
Partners Acquisition Corp. References in this 2017 Form 10-K to our
“public shares” are to shares of our common stock sold
as part of the units in our initial public offering (whether they
are purchased in our initial public offering or thereafter in the
open market) and references to “public stockholders”
refer to the holders of our public shares, including our sponsor
(as defined below), officers and directors to the extent they
purchase public shares, provided that their status as “public
stockholders” shall only exist with respect to such public
shares. References in this 2017 Form 10-K to our
“management” or our “management team” refer
to our officers, directors and director nominees and references to
our “sponsor” or our “initial stockholder”
refer to Big Rock Partners Sponsor, LLC, a company affiliated with
our Chairman, President and Chief Executive Officer. References in
this 2017 Form 10-K to our “founder’s shares”
refer to our shares of common stock initially purchased by our
sponsor in a private sale prior to our initial public offering.
References in this 2017 Form 10-K to our “private placement
units” refer to the units sold in a private placement
simultaneously with the closing of our initial public
offering.
Company Overview
We are
a blank check company formed pursuant to the laws of the State of
Delaware on September 18, 2017 for the purpose of entering into a
merger, stock exchange, asset acquisition, stock purchase,
recapitalization, reorganization or other similar business
combination with one or more businesses or entities. While our
efforts in identifying a prospective target business for our
initial business combination will not be limited to a particular
industry or geographic region, we intend to initially focus our
search on identifying a prospective target business in the senior
housing and care industry in the United States, as described below.
We have reviewed, and continue to review, opportunities to enter
into an initial business combination with an operating business,
but we are not able to determine at this time whether we will
complete a business combination with any of the target businesses
that we have reviewed or with any other target business on
favorable terms or at all.
On
November 22, 2017, we consummated the initial public offering (the
“Initial Public Offering”) of 6,000,000 units
(“Units”), each Unit consisting of one share of common
stock, par value $0.001 per share (“Common Stock”), one
right entitling the holder thereof to receive one-tenth (1/10) of
one share of Common Stock upon the consummation of an initial
business combination, and one-half of one warrant
(“Warrant”), each whole Warrant exercisable to purchase
one share of Common Stock at an exercise price of $11.50 per share,
pursuant to the registration statements on Form S-1 (File Nos.
333-220947 and 333-221659) (the “Registration
Statements”). The Units were sold at an offering price of
$10.00 per Unit, generating gross proceeds of $60,000,000. The
underwriters of the Initial Public Offering were granted an option
to purchase an additional 900,000 Units to cover over-allotments,
if any (the “Over-Allotment Units”).
Simultaneously with
the consummation of the Initial Public Company, on November 22,
2017, we completed a private placement (the “Private
Placement”) of 250,000 units (“Placement Units”)
at a price of $10.00 per Placement Unit, generating total proceeds
of $2,500,000. The securities issued
in the Private Placement were issued in reliance on the exemption
from registration provided by Section 4(a)(2) under the Securities
Act of 1933, as amended, or Regulation D thereunder, as a sale not
involving any public offering.
On
November 28, 2017, the underwriters notified us of their exercise
of the over-allotment option in full and on November 29, 2017,
purchased 900,000 Over-Allotment Units at $10.00 per Unit upon the
closing of the over-allotment option, generating gross proceeds of
$9,000,000. Simultaneously with the sale of the additional Units,
we consummated the sale of an additional 22,500 placement units
(the “Over-Allotment Placement Units”) at $10.00 per
unit, generating gross proceeds of $225,000. The securities issued
in the Private Placement were issued in reliance on the exemption
from registration provided by Section 4(a)(2) under the Securities
Act of 1933, as amended, or Regulation D thereunder, as a sale not
involving any public offering.
A total
of $69,000,000 of the net proceeds from the Initial Public Offering
and the Private Placement (including $9,000,000 from the sale of
the Over-Allotment Units and Over-Allotment Placement Units) were
deposited in a trust account established for the benefit of the
Company’s public stockholders. We incurred costs in the
aggregate amount of $2,172,419 related to Initial Public Offering
including $1,725,000 of underwriting fees and $447,419 of other
costs.
Our
units began trading on November 20, 2017 on the NASDAQ Capital
Market under the symbol “BRPAU.” Commencing on December
1, 2017, the underlying shares of Common Stock, Warrants and rights
began trading on the NASDAQ Capital Market under the symbols
“BRPA,” “BRPAW” and “BRPAR,”
respectively.
Business Strategy
While
our efforts in identifying a prospective target business for our
initial business combination will not be limited to a particular
industry or geographic region, we intend to initially focus our
search on identifying a prospective target business in the senior
housing and care industry in the United States. The senior housing
and care industry provides both housing and an array of services to
seniors, generally to those over the age of 75. Care segments are
commonly divided into four categories:
In the
U.S., there currently are approximately 23,400 investment grade
senior housing and care properties containing 3 million units. The
total value of the investment grade senior housing and care
property market is estimated at $372 billion. The average age of
residents in senior housing is approximately in the mid-80s, while
the average move-in age is in the low to mid-80s. The sizes of the
80+ and 85+ populations are expected to increase at a rate of
approximately 1.5%-2% annually during the remainder of the decade.
The latter part of the 2020s is expected to see the beginning of
significant acceleration in this population, with the 80+
population growth rate averaging roughly 4.5% from 2025 through
2029. As such, we believe there are significant opportunities to
acquire senior housing property management companies that are
positioned for growth. These operating companies may have leasehold
and/or fee ownership of senior housing communities.
We
intend to seek out potential targets that enjoy proven business
models and attractive growth profiles. We also believe our
sponsor’s and management team’s extensive experience in
deal sourcing from private and public sources, as well as their
capital market expertise, provide unique insight when identifying
potential business combination opportunities and creating value. We
believe their experience and deep understanding of various markets
in the senior housing and care industry positions us to obtain
access to potential targets in such markets, frequently in a
non-competitive manner and prior to other parties.
Acquisition Criteria
Consistent with our
business strategy, we have identified the following general
criteria and guidelines that we believe are important in evaluating
prospective target businesses. We intend to use these criteria and
guidelines in evaluating acquisition opportunities, but we may
decide to enter into our initial business combination with a target
business that does not meet any of these criteria and
guidelines.
We
intend to seek to acquire companies that we believe:
●
have strong
competitive positions, proven business models, consistent
historical financial performance and attractive growth
prospects;
●
have limited access
to capital markets due to external factors;
●
could benefit from
the substantial expertise, experience and network of our sponsor
and management team, who could assist with, for example, growth
strategy, operations, and the evaluation and integration of
acquisitions;
●
are well positioned
to participate in sector consolidation and would benefit from a
public acquisition currency;
●
would avoid the
potentially onerous terms, such as liquidation preferences, that
are often characteristic of late state private growth financing
rounds; and
●
offer attractive
risk-adjusted returns.
These
criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular initial business combination may be
based, to the extent relevant, on these general guidelines as well
as other considerations, factors, and criteria that our management
may deem relevant.
Competitive Strengths
We
believe we have the following competitive strengths:
Status as a public company
We
believe our structure will make us an attractive business
combination partner to target businesses. As an existing public
company, we offer a target business an alternative to the
traditional initial public offering through a merger or other
business combination. In this situation, the owners of the target
business would exchange their shares of stock in the target
business for shares of our stock or for a combination of shares of
our stock and cash, allowing us to tailor the consideration to the
specific needs of the sellers. We believe target businesses might
find this method a more certain and cost effective method to
becoming a public company than the typical initial public offering.
In a typical initial public offering, there are additional expenses
incurred in marketing, roadshow and public reporting efforts that
will likely not be present to the same extent in connection with a
business combination with us. Furthermore, once the business
combination is consummated, the target business will have
effectively become public, whereas an initial public offering is
always subject to the underwriters’ ability to complete the
offering, as well as general market conditions, that could prevent
the offering from occurring. Once public, we believe the target
business would then have greater access to capital and an
additional means of providing management incentives consistent with
stockholders’ interests than it would have as a
privately-held company. It can offer further benefits by augmenting
a company’s profile among potential new customers and vendors
and aid in attracting talented employees.
While
we believe that our status as a public company will make us an
attractive business partner, some potential target businesses may
view the inherent limitations in our status as a blank check
company as a deterrent and may prefer to effect a business
combination with a more established entity or with a private
company. These inherent limitations include limitations on our
available financial resources, which may be inferior to those of
other entities pursuing the acquisition of similar target
businesses; the requirement that we seek shareholder approval of a
business combination or conduct a tender offer in relation thereto,
which may delay the consummation of a transaction; and the
existence of our outstanding warrants, which may represent a source
of future dilution.
Financial position
With
funds in the trust account of approximately $69 million available
to use for a business combination (assuming no stockholder seeks
conversion of their shares or seeks to sell their shares to us in a
tender offer in relation to such business combination), we offer a
target business a variety of options such as providing the owners
of a target business with shares in a public company and a public
means to sell such shares, providing capital for the potential
growth and expansion of its operations or strengthening its balance
sheet by reducing its debt ratio. Because we are able to consummate
our initial business combination using our cash, debt or equity
securities, or a combination of the foregoing, we have the
flexibility to use the most efficient combination that will allow
us to tailor the consideration to be paid to the target business to
fit its needs and desires. However, since we have no specific
business combination under consideration, we have not taken any
steps to secure third party financing if we are forced to use a
significant portion of such funds for converting or tendering
stockholders and there can be no assurance that it will be
available to us.
Offering Structure
Unlike some other blank check companies that sell units comprised
of shares of common stock and warrants to purchase a full share of
common stock in their initial public offerings, our initial public
offering was for units comprised of one share of common stock,
one-half of one warrant and one right which entitles the holder
thereof to receive one-tenth (1/10) of one share of common stock
upon consummation of our initial business combination. Because the
number of shares ordinarily issuable upon exercise of the warrants
found in the typical structure of some other blank check initial
public offerings is less in our case (since such warrants most
often entitle the holder thereof to receive a full share of common
stock as opposed to the one-tenth (1/10) of one share the rights
entitle a holder to receive and the one-half of one share of common
stock that each warrant holder is entitled to purchase), our
management believes we will be viewed more favorably by potential
target companies when determining which company to engage in a
business combination with. However, our management may be incorrect
in this belief.
Our Management Team
We will
seek to capitalize on the significant investing and operating
experience and contacts of our officers and directors in
consummating an initial business combination. Our Chairman,
President and Chief Executive Officer, Richard Ackerman, has over
35 years of real estate experience with 18 years in senior housing.
Prior to starting Big Rock Partners
(“BRP”), an opportunistic real estate investment
firm founded in 2004 that has invested in and managed over $800
million in assets since its formation, Mr. Ackerman was Head of the
Los Angeles office for Apollo Real
Estate Advisors (“Apollo”), a global private
equity firm. Our Chief Financial Officer, Lori Wittman, also has
over 35 years of real estate experience and was most recently the
Chief Financial Officer of Care
Capital Properties (“CCP”), a public healthcare
real estate investment trust with a diversified portfolio of
triple-net leased properties focused on the post-acute sector,
which merged with Sabra Healthcare REIT, Inc. Prior to CCP, Ms.
Wittman was Senior Vice President of Capital Markets and Investor
Relations at Ventas, Inc., a leading real estate investment trust
with a diverse portfolio of more than 1,600 assets in the United
States, Canada and the United Kingdom consisting of seniors housing
communities, medical office buildings, skilled nursing facilities,
hospitals and other properties. Our Chief Investment Officer and
Corporate Secretary, Bennett Kim, has over 20 years of real estate
experience and worked with Mr. Ackerman at Apollo. Through BRP,
Messrs. Ackerman and Kim are currently developing $200 million of
senior housing in Florida, which consists of independent living,
assisted living and memory care. Also, our independent directors,
Richard Birdoff, Michael Fong, Stuart Koenig, Albert G. Rex and
Troy T. Taylor, have significant experience in private investments,
ownership and management of businesses of many types, large and
small.
While
we may pursue an acquisition opportunity in any industry or sector
and in any region, we intend to focus on industries that complement
our management team’s background so we can capitalize on
their ability to identify, acquire, and operate a business. We
therefore intend to initially focus on companies in the senior
housing and care industry in the United States; however, we may
decide to enter into an initial business combination with a target
business that is not connected to the senior housing and care
industry.
We
believe our sponsor’s and management team’s deal
sourcing, investing, and operating expertise, as well as their
network of contacts will position us to take advantage of
opportunities in the senior housing and care industry. We believe
this expertise and network of contacts will allow us to generate a
number of acquisition opportunities. We believe there are a number
of high quality senior housing businesses with adequate scale to be
attractive public companies.
For
more information regarding our management team’s experience,
please see Part III, Item 10. Directors, Executive Officers and
Corporate Governance.
Effecting a Business Combination
General
We are
not presently engaged in, and we will not engage in, any
substantive commercial business for an indefinite period of time
following the Initial Public Offering. We intend to utilize cash
derived from the proceeds of the Initial Public Offering and the
sale of the private placement units, our capital stock, debt or a
combination of these in effecting a business combination which has
not yet been identified. A business combination may involve the
acquisition of, or merger with, a company which does not need
substantial additional capital but which desires to establish a
public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering
itself. These include time delays, significant expense, loss of
voting control and compliance with various federal and state
securities laws. In the alternative, we may seek to consummate a
business combination with a company that may be financially
unstable or in its early stages of development or growth. While we
may seek to effect simultaneous business combinations with more
than one target business, we will probably have the ability, as a
result of our limited resources, to effect only a single business
combination.
We will
have until 12 months from the closing of the Initial Public
Offering (or up to 18
months from the closing of the Initial Public Offering
if we extend the period of
time to consummate a business combination by the full amount of
time) to consummate our initial business combination. If we
are unable to consummate our initial business combination within
the applicable time period, we will, as promptly as reasonably
possible but not more than ten business days thereafter, redeem the
public shares for a pro rata portion of the funds held in the trust
account and as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each
case to our obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable
law.
We Have Not Identified a Target Business
We have
reviewed, and continue to review, opportunities to enter into an
initial business combination with an operating business, but we are
not able to determine at this time whether we will complete a
business combination with any of the target businesses that we have
reviewed or with any other target business on favorable terms or at
all.
Subject
to our officers’ and directors’ pre-existing fiduciary
duties and the limitation that a target business have a fair market
value of at least 80% of the balance in the trust account
(excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our
initial business combination, as described below in more detail, we
will have virtually unrestricted flexibility in identifying and
selecting a prospective acquisition candidate. Except for the
general criteria and guidelines set forth above under the caption
“Business Strategy,” we have not established any other
specific attributes or criteria (financial or otherwise) for
prospective target businesses. To the extent we effect a business
combination with a financially unstable company or an entity in its
early stage of development or growth, including entities without
established records of sales or earnings, we may be affected by
numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth
companies. Although our management will endeavor to evaluate the
risks inherent in a particular target business, we cannot assure
you that we will properly ascertain or assess all significant risk
factors.
Our Acquisition Process
In
evaluating a prospective target business, we expect to conduct a
thorough due diligence review that will encompass, among other
things, meetings with incumbent management and employees, document
reviews, inspection of facilities, as well as a review of financial
and other information that will be made available to us. We also
expect to utilize our management team’s operational and
capital markets experience.
We are
not prohibited from pursuing an initial business combination with a
company that is affiliated with our sponsor, officers or directors.
In the event we seek to complete our initial business combination
with a company that is affiliated with our sponsor, officers or
directors, we, or a committee of independent directors, will obtain
an opinion from an independent investment banking firm, or another
independent entity that commonly renders valuation opinions on the
type of target business we are seeking to acquire, that our initial
business combination is fair to our company from a financial point
of view.
Sources of Target Businesses
We
expect that our principal means of identifying potential target
businesses will be through the extensive contacts and relationships
of our officers and directors. While our officers and directors are
not required to commit any specific amount of time in identifying
or performing due diligence on potential target businesses, our
officers and directors believe that the relationships they have
developed over their careers and their access to their contacts and
resources will generate a number of potential business combination
opportunities that will warrant further investigation. We also
anticipate that target business candidates will be brought to our
attention from various unaffiliated sources, including investment
bankers, venture capital funds, private equity funds, leveraged
buyout funds, management buyout funds and other members of the
financial community. Target businesses may be brought to our
attention by such unaffiliated sources as a result of being
solicited by us through calls or mailings. These sources may also
introduce us to target businesses they think we may be interested
in on an unsolicited basis, since many of these sources will have
read this Report and know what types of businesses we are
targeting. Our officers and directors, as well as their affiliates,
may also bring to our attention target business candidates that
they become aware of through their business contacts as a result of
formal or informal inquiries or discussions they may have, as well
as attending trade shows or conventions. They must present to us
all target business opportunities that have a fair market value of
at least 80% of the assets held in the trust account (excluding
taxes payable on the income accrued in the trust account) at the
time of the agreement to enter into the initial business
combination, subject to any pre-existing fiduciary or contractual
obligations. We have engaged a professional firm that specializes
in business acquisitions, and we may engage other firms or other
individuals in the future, in which event we may pay a
finder’s fee, consulting fee or other compensation to be
determined in an arm’s length negotiation based on the terms
of the transaction. In no event, however, will our sponsor,
officers, directors or their respective affiliates be paid any
finder’s fee, consulting fee or other compensation prior to,
or for any services they render in order to effectuate the
consummation of an initial business combination (regardless of the
type of transaction that it is) other than the monthly
administrative services fee of up to $10,000, the repayment of any
loans from our sponsor, officers and directors for working capital
purposes and reimbursement of any out-of-pocket expenses. We are
not restricted from entering into a business
combination with a target business that is affiliated with any of
our officers, directors or sponsor and may do so if (i) such
transaction is approved by a majority of our disinterested
independent directors and (ii) we obtain an opinion from an
independent investment banking firm, or another independent entity
that commonly renders valuation opinions on the type of target
business we are seeking to acquire, that the business combination
is fair to our unaffiliated stockholders from a financial point of
view.
Selection of a Target Business and Structuring of a Business
Combination
Subject
to our officers’ and directors’ pre-existing fiduciary
duties and the limitations that a target business have a fair
market value of at least 80% of the balance in the trust account
(excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our
initial business combination, as described below in more detail,
and that we must acquire a controlling interest in the target
business, our management will have virtually unrestricted
flexibility in identifying and selecting a prospective target
business. Except for the general criteria and guidelines set forth
above under the caption “Acquisition Criteria,” we have
not established any specific attributes or criteria (financial or
otherwise) for prospective target businesses. In evaluating a
prospective target business, our management may consider a variety
of factors, including one or more of the following:
●
financial condition
and results of operation;
●
brand recognition
and potential;
●
experience and
skill of management and availability of additional
personnel;
●
stage of
development of the products, processes or services;
●
existing
distribution and potential for expansion;
●
degree of current
or potential market acceptance of the products, processes or
services;
●
proprietary aspects
of products and the extent of intellectual property or other
protection for products or formulas;
●
impact of
regulation on the business;
●
regulatory
environment of the industry;
●
costs associated
with effecting the business combination;
●
industry
leadership, sustainability of market share and attractiveness of
market industries in which a target business participates;
and
●
macro competitive
dynamics in the industry within which the company
competes.
These
criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular business combination will be based,
to the extent relevant, on the above factors as well as other
considerations deemed relevant by our management in effecting a
business combination consistent with our business objective. In
evaluating a prospective target business, we will conduct an
extensive due diligence review which will encompass, among other
things, meetings with incumbent management and inspection of
facilities, as well as review of financial and other information
which is made available to us. This due diligence review will be
conducted either by our management or by unaffiliated third parties
we may engage.
The
time and costs required to select and evaluate a target business
and to structure and complete the business combination can only be
estimated at this time. Any costs incurred with respect to the
identification and evaluation of a prospective target business with
which a business combination is not ultimately completed will
result in a loss to us and reduce the amount of capital available
to otherwise complete a business combination.
Fair Market Value of Target Business
The
target business or businesses that we acquire must collectively
have a fair market value equal to at least 80% of the balance of
the funds in the trust account (excluding taxes payable on the
income earned on the trust account) at the time of the execution of
a definitive agreement for our initial business combination,
although we may acquire a target business whose fair market value
significantly exceeds 80% of the trust account
balance.
We
currently anticipate structuring a business combination to acquire
100% of the equity interests or assets of the target business or
businesses. We may, however, structure our initial business
combination where we merge directly with the target business or
where we acquire less than 100% of such interests or assets of the
target business in order to meet certain objectives of the target
management team or stockholders or for other reasons, but we will
only complete such 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.
Even if the post-transaction company owns or acquires 50% or more
of the voting securities of the target, our stockholders prior to
the business combination may collectively own a minority interest
in the post-transaction company, depending on valuations ascribed
to the target and us in the business combination transaction. For
example, we could pursue a transaction in which we issue a
substantial number of new shares in exchange for all of the
outstanding capital stock of a target. In this case, we could
acquire a 100% controlling interest in the target; however, as a
result of the issuance of a substantial number of new shares, our
stockholders immediately prior to our initial business combination
could own less than a majority of our outstanding shares subsequent
to our initial business combination. If less than 100% of the
equity interests or assets of a target business or businesses are
owned or acquired by the post-transaction company, the portion of
such business or businesses that is owned or acquired is what will
be valued for purposes of the 80% of trust account balance test. In
order to consummate such an acquisition, we may issue a significant
amount of our debt or equity securities to the sellers of such
businesses and/or seek to raise additional funds through a private
offering of debt or equity securities. Since we have no specific
business combination under consideration, we have not entered into
any such fund raising arrangement and have no current intention of
doing so. The fair market value of the target will be determined by
our board of directors based upon one or more standards generally
accepted by the financial community (such as actual and potential
sales, earnings, cash flow and/or book value). The proxy
solicitation materials or tender offer documents used by us in
connection with any proposed transaction will provide public
stockholders with our analysis of the fair market value of the
target business, as well as the basis for our determinations. If
our board is not able to independently determine that the target
business has a sufficient fair market value, we will obtain an
opinion from an unaffiliated, independent investment banking firm,
or another independent entity that commonly renders valuation
opinions on the type of target business we are seeking to acquire,
with respect to the satisfaction of such criteria.
We will
not be required to obtain an opinion from an investment banking
firm as to the fair market value if our board of directors
independently determines that the target business complies with the
80% threshold.
Lack of Business Diversification
We may
seek to effect a business combination with more than one target
business, and there is no required minimum valuation standard for
any target at the time of such acquisition. We expect to complete
only a single business combination, although this process may
entail the simultaneous acquisitions of several operating
businesses. Therefore, at least initially, the prospects for our
success may be entirely dependent upon the future performance of a
single business operation. Unlike other entities which may have the
resources to complete several business combinations of entities
operating in multiple industries or multiple areas of a single
industry, it is probable that we will not have the resources to
diversify our operations or benefit from the possible spreading of
risks or offsetting of losses. By consummating a business
combination with only a single entity, our lack of diversification
may:
●
subject us to
numerous economic, competitive and regulatory developments, any or
all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to a
business combination, and
●
result in our
dependency upon the performance of a single operating business or
the development or market acceptance of a single or limited number
of products, processes or services.
If we
determine to simultaneously acquire several businesses, and such
businesses are owned by different sellers, we will need for each of
such sellers to agree that our purchase of its business is
contingent on the simultaneous closings of the other acquisitions,
which may make it more difficult for us, and delay our ability, to
complete the business combination. With multiple acquisitions, we
could also face additional risks, including additional burdens and
costs with respect to possible multiple negotiations and due
diligence investigations (if there are multiple sellers) and the
additional risks associated with the subsequent assimilation of the
operations and services or products of the acquired companies in a
single operating business.
Limited Ability to Evaluate the Target Business’s
Management
Although we intend
to scrutinize the management of a prospective target business when
evaluating the desirability of effecting a business combination, we
cannot assure you that our assessment of the target
business’s management will prove to be correct. In addition,
we cannot assure you that the future management will have the
necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and
directors, if any, in the target business following a business
combination cannot presently be stated with any certainty. While it
is possible that some of our key personnel will remain in senior
management or advisory positions with us following a business
combination, it is possible that they will not devote their full
time efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with the company after
the consummation of a business combination if they are able to
negotiate employment or consulting agreements in connection with
the business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination and
will likely provide for them to receive compensation in the form of
cash payments and/or our securities for services they would render
to the company after the consummation of the business combination.
While the personal and financial interests of our key personnel may
influence their motivation in identifying and selecting a target
business, their ability to remain with the company after the
consummation of a business combination will not be the determining
factor in our decision as to whether or not we will proceed with
any potential business combination. Additionally, we cannot assure
you that our officers and directors will have significant
experience or knowledge relating to the operations of the
particular target business.
Following a
business combination, we may seek to recruit additional managers to
supplement the incumbent management of the target business. We
cannot assure you that we will have the ability to recruit
additional managers, or that any such additional managers we do
recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve an Initial
Business Combination
In
connection with any proposed business combination, we will either
(1) seek stockholder approval of our initial business combination
at a meeting called for such purpose at which stockholders may seek
to convert their shares, regardless of whether they vote for or
against the proposed business combination, into their pro rata
share of the aggregate amount then on deposit in the trust account
(net of taxes payable), or (2) provide our public stockholders with
the opportunity to sell their shares to us by means of a tender
offer (and thereby avoid the need for a stockholder vote) for an
amount equal to their pro rata share of the aggregate amount then
on deposit in the trust account (net of taxes payable), in each
case subject to the limitations described herein. If we determine
to engage in a tender offer, such tender offer will be structured
so that each stockholder may tender any or all of his, her or its
shares rather than some pro rata portion of his, her or its shares.
The decision as to whether we will seek stockholder approval of a
proposed business combination or will allow stockholders to sell
their shares to us in a tender offer will be made by us, solely in
our discretion, and will be based on a variety of factors such as
the timing of the transaction and whether the terms of the
transaction would otherwise require us to seek stockholder
approval. Unlike other blank check companies which require
stockholder votes and conduct proxy solicitations in conjunction
with their initial business combinations and related conversions of
public shares for cash upon consummation of such initial business
combination even when a vote is not required by law, we will have
the flexibility to avoid such stockholder vote and allow our
stockholders to sell their shares pursuant to Rule 13e-4 and
Regulation 14E of the Exchange Act which regulate issuer tender
offers. In that case, we will file tender offer documents with the
SEC which will contain substantially the same financial and other
information about the initial business combination as is required
under the SEC’s proxy rules. We will consummate our initial
business combination only if we have net tangible assets of at
least $5,000,001 upon such consummation and, if we seek stockholder
approval, a majority of the outstanding shares of common stock
voted are voted in favor of the business combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that
we would avoid being subject to Rule 419 promulgated under the
Securities Act of 1933, as amended. However, if we seek to
consummate an initial business combination with a target business
that imposes any type of working capital closing condition or
requires us to have a minimum amount of funds available from the
trust account upon consummation of such initial business
combination, we may need to have more than $5,000,001 in net
tangible assets upon consummation and this may force us to seek
third party financing which may not be available on terms
acceptable to us or at all. As a result, we may not be able to
consummate such initial business combination and we may not be able
to locate another suitable target within the applicable time
period, if at all. Public stockholders may therefore have to wait
12 months from the closing of the Initial Public Offering
(or up to
18 months from the closing of the Initial Public Offering
if we
extend the period of time to consummate a business combination by
the full amount of time) in order to be able to receive a
pro rata share of the trust account.
Our
sponsor, officers and directors have agreed (1) to vote any shares
of common stock owned by them in favor of any proposed business
combination, including the founder’s shares, (2) not to
convert any shares of common stock in connection with a stockholder
vote to approve a proposed initial business combination and (3) not
sell any shares of common stock in any tender in connection with a
proposed initial business combination. As a result, we would need
only 2,502,251, or approximately 36.3%, of the 6,900,000 public
shares sold in the Initial Public Offering to be voted in favor of
a transaction in order to have our initial business combination
approved (assuming all shares were present and entitled to vote at
the meeting, and that the 120,000 shares to be issued to
EarlyBirdCapital upon the consummation of the Initial Public
Offering are voted in favor of the transaction).
None of
our officers, directors, sponsor or their affiliates has indicated
any intention to purchase units or shares of common stock from
persons in the open market or in private transactions. However, if
we hold a meeting to approve a proposed business combination and a
significant number of stockholders vote, or indicate an intention
to vote, against such proposed business combination, our officers,
directors, sponsor or their affiliates could make such purchases in
the open market or in private transactions in order to influence
the vote. Notwithstanding the foregoing, our officers, directors,
sponsor and their affiliates will not make purchases of shares of
common stock if the purchases would violate Section 9(a)(2) or Rule
10b-5 of the Exchange Act, which are rules designed to stop
potential manipulation of a company’s stock.
Conversion Rights
At any
meeting called to approve an initial business combination, public
stockholders may seek to convert their shares, regardless of
whether they vote for or against the proposed business combination,
into their pro rata share of the aggregate amount then on deposit
in the trust account as of two business days prior to the
consummation of the initial business combination, less any taxes
then due but not yet paid (which taxes may be paid only from the
interest earned on the funds in the trust account). Alternatively,
we may provide our public stockholders with the opportunity to sell
their shares of our common stock to us through a tender offer (and
thereby avoid the need for a stockholder vote) for an amount equal
to their pro rata share of the aggregate amount then on deposit in
the trust account, less any taxes then due but not yet
paid.
We may
require public stockholders seeking conversion, whether they are a
record holder or hold their shares in “street name,” to
either (i) tender their certificates to our transfer agent or (ii)
deliver their shares to the transfer agent electronically using
Depository Trust Company’s DWAC (Deposit/Withdrawal At
Custodian) System, at the holder’s option, in each case prior
to a date set forth in the proxy materials sent in connection with
the proposal to approve the business combination.
There
is a nominal cost associated with the above-referenced delivery
process and the act of certificating the shares or delivering them
through the DWAC System. The transfer agent will typically charge
the tendering broker $45.00 and it would be up to the broker
whether to pass this cost on to the holder. However, this fee would
be incurred regardless of whether we require holders seeking to
exercise conversion rights to tender their shares. The need to
deliver shares is a requirement of exercising conversion rights
regardless of the timing of when such delivery must be effectuated.
However, in the event we require stockholders seeking to exercise
conversion rights to deliver their shares prior to the consummation
of the proposed business combination and the proposed business
combination is not consummated, this may result in an increased
cost to stockholders.
Any
proxy solicitation materials we furnish to stockholders in
connection with a vote for any proposed business combination will
indicate whether we are requiring stockholders to satisfy such
certification and delivery requirements. Accordingly, a stockholder
would have from the time the stockholder received our proxy
statement up until the vote on the proposal to approve the business
combination to deliver his shares if he wishes to seek to exercise
his conversion rights. This time period varies depending on the
specific facts of each transaction. However, as the delivery
process can be accomplished by the stockholder, whether or not he
is a record holder or his shares are held in “street
name,” in a matter of hours by simply contacting the transfer
agent or his broker and requesting delivery of his shares through
the DWAC System, we believe this time period is sufficient for an
average investor. However, we cannot assure you of this fact.
Please see the risk factor titled “In connection with any stockholder meeting
called to approve a proposed initial business combination, we may
require stockholders who wish to convert their shares in connection
with a proposed business combination to comply with specific
requirements for conversion that may make it more difficult for
them to exercise their conversion rights prior to the deadline for
exercising their rights.” for further information on
the risks of failing to comply with these
requirements.
The
foregoing is different from the procedures historically used by
some blank check companies. Traditionally, in order to perfect
conversion rights in connection with a blank check company’s
business combination, the company would distribute proxy materials
for the stockholders’ vote on an initial business
combination, and a holder could simply vote against a proposed
business combination and check a box on the proxy card indicating
such holder was seeking to exercise his conversion rights. After
the business combination was approved, the company would contact
such stockholder to arrange for him to deliver his certificate to
verify ownership. As a result, the stockholder then had an
“option window” after the consummation of the business
combination during which he could monitor the price of the
company’s stock in the market. If the price rose above the
conversion price, he could sell his shares in the open market
before actually delivering his shares to the company for
cancellation. As a result, the conversion rights, to which
stockholders were aware they needed to commit before the
stockholder meeting, would become a “continuing” right
surviving past the consummation of the business combination until
the holder delivered its certificate. The requirement for physical
or electronic delivery prior to the meeting ensures that a
holder’s election to convert his shares is irrevocable once
the business combination is approved.
Any
request to convert such shares once made, may be withdrawn at any
time up to the vote on the proposed business combination.
Furthermore, if a holder of a public share of common stock
delivered his certificate in connection with an election of their
conversion and subsequently decides prior to the vote on the
proposed business combination not to elect to exercise such rights,
he may simply request that the transfer agent return the
certificate (physically or electronically).
If the
initial business combination is not approved or completed for any
reason, then our public stockholders who elected to exercise their
conversion rights would not be entitled to convert their shares for
the applicable pro rata share of the trust account as of two
business days prior to the consummation of the initial business
combination. In such case, we will promptly return any shares
delivered by public holders.
Ability to Extend Time to Complete Business
Combination
We will have until 12 months from the
closing of the Initial Public Offering to consummate an initial business
combination. However, if we anticipate that we may not be able to
consummate our initial business combination within 12 months, we
may extend the period of time to consummate a business combination
up to two times, each by an additional three months (for a total of
up to 18 months to complete a business combination). Pursuant to
the terms of our amended and restated certificate of incorporation
and the Investment Management Trust Account Agreement, dated
November 20, 2017, between Continental Stock Transfer & Trust
Company and us, in order to
extend the time available for us to consummate our initial business
combination, our sponsor or its affiliates or designees, upon five
days advance notice prior to the applicable deadline, must deposit
into the trust account $690,000 ($0.10 per share) on or prior to
the date of the applicable deadline, for each three month extension
(or up to an aggregate of $1,380,000), or $0.20 per share, if we
extend for the full six months). In the event that we receive
notice from our sponsor five days prior to the applicable deadline
of its intent to effect an extension, we intend to issue a press
release announcing such intention at least three days prior to the
applicable deadline. In addition, we intend to issue a press
release the day after the applicable deadline announcing whether or
not the funds had been timely deposited. Our sponsor and its
affiliates or designees are not obligated to fund the trust account
to extend the time for us to complete our initial business
combination.
Liquidation if No Business Combination
Our
amended and restated certificate of incorporation provides that we
will have only 12 months from the closing of the Initial Public
Offering (or up to 18 months
from the closing of the Initial
Public Offering if we extend the period
of time to consummate a business combination by the full amount of
time) to complete an initial business combination. If we
have not completed an initial business combination by such date, we
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 100% of the outstanding public
shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account, including
any interest earned on the funds held in the trust account net of
interest that may be used by us to pay our franchise and income
taxes payable, 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 liquidation distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to our obligations
under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Our
sponsor, officers and directors have agreed that they will not
propose any amendment to our amended and restated certificate of
incorporation that would restrict our public stockholders from
converting or selling their shares to us in connection with a
business combination or affect the substance or timing of our
obligation to redeem 100% of our public shares if we do not
complete a business combination within 12 months from the closing
of the Initial Public Offering (or up to 18 months
from the closing of the Initial
Public Offering if we extend the period
of time to consummate a business combination by the full amount of
time) unless we provide our public stockholders with the
opportunity to convert their shares of common stock upon such
approval at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account, including
interest not previously released to us but net of franchise and
income taxes payable, divided by the number of then outstanding
public shares. This redemption right shall apply in the event of
the approval of any such amendment, whether proposed by our
sponsor, any executive officer, director or director nominee, or
any other person.
Under
the Delaware General Corporation Law, stockholders may be held
liable for claims by third parties against a corporation to the
extent of distributions received by them in a dissolution. The pro
rata portion of our trust account distributed to our public
stockholders upon the redemption of 100% of our outstanding public
shares in the event we do not complete our initial business
combination within the required time period may be considered a
liquidation distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the
Delaware General Corporation Law intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day
notice period during which any third-party claims can be brought
against the corporation, a 90-day period during which the
corporation may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are
made to stockholders, any liability of stockholders with respect to
a liquidating distribution is limited to the lesser of such
stockholder’s pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution.
Furthermore, if the
pro rata portion of our trust account distributed to our public
stockholders upon the redemption of 100% of our public shares in
the event we do not complete our initial business combination
within the required time period is not considered a liquidation
distribution under Delaware law and such redemption distribution is
deemed to be unlawful, then pursuant to Section 174 of the Delaware
General Corporation Law, the statute of limitations for claims of
creditors could then be six years after the unlawful redemption
distribution, instead of three years, as in the case of a
liquidation distribution. If we are unable to complete a business
combination within the prescribed time frame, we 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 100% of the outstanding public shares, at a
per-share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including any interest earned
on the funds held in the trust account net of interest that may be
used by us to pay our franchise and income taxes payable, 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 liquidation
distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject
to the approval of our remaining stockholders and our board of
directors, dissolve and liquidate, subject (in the case of (ii) and
(iii) above) to our obligations under Delaware law to provide for
claims of creditors and the requirements of other applicable law.
Accordingly, it is our intention to redeem our public shares as
soon as reasonably possible following the 12-month anniversary of
the closing of the Initial Public Offering (or up to 18-months if
we extend the period of time to consummate a business combination
by the full amount of time), and, therefore, we do not
intend to comply with those procedures. As such, our stockholders
could potentially be liable for any claims to the extent of
distributions received by them (but no more) and any liability of
our stockholders may extend well beyond the third anniversary of
such date.
Because
we will not be complying with Section 280 of the Delaware General
Corporation Law, Section 281(b) of the Delaware General Corporation
Law requires us to adopt a plan, based on facts known to us at such
time that will provide for our payment of all existing and pending
claims or claims that may be potentially brought against us within
the subsequent ten years. However, because we are a blank check
company, rather than an operating company, and our operations will
be limited to searching for prospective target businesses to
acquire, the only likely claims to arise would be from our vendors
(such as lawyers, investment bankers, etc.) or prospective target
businesses.
We are
required to use our reasonable best efforts to have all third
parties and any prospective target businesses enter into agreements
with us waiving any right, title, interest or claim of any kind
they may have in or to any monies held in the trust account. As a
result, the claims that could be made against us will be limited,
thereby lessening the likelihood that any claim would result in any
liability extending to the trust. We therefore believe that any
necessary provision for creditors will be reduced and should not
have a significant impact on our ability to distribute the funds in
the trust account to our public stockholders. Nevertheless, we
cannot assure you of this fact as there is no guarantee that
vendors, service providers and prospective target businesses will
execute such agreements. If any third party refuses to execute an
agreement waiving such claims to the monies held in the trust
account, our management will perform an analysis of the
alternatives available to it and will only enter into an agreement
with a third party that has not executed a waiver if management
believes that such third party’s engagement would be
significantly more beneficial to us than any alternative. Examples
of possible instances where we may engage a third party that
refuses to execute a waiver include the engagement of a third party
consultant whose particular expertise or skills are believed by
management to be significantly superior to those of other
consultants that would agree to execute a waiver or in cases where
management is unable to find a service provider willing to execute
a waiver. Our underwriters and auditor are the only third parties
we are currently aware of that may not execute a waiver. Nor is
there any guarantee that, even if they execute such agreements with
us, they will not seek recourse against the trust account. A/Z
Property Partners, LLC ("A/Z Property"), an entity majority owned
by Richard Ackerman, our Chairman, President and Chief Executive
Officer, has agreed that it will be liable to ensure that the
proceeds in the trust account are not reduced below $10.00 per
share by the claims of target businesses or claims of vendors or
other entities that are owed money by us for services rendered or
contracted for or products sold to us. We believe A/Z Property has
sufficient net worth to satisfy its indemnity obligation should it
arise, however we cannot assure you that A/Z Property will have
sufficient liquid assets to satisfy such obligations if it is
required to do so. Additionally, the agreement entered into by A/Z
Property specifically provides for two exceptions to the indemnity
it has given: it will have no liability (1) as to any claimed
amounts owed to a target business or vendor or other entity who has
executed an agreement with us waiving any right, title, interest or
claim of any kind they may have in or to any monies held in the
trust account, or (2) as to any claims for indemnification by the
underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act. As a
result, if we liquidate, the per-share distribution from the trust
account could be less than $10.00 due to claims or potential claims
of creditors. We will distribute to all of our public stockholders,
in proportion to their respective equity interests, an aggregate
amount then on deposit in the trust account, including any interest
earned on the funds held in the trust account net of interest that
may be used by us to pay our franchise and income taxes
payable.
We
anticipate notifying the trustee of the trust account to begin
liquidating such assets promptly after such date and anticipate it
will take no more than 10 business days to effect such a
distribution. Our sponsor has waived its rights to participate in
any liquidation distribution with respect to the founder’s
shares and any shares, rights or warrants included in the private
placement units. Additionally, any loans made by our officers,
directors, sponsors or their affiliates for working capital needs
will be forgiven and not repaid if we are unable to complete an
initial business combination. There will be no distribution from
the trust account with respect to our rights or warrants, including
the rights or warrants contained in the private placement units,
which will expire worthless. We will pay the costs of any
subsequent liquidation from our remaining assets outside of the
trust account. If such funds are insufficient, A/Z Property has
agreed to pay the funds necessary to complete such liquidation
(currently anticipated to be no more than approximately $15,000)
and has agreed not to seek repayment for such
expenses.
If we
are unable to complete an initial business combination and expend
all of the net proceeds of the Initial Public Offering and the sale
of the private placement units, other than the proceeds deposited
in the trust account, and without taking into account interest, if
any, earned on the trust account, the initial per-share redemption
price would be $10.00. The proceeds deposited in the trust account
could, however, become subject to claims of our creditors that are
in preference to the claims of public stockholders.
Our
public stockholders shall be entitled to receive funds from the
trust account only in the event of our failure to complete a
business combination within the required time period or if the
stockholders seek to have us convert or purchase their respective
shares upon a business combination which is actually completed by
us or upon certain amendments to our amended and restated
certificate of incorporation as described elsewhere herein. In no
other circumstances shall a stockholder have any right or interest
of any kind to or in the trust account.
If we
are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us which is not dismissed, the proceeds held
in the trust account could be subject to applicable bankruptcy law,
and may be included in our bankruptcy estate and subject to the
claims of third parties with priority over the claims of our
stockholders. To the extent any bankruptcy claims deplete the trust
account, we cannot assure you we will be able to return to our
public stockholders at least $10.00 per share.
If we
are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us which is not dismissed, any distributions
received by stockholders could be viewed under applicable
debtor/creditor and/or bankruptcy laws as either a
“preferential transfer” or a “fraudulent
conveyance.” As a result, a bankruptcy court could seek to
recover all amounts received by our stockholders. Furthermore,
because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after the expiration of
the time we have to complete an initial business combination, this
may be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access to
or distributions from our assets. Furthermore, our board may be
viewed as having breached their fiduciary duties to our creditors
and/or may have acted in bad faith, and thereby exposing itself and
our company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the claims
of creditors. We cannot assure you that claims will not be brought
against us for these reasons.
Amended and Restated Certificate of Incorporation
Our
amended and restated certificate of incorporation contains certain
requirements and restrictions that will apply to us until the
consummation of our initial business combination. These provisions
cannot be amended without the approval of a majority of our
stockholders. If we seek to amend any provisions of our amended and
restated certificate of incorporation that would restrict our
public stockholders from converting or selling their shares to us
in connection with a business combination or affect the substance
or timing of our obligation to redeem 100% of our public shares if
we do not complete a business combination within 12 months from the
closing of the Initial Public Offering (or up to 18 months
from the closing of the Initial Public Offering if we extend the period
of time to consummate a business combination by the full amount of
time), we will provide dissenting public stockholders with
the opportunity to convert their public shares in connection with
any such vote. This redemption right shall apply in the event of
the approval of any such amendment, whether proposed by our
sponsor, any executive officer, director or director nominee, or
any other person. Our sponsor, officers and directors have agreed
to waive any conversion rights with respect to any founder’s
shares and any public shares they may hold in connection with any
vote to amend our amended and restated certificate of
incorporation. Specifically, our amended and restated certificate
of incorporation provides, among other things, that:
●
we shall either (1)
seek stockholder approval of our initial business combination at a
meeting called for such purpose at which stockholders may seek to
convert their shares, regardless of whether they vote for or
against the proposed business combination, into their pro rata
share of the aggregate amount then on deposit in the trust account
(net of taxes payable), or (2) provide our stockholders with the
opportunity to sell their shares to us by means of a tender offer
(and thereby avoid the need for a stockholder vote) for an amount
equal to their pro rata share of the aggregate amount then on
deposit in the trust account (net of taxes payable), in each case
subject to the limitations described herein;
●
we will consummate
our initial business combination only if we have net tangible
assets of at least $5,000,001 upon such consummation and, if we
seek stockholder approval, a majority of the outstanding shares of
common stock voted are voted in favor of the business
combination;
●
if our initial
business combination is not consummated within 12 months from the
closing of the Initial Public Offering (or up to 18 months from the closing
of the Initial Public Offering if we extend the period of time to
consummate a business combination by the full amount of
time), then we will redeem all of the outstanding public
shares and thereafter liquidate and dissolve our
company;
●
upon the
consummation of the Initial Public Offering, $60.0 million, or
approximately $69.0 million if the over-allotment option is
exercised in full, shall be placed into the trust
account;
●
we may not
consummate any other business combination, merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or
similar transaction prior to our initial business combination;
and
●
prior to our
initial business combination, we may not issue additional stock
that participates in any manner in the proceeds of the trust
account, or that votes as a class with the common stock sold in
this offering on any matter.
Competition
In
identifying, evaluating and selecting a target business, we may
encounter intense competition from other entities having a business
objective similar to ours. Many of these entities are well
established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Many of these
competitors possess greater technical, human and other resources
than we do and our financial resources will be relatively limited
when contrasted with those of many of these competitors. While we
believe there may be numerous potential target businesses that we
could acquire with the net proceeds of the Initial Public Offering
and the sale of the private placement units, our ability to compete
in acquiring certain sizable target businesses may be limited by
our available financial resources.
The
following also may not be viewed favorably by certain target
businesses:
●
our obligation to
seek stockholder approval of a business combination or engage in a
tender offer may delay the completion of a
transaction;
●
our obligation to
convert or repurchase shares of common stock held by our public
stockholders may reduce the resources available to us for a
business combination; and
●
our outstanding
rights or warrants and unit purchase options, and the potential
future dilution they represent.
Any of
these factors may place us at a competitive disadvantage in
successfully negotiating a business combination. Our management
believes, however, that our status as a public entity and potential
access to the United States public equity markets may give us a
competitive advantage over privately-held entities having a similar
business objective as ours in acquiring a target business with
significant growth potential on favorable terms.
If we
succeed in effecting a business combination, there will be, in all
likelihood, intense competition from competitors of the target
business. We cannot assure you that, subsequent to a business
combination, we will have the resources or ability to compete
effectively.
Employees
We have
three executive officers who receive no compensation from the
Company. These individuals are not obligated to devote any specific
number of hours to our matters and intend to devote only as much
time as they deem necessary to our affairs. The amount of time they
will devote in any time period will vary based on whether a target
business has been selected for the business combination and the
stage of the business combination process of the company.
Accordingly, once a suitable target business to acquire has been
located, management will spend more time investigating such target
business and negotiating and processing the business combination
(and consequently spend more time on our affairs) than had been
spent prior to locating a suitable target business. We presently
expect our executive officers to devote such amount of time as they
reasonably believe is necessary to our business. We do not intend
to have any employees prior to the consummation of a business
combination.
Periodic Reporting and Audited Financial Statements
We have
registered our units, common stock, rights and warrants under the
Exchange Act and have reporting obligations, including the
requirement that we file annual, quarterly and current reports with
the SEC. In accordance with the requirements of the Exchange Act,
this 2017 Form 10-K contains financial statements audited and
reported on by our independent registered public
accountants.
We will
provide stockholders with audited financial statements of the
prospective target business as part of any proxy solicitation as
issued by the International Accounting Standards Board materials or
tender offer documents sent to stockholders to assist them in
assessing the target business. These financial statements will need
to be prepared in accordance with or reconciled to United States
generally accepted accounting principles or international financial
reporting standards. We cannot assure you that any particular
target business identified by us as a potential acquisition
candidate will have the necessary financial statements. To the
extent that this requirement cannot be met, we may not be able to
acquire the proposed target business.
We may
be required to have our internal control procedures audited for the
fiscal year ending December 31, 2018 as required by the
Sarbanes-Oxley Act. A target company may not be in compliance with
the provisions of the Sarbanes-Oxley Act regarding adequacy of
their internal controls. The development of the internal controls
of any such entity to achieve compliance with the Sarbanes-Oxley
Act may increase the time and costs necessary to complete any such
acquisition.
Our
business, financial condition, operating results, and cash flows
may be impacted by a number of factors, many of which are beyond
our control, including those set forth below and elsewhere in this
2017 Form 10-K, the occurrence of any one of which could have a
material adverse effect on our actual results.
We have no operating history and, accordingly, you will not have
any basis on which to evaluate our ability to achieve our business
objective.
We have
no operating results to date. Therefore, our ability to commence
operations is dependent upon obtaining financing through the public
offering of our securities. Since we do not have an operating
history, you will have no basis upon which to evaluate our ability
to achieve our business objective, which is to consummate an
initial business combination. We have not conducted any substantive
discussions and we have no plans, arrangements or understandings
with any prospective acquisition candidates. We will not generate
any revenues until, at the earliest, after the consummation of a
business combination.
If we are unable to consummate a business combination, our public
stockholders may be forced to wait more than 12 months (or up to 18 months from the closing of
the Initial Public Offering if we extend the period of time to
consummate a business combination by the full amount of
time) before receiving distributions from the trust
account.
We have
12 months from the closing of the Initial Public Offering
(or up to 18 months from
the closing of t the Initial Public Offering if we extend the period of time to
consummate a business combination by the full amount of
time) in which to complete a business combination. We have
no obligation to return funds to investors prior to such date
unless (i) we consummate a business combination prior thereto or
(ii) we seek to amend our amended and restated certificate of
incorporation prior to consummation of a business combination, and
only then in cases where investors have sought to convert or sell
their shares to us. Only after the expiration of this full time
period will public security holders be entitled to distributions
from the trust account if we are unable to complete a business
combination. Accordingly, investors’ funds may be unavailable
to them until after such date and to liquidate your investment,
public security holders may be forced to sell their public shares
or warrants, potentially at a loss.
Our public stockholders may not be afforded an opportunity to vote
on our proposed business combination.
We will
either (1) seek stockholder approval of our initial business
combination at a meeting called for such purpose at which public
stockholders may seek to convert their shares, regardless of
whether they vote for or against the proposed business combination,
into their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable), or (2) provide our
public stockholders with the opportunity to sell their shares to us
by means of a tender offer (and thereby avoid the need for a
stockholder vote) for an amount equal to their pro rata share of
the aggregate amount then on deposit in the trust account (net of
taxes payable), in each case subject to the limitations described
elsewhere in this Report. Accordingly, it is possible that we will
consummate our initial business combination even if holders of a
majority of our public shares do not approve of the business
combination we consummate. The decision as to whether we will seek
stockholder approval of a proposed business combination or will
allow stockholders to sell their shares to us in a tender offer
will be made by us, solely in our discretion, and will be based on
a variety of factors such as the timing of the transaction and
whether the terms of the transaction would otherwise require us to
seek stockholder approval. For instance, Nasdaq rules currently
allow us to engage in a tender offer in lieu of a stockholder
meeting but would still require us to obtain stockholder approval
if we were seeking to issue more than 20% of our outstanding shares
to a target business as consideration in any business combination.
Therefore, if we were structuring a business combination that
required us to issue more than 20% of our outstanding shares, we
would seek stockholder approval of such business combination
instead of conducting a tender offer.
You will not be entitled to protections normally afforded to
investors of blank check companies.
Since
the net proceeds of the Initial Public Offering and the sale of the
private placement units are intended to be used to complete a
business combination with a target business that has not been
identified, we are deemed to be a “blank check” company
under the United States securities laws. However, since we have net
tangible assets in excess of $5,000,000 as a result of the Initial
Public Offering, we are exempt from rules promulgated by the SEC to
protect investors of blank check companies such as Rule 419.
Accordingly, investors will not be afforded the benefits or
protections of those rules which would, for example, completely
restrict the transferability of our securities, require us to
complete a business combination within 18 months of the effective
date of the initial registration statement and restrict the use of
interest earned on the funds held in the trust account. Because we
are not subject to Rule 419, our units are immediately tradable, we
are entitled to withdraw amounts from the funds held in the trust
account prior to the completion of a business combination and we
have a longer period of time to complete such a business
combination than we would if we were subject to such
rule.
If we determine to change our acquisition criteria or guidelines,
many of the disclosures contained in this Report would be rendered
irrelevant and you would be investing in our company without any
basis on which to evaluate the potential target business we may
acquire.
We
could seek to deviate from the acquisition criteria or guidelines
disclosed in this Report although we have no current intention to
do so. For instance, we currently anticipate acquiring a target
business with a consistent historical financial performance.
However, we are not obligated to do so and may determine to merge
with or acquire a company with no operating history if the terms of
the transaction are determined by us to be favorable to our public
stockholders. In such event, many of the acquisition criteria and
guidelines set forth in this Report would be rendered irrelevant.
We could also seek to amend our amended and restated certificate of
incorporation to provide us with more time to complete an initial
business combination. Accordingly, investors may be making an
investment in our company without any basis on which to evaluate
the potential target business we may acquire.
We may issue shares of our capital stock or debt securities to
complete a business combination, which would reduce the equity
interest of our stockholders and likely cause a change in control
of our ownership.
Our
amended and restated certificate of incorporation authorizes the
issuance of up to 100,000,000 shares of common stock, par value
$0.001 per share, and 1,000,000 shares of preferred stock, par
value $0.001 per share. As of March 21, 2018, there are 85,701,000
authorized but unissued shares of common stock available for
issuance, which amount takes into account shares reserved for
issuance upon exercise of the underwriter’s option,
conversion of outstanding rights (including private placement
rights and the rights underlying the underwriter's option) and
warrants (including the warrants contained in the private placement
units and the underwriter’s option). As of March 21, 2018,
there are no shares of preferred stock issued and outstanding.
Although we have no commitment as of the date of this 2017 Form
10-K, we may issue a substantial number of additional shares of
common stock or shares of preferred stock, or a combination of
common stock and preferred stock, to complete a business
combination. The issuance of additional shares of common stock will
not reduce the per-share conversion amount in the trust account.
The issuance of additional shares of common stock or preferred
stock:
●
may significantly
reduce the equity interest of investors in the Initial Public
Offering;
●
may subordinate the
rights of holders of shares of common stock if we issue shares of
preferred stock with rights senior to those afforded to our shares
of common stock;
●
may cause a change
in control if a substantial number of shares of common stock are
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;
and
●
may adversely
affect prevailing market prices for our shares of common
stock.
Similarly, if we
issue debt securities, it could result in:
●
default and
foreclosure on our assets if our operating revenues after a
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; and
●
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.
If we
incur indebtedness, our lenders will not have a claim on the cash
in the trust account and such indebtedness will not decrease the
per-share conversion amount in the trust account.
If the net proceeds of the Initial Public Offering and the sale of
the private placement units not being held in trust are
insufficient to allow us to operate for at least 12 months
from the closing of the Initial
Public Offering (or up to 18 months
from the closing of the Initial Public Offering if we extend the period of time to consummate a
business combination by the full amount of time), we may be
unable to complete a business combination.
We
believe that the funds available to us outside of the trust account
will be sufficient to allow us to operate for at least the 12
months from the closing of the Initial Public Offering (or up to 18 months from the closing of the
Initial Public Offering if we extend
the period of time to consummate a business combination by the full
amount of time), assuming that a business combination is not
consummated during that time. However, we cannot assure you that
our estimates will be accurate. Accordingly, if we use all of the
funds held outside of the trust account, we may not have sufficient
funds available with which to structure, negotiate or close an
initial business combination. In such event, we would need to
borrow funds from our sponsor, officers or directors or their
affiliates to operate or may be forced to liquidate. Our sponsor,
officers, directors and their affiliates may, but are not obligated
to, loan us funds, from time to time or at any time, in whatever
amount that they deem reasonable in their sole discretion for our
working capital needs. Each loan would be evidenced by a promissory
note. The notes would either be paid upon consummation of our
initial business combination, without interest, or, at
holder’s discretion, up to $1,500,000 of the notes may be
converted into private units at a price of $10.00 per unit
(which, for example, would result in
the holders being issued 165,000 shares of common stock if
$1,500,000 of notes were so converted since the 150,000 rights
included in such units would result in the issuance of 15,000
shares upon the closing of our business combination, as well as
75,000 warrants to purchase 75,000 shares).
If third parties bring claims against us, the proceeds held in
trust could be reduced and the per-share redemption price received
by stockholders may be less than $10.00.
Our
placing of funds in trust may not protect those funds from third
party claims against us. Although we will seek to have all vendors
and service providers we engage and prospective target businesses
we negotiate with execute agreements with us waiving any right,
title, interest or claim of any kind in or to any monies held in
the trust account for the benefit of our public stockholders, they
may not execute such agreements. Furthermore, even if such entities
execute such agreements with us, they may seek recourse against the
trust account. A court may not uphold the validity of such
agreements. Accordingly, the proceeds held in trust could be
subject to claims which could take priority over those of our
public stockholders. If we are unable to complete a business
combination and distribute the proceeds held in trust to our public
stockholders, A/Z Property has agreed (subject to certain
exceptions described elsewhere in this Report) that it will be
liable to ensure that the proceeds in the trust account are not
reduced below $10.00 per share by the claims of target businesses
or claims of vendors or other entities that are owed money by us
for services rendered or contracted for or products sold to us. We
believe A/Z Property has sufficient net worth to satisfy its
indemnity obligation should it arise, however we cannot assure you
that A/Z Property will have sufficient liquid assets to satisfy
obligations if it is required to do so. Additionally, the agreement
entered into by A/Z Property specifically provides for two
exceptions to the indemnity it has given: it will have no liability
(1) as to any claimed amounts owed to a target business or vendor
or other entity who has executed an agreement with us waiving any
right, title, interest or claim of any kind they may have in or to
any monies held in the trust account, or (2) as to any claims for
indemnification by the underwriters of the Initial Public Offering
against certain liabilities, including liabilities under the
Securities Act. Therefore, the
per-share distribution from the trust account may be less than
$10.00, plus interest, due to such claims.
Additionally, if we
are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us which is not dismissed, the proceeds held
in the trust account could be subject to applicable bankruptcy law,
and may be included in our bankruptcy estate and subject to the
claims of third parties with priority over the claims of our
stockholders. To the extent any bankruptcy claims deplete the trust
account, we may not be able to return to our public stockholders at
least $10.00 per share. As a result, if any such claims were
successfully made against the trust account, the funds available
for our initial business combination and redemptions could be
reduced to less than $10.00 per public share.
Our stockholders may be held liable for claims by third parties
against us to the extent of distributions received by
them.
Our
amended and restated certificate of incorporation provides that we
will continue in existence only until 12 months from the closing of
the Initial Public Offering (or up to 18 months
from the closing of the Initial Public Offering if we extend the period
of time to consummate a business combination by the full amount of
time). If we have not completed a business combination by
such date, we 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 100% of the outstanding
public shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account, including
any interest earned on the funds held in the trust account net of
interest that may be used by us to pay our franchise and income
taxes payable, 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 liquidation distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining
stockholders and our board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to our obligations
under Delaware law to provide for claims of creditors and the
requirements of other applicable law. We cannot assure you that we
will properly assess all claims that may be potentially brought
against us. As such, our stockholders could potentially be liable
for any claims to the extent of distributions received by them (but
no more) and any liability of our stockholders may extend well
beyond the third anniversary of the date of distribution.
Accordingly, we cannot assure you that third parties will not seek
to recover from our stockholders amounts owed to them by
us.
If we
are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us which is not dismissed, any distributions
received by stockholders could be viewed under applicable
debtor/creditor and/or bankruptcy laws as either a
“preferential transfer” or a “fraudulent
conveyance.” As a result, a bankruptcy court could seek to
recover all amounts received by our stockholders. Furthermore,
because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly after expiration of the
time we have to complete an initial business combination, this may
be viewed or interpreted as giving preference to our public
stockholders over any potential creditors with respect to access to
or distributions from our assets. Furthermore, our board may be
viewed as having breached their fiduciary duties to our creditors
and/or may have acted in bad faith, and thereby exposing itself and
our company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the claims
of creditors. We cannot assure you that claims will not be brought
against us for these reasons.
Our directors may decide not to enforce A/Z Property's
indemnification obligations, resulting in a reduction in the amount
of funds in the trust account available for distribution to our
public stockholders.
In the
event that the proceeds in the trust account are reduced below
$10.00 per public share and A/Z Property asserts that it is unable
to satisfy its obligations or that it has no indemnification
obligations related to a particular claim, our independent
directors would determine whether to take legal action against A/Z
Property to enforce such indemnification obligations. While we
currently expect that our independent directors would take legal
action on our behalf against A/Z Property to enforce such
indemnification obligations to us, it is possible that our
independent directors in exercising their business judgment may
choose not to do so in any particular instance. If our independent
directors choose not to enforce these indemnification obligations,
the amount of funds in the trust account available for distribution
to our public stockholders may be reduced below $10.00 per
share.
If we do not file and maintain a current and effective prospectus
relating to the common stock issuable upon exercise of the
warrants, holders will only be able to exercise such warrants on a
“cashless basis.”
If we
do not file and maintain a current and effective prospectus
relating to the common stock issuable upon exercise of the warrants
at the time that holders wish to exercise such warrants, they will
only be able to exercise them on a “cashless basis”
provided that an exemption from registration is available. As a
result, the number of shares of common stock that holders will
receive upon exercise of the warrants will be fewer than it would
have been had such holder exercised his warrant for cash. Further,
if an exemption from registration is not available, holders would
not be able to exercise on a cashless basis and would only be able
to exercise their warrants for cash if a current and effective
prospectus relating to the common stock issuable upon exercise of
the warrants is available. Under the terms of the warrant
agreement, we have agreed to use our best efforts to meet these
conditions and to file and maintain a current and effective
prospectus relating to the common stock issuable upon exercise of
the warrants until the expiration of the warrants. However, we
cannot assure you that we will be able to do so. If we are unable
to do so, the potential “upside” of the holder’s
investment in our company may be reduced or the warrants may expire
worthless.
An investor will only be able to exercise a warrant if the issuance
of shares of common stock upon such exercise has been registered or
qualified or is deemed exempt under the securities laws of the
state of residence of the holder of the warrants.
No
warrants will be exercisable and we will not be obligated to issue
shares of common stock unless the shares of common stock issuable
upon such exercise has been registered or qualified or deemed to be
exempt under the securities laws of the state of residence of the
holder of the warrants. If the shares of common stock issuable upon
exercise of the warrants are not qualified or exempt from
qualification in the jurisdictions in which the holders of the
warrants reside, the warrants may be deprived of any value, the
market for the warrants may be limited and they may expire
worthless if they cannot be sold and may be subject to
redemption.
We may amend the terms of the warrants in a manner that may be
adverse to holders with the approval by the holders of at least 50%
of the then outstanding warrants.
Our
warrants were issued in registered form under the Warrant
Agreement, dated November 20, 2017, between Continental Stock
Transfer & Trust Company, as warrant agent, and us. The warrant
agreement provides that the terms of the warrants may be amended
without the consent of any holder to cure any ambiguity or correct
any defective provision. The warrant agreement requires the
approval by the holders of at least 50% of the then outstanding
warrants (including the warrants contained in the private placement
units) in order to make any change that adversely affects the
interests of the registered holders. Accordingly, we would need
only 1,656,876, or 48.0%, of the public warrants to vote in favor
of a proposed amendment for it to be approved (assuming the holders
of the warrants contained in the private placement units all voted
in favor of the amendment).
We may amend the terms of the rights in a manner that may be
adverse to holders with the approval by the holders of at least 50%
of the then outstanding rights.
Our rights were issued in registered
form under a right agreement between Continental Stock Transfer
& Trust Company, as rights agent, and us. The right agreement
provides that the terms of the rights may be amended without the
consent of any holder to cure any ambiguity or correct any
defective provision. The right agreement requires the approval by
the holders of at least 50% of the then outstanding rights in order
to make any change that adversely affects the interests of the
registered holders. Accordingly, we would need only
3,313,751, or
48.0%, of the public rights
to vote in favor of a proposed amendment for it to be approved
(assuming the holders of the private rights all voted in favor of
the amendment).
Since we have not yet selected a particular industry or target
business with which to complete a business combination, we are
unable to currently ascertain the merits or risks of the industry
or business in which we may ultimately operate.
Although we intend
to initially focus our search on identifying a prospective target
business in the senior housing and care industry, we are not
limited to such industry and may consummate a business combination
with a company in any industry we choose. Accordingly, there is no
current basis for you to evaluate the possible merits or risks of
the particular industry in which we may ultimately operate or the
target business which we may ultimately acquire. To the extent we
complete a business combination with a financially unstable company
or an entity in its development stage, we may be affected by
numerous risks inherent in the business operations of those
entities. If we complete a business combination with an entity in
an industry characterized by a high level of risk, we may be
affected by the currently unascertainable risks of that industry.
Although our management will endeavor to evaluate the risks
inherent in a particular industry or target business, we cannot
assure you that we will properly ascertain or assess all of the
significant risk factors. We also cannot assure you that an
investment in our units will not ultimately prove to be less
favorable to investors than a direct investment, if an opportunity
were available, in a target business.
Our ability to successfully effect a business combination and to be
successful thereafter will be totally dependent upon the efforts of
our key personnel, some of whom may join us following a business
combination. While we intend to closely scrutinize any individuals
we engage after a business combination, we cannot assure you that
our assessment of these individuals will prove to be
correct.
Our
ability to successfully effect a business combination is dependent
upon the efforts of our key personnel. We believe that our success
depends on the continued service of our key personnel, at least
until we have consummated our initial business combination. We
cannot assure you that any of our key personnel will remain with us
for the immediate or foreseeable future. In addition, none of our
officers are required to commit any specified amount of time to our
affairs and, accordingly, our officers may have conflicts of
interest in allocating management time among various business
activities, including identifying potential business combinations
and monitoring the related due diligence. We do not have employment
agreements with, or key-man insurance on the life of, any of our
officers. The unexpected loss of the services of our key personnel
could have a detrimental effect on us.
Additionally, the
role of our key personnel after a business combination cannot
presently be ascertained. Although some of our key personnel may
continue to serve in senior management or advisory positions
following a business combination, it is likely that most, if not
all, of the management of the target business will remain in place.
While we intend to closely scrutinize any individuals we engage
after a business combination, we cannot assure you that our
assessment of these individuals will prove to be correct. These
individuals may be unfamiliar with the requirements of operating a
public company which could cause us to have to expend time and
resources helping them become familiar with such requirements. This
could be expensive and time-consuming and could lead to various
regulatory issues which may adversely affect our
operations.
Our officers and directors may not have significant experience or
knowledge regarding the jurisdiction or industry of the target
business we may seek to acquire.
Although we intend
to initially focus our search on identifying a prospective target
business in the senior housing and care industry, which is where
our management team has significant experience, we are not limited
to such industry and may consummate a business combination with a
target business in any geographic location or industry we choose.
We cannot assure you that our officers and directors will have
enough experience or have sufficient knowledge relating to the
jurisdiction of the target or its industry to make an informed
decision regarding a business combination.
Our key personnel may negotiate employment or consulting agreements
with a target business in connection with a particular business
combination. These agreements may provide for them to receive
compensation following a business combination and as a result, may
cause them to have conflicts of interest in determining whether a
particular business combination is the most
advantageous.
Our key
personnel will be able to remain with the company after the
consummation of a business combination only if they are able to
negotiate employment or consulting agreements or other appropriate
arrangements in connection with the business combination. Such
negotiations would take place simultaneously with the negotiation
of the business combination and could provide for such individuals
to receive compensation in the form of cash payments and/or our
securities for services they would render to the company after the
consummation of the business combination. The personal and
financial interests of such individuals may influence their
motivation in identifying and selecting a target
business.
Our officers and directors may allocate their time to other
businesses thereby causing conflicts of interest in their
determination as to how much time to devote to our affairs. This
conflict of interest could have a negative impact on our ability to
consummate a business combination.
Our
officers and directors are not required to commit their full time
to our affairs, which could create a conflict of interest when
allocating their time between our operations and their other
commitments. We presently expect each of our employees to devote
such amount of time as they reasonably believe is necessary to our
business. We do not intend to have any full time employees prior to
the consummation of our initial business combination. All of our
officers and directors are engaged in other business endeavors and
are not obligated to devote any specific number of hours to our
affairs. If our officers’ and directors’ other business
affairs require them to devote more substantial amounts of time to
such affairs, it could limit their ability to devote time to our
affairs and could have a negative impact on our ability to
consummate our initial business combination. We cannot assure you
that these conflicts will be resolved in our favor.
Our officers and directors may have a conflict of interest in
determining whether a particular target business is appropriate for
a business combination.
Our
sponsor, which is affiliated with certain of our officers and
directors, has agreed to waive its right to convert its
founder’s shares and any other shares purchased in the
Initial Public Offering or thereafter, or to receive distributions
from the trust account with respect to their founder’s shares
upon our liquidation if we are unable to consummate a business
combination. Accordingly, the shares acquired prior to the Initial
Public Offering will be worthless if we do not consummate a
business combination. Additionally, the warrants, including the
warrants contained in the private placement units held by our
sponsor, will expire worthless if we do not consummate a business
combination. The personal and financial interests of our directors
and officers, through their interests in our sponsor, may influence
their motivation in timely identifying and selecting a target
business and completing a business combination. Consequently, our
directors’ and officers’ discretion in identifying and
selecting a suitable target business may result in a conflict of
interest when determining whether the terms, conditions and timing
of a particular business combination are appropriate and in our
stockholders’ best interest.
Certain of our officers have, and any of our officers and directors
or their affiliates may in the future have, outside fiduciary and
contractual obligations and, accordingly, may have conflicts of
interest in determining to which entity a particular business
opportunity should be presented.
Certain
of our directors have, and any of our officers and directors or
their affiliates may in the future have, fiduciary and contractual
obligations to other companies. Accordingly, they may participate
in transactions and have obligations that may be in conflict or
competition with the consummation of our initial business
combination. As a result, a potential target business may be
presented by our management team to another entity prior to its
presentation to us and we may not be afforded the opportunity to
engage in a transaction with such target business. For a more
detailed description of the pre-existing fiduciary and contractual
obligations of our management team, and the potential conflicts of
interest that such obligations may present, see the section Part
III, Item 10. Directors, Executive Officers and Corporate
Governance.
Nasdaq may delist our securities from quotation on its exchange
which could limit investors’ ability to make transactions in
our securities and subject us to additional trading
restrictions.
We
cannot assure you that our securities will continue to be listed on
Nasdaq in the future prior to an initial business combination.
Additionally, in connection with our initial business combination,
it is likely that Nasdaq will require us to file a new initial
listing application and meet its initial listing requirements as
opposed to its more lenient continued listing requirements. We
cannot assure you that we will be able to meet those initial
listing requirements at that time.
If
Nasdaq delists our securities from trading on its exchange, we
could face significant material adverse consequences,
including:
●
a limited
availability of market quotations for our securities;
●
reduced liquidity
with respect to our securities;
●
a determination
that our shares of common stock are “penny stock” which
will require brokers trading in our shares of common stock to
adhere to more stringent rules, possibly resulting in a reduced
level of trading activity in the secondary trading market for our
shares of common stock;
●
a limited amount of
news and analyst coverage for our company; and
●
a decreased ability
to issue additional securities or obtain additional financing in
the future.
The
National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as
“covered securities.” Because we expect that our units
and eventually our common stock, rights and warrants will be listed
on Nasdaq, our units, common stock, rights and warrants will be
covered securities. Although the states are preempted from
regulating the sale of our securities, the federal statute does
allow the states to investigate companies if there is a suspicion
of fraud, and, if there is a finding of fraudulent activity, then
the states can regulate or bar the sale of covered securities in a
particular case. While we are not aware of a state having used
these powers to prohibit or restrict the sale of securities issued
by blank check companies, certain state securities regulators view
blank check companies unfavorably and might use these powers, or
threaten to use these powers, to hinder the sale of securities of
blank check companies in their states. Further, if we were no
longer listed on Nasdaq, our securities would not be covered
securities and we would be subject to regulation in each state in
which we offer our securities.
We are an “emerging growth company” and we cannot be
certain if the reduced disclosure requirements applicable to
emerging growth companies will make our shares of common stock less
attractive to investors.
We are
an “emerging growth company,” as defined in the JOBS
Act. We will remain an “emerging growth company” for up
to five years. However, if our non-convertible debt issued within a
three year period or revenues exceeds $1.07 billion, or the market
value of our shares of common stock that are held by non-affiliates
exceeds $700 million on the last day of the second fiscal quarter
of any given fiscal year, we would cease to be an emerging growth
company as of the following fiscal year. As an emerging growth
company, we are not required to comply with the auditor attestation
requirements of section 404 of the Sarbanes-Oxley Act, we have
reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements and we are exempt from
the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute
payments not previously approved. Additionally, as an emerging
growth company, we have elected to delay the adoption of new or
revised accounting standards that have different effective dates
for public and private companies until those standards apply to
private companies. As such, our financial statements may not be
comparable to companies that comply with public company effective
dates. We cannot predict if investors will find our shares of
common stock less attractive because we may rely on these
provisions. If some investors find our shares of common stock less
attractive as a result, there may be a less active trading market
for our shares and our share price may be more
volatile.
We may only be able to complete one business combination with the
proceeds of the Initial Public Offering and the sale of the private
placement units, which will cause us to be solely dependent on a
single business which may have a limited number of products or
services.
It is
likely we will consummate a business combination with a single
target business, although we have the ability to simultaneously
acquire several target businesses. By consummating a business
combination with only a single entity, our lack of diversification
may subject us to numerous economic, competitive and regulatory
developments. Further, we would not be able to diversify our
operations or benefit from the possible spreading of risks or
offsetting of losses, unlike other entities which may have the
resources to complete several business combinations in different
industries or different areas of a single industry. Accordingly,
the prospects for our success may be:
●
solely dependent
upon the performance of a single business, or
●
dependent upon the
development or market acceptance of a single or limited number of
products, processes or services.
This
lack of diversification may subject us to numerous economic,
competitive and regulatory developments, any or all of which may
have a substantial adverse impact upon the particular industry in
which we may operate subsequent to a business
combination.
Alternatively, if
we determine to simultaneously acquire several businesses, and such
businesses are owned by different sellers, we will need for each of
such sellers to agree that our purchase of its business is
contingent on the simultaneous closings of the other business
combinations, which may make it more difficult for us, and delay
our ability, to complete the business combinations. With multiple
business combinations, we could also face additional risks,
including additional burdens and costs with respect to possible
multiple negotiations and due diligence investigations (if there
are multiple sellers) and the additional risks associated with the
subsequent assimilation of the operations and services or products
of the acquired companies into a single operating business. If we
are unable to adequately address these risks, it could negatively
impact our profitability and results of operations.
The ability of our stockholders to exercise their conversion rights
or sell their shares to us in a tender offer may not allow us to
effectuate the most desirable business combination or optimize our
capital structure.
If our
business combination requires us to use substantially all of our
cash to pay the purchase price, because we will not know how many
stockholders may exercise conversion rights or seek to sell their
shares to us in a tender offer, we may either need to reserve part
of the trust account for possible payment upon such conversion, or
we may need to arrange third party financing to help fund our
business combination. In the event that the acquisition involves
the issuance of our stock as consideration, we may be required to
issue a higher percentage of our stock to make up for a shortfall
in funds. Raising additional funds to cover any shortfall may
involve dilutive equity financing or incurring indebtedness at
higher than desirable levels. This may limit our ability to
effectuate the most attractive business combination available to
us.
In connection with any vote to approve a business combination, we
will offer each public stockholder the option to vote in favor of a
proposed business combination and still seek conversion of his, her
or its shares.
In
connection with any vote to approve a business combination, we will
offer each public stockholder (but not our sponsor, officers or
directors) the right to have his, her or its shares of common stock
converted to cash (subject to the limitations described elsewhere
in this Report) regardless of whether such stockholder votes for or
against such proposed business combination. This ability to seek
conversion while voting in favor of our proposed business
combination may make it more likely that we will consummate a
business combination.
In connection with any stockholder meeting called to approve a
proposed initial business combination, we may require stockholders
who wish to convert their shares in connection with a proposed
business combination to comply with specific requirements for
conversion that may make it more difficult for them to exercise
their conversion rights prior to the deadline for exercising their
rights.
In
connection with any stockholder meeting called to approve a
proposed initial business combination, each public stockholder will
have the right, regardless of whether he is voting for or against
such proposed business combination, to demand that we convert his
shares into a pro rata share of the trust account as of two
business days prior to the consummation of the initial business
combination. We may require public stockholders who wish to convert
their shares in connection with a proposed business combination to
either (i) tender their certificates to our transfer agent or (ii)
deliver their shares to the transfer agent electronically using the
Depository Trust Company’s DWAC (Deposit/Withdrawal At
Custodian) System, at the holders’ option, in each case prior
to a date set forth in the proxy materials sent in connection with
the proposal to approve the business combination. In order to
obtain a physical stock certificate, a stockholder’s broker
and/or clearing broker, DTC and our transfer agent will need to act
to facilitate this request. It is our understanding that
stockholders should generally allot at least two weeks to obtain
physical certificates from the transfer agent. However, because we
do not have any control over this process or over the brokers or
DTC, it may take significantly longer than two weeks to obtain a
physical stock certificate. While we have been advised that it
takes a short time to deliver shares through the DWAC System, we
cannot assure you of this fact. Accordingly, if it takes longer
than we anticipate for stockholders to deliver their shares,
stockholders who wish to convert may be unable to meet the deadline
for exercising their conversion rights and thus may be unable to
convert their shares.
If, in connection with any stockholder meeting called to approve a
proposed business combination, we require public stockholders who
wish to convert their shares to comply with specific requirements
for conversion, such converting stockholders may be unable to sell
their securities when they wish to in the event that the proposed
business combination is not approved.
If we
require public stockholders who wish to convert their shares to
either (i) tender their certificates to our transfer agent or (ii)
deliver their shares to the transfer agent electronically using the
Depository Trust Company’s DWAC (Deposit/Withdrawal At
Custodian) System as described above and such proposed business
combination is not consummated, we will promptly return such
certificates to the tendering public stockholders. Accordingly,
investors who attempted to convert their shares in such a
circumstance will be unable to sell their securities after the
failed acquisition until we have returned their securities to them.
The market price for our shares of common stock may decline during
this time and you may not be able to sell your securities when you
wish to, even while other stockholders that did not seek conversion
may be able to sell their securities.
Because of our structure, other companies may have a competitive
advantage and we may not be able to consummate an attractive
business combination.
We
expect to encounter intense competition from entities other than
blank check companies having a business objective similar to ours,
including venture capital funds, leveraged buyout funds and
operating businesses competing for acquisitions. Many of these
entities are well established and have extensive experience in
identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical,
human and other resources than we do and our financial resources
will be relatively limited when contrasted with those of many of
these competitors. While we believe that there are numerous
potential target businesses that we could acquire with the net
proceeds of the Initial Public Offering and the sale of the private
placement units, our ability to compete in acquiring certain
sizable target businesses will be limited by our available
financial resources. This inherent competitive limitation gives
others an advantage in pursuing the acquisition of certain target
businesses. Furthermore, seeking stockholder approval or engaging
in a tender offer in connection with any proposed business
combination may delay the consummation of such a transaction.
Additionally, our outstanding warrants, rights and the unit
purchase option, and the future dilution they potentially
represent, may not be viewed favorably by certain target
businesses. Any of the foregoing may place us at a competitive
disadvantage in successfully negotiating a business
combination.
We may be unable to obtain additional financing, if required, to
complete a business combination or to fund the operations and
growth of the target business, which could compel us to restructure
or abandon a particular business combination.
Although we believe
that the net proceeds of the Initial Public Offering and the sale
of the private placement units will be sufficient to allow us to
consummate a business combination, because we have not yet
identified any prospective target business, we cannot ascertain the
capital requirements for any particular transaction. If the net
proceeds of the Initial Public Offering and the sale of the private
placement units prove to be insufficient, because of either the
size of the business combination, the depletion of the available
net proceeds in search of a target business or the obligation to
convert into cash a significant number of shares from dissenting
stockholders, we will be required to seek additional financing.
Such financing may not be available on acceptable terms, if at all.
To the extent that additional financing proves to be unavailable
when needed to consummate a particular business combination, we
would be compelled to either restructure the transaction or abandon
that particular business combination and seek an alternative target
business candidate. In addition, if we consummate a business
combination, we may require additional financing to fund the
operations or growth of the target business. The failure to secure
additional financing could have a material adverse effect on the
continued development or growth of the target business. None of our
sponsor, officers, directors or stockholders is required to provide
any financing to us in connection with or after a business
combination.
Our initial stockholder controls a substantial interest in us and
thus may influence certain actions requiring a stockholder
vote.
As of
March 21, 2018, our initial stockholder owns approximately 22.1% of
our issued and outstanding shares of common stock. None of our
sponsor, officers, directors or their affiliates has indicated any
intention to purchase any units or shares of common stock from
persons in the open market or in private transactions. However, our
sponsor, officers, directors or their affiliates could determine in
the future to make such purchases in the open market or in private
transactions, to the extent permitted by law, in order to influence
the vote or magnitude of the number of stockholders seeking to
tender their shares to us. In connection with any vote for a
proposed business combination, our sponsor and initial stockholder,
as well as all of our officers and directors, have agreed to vote
the shares of common stock owned by them immediately before the
Initial Public Offering as well as any shares of common stock
acquired in the Initial Public Offering or in the aftermarket in
favor of such proposed business combination.
Our
board of directors is divided into two classes, each of which will
generally serve for a term of two years with only one class of
directors being elected in each year. There may not be an annual
meeting of stockholders to elect new directors prior to the
consummation of a business combination, in which case all of the
current directors will continue in office until at least the
consummation of the business combination. If there is an annual
meeting, as a consequence of our “staggered” board of
directors, only a minority of the board of directors will be
considered for election and our initial stockholder, because of its
ownership position, will have considerable influence regarding the
outcome. Accordingly, our initial stockholder will continue to
exert control at least until the consummation of a business
combination.
Our outstanding rights, warrants and unit purchase options may have
an adverse effect on the market price of our common stock and make
it more difficult to effect a business combination.
We
issued rights to receive 690,000 shares of common stock and
warrants to purchase 3,450,000 shares of common stock as part of
the units offered in connection with the Initial Public Offering
and rights to receive 27,250 shares of common stock and warrants to
purchase 136,250 shares of common stock in connection with the
Private Placement. We also issued unit purchase options to purchase
600,000 units to EarlyBirdCapital, Inc. (and/or its designees)
which, if exercised, will result in the issuance of 600,000 shares
of common stock, rights to receive 60,000 shares of common stock
and warrants to purchase an additional 300,000 shares of common
stock. We may also issue additional private units, which will be
identical to the private placement units, to our sponsor, officers
or directors in payment of working capital loans made to us as
described in this 2017 Form 10-K. To the extent we issue shares of
common stock to effect a business combination, the potential for
the issuance of a substantial number of additional shares upon
conversion or exercise of these rights, warrants and unit purchase
options could make us a less attractive acquisition vehicle in the
eyes of a target business. Such securities, when exercised, will
increase the number of issued and outstanding shares of common
stock and reduce the value of the shares issued to complete the
business combination. Accordingly, our rights, warrants and unit
purchase option may make it more difficult to effectuate a business
combination or increase the cost of acquiring the target business.
Additionally, the sale, or even the possibility of sale, of the
shares underlying the warrants, rights, or unit purchase option
could have an adverse effect on the market price for our securities
or on our ability to obtain future financing. If and to the extent
these rights are converted or warrants and options are exercised,
you may experience dilution to your holdings.
Because each unit contains one-half of one warrant and one right to
receive one-tenth of one share of common stock, the units may be
worth less than units of other blank check companies.
Each
unit contains one-half of one warrant and one right to receive
one-tenth (1/10) of one share of common stock upon consummation of
our initial business combination. This is different from other
offerings similar to ours whose units include one share of common
stock and one warrant to purchase one whole share. We have
established the components of the units in this way in order to
reduce the dilutive effect of the warrants and rights upon
completion of a business combination since the warrants will be
exercisable for, and the rights will be convertible into, a
fraction of the number of shares in the aggregate, compared to
units that each contain a warrant to purchase one whole share, thus
making us, we believe, a more attractive business combination
partner for target businesses. Nevertheless, this unit structure
may cause our units to be worth less than if they included a
warrant to purchase one whole share.
We may redeem your unexpired warrants prior to their exercise at a
time that is disadvantageous to you, thereby making your warrants
worthless.
We have
the ability to redeem outstanding warrants at any time after they
become exercisable and prior to their expiration, at a price of
$0.01 per warrant, provided that the last reported sales price of
the common stock equals or exceeds $21.00 per share (as adjusted
for stock splits, stock dividends, reorganizations and
recapitalizations) for any 20 trading days within a 30 trading-day
period ending on the third business day prior to proper notice of
such redemption provided that on the date we give notice of
redemption and during the entire period thereafter until the time
we redeem the warrants, we have an effective registration statement
under the Securities Act covering the shares of common stock
issuable upon exercise of the warrants and a current prospectus
relating to them is available. If and when the warrants become
redeemable by us, we may exercise our redemption right even if we
are unable to register or qualify the underlying securities for
sale under all applicable state securities laws. Redemption of the
outstanding warrants could force you (i) to exercise your warrants
and pay the exercise price therefor at a time when it may be
disadvantageous for you to do so, (ii) to sell your warrants at the
then-current market price when you might otherwise wish to hold
your warrants or (iii) to accept the nominal redemption price
which, at the time the outstanding warrants are called for
redemption, is likely to be substantially less than the market
value of your warrants. None of the warrants contained in the
private placement units will be redeemable by us so long as they
are held by the sponsor or its permitted transferees.
Our management’s ability to require holders of our warrants
to exercise such warrants on a cashless basis will cause holders to
receive fewer shares of common stock upon their exercise of the
warrants than they would have received had they been able to
exercise their warrants for cash.
If we
call our public warrants for redemption after the redemption
criteria described elsewhere in this 2017 Form 10-K have been
satisfied, our management will have the option to require any
holder that wishes to exercise his warrant (including any warrants
held by our sponsor, officers or directors or their permitted
transferees) to do so on a “cashless basis.” If our
management chooses to require holders to exercise their warrants on
a cashless basis, the number of shares of common stock received by
a holder upon exercise will be fewer than it would have been had
such holder exercised his warrant for cash. This will have the
effect of reducing the potential “upside” of the
holder’s investment in our company.
We have no obligation to net cash settle the rights or
warrants.
In no
event will we have any obligation to net cash settle the rights or
warrants. Furthermore, there are no contractual penalties for
failure to deliver securities to the holders of the rights or
warrants upon consummation of an initial business combination or
exercise of the warrants. Accordingly, you might not receive the
shares of common stock underlying the rights and
warrants.
If our security holders exercise their registration rights, it may
have an adverse effect on the market price of our shares of common
stock and the existence of these rights may make it more difficult
to effect a business combination.
Our
stockholders prior to the Initial Public Offering are entitled to
demand that we register the resale of the founder’s shares at
any time commencing three months prior to the date on which their
shares may be released from escrow. Additionally, the holders of
the private placement units and any private units our sponsor,
officers, directors, or their affiliates may be issued in payment
of working capital loans made to us are entitled to demand that we
register the resale of the private placement units and any other
private units we issue to them (and the underlying securities)
commencing at any time after we consummate an initial business
combination. The presence of these additional shares of common
stock trading in the public market may have an adverse effect on
the market price of our securities. In addition, the existence of
these rights may make it more difficult to effectuate a business
combination or increase the cost of acquiring the target business,
as the stockholders of the target business may be discouraged from
entering into a business combination with us or will request a
higher price for their securities because of the potential effect
the exercise of such rights may have on the trading market for our
shares of common stock.
If we are deemed to be an investment company, we may be required to
institute burdensome compliance requirements and our activities may
be restricted, which may make it difficult for us to complete a
business combination.
A
company that, among other things, is or holds itself out as being
engaged primarily, or proposes to engage primarily, in the business
of investing, reinvesting, owning, trading or holding certain types
of securities would be deemed an investment company under the
Investment Company Act, as amended, or the Investment Company Act.
Since we will invest the proceeds held in the trust account, it is
possible that we could be deemed an investment company.
Notwithstanding the foregoing, we do not believe that our
anticipated principal activities will subject us to the Investment
Company Act. To this end, the proceeds held in trust may be
invested by the trustee only in United States “government
securities” within the meaning of Section 2(a)(16) of the
Investment Company Act having a maturity of 180 days or less or in
money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act which invest only in
direct U.S. government treasury obligations. By restricting the
investment of the proceeds to these instruments, we intend to meet
the requirements for the exemption provided in Rule 3a-1
promulgated under the Investment Company Act.
If we
are nevertheless deemed to be an investment company under the
Investment Company Act, we may be subject to certain restrictions
that may make it more difficult for us to complete a business
combination, including:
●
restrictions on the
nature of our investments; and
●
restrictions on the
issuance of securities.
In
addition, we may have imposed upon us certain burdensome
requirements, including:
●
registration as an
investment company;
●
adoption of a
specific form of corporate structure; and
●
reporting, record
keeping, voting, proxy, compliance policies and procedures and
disclosure requirements and other rules and
regulations.
Compliance with
these additional regulatory burdens would require additional
expense for which we have not allotted.
If we do not conduct an adequate due diligence investigation of a
target business, we may subsequently be required to take
write-downs or write-offs, restructuring, and impairment or other
charges that could have a significant negative effect on our
financial condition, results of operations and our stock price,
which could cause you to lose some or all of your
investment.
We must
conduct a due diligence investigation of the target businesses we
intend to acquire. Intensive due diligence is time consuming and
expensive due to the operations, accounting, finance and legal
professionals who must be involved in the due diligence process.
Even if we conduct extensive due diligence on a target business,
this diligence may not reveal all material issues that may affect a
particular target business, and factors outside the control of the
target business and outside of our control may later arise. If our
diligence fails to identify issues specific to a target business,
industry or the environment in which the target business operates,
we may later be forced to write-down or write-off assets,
restructure our operations, or incur impairment or other charges
that could result in our reporting losses. Even though these
charges may be non-cash items and not have an immediate impact on
our liquidity, the fact that we report charges of this nature could
contribute to negative market perceptions about us or our common
stock. In addition, charges of this nature may cause us to violate
net worth or other covenants to which we may be subject as a result
of assuming pre-existing debt held by a target business or by
virtue of our obtaining debt financing during or subsequent to the
business combination.
Our sponsor may decide not to extend the term we have to consummate
our initial business combination, in which case we would cease all
operations except for the purpose of winding up and we would redeem
our public shares and liquidate, and the rights and warrants will
be worthless.
We will have until 12 months from the
closing of the Initial Public Offering to consummate an initial business
combination. However, if we anticipate that we may not be able to
consummate our initial business combination within 12 months, we
may extend the period of time to consummate a business combination
up to two times, each by an additional three months (for a total of
up to 18 months to complete a business combination). Pursuant to
the terms of our amended and restated certificate of incorporation
and the Investment Management Trust Account Agreement, dated
November 20, 2017, between Continental Stock Transfer & Trust
Company and us, in order to
extend the time available for us to consummate our initial business
combination, our sponsor or its affiliates or designees, upon five
days advance notice prior to the applicable deadline, must deposit
into the trust account $690,000 ($0.10 per share) on or prior to
the date of the applicable deadline, for each three month extension
(or up to an aggregate of $1,380,000), or $0.20 per share, if we
extend for the full six months). Any such payments would be made in
the form of a loan. Any such loans will be non-interest bearing and
payable upon the consummation of our initial business combination.
If we complete our initial business combination, we would repay
such loaned amounts out of the proceeds of the trust account
released to us to pay our franchise and income taxes payable. If we
do not complete a business combination, we will not repay such
loans. Furthermore, the letter agreement with our initial
stockholders contains a provision pursuant to which our sponsor has
agreed to waive its right to be repaid for such loans out of the
funds held in the trust account in the event that we do not
complete a business combination. Our sponsor and its affiliates or
designees are not obligated to fund the trust account to extend the
time for us to complete our initial business combination. If we are
unable to consummate our initial business combination within the
applicable time period, we will, as promptly as reasonably possible
but not more than ten business days thereafter, redeem the public
shares for a pro rata portion of the funds held in the trust
account and as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each
case to our obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law. In such
event, the rights and warrants
will be worthless.
The requirement that we complete an initial business combination
within 12 months from the closing of the Initial Public Offering
(or up to
18 months from the closing of the Initial Public Offering
if we
extend the period of time to consummate a business combination by
the full amount of time) may give potential target
businesses leverage over us in negotiating a business
combination.
We have
12 months from the closing of the Initial Public Offering
(or up to 18 months from
the closing of the Initial Public Offering if we extend the period of time to
consummate a business combination by the full amount of
time) to complete an initial business combination. Any
potential target business with which we enter into negotiations
concerning a business combination will be aware of this
requirement. Consequently, such target business may obtain leverage
over us in negotiating a business combination, knowing that if we
do not complete a business combination with that particular target
business, we may be unable to complete a business combination with
any other target business. This risk will increase as we get closer
to the time limit referenced above.
We may not obtain a fairness opinion with respect to the target
business that we seek to acquire and therefore you may be relying
solely on the judgment of our board of directors in approving a
proposed business combination.
We will
only be required to obtain a fairness opinion with respect to the
target business that we seek to acquire if it is an entity that is
affiliated with any of our officers, directors or sponsor. In all
other instances, we will have no obligation to obtain an opinion.
Accordingly, investors will be relying solely on the judgment of
our board of directors in approving a proposed business
combination.
Resources could be spent researching acquisitions that are not
consummated, which could materially adversely affect subsequent
attempts to locate and acquire or merge with another
business.
It is
anticipated that the investigation of each specific target business
and the negotiation, drafting, and execution of relevant
agreements, disclosure documents, and other instruments will
require substantial management time and attention and substantial
costs for accountants, attorneys and others. If a decision is made
not to complete a specific business combination, the costs incurred
up to that point for the proposed transaction likely would not be
recoverable. Furthermore, even if an agreement is reached relating
to a specific target business, we may fail to consummate the
business combination for any number of reasons including those
beyond our control. Any such event will result in a loss to us of
the related costs incurred which could materially adversely affect
subsequent attempts to locate and acquire or merge with another
business.
Compliance with the Sarbanes-Oxley Act of 2002 will require
substantial financial and management resources and may increase the
time and costs of completing an acquisition.
Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and
report on our system of internal controls and may require that we
have such system of internal controls audited beginning with our
Annual Report on Form 10-K for the year ending December 31, 2018.
If we fail to maintain the adequacy of our internal controls, we
could be subject to regulatory scrutiny, civil or criminal
penalties and/or stockholder litigation. Any inability to provide
reliable financial reports could harm our business. Section 404 of
the Sarbanes-Oxley Act also requires that our independent
registered public accounting firm report on management’s
evaluation of our system of internal controls, which requirement we
are exempt from so long as we qualify as an “emerging growth
company,” as defined in Section 2(a) of the Securities Act. A
target company may not be in compliance with the provisions of the
Sarbanes-Oxley Act regarding adequacy of their internal controls.
The development of the internal controls of any such entity to
achieve compliance with the Sarbanes-Oxley Act may increase the
time and costs necessary to complete any such acquisition.
Furthermore, any failure to implement required new or improved
controls, or difficulties encountered in the implementation of
adequate controls over our financial processes and reporting in the
future, could harm our operating results or cause us to fail to
meet our reporting obligations. Inferior internal controls could
also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading
price of our stock.
If we effect a business combination with a company located outside
of the United States, we would be subject to a variety of
additional risks that may negatively impact our
operations.
We may
effect a business combination with a company located outside of the
United States. If we did, we would be subject to any special
considerations or risks associated with companies operating in the
target business’s home jurisdiction, including any of the
following:
●
rules and
regulations or currency conversion or corporate withholding taxes
on individuals;
●
tariffs and trade
barriers;
●
regulations related
to customs and import/export matters;
●
tax issues, such as
tax law changes and variations in tax laws as compared to the
United States;
●
currency
fluctuations and exchange controls;
●
challenges in
collecting accounts receivable;
●
cultural and
language differences;
●
employment
regulations;
●
crime, strikes,
riots, civil disturbances, terrorist attacks and wars;
and
●
deterioration of
political relations with the United States.
We
cannot assure you that we would be able to adequately address these
additional risks. If we were unable to do so, our operations might
suffer.
If we effect a business combination with a company located outside
of the United States, the laws applicable to such company will
likely govern all of our material agreements and we may not be able
to enforce our legal rights.
If we
effect a business combination with a company located outside of the
United States, the laws of the country in which such company
operates will govern almost all of the material agreements relating
to its operations. We cannot assure you that the target business
will be able to enforce any of its material agreements or that
remedies will be available in this new jurisdiction. The system of
laws and the enforcement of existing laws in such jurisdiction may
not be as certain in implementation and interpretation as in the
United States. The inability to enforce or obtain a remedy under
any of our future agreements could result in a significant loss of
business, business opportunities or capital. Additionally, if we
acquire a company located outside of the United States, it is
likely that substantially all of our assets would be located
outside of the United States and some of our officers and directors
might reside outside of the United States. As a result, it may not
be possible for investors in the United States to enforce their
legal rights, to effect service of process upon our directors or
officers or to enforce judgments of United States courts predicated
upon civil liabilities and criminal penalties of our directors and
officers under federal securities laws.
Provisions in our amended and restated certificate of incorporation
and bylaws and Delaware law may inhibit a takeover of us, which
could limit the price investors might be willing to pay in the
future for our common stock and could entrench
management.
Our
amended and restated certificate of incorporation and bylaws
contain provisions that may discourage unsolicited takeover
proposals that stockholders may consider to be in their best
interests. Our board of directors is divided into two classes, each
of which will generally serve for a term of two years with only one
class of directors being elected in each year. As a result, at a
given annual meeting only a minority of the board of directors may
be considered for election. Since our “staggered board”
may prevent our stockholders from replacing a majority of our board
of directors at any given annual meeting, it may entrench
management and discourage unsolicited stockholder proposals that
may be in the best interests of stockholders. Also, our amended and
restated certificate of incorporation provides our board of
directors the ability to designate the terms of and issue new
series of preferred stock, which may inhibit a takeover of
us.
We are
also subject to anti-takeover provisions under Delaware law, which
could delay or prevent a change of control. Together these
provisions may make more difficult the removal of management and
may discourage transactions that otherwise could involve payment of
a premium over prevailing market prices for our
securities.
Because we must furnish our stockholders with target business
financial statements prepared in accordance with U.S. generally
accepted accounting principles or international financial reporting
standards, we will not be able to complete a business combination
with prospective target businesses unless their financial
statements are prepared in accordance with such
standards.
The
federal proxy rules require that a proxy statement with respect to
a vote on a business combination meeting certain financial
significance tests include historical and/or pro forma financial
statement disclosure in periodic reports. These financial
statements may be required to be prepared in accordance with, or be
reconciled to, accounting principles generally accepted in the
United States of America, or GAAP, or international financial
reporting standards, or IFRS, depending on the circumstances, and
the historical financial statements may be required to be audited
in accordance with the standards of the Public Company Accounting
Oversight Board (United States), or PCAOB. We will include the same
financial statement disclosure in connection with any tender offer
documents we use, whether or not they are required under the tender
offer rules. Additionally, to the extent we furnish our
stockholders with financial statements prepared in accordance with
IFRS, such financial statements may need to be audited in
accordance with U.S. GAAP at the time of the consummation of the
business combination. These financial statement requirements may
limit the pool of potential target businesses we may
acquire.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business,
investments and results of operations.
We are
subject to laws and regulations enacted by national, regional and
local governments. In particular, we will be required to comply
with certain SEC and other legal requirements. Compliance with, and
monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their
interpretation and application may also change from time to time
and those changes could have a material adverse effect on our
business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as
interpreted and applied, could have a material adverse effect on
our business and results of operations.
There may be tax consequences to our business combinations that may
adversely affect us.
While
we expect to undertake any merger or acquisition so as to minimize
taxes both to the acquired business and/or asset and us, such
business combination might not meet the statutory requirements of a
tax-free reorganization, or the parties might not obtain the
intended tax-free treatment upon a transfer of shares or assets. A
non-qualifying reorganization could result in the imposition of
substantial taxes.
Our amended and restated certificate of incorporation provides,
subject to limited exceptions, that the Court of Chancery of the
State of Delaware will be the sole and exclusive forum for certain
stockholder litigation matters, which could limit our
stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers, employees or
stockholders.
Our
amended and restated certificate of incorporation requires, to the
fullest extent permitted by law, that derivative actions brought in
our name, actions against directors, officers and employees for
breach of fiduciary duty and other similar actions may be brought
only in the Court of Chancery in the State of Delaware and, if
brought outside of Delaware, the stockholder bringing the suit will
be deemed to have consented to service of process on such
stockholder’s counsel. Any person or entity purchasing or
otherwise acquiring any interest in shares of our capital stock
shall be deemed to have notice of and consented to the forum
provisions in our amended and restated certificate of
incorporation.
This
choice of forum provision may limit a stockholder’s ability
to bring a claim in a judicial forum that it finds favorable for
disputes with us or any of our directors, officers, other employees
or stockholders, which may discourage lawsuits with respect to such
claims. Alternatively, if a court were to find the choice of forum
provision contained in our amended and restated certificate of
incorporation to be inapplicable or unenforceable in an action, we
may incur additional costs associated with resolving such action in
other jurisdictions, which could harm our business, operating
results and financial condition.
If we consummate a business combination with a target business in
the senior housing and care industry, we would be subject to the
risks attendant to that industry.
If we
are successful in consummating a business combination with a target
business in the senior housing and care industry, we would be
subject to all of the risks attendant to that industry, including,
among others:
●
terminations of
short-term resident agreements and resident attrition;
●
substantial
reliance on private pay residents;
●
risks and
circumstances that adversely affect the ability of the elderly to
pay for our services;
●
competition from a
significant number of competitors, some of which may have
substantially greater financial resources than we
have;
●
inherent risk of
liability in the provision of personal and health care services,
not all of which may be covered by insurance; and
●
significant
government regulations and compliance, some of which is burdensome
and some of which may change to our detriment in the
future.
Unresolved
Staff Comments.
None.
We
currently maintain our principal executive offices at 2645 N.
Federal Hwy, Suite 230, Delray Beach, Florida 33483. The cost for
this space is included in the up to $10,000 per-month aggregate fee
our sponsor charges us for general and administrative services,
which commenced on the date of the Initial Public Offering pursuant
to a letter agreement between us and our sponsor. We believe, based
on rents and fees for similar services in the Palm Beach, Florida
area, that the fee charged by our sponsor is at least as favorable
as we could have obtained from an unaffiliated person. We consider
our current office space, combined with the other office space
otherwise available to our executive officers, adequate for our
current operations.
There
is no material litigation, arbitration or governmental proceeding
currently pending against us or any members of our management
team.
Not
Applicable.
Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information
Our
units, common stock, warrants and rights are each traded on the
NASDAQ Capital Market under the symbols “BRPAU,”
“BRPA,” “BRPAW” and “BRPAR,”
respectively. Our units commenced public trading on November 20,
2017, and our common stock, rights and warrants commenced public
trading on December 1, 2017.
The
table below sets forth, for the period indicated, the high and low
sales prices of our units, common stock, warrants and rights as
reported on the NASDAQ Capital Market for the fiscal year ended
December 31, 2017.
Year Ended 12/31/2017
Period from
11/20/2017 to 12/31/2017
|
|
|
Units
|
$10.00
|
$10.34
|
Common
Stock
|
$9.60
|
$9.75
|
Warrants
|
$0.35
|
$0.40
|
Rights
|
$0.35
|
$0.41
|
Holders
As of
March 21, 2018, we had three holders of record of our common stock,
two holders of record of our units, one holder of record of our
warrants and one holder of record of our rights.
Dividends
We have
not paid any cash dividends on our common stock to date and do not
intend to pay cash dividends prior to the completion of an initial
business combination. The payment of cash dividends in the future
will be dependent upon our revenues and earnings, if any, capital
requirements and general financial condition subsequent to
completion of a business combination. The payment of any dividends
subsequent to a business combination will be within the discretion
of our board of directors at such time. It is the present intention
of our board of directors to retain all earnings, if any, for use
in our business operations and, accordingly, our board of directors
does not anticipate declaring any dividends in the foreseeable
future. On November 20, 2017, we increased the size of the offering
pursuant to Rule 462(b) under the Securities Act, and effectuated a
1.2-for-1 stock dividend of our common stock resulting in an
aggregate of 1,725,000 founder's shares outstanding to maintain the
ownership of our stockholder prior to our Initial Public Offering
at 20% of our issued and outstanding shares of our common stock
upon the consummation of our Initial Public Offering (excluding the
shares of common stock underlying the private placement units and
any units purchased in our Initial Public Offering). Further, if we
incur any indebtedness, our ability to declare dividends may be
limited by restrictive covenants we may agree to in connection
therewith.
Securities Authorized for Issuance Under Equity Compensation
Plans
None.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
This
item in not applicable as we are a smaller reporting
company.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
You
should read the following discussion in conjunction with our
financial statements and related notes included in this 2017 Form
10-K. This 2017 Form 10-K contains certain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 (“PSLRA”), Section 27A of the
Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of
1934, as amended, (the “Exchange Act”), about our
expectations, beliefs, or intentions regarding our business,
financial condition, results of operations, strategies, or
prospects. You can identify forward-looking statements by the fact
that these statements do not relate strictly to historical or
current matters. Rather, forward-looking statements relate to
anticipated or expected events, activities, trends, or results as
of the date they are made. Because forward-looking statements
relate to matters that have not yet occurred, these statements are
inherently subject to risks and uncertainties that could cause our
actual results to differ materially from any future results
expressed or implied by the forward-looking statements. Many
factors could cause our actual activities or results to differ
materially from the activities and results anticipated in
forward-looking statements. These factors include those contained
in Part I, “Item 1A. Risk Factors” of this 2017 Form
10-K. We do not undertake any obligation to update forward-looking
statements, except as required by law. We intend that all
forward-looking statements be subject to the safe harbor provisions
of PSLRA. These forward-looking statements are only predictions and
reflect our views as of the date they are made with respect to
future events and financial performance.
Overview
We are
a blank check company incorporated in Delaware on September 18,
2017 and formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or
more target businesses or entities (a “Business
Combination”). While our efforts in identifying a prospective
target business for our initial business combination will not be
limited to a particular industry or geographic region, we intend to
initially focus our search on identifying a prospective target
business in the senior housing and care industry in the United
States. We intend to effectuate our Business Combination using cash
from the proceeds of our Initial Public Offering and the sale of
Private Placement Units that occurred simultaneously with the
completion of our Initial Public Offering, our securities, debt or
a combination of cash, securities and debt.
Results of Operations
Our
entire activity since September 18, 2017 (inception) up to November
20, 2017 was in preparation for our Initial Public Offering. Since
our Initial Public Offering, our activity has been limited to the
search for a prospective initial business combination, and we will
not be generating any operating revenues until the closing and
completion of our initial business combination. We expect to incur
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.
For the
period from September 18, 2017 (inception) through December 31,
2017, we had a net loss of $105,033, which consists of operating
costs of $134,476 and an unrealized loss on marketable securities
held in a trust account established for the benefit of the
Company’s public stockholders (the “Trust
Account”) of $4,740, offset by interest income on marketable
securities held in the Trust Account of $34,183.
Liquidity and Capital Resources
On
November 22, 2017, we consummated our Initial Public Offering of
6,000,000 units (the “Units”) at a price of $10.00
per Unit, generating gross proceeds of $60,000,000. Simultaneously
with the closing of the Initial Public Offering, we consummated the
sale of 250,000 private units (the “Private Units”) to
our sponsor, generating gross proceeds of $2,500,000 (the
“Private Placement”).
On
November 28, 2017, the underwriters elected to fully exercise their
over-allotment option to purchase 900,000 additional Units (the
“Over-allotment Units”) at a purchase price of $10.00
per Unit, generating gross proceeds of $9,000,000. In addition,
simultaneously with the sale of the Over-Allotment Units, we
consummated the sale of an additional 22,500 private units (the
“Over-Allotment Private Units”) at $10.00 per unit,
generating gross proceeds of $225,000.
A total
of $69,000,000 of the net proceeds from the Initial Public Offering
and the Private Placement (including the sale of the Over-Allotment
Units and the Over-Allotment Private Units) were deposited in the
Trust Account. We incurred costs in the aggregate amount
of $2,172,419 related to Initial Public Offering, including
$1,725,000 of underwriting fees and $447,419 of other
costs.
As of
December 31, 2017, we had cash and securities held in the Trust
Account of $69,029,443 (including approximately $34,000 of interest
income, less approximately $5,000 of unrealized losses) consisting
of U.S Treasury bills with a maturity of 180 days or less. Interest
income earned on the balance in the Trust Account may be used by us
to pay taxes. Through December 31, 2017, we did not withdraw any
funds from the interest earned on the Trust Account. In February
2018, we withdrew $23,135 of interest income to pay our franchise
tax obligations.
For the
period from September 18, 2017 (inception) through December 31,
2017, cash used in operating activities amounted to $135,807,
resulting primarily from a net loss of $105,033 and interest earned
on marketable securities held in the Trust Account of $34,183,
offset by an unrealized loss on marketable securities held in our
Trust Account of $4,740. Changes in operating assets and
liabilities used $1,331 of cash for operating
activities.
We
intend to use substantially all of the net proceeds of the Initial
Public Offering, including the funds held in the Trust Account, to
acquire a target business or businesses and to pay our expenses
relating thereto. To the extent that our capital stock is used, in
whole or in part, as consideration to effect our Business
Combination, the remaining proceeds held in the Trust Account, as
well as any other net proceeds not expended, will be used as
working capital to finance the operations of the target business.
Such working capital funds could be used in a variety of ways
including, but not limited to, continuing or expanding the target
business’ operations, for strategic acquisitions and for
marketing, research and development of existing or new products.
Such funds could also be used to repay any expenses or
finders’ fees which we had incurred prior to the completion
of our Business Combination if the funds available to us outside of
the Trust Account were insufficient to cover such
expenses.
As of
December 31, 2017, we had $449,374 of cash held outside the Trust
Account and available for working capital purposes. We intend to
use the funds held outside the Trust Account primarily to pay the
expenses of being a public company and to identify and evaluate
target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, properties or
similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In
order to finance transaction costs in connection with a Business
Combination, our sponsor, an affiliate of our sponsor or certain of
our officers and directors may, but are not obligated to, loan us
funds as may be required. If we complete a Business Combination, we
would repay such loaned amounts out of the proceeds of the Trust
Account released to us. In the event that a Business Combination
does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts but no
proceeds from our Trust Account would be used to repay such loaned
amounts. Up to $1,500,000 of such loans may be convertible into
units, at a price of $10.00 per unit at the option of the lender.
The units would be identical to the Private Placement
Units.
We do
not believe we will need to raise additional funds in order to meet
the expenditures required for operating our business. However, if
our estimate of the costs of identifying a target business,
undertaking in-depth due diligence and negotiating a Business
Combination are less than the actual amounts necessary to do so, we
may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain
additional financing either to complete our Business Combination or
because we become obligated to redeem a significant number of our
public shares upon completion of our Business Combination, in which
case we may issue additional securities or incur debt in connection
with such Business Combination. Subject to compliance with
applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If
we are unable to complete our Business Combination because we do
not have sufficient funds available to us, we will be forced to
cease operations and liquidate the Trust Account. In addition,
following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order
to meet our obligations.
Off-balance sheet financing arrangements
We did
not have any off-balance sheet arrangements as of December 31,
2017.
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 our sponsor a monthly fee of $10,000 for office space,
utilities and administrative support provided to the Company. We
began incurring these fees on November 20, 2017 and will continue
to incur these fees monthly until the earlier of the completion of
the Business Combination and the Company’s
liquidation.
Critical Accounting Policies
The
preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”) 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. The Company has identified
the following critical accounting policy:
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
(if any) 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,
at December 31, 2017, the common stock subject to possible
redemption is presented as temporary equity, outside of the
stockholders’ equity section of our balance
sheet.
Recent accounting pronouncements
Management does not
believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material effect
on the Company’s financial statements.
Quantitative
and Qualitative Disclosures About Market Risk.
This
item in not applicable as we are a smaller reporting
company.
Financial
Statements and Supplementary Data.
Our
Consolidated Financial Statements and the Notes thereto, together
with the report thereon of our independent registered public
accounting firm are filed as part of this report, beginning on page
F-1.
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
None.
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
officer, we conducted an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the year ended
December 31, 2017, 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 officer have
concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this
report.
Management’s Annual Report on Internal Controls Over
Financial Reporting
This
annual report does not include a report of management’s
assessment regarding internal control over financial reporting or
an attestation report of our registered public accounting firm due
to a transition period established by the rules of the Securities
and Exchange Commission for newly public companies.
Changes in Internal Control over Financial Reporting
For the
quarter ended December 31, 2017 there has been no change in our
internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
None.
Directors,
Executive Officers and Corporate Governance.
As of
the date of this Report, our directors and officers are as set
forth in the table below. There are no family relationships between
any of our directors or senior management. There are no
arrangements or understandings with major shareholders, customers,
suppliers or others, pursuant to which any person referred to above
was selected as a director or member of senior management. The
Company is not aware of any agreements or arrangements between any
director and any person or entity other than the Company relating
to the compensation or other payments in connection with such
director’s candidacy or service as a director of the
Company.
Name
|
|
Age
|
|
Position
|
Richard
Ackerman
|
|
59
|
|
Chairman,
President and Chief Executive Officer
|
Lori B.
Wittman
|
|
59
|
|
Chief
Financial Officer and Director
|
Bennett
Kim
|
|
45
|
|
Chief
Investment Officer
|
Richard
Birdoff
|
|
58
|
|
Director
|
Michael
Fong
|
|
73
|
|
Director
|
Stuart
F. Koenig
|
|
65
|
|
Director
|
Albert
G. Rex
|
|
63
|
|
Director
|
Troy T.
Taylor
|
|
60
|
|
Director
|
Richard Ackerman, our Chairman,
President and Chief Executive Officer since September 18, 2017,
formed BRP in 2004. BRP is an opportunistic real estate investment
firm that has invested in and managed over $800 million in assets
since its formation. In 2012, BRP began to focus on senior housing
development as there was a distinct supply – demand imbalance
and fragmentation in senior housing developers, and formed Big Rock
Senior Housing, a national leader in developing and managing new
Class A senior housing communities of $50 million and more. Class A
housing communities consist of prestigious buildings with high
quality standard finishes, state of the art systems, exceptional
accessibility and a defined market presence competing for premier
senior housing users with rents above average for the area. Mr.
Ackerman serves as the Senior Managing Principal of BRP and Big
Rock Senior Housing. Prior to BRP, from 2001 to 2004, Mr. Ackerman
served as the Head of the Los Angeles office of Apollo, overseeing
all investments on the U.S. West Coast and Japan for the global
private equity firm. In August 1999, Mr. Ackerman was appointed by
Apollo as the Chief Executive Officer of Atlantic Gulf Communities
Corporation (an Apollo portfolio company) in order to restructure
the company and served in that capacity until April 2001. This
publicly traded development and asset management company's primary
operations included the development and sale of home sites and land
tracts and the construction and sale of oceanfront condominiums.
From September 1996 to August 1999, Mr. Ackerman was President and
co-founder of Crocker Realty Trust, a private REIT (an Apollo
portfolio company) specializing in the ownership and development of
office space in the southeastern United States. Prior to 1996, he
was president and co-founder of Crocker Realty Investors, a
publicly traded REIT and a portfolio company of the first Apollo
Real Estate Investment Fund. The company specialized in the
ownership and development of office space until its sale to
Highwoods Properties, Inc. In addition to the foregoing business
experience, Mr. Ackerman served as Chief Executive Officer and a
director of ALDA Office Properties, Inc. (“ALDA”)
during 2011. ALDA was formed in 2011 to acquire, own and operate
office properties in select markets primarily in Northern and
Southern California. In 2011, ALDA filed a registration statement
for its initial public offering, which offering was subsequently
abandoned due to market conditions. Mr. Ackerman is also a former
Director of Summerville Senior Living, Inc., which is one of the
largest assisted living companies in the nation. Mr. Ackerman
graduated with a B.A. from Tulane University and a J.D. from the
Tulane School of Law.
We
believe Mr. Ackerman is well-qualified to serve as a member of our
board due to his broad and deep expertise in senior housing,
development and operations of both senior housing and real
estate.
Lori B. Wittman, our Chief Financial
Officer and a director, since September 18, 2017, most recently
served as the Executive Vice President and Chief Financial Officer
of Care Capital Properties, Inc. (“CCP”), a public
healthcare real estate investment trust with a diversified
portfolio of triple-net leased properties focused on the post-acute
sector, from August 2015 (after a spin-off from Ventas, Inc.
(“Ventas”)) to August 2017 (due to the merger of CCP
and Sabra Healthcare REIT, Inc.). A triple-net leased property is a
property leased pursuant to an agreement where the tenant or lessee
agrees to pay all real estate taxes, building insurance, and
maintenance (the three "nets") on the property in addition to any
normal fees that are expected under the agreement (rent, utilities,
etc.) Ms. Wittman previously served as Senior Vice President,
Capital Markets and Investor Relations of Ventas, a leading real
estate investment trust with a diverse portfolio of more than 1,600
assets in the United States, Canada and the United Kingdom consists
of seniors housing communities, medical office buildings, skilled
nursing facilities, hospitals and other properties, from 2013 to
2015 and as Vice President, Capital Markets and Investor Relations
of Ventas from 2011 to 2013. From 2006 to 2011, she was the Chief
Financial Officer and Managing Principal of BRP. Before that, Ms.
Wittman held various capital markets and finance positions with
General Growth Properties, Inc., Heitman, Homart Development
Company, Citibank and Mellon Bank. She has been a member of the
Board of Directors of IMH Financial Corporation, a real estate
investment and finance company since July 2014. In addition to the
foregoing business experience, Ms. Wittman served as Chief
Financial Officer of ALDA during 2011. Ms. Wittman received a B.A.
in Geography and Sociology from Clark University, a Masters in City
Planning from the University of Pennsylvania and an M.B.A. from the
University of Chicago.
We
believe Ms. Wittman is well-qualified to serve as a member of our
board due to her substantial experience in finance, capital markets
and investor relations for both private and public
companies.
Bennett Kim, our Chief Investment
Officer and Corporate Secretary since September 18, 2017, has
served as the Managing Principal of Big Rock Senior Housing since
January 2016. Mr. Kim was the Chief Investment Officer at BRP from
May 2006 to July 2014 and was responsible for acquisitions,
development, asset management, and dispositions. From July 2014 to
December 2015, Mr. Kim served as the Head of Acquisitions for
Carefree Communities, the fifth largest national owner and operator
of manufactured housing communities and RV parks with 103
communities and 28,000 sites. From January 2001 to May 2006, Mr.
Kim served as a Vice President at Apollo and was responsible for
new investments and investment management including the development
of a $400 million mixed-use project that consists of two hotels,
two condominium towers, retail, office and structured parking. Mr.
Kim also formulated work-out strategies for one of the largest
assisted living companies in the nation while at Apollo. Between
1999 to 2000, Mr. Kim was an Assistant Vice President at Oaktree
Capital Management, where he evaluated and executed investments in
the U.S. and Japan for funds then totaling $1.7 billion of equity.
Previously, Mr. Kim worked as an Associate at Merrill Lynch Real
Estate Investment Banking, where he evaluated financing
alternatives for public and private real estate companies. Mr. Kim
also worked as a Senior Analyst at Walt Disney Imagineering and as
an Analyst at Disney Development Company. In addition to the
foregoing business experience, Mr. Kim served as Chief Investment
Officer of ALDA during 2011. Mr. Kim is currently on the Board of
Directors of UHI Soho Global, a Cayman Islands based hedge fund.
Mr. Kim graduated with an M.B.A. from Harvard Business School and a
B.A. in Economics from UCLA.
Richard J. Birdoff, who has served as
one of our directors since November 20, 2017, has served as
President of RD Management and Realty Investors Development Corp.
(“RD Management”), a privately held retail real estate
developer and manager, since January 2015. Mr. Birdoff is
responsible for all aspects of the day-to-day operations of the
company including development, construction, acquisitions, sales
and dispositions. Mr. Birdoff joined RD Management in 1991 as a
principal and Executive Vice President and since 1994, he has
developed in excess of 10,000,000 sq. ft. of shopping centers. Mr.
Birdoff previously served on the Board of Directors of Crocker
Realty Investors, a Florida based publicly held real estate
investment trust. Mr. Birdoff has been engaged in the real estate
business for more than 30 years. He received an undergraduate
degree from Emory College in 1980 and his Juris Doctorate degree in
1983 from Emory University Law School. Following his graduation,
Mr. Birdoff worked for IRT Properties in Atlanta, Georgia.
Thereafter, in 1984, he joined Bertram Associates of Union, New
Jersey where Mr. Birdoff served as associate counsel. Bertram
Associates, at the time was one of New Jersey’s largest
residential developers. Mr. Birdoff then transitioned to be a
principal in the real estate development industry with Bertram
Associates focusing on site acquisition, construction and sales of
residential homes.
We
believe Mr. Birdoff is well-qualified to serve as a member of our
board due to his extensive real estate experience.
Michael Fong, who has served as one of
our directors since November 20, 2017, serves as the Chairman and
Chief Executive Officer of JF International Ltd. (“JF
International”), a private equity firm he founded since 2003.
JF International invests and manages a diversified portfolio of
worldwide investments in real estate and operating companies. In
2015, JF International joined with BRP to invest in the luxury
senior housing sector. From 1994 to 2003, Mr. Fong was the Managing
Director of The ALJ Group which is based in Jeddah, Kingdom of
Saudi Arabia and is one of the largest privately held business
enterprises in the Middle East. Mr. Fong also previously served
from 1990 to 1994 as the President of Jaymont Properties, Inc., a
real estate development and management company with a substantial
portfolio of premier office and mixed used properties located in
the central business district of major cities such as New York,
Boston, San Francisco, Orlando, Chicago, and Miami. From 1979 to
1990, Mr. Fong was President of Intercap Investments, Inc, a
commercial developer of real estate central business district
projects in Miami and Coral Gables. From 1998 to 1999, Mr. Fong was
the President of the Coral Gables, FL Chamber of Commerce and
served on its Board of Directors for several years. Prior to 1979,
Mr. Fong was President of Interfin Investments, Inc., an investment
banking firm based in Lincoln, Nebraska and New York. From 1975 to
1979, Mr. Fong was a Vice President and also served as Assistant to
the President of DuPont Walston, Inc., a major retail brokerage and
investment banking firm with over 200 branches across the United
States. Mr. Fong began his business career in 1971 with EDS, a firm
founded by H. Ross Perot, and was sent to New York when Mr. Perot
made an investment in DuPont Glore Forgan when EDS was awarded a
major data processing contract for redesigning a new system for the
brokerage business.
We
believe Mr. Fong is well-qualified to serve as a member of our
board due to his expertise in real estate and finance.
Stuart Koenig, who has served as one of
our directors since November 20, 2017, has over forty years of
diversified experience in the real estate, investment banking and
financial services industries. His experience includes every aspect
of commercial and residential real estate including acquisition,
financing, leasing, property management and disposition. Mr. Koenig
most recently served as a Senior Partner in the real estate
division of Ares Management, LP (“Ares”), a global
alternative asset manager with over $100 billion of assets under
management, from 2013 to 2016. Mr. Koenig served as Chair of the
Investment Committees of the real estate funds of Ares, which
collectively had $8 billion under management. From 1995 to 2013,
Mr. Koenig served as the Global Chief Financial Officer, Chief
Administrative Officer and Senior Partner of AREA Property Partners
(“AREA”), a global real estate investment and asset
management firm that raised and invested approximately $14 billion
of client equity in more than 600 transactions across all sectors
of real estate. Mr. Koenig oversaw the financing and administrative
activities for AREA and was also responsible for its reporting,
human resources, compliance, legal and structuring activities. Mr.
Koenig helped negotiate and execute the sale of AREA to Ares
Management in 2013. Prior to AREA, Mr. Koenig worked in various
positions in investment bank including Goldman Sachs & Co.
(1986-1994) and EF Hutton Inc. (1981-1986). From 1997-2014, Mr.
Koenig served as the lead independent director and member of the
compensation committee of Emeritus Corporation (NYSE: ESC) one of
the largest publicly traded owners and operators of assisted living
facilities in the country and helped oversee the sale of the
company to Brookdale Senior Living (NYSE: BKD) in 2014. Mr. Koenig
currently serves as Trustee for the Binghamton University Endowment
Fund and is Chair of its Investment Committee and also provides
consulting services for the U.S. investment activity of Profimex,
an Israel based real estate investment firm. Mr. Koenig has a B.A.
from Binghamton University and an MBA from Baruch College of the
City University of N.Y.
We
believe Mr. Koenig is well-qualified to serve as a member of our
board due to his extensive and deep expertise in real estate,
finance, acquisition and investment management.
Albert G. Rex, who has served as one of
our directors since November 20, 2017, has served as the Managing
Director of Walker & Dunlop, a commercial real estate finance
company, since May 2012. In this role, Mr. Rex has been involved in
over 1500 loans totaling more than $15 billion in transactions. Mr.
Rex has over 40 years of experience in the financing and equity
aspects of commercial real estate development throughout the U.S.
with a focus on the Southeast region. Mr. Rex spent the majority of
his career as a Managing Partner with Carey Kramer, a company he
helped found in 1983 and ultimately owned solely from 2001 until it
merged with Collateral Real Estate Capital in 2005. Collateral
later merged with Laureate Capital, LLC in 2007, to form
Grandbridge Real Estate Capital, LLC, a wholly-owned subsidiary of
BB&T. Mr. Rex is a graduate of University of Florida with a
degree in Finance and Real Estate and serves on their Real Estate
Advisory Board. He is an active member of the Mortgage Bankers
Association (MBA), Urban Land Institute (ULI), International
Council of Shopping Centers (ICSC), and National Association of
Industrial and Office Properties (NAIOP), where he has served as
President of the South Florida Chapter.
We
believe Mr. Rex is well-qualified to serve as a member of our board
due to his experience in finance and capital markets.
Troy T. Taylor, who has served as one of
our directors since November 20, 2017, has served as President of
Algon Group, an advisory firm he founded, since 2002. Algon Group
is a specialized financial firm providing sophisticated financial
advisory services to stakeholders with complex, challenging, and
financially distressed situations. Mr. Taylor has 25 years of
experience including investment banking, restructuring (both in
Chapter 11 and out-of-court) and senior management. Mr. Taylor has
served as the Chief Restructuring Officer, Chief Executive Officer
or Lead Financial Advisor in a broad range of industries including
manufacturing, distribution, hospitality, real estate and retail.
He has also served as a member of the Board of Directors of several
public and private companies, including Keystone Consolidated
Industries, Inc., Barjan, Inc., and 1-800-AutoTow, Inc. He
currently serves as Vice Chairman of Hyperion Bank located in
Philadelphia. Before 2002, Mr. Taylor served in various capacities
with GMA Partners, Inc., KPMG Peat Marwick, LLP, Morgan Keegan
& Company, Inc., Oppenheimer & Co., Inc. and Thomson
McKinnon Securities, Inc. Mr. Taylor received his B.S. in Economics
and his MBA from The Wharton School, University of
Pennsylvania.
We
believe Mr. Taylor is well-qualified to serve as a member of our
board due to his experience in accounting, finance, capital markets
and investment management.
Employees
As of
the date hereof, the Company has no employees except its three
executive officers who receive no compensation from the Company.
These individuals are not obligated to devote any specific number
of hours to our matters but they intend to devote as much of their
time as they deem necessary to our affairs until we have completed
our initial business combination. The amount of time they will
devote in any time period will vary based on whether a target
business has been selected for our initial business combination and
the stage of the business combination process we are in. We do not
intend to have any full time employees prior to the consummation of
our initial business combination.
Committees of the Board of Directors
Our
board of directors has three standing committees: an audit
committee, a nominating committee and a compensation committee. The
rules of NASDAQ and Rule 10A-3 of the Exchange Act as required by
the rules of the NASDAQ, require that the audit committee and the
compensation committee of a listed company be comprised solely of
independent directors.
Audit Committee
Our
audit committee of the board of directors consists of Messrs. Fong,
Rex and Taylor (Chair), each of whom is an independent director
under Nasdaq’s listing standards. The audit committee’s
duties, which are specified in our Audit Committee Charter,
include:
●
reviewing and
discussing with management and the independent auditor the annual
audited financial statements, and recommending to the board whether
the audited financial statements should be included in our Form
10-K;
●
discussing with
management and the independent auditor significant financial
reporting issues and judgments made in connection with the
preparation of our financial statements;
●
discussing with
management major risk assessment and risk management
policies;
●
monitoring the
independence of the independent auditor;
●
verifying the
rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law;
●
reviewing and
approving all related-party transactions;
●
inquiring and
discussing with management our compliance with applicable laws and
regulations;
●
pre-approving all
audit services and permitted non-audit services to be performed by
our independent auditor, including the fees and terms of the
services to be performed;
●
appointing or
replacing the independent auditor;
●
determining the
compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose
of preparing or issuing an audit report or related
work;
●
establishing
procedures for the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding our financial
statements or accounting policies; and
●
approving
reimbursement of expenses incurred by our management team in
identifying potential target businesses.
The
audit committee has been at all times be composed exclusively of
“independent directors” who are “financially
literate” as defined under Nasdaq’s listing standards.
Nasdaq’s standards define “financially literate”
as being able to read and understand fundamental financial
statements, including a company’s balance sheet, income
statement and cash flow statement.
In
addition, we must certify to Nasdaq that the committee has, and
will continue to have, at least one member who has past employment
experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or
background that results in the individual’s financial
sophistication. The board of directors has determined that Mr.
Taylor qualifies as an “audit committee financial
expert,” as defined under rules and regulations of the
SEC.
Nominating Committee
Our
nominating committee of our board of directors consists of Messrs.
Fong, Koenig, Rex (Chair), each of whom is an independent director
under Nasdaq’s listing standards. The nominating committee is
responsible for overseeing the selection of persons to be nominated
to serve on our board of directors. The nominating committee
considers persons identified by its members, management,
stockholders, investment bankers and others.
Guidelines for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the
Nominating Committee Charter, generally provide that persons to be
nominated:
●
should have
demonstrated notable or significant achievements in business,
education or public service;
●
should possess the
requisite intelligence, education and experience to make a
significant contribution to the board of directors and bring a
range of skills, diverse perspectives and backgrounds to its
deliberations; and
●
should have the
highest ethical standards, a strong sense of professionalism and
intense dedication to serving the interests of the
stockholders.
The
Nominating Committee considers a number of qualifications relating
to management and leadership experience, background and integrity
and professionalism in evaluating a person’s candidacy for
membership on the board of directors. The nominating committee may
require certain skills or attributes, such as financial or
accounting experience, to meet specific board needs that arise from
time to time and will also consider the overall experience and
makeup of its members to obtain a broad and diverse mix of board
members. The nominating committee does not distinguish among
nominees recommended by stockholders and other
persons.
Compensation Committee
Our
compensation committee of the board of directors consists of
Messrs. Birdoff, Koenig (Chair) and Taylor, each of whom is an
independent director under Nasdaq’s listing standards. The
compensation committee’s duties, which are specified in our
Compensation Committee Charter, include, but are not limited
to:
●
reviewing and
approving on an annual basis the corporate goals and objectives
relevant to our Chief Executive Officer’s compensation,
evaluating our Chief Executive Officer’s performance in light
of such goals and objectives and determining and approving the
remuneration (if any) of our Chief Executive Officer based on such
evaluation;
●
reviewing and
approving the compensation of all of our other executive
officers;
●
reviewing our
executive compensation policies and plans;
●
implementing and
administering our incentive compensation equity-based remuneration
plans;
●
assisting
management in complying with our proxy statement and annual report
disclosure requirements;
●
approving all
special perquisites, special cash payments and other special
compensation and benefit arrangements for our executive officers
and employees;
●
if required,
producing a report on executive compensation to be included in our
annual proxy statement; and
●
reviewing,
evaluating and recommending changes, if appropriate, to the
remuneration for directors.
Code of Ethics
We have
adopted a code of ethics that applies to all of our executive
officers, directors and employees. The code of ethics codifies the
business and ethical principles that govern all aspects of our
business.
Compliance with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires our officers, directors and
persons who beneficially own more than ten percent of our ordinary
shares to file reports of ownership and changes in ownership with
the SEC. These reporting persons are also required to furnish us
with copies of all Section 16(a) forms they file. Based solely upon
a review of such Forms, we believe that during the year ended
December 31, 2017, there were no untimely reports, except for Form
3 filings for each of the officers and directors listed under Part
III, Item 10.
Limitation on Liability and Indemnification of Officers and
Directors
Our
amended and restated certificate of incorporation provides that,
subject to certain limitations, we shall indemnify our directors
and officers against all expenses, including legal fees, and
against all judgments, fines and amounts paid in settlement and
reasonably incurred in connection with legal, administrative or
investigative proceedings. Such indemnity only applies if the
person acted honestly and in good faith with a view to our best
interests and, in the case of criminal proceedings, the person had
no reasonable cause to believe that his or her conduct was
unlawful. The decision of the directors as to whether the person
acted honestly and in good faith and with a view to our best
interests and as to whether the person had no reasonable cause to
believe that his conduct was unlawful and is, in the absence of
fraud, sufficient for the purposes of the amended and restated
certificate of incorporation, unless a question of law is involved.
The termination of any proceedings by any judgment, order,
settlement, conviction or the entering of a nolle prosequi does
not, by itself, create a presumption that the person did not act
honestly and in good faith and with a view to our best interests or
that the person had reasonable cause to believe that his conduct
was unlawful.
We have
entered into agreements with our officers and directors to provide
contractual indemnification in addition to the indemnification
provided for in our amended and restated certificate of
incorporation. Our amended and restated certificate of
incorporation also will permit us to purchase and maintain
insurance on behalf of any officer or director who at the request
of the Company is or was serving as a director or officer of, or in
any other capacity is or was acting for, another company or a
partnership, joint venture, trust or other enterprise, against any
liability asserted against the person and incurred by the person in
that capacity, whether or not the company has or would have had the
power to indemnify the person against the liability as provided in
our amended and restated certificate of incorporation. We have
purchased a policy of directors’ and officers’
liability insurance that insures our officers and directors against
the cost of defense, settlement or payment of a judgment in some
circumstances and insures us against our obligations to indemnify
our officers and directors.
These
provisions may discourage shareholders from bringing a lawsuit
against our directors for breach of their fiduciary duty. These
provisions also may have the effect of reducing the likelihood of
derivative litigation against officers and directors, even though
such an action, if successful, might otherwise benefit us and our
shareholders. Furthermore, a shareholder’s investment may be
adversely affected to the extent we pay the costs of settlement and
damage awards against officers and directors pursuant to these
indemnification provisions.
We
believe that these provisions, the insurance and the indemnity
agreements are necessary to attract and retain talented and
experienced officers and directors.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we have been informed that in
the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable.
Conflicts of Interest
Below
are potential conflicts of interest:
●
None of our
officers and directors is required to commit their full time to our
affairs and, accordingly, they may have conflicts of interest in
allocating their time among various business
activities.
●
In the course of
their other business activities, our sponsor, officers and
directors may become aware of investment and business opportunities
which may be appropriate for presentation to our company as well as
the other entities with which they are affiliated. Our officers and
directors may have conflicts of interest in determining to which
entity a particular business opportunity should be presented but
barring such a conflict, must present target business opportunities
that have a fair market value of at least 80% of the assets held in
the trust account (excluding taxes payable on the income earned in
the trust account) at the time of the agreement to enter into the
initial business combination, subject to any pre-existing fiduciary
or contractual obligations.
●
Unless we
consummate our initial business combination, our officers,
directors and sponsor will not receive reimbursement for any
out-of-pocket expenses incurred by them to the extent that such
expenses exceed the amount of available proceeds not deposited in
the trust account.
●
The founder’s
shares beneficially owned by our officers and directors will be
released from escrow only if a business combination is successfully
completed, and the private placement units including the underlying
shares of common stock, rights and warrants, purchased by our
sponsor will be worthless if a business combination is not
consummated. Additionally, our officers and directors will not
receive liquidation distributions with respect to any of their
founder’s shares. For the foregoing reasons, our board may
have a conflict of interest in determining whether a particular
target business is appropriate to effect a business combination
with.
In
general, officers and directors of a corporation incorporated under
the laws of the State of Delaware are required to present business
opportunities to a corporation if:
●
the corporation
could financially undertake the opportunity;
●
the opportunity is
within the corporation’s line of business; and
●
it would not be
fair to the corporation and its stockholders for the opportunity
not to be brought to the attention of the corporation.
Accordingly, as a
result of multiple business affiliations, our officers and
directors may have similar legal obligations relating to presenting
business opportunities meeting the above-listed criteria to
multiple entities. In addition, conflicts of interest may arise
when our board evaluates a particular business opportunity with
respect to the above-listed criteria. We cannot assure you that any
of the above mentioned conflicts will be resolved in our
favor.
In
order to minimize potential conflicts of interest which may arise
from multiple corporate affiliations, each of our officers and
directors has contractually agreed, pursuant to a written agreement
with us, until the earliest of our execution of a definitive
agreement for a business combination, our liquidation, or such time
as he or she ceases to be an officer or director, to present to our
company for our consideration, prior to presentation to any other
entity, any suitable business opportunity that may reasonably be
required to be presented to us, subject to any pre-existing
fiduciary or contractual obligations he or she might have.
Accordingly, our amended and restated certificate of incorporation
will provide that the doctrine of corporate opportunity will not
apply with respect to any of our executive officers or directors in
circumstances where the application of the doctrine would conflict
with any fiduciary duties or contractual obligations they may
have.
Below
is a table summarizing the entities to which our executive officers
and directors currently have fiduciary duties or
obligations:
Individual
|
|
Entity
|
|
Entity’s
Business
|
|
Affiliation
|
Richard
Ackerman
|
|
None
|
|
-
|
|
-
|
Lori B.
Wittman
|
|
IMH
Financial Corporation
|
|
Real
Estate Investment & Finance
|
|
Director
|
Bennet
Kim
|
|
Sun Bay
Senior Club
|
|
Adult
Day Program
|
|
Chief
Executive Officer
|
Richard
Birdoff
|
|
RD
Management and Realty Investors
Development
Corp.
|
|
Retail
Real Estate Developer and Manager
|
|
Principal
and Executive Vice President
|
Michael
Fong
|
|
JF
International Ltd.
|
|
Private
Equity
|
|
Chairman
and Chief Executive Officer
|
Stuart
Koenig
|
|
None
|
|
-
|
|
-
|
Albert
G. Rex
|
|
Walker
& Dunlop
|
|
Commercial
Real Estate Finance
|
|
Managing
Director
|
Troy T.
Taylor
|
|
Algon
Group
|
|
Financial
Advisory Services
|
|
President
|
|
|
Hyperion
Bank
|
|
Financial
Institution
|
|
Vice
Chairman
|
In
addition, our executive officers and directors have agreed not to
participate in the formation of, or become an officer or director
of, any other special purpose acquisition company with a class of
securities registered under the Exchange Act until we have entered
into a definitive agreement regarding our initial business
combination or we have failed to complete our initial business
combination within 12 months after the closing of the Initial
Public Offering (or up to 18 months
from the closing of the Initial Public Offering if we extend the period
of time to consummate a business combination by the full amount of
time).
If we
submit our initial business combination to our public stockholders
for a vote, our sponsor, as well as all of our officers and
directors have agreed to vote any shares held by them in favor of
our initial business combination. If they purchase shares of common
stock in the open market, however, they would be entitled to
participate in any liquidation distribution in respect of such
shares but have agreed not to convert or sell such shares to us in
connection with the consummation of an initial business
combination.
All
ongoing and future transactions between us and any of our officers
and directors or their respective affiliates will be on terms
believed by us to be no less favorable to us than are available
from unaffiliated third parties. Such transactions will require
prior approval by a majority of our uninterested
“independent” directors or the members of our board who
do not have an interest in the transaction, in either case who had
access, at our expense, to our attorneys or independent legal
counsel. We will not enter into any such transaction unless our
disinterested “independent” directors determine that
the terms of such transaction are no less favorable to us than
those that would be available to us with respect to such a
transaction from unaffiliated third parties.
Commencing on
November 20, 2017 through the acquisition of a target business, we
will pay our sponsor an aggregate fee of up to $10,000 per month
for providing us with office space and certain office and
secretarial services. However, this arrangement is solely for our
benefit and is not intended to provide our executive officers or
directors compensation in lieu of a salary.
Other
than the administrative fee of up to $10,000 per month and the
repayment of any loans made by our sponsor and our Chief Executive
Officer to us, no compensation or fees of any kind, including
finder’s, consulting fees and other similar fees, will be
paid to our sponsor, members of our management team or their
respective affiliates, for services rendered prior to or in
connection with the consummation of our initial business
combination (regardless of the type of transaction that it is).
However, they will receive repayment of any loans from our sponsor,
officers and directors for working capital purposes and
reimbursement for any out-of-pocket expenses incurred by them in
connection with activities on our behalf, such as identifying
potential target businesses, performing business due diligence on
suitable target businesses and business combinations as well as
traveling to and from the offices, plants or similar locations of
prospective target businesses to examine their operations. There is
no limit on the amount of out-of-pocket expenses reimbursable by
us.
After
our initial business combination, members of our management team
who remain with us may be paid consulting, management or other fees
from the combined company with any and all amounts being fully
disclosed to stockholders, to the extent then known, in the proxy
solicitation materials furnished to our stockholders. It is
unlikely the amount of such compensation will be known at the time
of a stockholder meeting held to consider an initial business
combination, as it will be up to the directors of the
post-combination business to determine executive and director
compensation. In this event, such compensation will be publicly
disclosed at the time of its determination in a Current Report on
Form 8-K, as required by the SEC.
Grants of Plan-Based Awards and Outstanding Equity Awards at Fiscal
Year-End
We do
not have any equity incentive plans under which to grant
awards.
Employment Agreements
We do
not currently have any written employment agreements with any of
our directors and officers.
Retirement/Resignation Plans
We do
not currently have any plans or arrangements in place regarding the
payment to any of our executive officers following such
person’s retirement or resignation.
Director Compensation
We have
not paid our directors fees in the past for attending board
meetings. In the future, we may adopt a policy of paying
independent directors a fee for their attendance at board and
committee meetings. We reimburse each director for reasonable
travel expenses related to such director’s attendance at
board of directors and committee meetings.
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table sets forth information regarding the beneficial
ownership of our shares of common stock as of
March 21, 2018 by:
●
each person known
by us to be the beneficial owner of more than 5% of our outstanding
shares of common stock;
●
each of our
officers, directors and director nominees; and
●
all of our
officers, directors and director nominees as a group.
Unless
otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of
common stock beneficially owned by them. The following table does
not reflect record of beneficial ownership of the rights or
warrants included in the units offered by this prospectus or the
private placement units as these rights and warrants are not
convertible or exercisable, respectively, within 60 days of the
date of this prospectus.
Name and
Address of Beneficial Owner(1)
|
Amount and
Nature of Beneficial Ownership
|
|
Approximate
Percentage of Outstanding Shares of Common Stock(2)
|
Big Rock Partners
Sponsor, LLC
|
1,997,500
|
|
22.1%
|
Polar Asset Management Partners
Inc.(4)
|
780,000
|
|
8.6%
|
Boothbay Absolute Return Strategies
LP(5)
|
539,526
|
|
6.0%
|
Richard
Ackerman
|
1,997,500
|
|
22.1%
|
Lori B. Wittman(7)
|
-
|
|
-
|
Bennett
Kim
|
-
|
|
-
|
Richard
Birdoff
|
-
|
|
-
|
Michael Fong(7)
|
-
|
|
-
|
Stuart Koenig(7)
|
-
|
|
-
|
Albert G. Rex(7)
|
-
|
|
-
|
Troy T. Taylor(7)
|
-
|
|
-
|
All directors and
executive officers as a group (8 individuals)
|
1,997,500
|
|
22.1%
|
__________
(1)
Unless otherwise
indicated, the business address of each of the individuals is 2645
N. Federal Highway, Suite 230, Delray Beach, Florida
33483.
(2)
Based on 9,035,550
shares of the Company’s Common Stock outstanding as of March
21, 2018.
(3)
Richard Ackerman is
the Company's President, Chairman and Chief Executive Officer and
the managing member of Big Rock Partners Sponsor, LLC (the
"Sponsor") and has the sole voting and dispositive power of the
securities held by the Sponsor. Accordingly. Mr. Ackerman may be
deemed to have beneficial ownership of such shares.
(4)
Information was
obtained from a Schedule 13G filed on February 13, 2018 with the
United States Securities and Exchange Commission (the
“SEC”). The address for Polar Asset Management Partners
Inc. is 401 Bay Street, Suite 1900, PO Box 19, Toronto, Ontario M5H
2Y4, Canada.
(5)
Information was
obtained from a Schedule 13G/A filed on February 12, 2018 with the
SEC. The shares are held by Boothbay Absolute Return Strategies LP,
a Delaware limited partnership (the “Boothbay Fund”),
which is managed by Boothbay Fund Management, LLC, a Delaware
limited liability company (the “Boothbay Adviser”). The
Boothbay Adviser, in its capacity as the investment manager of the
Boothbay Fund, has the power to vote and the power to direct the
disposition of all shares held by the Boothbay Fund. Ari Glass is
the Managing Member of the Boothbay Adviser. Accordingly, for the
purposes of Reg. Section 240.13d-3, the reporting persons herein
may be deemed to beneficially own an aggregate of 539,526 shares of
common stock. Each of the Boothbay Fund, the Boothbay Adviser, and
Mr. Glass disclaims beneficial ownership of the Shares reported
herein except to the extent of the reporting person’s
pecuniary interest therein. The address for each of the Boothbay
Fund, the Boothbay Adviser, and Mr. Glass is 810 7th Avenue, Suite
615, New York, NY 10019.
(6)
Represents shares
held by Big Rock Partners Sponsor, LLC, our sponsor, of which Mr.
Ackerman is the managing member and has sole voting and investment
power with respect to such shares. Ms. Wittman and Messrs. Fong,
Koenig, Rex and Taylor hold economic interests in Big Rock Partners
Sponsor, LLC and pecuniary interests in the securities held by Big
Rock Partners Sponsor, LLC. Each of Ms. Wittman and Messrs. Fong,
Koenig, Rex and Taylor disclaims beneficial ownership of such
securities, except to the extent of his or her pecuniary
interests.
(7)
Does not include
shares held by Big Rock Partners Sponsor, LLC. This individual is a
member of Big Rock Partners Sponsor, LLC as described in footnote
6.
Certain
Relationships and Related Transactions, and Director
Independence.
In
September 2017, our sponsor purchased 1,437,500 shares of our
common stock for an aggregate purchase price of $25,000 or
approximately $0.017 per share. On
November 20, 2017, the Company effectuated a 1.2-for-1 stock
dividend of its common stock resulting in an aggregate of 1,725,000
founder's shares outstanding. All share and per share amounts have
been retroactively restated to reflect the stock
dividend.
Our
sponsor purchased an aggregate of 250,000 private placement units
(for a total purchase price of $2,500,000) from us. These purchases
took place on a private placement basis simultaneously with the
consummation of the Initial Public Offering. Because the
over-allotment option was exercised in full by the underwriters,
our sponsor also purchased from us at a price of $10.00 per unit an
additional 22,500 private placement units in an amount necessary to
maintain in the trust account at $10.00 per unit sold to the public
in this offering. These additional private placement units were
also purchased in a private placement that occurred simultaneously
with the purchase of units resulting from the exercise of the
over-allotment option. We believe the purchase price of the private
placement units is greater than the fair value of such units and
therefore will not result in any share-based compensation expense.
The private placement units are identical to the units being sold
in this offering except that the warrants contained in the private
placement units: (i) are not be redeemable by us and (ii) may be
exercised for cash or on a cashless basis, so long as they are held
by the initial purchasers or any of their permitted transferees.
The purchasers of the private placement units have agreed not to
transfer, assign or sell any of their private placement units or
the common stock issuable upon conversion of the underlying rights
or exercise of the underlying warrants of the private placement
units (except to certain permitted transferees), until after the
completion of our initial business combination.
In
order to meet our working capital needs following the consummation
of the Initial Public Offering, our sponsor, officers and directors
may, but are not obligated to, loan us funds, from time to time or
at any time, in whatever amount they deem reasonable in their sole
discretion. Each loan would be evidenced by a promissory note. The
notes would either be paid upon consummation of our initial
business combination, without interest, or, at the holder’s
discretion, up to $1,500,000 of the notes may be converted into
private units at a price of $10.00 per unit. The units would be
identical to the private placement units (which, for example, would result in the holders
being issued 165,000 shares of common stock if $1,500,000 of notes
were so converted since the 150,000 rights included in such units
would result in the issuance of 15,000 shares upon the closing of
our business combination, as well as 75,000 warrants to purchase
75,000 shares). If we do not complete a business
combination, the loans will be forgiven.
The
holder of our founder’s shares issued and outstanding on the
date of the Initial Public Offering, as well as the holders of the
private placement units and any warrants our sponsor, officers,
directors or their affiliates may be issued in payment of working
capital loans made to us (and all underlying securities), are
entitled to registration rights pursuant to the Registration Rights
Agreement among the Company and our sponsor. The holders of a
majority of these securities are entitled to make up to three
demands that we register such securities. The holders of the
majority of the founder’s shares can elect to exercise these
registration rights at any time commencing three months prior to
the date on which these shares of common stock are to be released
from escrow. The holders of a majority of the private placement
units or private units issued in payment of working capital loans
made to us (or underlying securities) can elect to exercise these
registration rights at any time after we consummate a business
combination. In addition, the holders have certain
“piggy-back” registration rights with respect to
registration statements filed subsequent to our consummation of a
business combination. We will bear the expenses incurred in
connection with the filing of any such registration
statements.
During
the year ended December 31, 2017, our sponsor loaned to us a total
of $122,625 which was used in connection with a portion of the
expenses of the Initial Public Offering. Also, during the year
ended December 31, 2017 our Chief Executive Officer loaned to us
$25,000 which was used in connection with a portion of the expenses
of the Initial Public Offering. These loans were non-interest
bearing, unsecured and were due at the closing of the Initial
Public Offering. The loans were repaid upon the closing of the
Initial Public Offering out of the $500,000 of offering proceeds
that were allocated to the payment of offering
expenses.
Also,
A/Z Property, an entity majority owned by Richard Ackerman, our
Chairman, President and Chief Executive Officer, has agreed that it
will be liable to ensure that the proceeds in the trust account are
not reduced below $10.00 per share by the claims of target
businesses or claims of vendors or other entities that are owed
money by us for services rendered or contracted for or products
sold to us. We believe A/Z Property has sufficient net worth to
satisfy its indemnity obligation should it arise, however we cannot
assure you that A/Z Property will have sufficient liquid assets to
satisfy such obligations if it is required to do so. Additionally,
the agreement entered into by A/Z Property specifically provides
for two exceptions to the indemnity it has given: it will have no
liability (1) as to any claimed amounts owed to a target business
or vendor or other entity who has executed an agreement with us
waiving any right, title, interest or claim of any kind they may
have in or to any monies held in the trust account, or (2) as to
any claims for indemnification by the underwriters of the Initial
Public Offering against certain liabilities, including liabilities
under the Securities Act.
Our
sponsor, which is affiliated with our officers and directors, has
agreed that, commencing on November 20, 2017 through the earlier of
our consummation of our initial business combination or our
liquidation, it will make available to us certain general and
administrative services, including office space, utilities and
administrative support, as we may require from time to time. We
have agreed to pay our sponsor an aggregate of up to $10,000 per
month for these services. Accordingly, our officers and directors
will benefit from the transaction to the extent of their interest
in our sponsor. However, this arrangement is solely for our benefit
and is not intended to provide our officers or directors
compensation in lieu of a salary. We believe, based on rents and
fees for similar services in the Palm Beach, Florida area, that the
fee charged by our sponsor is at least as favorable as we could
have obtained from an unaffiliated person.
Other
than the administrative fee of up to $10,000 per month, no
compensation or fees of any kind, including finder’s,
consulting fees and other similar fees, will be paid to our
sponsor, members of our management team or their respective
affiliates, for services rendered prior to or in connection with
the consummation of our initial business combination (regardless of
the type of transaction that it is). However, such individuals will
receive the repayment of any loans from our sponsor, officers and
directors for working capital purposes and reimbursement for any
out-of-pocket expenses incurred by them in connection with
activities on our behalf, such as identifying potential target
businesses, performing business due diligence on suitable target
businesses and business combinations as well as traveling to and
from the offices, plants or similar locations of prospective target
businesses to examine their operations. There is no limit on the
amount of out-of-pocket expenses reimbursable by us.
After
our initial business combination, members of our management team
who remain with us may be paid consulting, management or other fees
from the combined company with any and all amounts being fully
disclosed to stockholders, to the extent then known, in the proxy
solicitation materials furnished to our stockholders. It is
unlikely the amount of such compensation will be known at the time
of a stockholder meeting held to consider an initial business
combination, as it will be up to the directors of the
post-combination business to determine executive and director
compensation. In this event, such compensation will be publicly
disclosed at the time of its determination in a Current Report on
Form 8-K, as required by the SEC.
All
ongoing and future transactions between us and any of our officers
and directors or their respective affiliates will be on terms
believed by us to be no less favorable to us than are available
from unaffiliated third parties. Such transactions will require
prior approval by a majority of our uninterested
“independent” directors or the members of our board who
do not have an interest in the transaction, in either case who had
access, at our expense, to our attorneys or independent legal
counsel. We will not enter into any such transaction unless our
disinterested “independent” directors determine that
the terms of such transaction are no less favorable to us than
those that would be available to us with respect to such a
transaction from unaffiliated third parties.
Related Party Policy
Our
Code of Ethics requires us to avoid, wherever possible, all related
party transactions that could result in actual or potential
conflicts of interests, except under guidelines approved by the
board of directors (or the audit committee). Related-party
transactions are defined as transactions in which (1) the aggregate
amount involved will or may be expected to exceed $120,000 in any
calendar year, (2) we or any of our subsidiaries is a participant,
and (3) any (a) executive officer, director or nominee for election
as a director, (b) greater than 5% beneficial owner of our shares
of common stock, or (c) immediate family member, of the persons
referred to in clauses (a) and (b), has or will have a direct or
indirect material interest (other than solely as a result of being
a director or a less than 10% beneficial owner of another entity).
A conflict of interest situation can arise when a person takes
actions or has interests that may make it difficult to perform his
or her work objectively and effectively. Conflicts of interest may
also arise if a person, or a member of his or her family, receives
improper personal benefits as a result of his or her
position.
Our
audit committee, pursuant to its written charter, will be
responsible for reviewing and approving related-party transactions
to the extent we enter into such transactions. The audit committee
will consider all relevant factors when determining whether to
approve a related party transaction, including whether the related
party transaction is on terms no less favorable to us than terms
generally available from an unaffiliated third-party under the same
or similar circumstances and the extent of the related
party’s interest in the transaction. No director may
participate in the approval of any transaction in which he is a
related party, but that director is required to provide the audit
committee with all material information concerning the transaction.
We also require each of our directors and executive officers to
complete a directors’ and officers’ questionnaire that
elicits information about related party transactions.
These
procedures are intended to determine whether any such related party
transaction impairs the independence of a director or presents a
conflict of interest on the part of a director, employee or
officer.
To
further minimize conflicts of interest, we have agreed not to
consummate an initial business combination with an entity that is
affiliated with any of our sponsor, officers or directors including
(i) an entity that is either a portfolio company of, or has
otherwise received a material financial investment from, any
private equity fund or investment company (or an affiliate thereof)
that is affiliated with any of the foregoing, (ii) an entity in
which any of the foregoing or their affiliates are currently
passive investors, (iii) an entity in which any of the foregoing or
their affiliates are currently officers or directors, or (iv) an
entity in which any of the foregoing or their affiliates are
currently invested through an investment vehicle controlled by
them, unless we have obtained an opinion from an independent
investment banking firm, or another independent entity that
commonly renders valuation opinions on the type of target business
we are seeking to acquire, and the approval of a majority of our
disinterested independent directors that the business combination
is fair to our unaffiliated stockholders from a financial point of
view.
Director Independence
Messrs.
Birdoff, Fong, Koenig, Rex and Taylor are each considered an
“independent director” under the Nasdaq listing rules,
which is defined generally as a person other than an officer or
employee of the company or its subsidiaries or any other individual
having a relationship, which, in the opinion of the company’s
board of directors would interfere with the director’s
exercise of independent judgment in carrying out the
responsibilities of a director.
Our
independent directors have regularly scheduled meetings at which
only independent directors are present.
Principal
Accounting Fees and Services.
The
following is a summary of fees paid or to be paid to Marcum LLP, or
Marcum, for services rendered.
Audit Fees. Audit
fees consist of fees billed for professional services rendered for
the audit of our year-end financial statements and services that
are normally provided by Marcum in connection with regulatory
filings. The aggregate fees billed by Marcum for professional
services rendered for the audit of our annual financial statements,
review of the financial information included in our Form 10-K and
other required filings with the SEC for the period from September
18, 2017 (inception) through December 31, 2017 totaled $74,625. The
above amounts include interim procedures, audit fees, and consent
issued for registration statements and comfort
letters.
Audit-Related
Fees. Audit-related services consist
of fees billed for assurance and related services that are
reasonably related to performance of the audit or review of our
financial statements and are not reported under “Audit
Fees.” These services include attest services that are not
required by statute or regulation and consultations concerning
financial accounting and reporting standards. We paid did not pay
Marcum for consultations concerning financial accounting and
reporting standards for the period from September 18, 2017
(inception) through December 31, 2017.
Tax Fees. We did not pay Marcum for tax
planning and tax advice for the period from September 18, 2017
(inception) through December 31, 2017.
All Other Fees. We did not pay Marcum
for other services for the period from September 18, 2017
(inception) through December 31, 2017.
Pre-Approval Policy
Our
audit committee was formed upon the consummation of our Initial
Public Offering. As a result, the audit committee did not
pre-approve all of the foregoing services, although any services
rendered prior to the formation of our audit committee were
approved by our board of directors. Since the formation of our
audit committee, and on a going-forward basis, the audit committee
has and will pre-approve all auditing services and permitted
non-audit services to be performed for us by our auditors,
including the fees and terms thereof (subject to the de minimis
exceptions for non-audit services described in the Exchange Act
which are approved by the audit committee prior to the completion
of the audit).
Exhibits,
Financial Statement Schedules.
(a)
List of documents filed as part of this report:
1.
Financial Statements: The information required by this item is
contained in Item 8 of this Form 10-K.
2.
Financial Statement Schedules: The information required by this
item is included in the financial statements contained in
Item 8 of this Form 10-K.
3.
Exhibits: The following exhibits are filed as part of, or
incorporated by reference into, this Form 10-K.
Exhibit No.
|
|
Description
|
|
|
Underwriting
Agreement, dated November 20, 2017, between the Company and
EarlyBirdCapital, Inc. (incorporated by reference to Exhibit 1.1 to
the Company’s Form 8-K, File No. 001-38302, filed on November
22, 2017).
|
|
|
Letter
Agreement, dated November 20, 2017, between the Company and
EarlyBirdCapital, Inc. (incorporated by reference to Exhibit 1.2 to
the Company’s Form 8-K, File No. 001-38302, filed on November
22, 2017).
|
|
|
Amended
and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company’s Form 8-K, File No.
001-38302, filed on November 22, 2017).
|
|
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.2 to
the Company’s Form 8-K, File No. 001-38302, filed on November
22, 2017).
|
|
|
Specimen
Unit Certificate (incorporated by reference to Exhibit 4.1 to the
Company’s Form S-1/A, File No. 333 220947, filed on
November 14, 2017).
|
|
|
Specimen
Common Stock Certificate (incorporated by reference to Exhibit 4.2
to the Company’s Form S-1/A, File No. 333-220947, filed on
November 14, 2017).
|
|
|
Specimen
Right Certificate (incorporated by reference to Exhibit 4.3 to the
Company’s Form S-1/A, File No. 333 220947, filed on
November 14, 2017).
|
|
|
Specimen
Warrant Certificate (incorporated by reference to Exhibit 4.4 to
the Company’s Form S-1/A, File No. 333 220947, filed on
November 14, 2017).
|
|
|
Right
Agreement, dated November 20, 2017, between the Company and
Continental Stock Transfer & Trust Company (incorporated by
reference to Exhibit 4.1 to the Company’s Form 8-K, File No.
001-38302, filed on November 22, 2017).
|
|
|
Warrant
Agreement, dated November 20, 2017, between Continental Stock
Transfer & Trust Company and the Company (incorporated by
reference to Exhibit 4.2 to the Company’s Form 8-K, File No.
001-38302, filed on November 22, 2017).
|
|
|
Form of
Unit Purchase Option, dated November 20, 2017, with
EarlyBirdCapital, Inc. and its designees (incorporated by reference
to Exhibit 4.3 to the Company’s Form 8-K, File No. 001-38302,
filed on November 22, 2017).
|
|
|
Letter
Agreement, dated November 20, 2017, by and between the Company and
Big Rock Partners Sponsor, LLC (incorporated by reference to
Exhibit 10.4 to the Company’s Form 8-K, File No. 001-38302,
filed on November 22, 2017).
|
|
|
Form of
Letter, dated November 20, 2017, Agreement by and between the
Company and its officers and directors. (incorporated by reference
to Exhibit 10.6 to the Company’s Form 8-K, File No.
001-38302, filed on November 22, 2017).
|
|
|
Letter
Agreement, dated November 20, 2017, by and between the Company and
A/Z Property Partners, LLC (incorporated by reference to Exhibit
10.5 to the Company’s Form 8-K, File No. 001-38302, filed on
November 22, 2017).
|
|
|
Investment
Management Trust Account Agreement, dated November 20, 2017,
between Continental Stock Transfer & Trust Company and the
Company (incorporated by reference to Exhibit 10.1 to the
Company’s Form 8-K, File No. 001-38302, filed on November 22,
2017).
|
|
|
Stock
Escrow Agreement, dated November 20, 2017, between the Company, Big
Rock Partners Sponsor, LLC and Continental Stock Transfer &
Trust Company (incorporated by reference to Exhibit 10.2 to the
Company’s Form 8-K, File No. 001-38302, filed on November 22,
2017).
|
|
|
Registration
Rights Agreement among the Company and Big Rock Partners Sponsor,
LLC (incorporated by reference to Exhibit 10.3 to the
Company’s Form 8-K, File No. 001-38302, filed on November 22,
2017).
|
|
|
Administrative
Services Agreement, dated November 20, 2017, between the Company
and Big Rock Partners Sponsor, LLC (incorporated by reference to
Exhibit 10.7 to the Company’s Form 8-K, File No. 001-38302,
filed on November 22, 2017).
|
|
|
Securities
Subscription Agreement, dated September 26, 2017, between the
Registrant and Big Rock Partners Sponsor, LLC (incorporated by
reference to Exhibit 10.6 to the Company’s Form S-1/A, File
No. 333-220947, filed on November 14, 2017).
|
|
|
Securities
Subscription Agreement, dated November 20, 2017, between the
Company and Big Rock Partners Sponsor, LLC (incorporated by
reference to Exhibit 10.9 to the Company’s Form 8-K, File No.
001-38302, filed on November 22, 2017).
|
|
|
Promissory
Note, dated as of September 26, 2017, in favor of Richard Ackerman
(incorporated by reference to Exhibit 10.7 to the Company’s
Form S-1/A, File No. 333-220947, filed on November 14,
2017).
|
|
|
Promissory
Note, dated as of September 26, 2017, in favor of Big Rock Partners
Sponsor, LLC (incorporated by reference to Exhibit 10.8 to the
Company’s Form S-1/A, File No. 333-220947, filed on November
14, 2017).
|
|
|
Form of
Indemnification Agreement, dated November 20, 2017, with the
Company’s officers and directors (incorporated by reference
to Exhibit 10.8 to the Company’s Form 8-K, File No.
001-38302, filed on November 22, 2017).
|
|
|
Code of
Ethics (incorporated by reference to Exhibit 14 to the
Company’s Form S-1/A, File No. 333-220947, filed on November
14, 2017).
|
|
|
Certification
of the Chief Executive Officer required by Rule 13a-14(a) or Rule
15d-14(a).
|
|
|
Certification
of the Chief Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a).
|
|
|
Certification
of the Chief Executive Officer required by Rule 13a-14(b) or Rule
15d-14(b) and 18 U.S.C. 1350.
|
|
|
Certification
of the Chief Financial Officer required by Rule 13a-14(b) or Rule
15d-14(b) and 18 U.S.C. 1350.
|
101.INS
|
|
XBRL
Instance Document*.
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document*.
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document*.
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document*.
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document*.
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document*.
|
|
|
|
*
|
|
Filed herewith
|
**
|
|
Furnished herewith
|
Registrants may
voluntarily include a summary of information required by Form 10-K
under this Item 16. The Company has elected not to include such
summary information.
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
March
23, 2018
|
|
|
|
|
BIG ROCK PARTNERS ACQUISITION CORP.
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Richard
Ackerman
|
|
|
|
|
|
Richard
Ackerman
|
|
|
|
|
|
Chairman,
President and Chief Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
|
Chairman,
President and Chief Executive Officer
|
|
|
/s/ Richard
Ackerman
|
|
(Principal
Executive Officer)
|
|
March
23, 2018
|
Richard
Ackerman
|
|
|
|
|
|
|
|
|
|
/s/ Lori B.
Wittman
|
|
Chief
Financial Officer and Director
|
|
March 23,
2018
|
Lori B.
Wittman
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Richard
Birdoff
|
|
Director
|
|
March 23,
2018
|
Richard Birdoff
|
|
|
|
|
|
|
|
|
|
/s/ Michael
Fong
|
|
Director
|
|
March 23,
2018
|
Michael
Fong
|
|
|
|
|
|
|
|
|
|
/s/ Stuart F.
Koenig
|
|
Director
|
|
March 23,
2018
|
Stuart
F. Koenig
|
|
|
|
|
|
|
|
|
|
/s/ Albert G.
Rex
|
|
Director
|
|
March 23,
2018
|
Albert
G. Rex
|
|
|
|
|
|
|
|
|
|
/s/ Troy T.
Taylor
|
|
Director
|
|
March 23,
2018
|
Troy T.
Taylor
|
|
|
|
|
BIG ROCK
PARTNERS ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
F.
|
F-2
|
|
|
|
F-3
|
|
|
|
F-4
|
|
|
|
F-5
|
|
|
|
F-6
|
|
|
|
F-7
to F-17
|
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the
Shareholders and Board of Directors
of Big
Rock Partners Acquisition Corp.
We have audited the accompanying balance sheet of Big Rock
Partners Acquisition Corp. (the
“Company”) as of December 31, 2017, the related
statements of operations, changes in stockholders’ equity and
cash flows for the period from September 18, 2017 (inception)
through December 31, 2017, and the related notes (collectively
referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31,
2017, and the results of its operations and its cash flows for the
period from September 18, 2017 (inception) through December 31,
2017, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audit we are required to obtain an understanding of
internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express
no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
/s/ Marcum LLP
Marcum
LLP
We have served as the Company’s auditor since
2017.
New
York, NY
March
23, 2018
BIG ROCK PARTNERS
ACQUISITION CORP.
BALANCE SHEET
DECEMBER 31, 2017
ASSETS
|
|
Current
assets
|
|
Cash
|
$449,374
|
Prepaid expenses
and other current assets
|
87,002
|
Total Current
Assets
|
536,376
|
|
|
Marketable
securities held in Trust Account
|
69,029,443
|
Total
Assets
|
$69,565,819
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
Current
liabilities
|
|
Accounts payable
and accrued expenses
|
$85,671
|
Accrued offering
costs
|
7,500
|
Total Current
Liabilities
|
93,171
|
|
|
Commitments
|
|
|
|
Common stock
subject to possible redemption, 6,444,515 shares at redemption
value
|
64,472,647
|
|
|
Stockholders'
Equity
|
|
Preferred stock,
$0.001 par value; 1,000,000 authorized; none issued and
outstanding
|
—
|
Common stock,
$0.001 par value; 100,000,000 shares authorized; 2,590,985 shares
issued and outstanding (excluding 6,444,515 shares subject to
possible redemption)
|
2,591
|
Additional paid-in
capital
|
5,102,443
|
Accumulated
deficit
|
(105,033)
|
Total
Stockholders' Equity
|
5,000,001
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$69,565,819
|
The
accompanying notes are an integral part of the financial
statements.
BIG ROCK PARTNERS
ACQUISITION CORP.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 18, 2017 (INCEPTION) THROUGH DECEMBER
31, 2017
Formation and
operating costs
|
$134,476
|
Loss
from operations
|
(134,476)
|
|
|
Other
income:
|
|
Interest
income
|
34,183
|
Unrealized loss on
marketable securities held in Trust Account
|
(4,740)
|
Other income,
net
|
29,443
|
|
|
Net
loss
|
$(105,033)
|
|
|
Weighted average
shares outstanding, basic and diluted (1)
|
1,888,881
|
|
|
Basic
and diluted net loss per common share (2)
|
$(0.06)
|
(1)
|
Excludes
an aggregate of up to 6,444,515 shares subject to redemption at
December 31, 2017.
|
(2)
|
Net
loss per common share - basic and diluted excludes interest income
attributable to common stock subject to redemption of $5,845 for
the period from September 18, 2017 (inception) through December 31,
2017 (see Note 2).
|
The
accompanying notes are an integral part of the financial
statements.
BIG ROCK PARTNERS ACQUISITION
CORP.
STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
FOR THE PERIOD FROM SEPTEMBER 18, 2017 (INCEPTION) THROUGH DECEMBER
31, 2017
|
|
|
|
|
|
|
|
|
|
|
Balance
– September 18, 2017 (inception)
|
—
|
$—
|
$—
|
$—
|
$—
|
|
|
|
|
|
|
Issuance of common
stock to Sponsor
|
1,725,000
|
1,725
|
23,275
|
—
|
25,000
|
|
|
|
|
|
|
Sale of 6,900,000
Units, net of underwriting discount and offering
expenses
|
6,900,000
|
6,900
|
66,820,681
|
—
|
66,827,581
|
|
|
|
|
|
|
Sale of Private
Placement Units
|
272,500
|
273
|
2,724,727
|
—
|
2,725,000
|
|
|
|
|
|
|
Issuance of
Representative Shares
|
138,000
|
138
|
(138)
|
—
|
—
|
|
|
|
|
|
|
Sale of Unit
Purchase Option
|
—
|
—
|
100
|
—
|
100
|
|
|
|
|
|
|
Common stock
subject to possible redemption
|
(6,444,515)
|
(6,445)
|
(64,466,202)
|
—
|
(64,472,647)
|
|
|
|
|
|
|
Net
loss
|
—
|
—
|
—
|
(105,033)
|
(105,033)
|
|
|
|
|
|
|
Balance
- December 31, 2017
|
2,590,985
|
$2,591
|
$5,102,443
|
$(105,033)
|
$5,000,001
|
The
accompanying notes are an integral part of the financial
statements.
BIG ROCK PARTNERS ACQUISITION
CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 18, 2017 (INCEPTION) THROUGH DECEMBER
31, 2017
Cash
Flows from Operating Activities:
|
|
Net
loss
|
$(105,033)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
Interest earned on
marketable securities held in Trust Account
|
(34,183)
|
Unrealized loss on
marketable securities held in Trust Account
|
4,740
|
Changes in
operating assets and liabilities:
|
|
Prepaid expenses
and other current assets
|
(87,002)
|
Accounts payable
and accrued expenses
|
85,671
|
Net
cash used in operating activities
|
(135,807)
|
|
|
Cash
Flows from Investing Activities:
|
|
Investment of cash
in Trust Account
|
(69,000,000)
|
Net
cash used in investing activities
|
(69,000,000)
|
|
|
Cash
Flows from Financing Activities:
|
|
Proceeds from
issuance of common stock to Sponsor
|
25,000
|
Proceeds from sale
of Units, net of underwriting discounts paid
|
67,275,000
|
Proceeds from sale
of Private Placement Units
|
2,725,000
|
Proceeds from Unit
Purchase Option
|
100
|
Proceeds from
promissory note – related parties
|
147,625
|
Repayment of
promissory note - related parties
|
(147,625)
|
Payment of offering
costs
|
(439,919)
|
Net
cash provided by financing activities
|
69,585,181
|
|
|
Net
Change in Cash
|
449,374
|
Cash –
Beginning
|
—
|
Cash
– Ending
|
$449,374
|
|
|
Non-cash
investing and financing activities:
|
|
Initial
classification of common stock subject to redemption
|
$64,576,390
|
Change in value of
common stock subject to redemption
|
$(103,743)
|
Accrued offering
costs charged to additional paid in capital
|
$7,500
|
The
accompanying notes are an integral part of the financial
statements.
BIG ROCK PARTNERS ACQUISITION
CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Big
Rock Partners Acquisition Corp. (the “Company”) is a
newly organized blank check company incorporated in Delaware on
September 18, 2017. The Company was formed for the purpose of
acquiring, through a merger, share exchange, asset acquisition,
stock purchase, reorganization, recapitalization, or other similar
business transaction, one or more operating businesses or entities
that the Company has not yet identified (a “Business
Combination”). Although the Company is not limited to a
particular industry or geographic region for purposes of
consummating a Business Combination, the Company intends to focus
on businesses in the senior housing and care industry in the United
States.
At
December 31, 2017, the Company had not yet commenced operations.
All activity through December 31, 2017 relates to the
Company’s formation, its initial public offering
(“Initial Public Offering”), which is described below,
and the search for a target business with which to complete a
Business Combination.
The
registration statements for the Company’s Initial Public
Offering were declared effective on November 20, 2017. On November
22, 2017, the Company consummated the Initial Public Offering of
6,000,000 units (“Units” and, with respect to the
common stock included in the Units being offered, the “Public
Shares”), generating gross proceeds of $60,000,000, which is
described in Note 3. Each Unit consists of one share of common
stock, one right (“Public Right”) and one-half of one
warrant (“Public Warrant”). Each Public Right will
convert into one-tenth (1/10) of one share of common stock upon
consummation of a Business Combination. Each whole Public Warrant
entitles the holder to purchase one share of common stock at an
exercise price of $11.50 per whole share.
Simultaneously with
the Initial Public Offering, the Company consummated the sale of
250,000 units (the “Private Placement Units”) at a
price of $10.00 per Unit in a private placement to Big Rock
Partners Sponsor, LLC (the “Sponsor”), generating gross
proceeds of $2,500,000, which is described in Note 4.
Following the
closing of the Initial Public Offering, an amount of $60,000,000
($10.00 per Unit) from the net proceeds of the sale of the Units in
the Initial Public Offering and the Private Placement Units was
placed in a trust account (“Trust Account”) which may
be invested in U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act of 1940, as
amended (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 selected by the Company
meeting the conditions of Rule 2a-7 of the Investment Company Act,
as determined by the Company, until the earlier of: (i) the
consummation of a Business Combination or (ii) the distribution of
the Trust Account, as described below.
On
November 29, 2017, in connection with the underwriters’
exercise of their over-allotment option in full, the Company
consummated the sale of an additional 900,000 Units, and the sale
of an additional 22,500 Private Placement Units at $10.00 per unit,
generating total gross proceeds of $9,225,000. A total of
$9,000,000 of the net proceeds were deposited in the Trust Account,
bringing the aggregate proceeds held in the Trust Account to
$69,000,000.
At the
closing of the Initial Public Offering, the Company issued
EarlyBirdCapital and its designees 120,000 shares of common stock
(the “Representative Shares”). On November 29, 2017,
the Company issued an additional 18,000 Representative Shares for
no consideration (see Note 7).
Transaction costs
amounted to $2,172,419, consisting of $1,725,000 of underwriting
fees and $447,419 of Initial Public Offering costs. In addition, at
December 31, 2017, $449,374 of cash was held outside of the Trust
Account and is available for working capital purposes.
The
Company’s management has broad discretion with respect to the
specific application of the net proceeds of the Initial Public
Offering and Private Placement Units, although substantially all of
the net proceeds are intended to be applied generally toward
consummating a Business Combination. The Company’s initial
Business Combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the
balance in the Trust Account (excluding taxes payable on income
earned on the Trust Account) at the time of the signing an
agreement to enter into a Business Combination. The Company will
only complete a Business Combination if the post-Business
Combination 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.
There is no assurance that the Company will be able to successfully
effect a Business Combination.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
The
Company will provide its stockholders with the opportunity to
redeem all or a portion of their shares included in the Units sold
in the Initial Public Offering (the “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 stockholders will be
entitled to redeem their shares for a pro rata portion of the
amount then on deposit in the Trust Account ($10.00 per 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 franchise and
income tax obligations). There will be no redemption rights upon
the completion of a Business Combination with respect to the
Company’s warrants.
The
Company will proceed with a Business Combination if the Company has
net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and, if the Company seeks stockholder
approval, a majority of the outstanding 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, conduct the redemptions pursuant to the tender offer
rules of the Securities and Exchange Commission
(“SEC”), and file tender offer documents with the SEC
prior to completing a Business Combination. If, however, a
stockholder approval of the transaction is required by law, or the
Company decides to obtain stockholder approval for business or
other 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, officers and directors (the “Initial
Stockholders”) have agreed (a) to vote their Founder’s
Shares (as defined in Note 5), Placement Shares (as defined in Note
4) and any Public Shares held by them in favor of approving a
Business Combination and (b) not to convert any Founder’s
Shares, Placement Shares and any Public Shares held by them in
connection with a stockholder vote to approve a Business
Combination or sell any such shares to the Company in a tender
offer in connection with 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.
The
Company will have until 12 months from the closing of the Initial
Public Offering to consummate a Business Combination. However, if
the Company anticipates that it may not be able to consummate a
Business Combination within 12 months, the Company may extend the
period of time to consummate a Business Combination up to two
times, each by an additional three months (for a total of up to 18
months to complete a Business Combination) (the “Combination
Period”). Pursuant to the terms of the Amended and Restated
Certificate of Incorporation and the trust agreement entered into
between the Company and Continental Stock Transfer & Trust
Company on November 20, 2017, in order to extend the time available
for the Company to consummate a Business Combination, the Sponsor
or its affiliates or designees must deposit into the Trust Account
$690,000 ($0.10 per share), up to an aggregate of $1,380,000, or
$0.20 per share, if the Company extends for the full six months, on
or prior to the date of the applicable deadline, for each three
month extension. The Sponsor and its affiliates or designees are
not obligated to fund the Trust Account to extend the time for the
Company to complete a Business Combination.
If the
Company is unable to complete a Business Combination within the
Combination Period, the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as
reasonably possible but no more than ten business days thereafter,
redeem 100% of the outstanding 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 (net of taxes
payable), 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 liquidation distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining
stockholders and the Company’s board of directors, proceed to
commence a voluntary liquidation and thereby a formal dissolution
of the Company, subject in each case to its obligations to provide
for claims of creditors and the requirements of applicable law. In
the event of such distribution, it is possible that the per share
value of the assets remaining available for distribution (including
Trust Account assets) will be less than the $10.00 per Unit in the
Initial Public Offering.
The
Initial Stockholders have agreed to (i) waive their redemption
rights with respect to Founder Shares, Placement Shares and any
Public Shares they may acquire during or after the Initial Public
Offering in connection with the consummation of a Business
Combination, (ii) to waive their rights to liquidating
distributions from the Trust Account with respect to their
Founder’s Shares and Placement Shares if the Company fails to
consummate a Business Combination within the Combination Period and
(iii) not to propose an amendment to the Company’s Amended
and Restated Certificate of Incorporation that would affect the
substance or timing of the Company’s obligation to redeem
100% of its Public Shares if the Company does not complete a
Business Combination, unless the Company provides the public
stockholders with the opportunity to redeem their Public Shares in
conjunction with any such amendment. However, the Initial
Stockholders will be entitled to liquidating distributions with
respect to any Public Shares acquired if the Company fails to
consummate a Business Combination or liquidates within the
Combination Period.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
In
order to protect the amounts held in the Trust Account, A/Z
Property Partners, LLC (“AZ Property Partners”), an
entity majority owned and controlled by Richard Ackerman, the
Company’s Chairman, President and Chief Executive Officer,
has agreed that it will be liable to ensure that the proceeds in
the Trust Account are not reduced below $10.00 per share by the
claims of target businesses or claims of vendors or other entities
that are owed money by the Company for services rendered or
contracted for or products sold to the Company. Additionally, the
agreement entered into by AZ Property Partners specifically
provides for two exceptions to the indemnity it has given: it will
have no liability (1) as to any claimed amounts owed to a target
business or vendor or other entity who has executed an agreement
with the Company waiving any right, title, interest or claim of any
kind they may have in or to any monies held in the Trust Account,
or (2) as to any claims for indemnification by the underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the “Securities
Act”). The Company will seek to reduce the possibility that
A/Z Property Partners will have to indemnify the Trust Account due
to claims of creditors by endeavoring to have all vendors, service
providers, 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The
accompanying financial statements are presented in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”) and pursuant to the rules and
regulations of the SEC.
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 auditor 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, will 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.
Use of estimates
The
preparation of 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 the Company’s
estimates.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
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
December 31, 2017.
Marketable securities held in Trust Account
At
December 31, 2017, 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 (if any) 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 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, at December 31, 2017, common stock
subject to possible redemption is presented as temporary equity,
outside of the stockholders’ equity section of the
Company’s balance sheet.
Offering costs
Offering costs
consist of legal, accounting, underwriting fees and other costs
incurred through the balance sheet date that are directly related
to the Initial Public Offering. Offering costs amounting to
$2,172,419 were charged to stockholders’ equity upon the
completion of the Initial Public Offering.
Income taxes
The
Company complies with the accounting and reporting requirements of
ASC Topic 740 “Income Taxes,” which requires an asset
and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are
computed for differences between the financial statement and tax
bases of assets and liabilities that will result in future taxable
or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to
be realized.
ASC
Topic 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. As of
December 31, 2017, there were no unrecognized tax benefits and no
amounts accrued for interest and penalties. 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 may be subject to potential examination by federal, state
and city taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and
amount of deductions, the nexus of income among various tax
jurisdictions and compliance with federal, state and city tax laws.
The Company’s management does not expect that the total
amount of unrecognized tax benefits will materially change over the
next twelve months.
On December 22, 2017
the U.S. Tax Cuts and Jobs Act of 2017
(“Tax Reform”) was signed into law. As a result of Tax
Reform, the U.S. statutory tax rate was lowered from 35% to 21%
effective January 1, 2018, among other changes. ASC Topic
740 requires companies to recognize the effect of tax law
changes in the period of enactment; therefore, the Company was
required to revalue its deferred tax assets and liabilities at
December 31, 2017 at the new rate. The SEC issued Staff Accounting
Bulletin No. 118 (“SAB 118”) to address the application
of GAAP in situations when a registrant does not have the necessary
information available, prepared, or analyzed (including
computations) in reasonable detail to complete the accounting for
certain tax effects of Tax Reform.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
Net loss per common share
The
Company complies with accounting and disclosure requirements ASC
Topic 260, “Earnings Per Share.” Net loss per common
share is computed by dividing net loss by the weighted average
number of common shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share.
Shares of common stock subject to possible redemption at December
31, 2017, which are not currently redeemable and are not redeemable
at fair value, have been excluded from the calculation of basic
loss per 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 (1) warrants sold in the Initial
Public Offering and private placement to purchase 3,586,250 shares
of common stock, (2) rights sold in the Initial Public Offering and
private placement that convert into 717,250 shares of common stock
and (3) 600,000 shares of common stock, warrants to purchase
300,000 shares of common stock and rights that convert into 60,000
shares of common stock in the unit purchase option sold to the
underwriter, in the calculation of diluted loss per share, since
the exercise of the warrants, the conversion of the rights into
shares of common stock and the exercise of the unit purchase option
is contingent upon the occurrence of future events. As a result,
diluted loss per common share is the same as basic income per
common share for the periods.
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 redemption, as these
shares only participate in the income of the Trust Account and not
the losses of the Company. Accordingly, basic and diluted loss per
common share is calculated as follows:
|
For the Period
from September 18, 2017 (inception) through December
31,
|
|
|
Net
loss
|
$(105,033)
|
Less: Income
attributable to common stock subject to redemption
|
(5,845)
|
Adjusted net
loss
|
$(110,878)
|
|
|
Weighted average
shares outstanding, basic and diluted
|
1,888,881
|
|
|
Basic and diluted
net loss per common share
|
$(0.06)
|
Concentration of credit risk
Financial
instruments that potentially subject the Company to concentration
of credit risk consist of cash accounts in a financial institution
which, at times may exceed the Federal depository insurance
coverage of $250,000. At December 31, 2017, the Company had 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 Measurements and Disclosures,” approximates the
carrying amounts represented in the accompanying balance sheet,
primarily due to their short-term nature.
Recently issued accounting standards
Management does not
believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material effect
on the Company’s financial statements.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
3. INITIAL PUBLIC OFFERING
Pursuant to the
Initial Public Offering, the Company sold 6,900,000 units at a
purchase price of $10.00 per Unit, which includes the full exercise
by the underwriters of their over-allotment option of 900,000 Units
at $10.00 per Unit. Each Unit consists of one share of common
stock, one Public Right and one Public Warrant. Each Public Right
will convert into one-tenth (1/10) of one share of common stock
upon consummation of a Business Combination (see Note 7). Each
whole Public Warrant entitles the holder to purchase one share of
common stock at an exercise price of $11.50 per whole share (see
Note 7).
4. PRIVATE PLACEMENT
Simultaneously with
the Initial Public Offering, the Sponsor purchased 250,000 Private
Placement Units, at $10.00 per Private Placement Unit, for an
aggregate purchase price of $2,500,000. On November 29, 2017, the
Company consummated the sale of an additional 22,500 Private
Placement Units at a price of $10.00 per unit, which were purchased
by the Sponsor, generating gross proceeds of $225,000. Each Private
Placement Unit consists of one share of common stock
(“Placement Share”), one right (“Placement
Right”) and one-half of one warrant (each, a “Placement
Warrant”), each whole Placement Warrant exercisable to
purchase one share of common stock at an exercise price of $11.50.
The proceeds from the Private 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
Private Placement Units will be used to fund the redemption of the
Public Shares (subject to the requirements of applicable law), and
the Placement Rights and the Placement Warrants will expire
worthless.
The
Private Placement Units are identical to the Units sold in the
Initial Public Offering except that the Placement Warrants (i) are
not redeemable by the Company and (ii) may be exercised for cash or
on a cashless basis, so long as they are held by the initial
purchaser or any of its permitted transferees. In addition, the
Private Placement Units and their component securities may not be
transferable, assignable or salable until after the consummation of
a Business Combination, subject to certain limited exceptions. 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.
5. RELATED PARTY TRANSACTIONS
Founder Shares
In
September 2017, the Company issued an aggregate of 1,437,500 shares
of common stock to the Sponsor (“Founder’s
Shares”) for an aggregate purchase price of $25,000. On
November 20, 2017, the Company effectuated a 1.2-for-1 stock
dividend of its common stock resulting in an aggregate of 1,725,000
Founder's Shares outstanding. The Founder’s Shares included
an aggregate of up to 225,000 shares subject to forfeiture by the
Sponsor to the extent that the underwriters’ over-allotment
was not exercised in full or in part, so that the Initial
Stockholders would own 20% of the Company’s issued and
outstanding shares after the Initial Public Offering (assuming the
Initial Stockholders do not purchase any Public Shares in the
Initial Public Offering and excluding the Private Placement Units
and the Representative Shares (as defined in Note 6)). As a result
of the underwriters’ election to fully exercise their
over-allotment option, 225,000 Founder Shares are no longer subject
to forfeiture.
The
Initial Stockholders have agreed not to transfer, assign or sell
any of the Founder’s Shares until the earlier of (i) one year
after the date of the consummation of a Business Combination, or
(ii) with respect to 50% of the Founder Shares, the date on which
the closing price of the Company’s common stock equals or
exceeds $12.50 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations) for any 20
trading days within any 30-trading day period commencing after a
Business Combination, or earlier, in each case, if subsequent to a Business Combination, the Company
consummates a subsequent liquidation, merger, stock exchange,
reorganization or other similar transaction which results in all of
the Company’s stockholders having the right to exchange their
common stock for cash, securities or other
property.
Promissory Notes – Related Parties
On
September 26, 2017, the Company issued to the Sponsor and its Chief
Executive Officer, unsecured promissory notes pursuant to which the
Company could borrow up to an aggregate amount of $150,000 and
$25,000, respectively (the “Promissory Notes”). The
Promissory Notes were non-interest bearing and payable on the
earlier to occur of (i) December 31, 2018, or (ii) the consummation
of the Initial Public Offering. The Promissory Notes were repaid on
November 24, 2017.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
Administrative Services Agreement
The
Company entered into an agreement whereby, commencing on November
20, 2017 through the earlier of the consummation of a Business
Combination or the Company’s liquidation, the Company will
pay the Sponsor a monthly fee of $10,000 for office space,
utilities and administrative support. For the period from September
18, 2017 (inception) through December 31, 2017, the Company
incurred $15,000 in fees for these services, of which $5,000 is
included in accounts payable and accrued expenses in the
accompanying balance sheet.
Related Party Loans
In
order to finance transaction costs in connection with a Business
Combination, the Sponsor, an affiliate of the Sponsor, or the
Company’s officers and directors may, but are not obligated
to, loan the Company funds from time to time or at any time, as may
be required (“Working Capital Loans”). Each Working
Capital Loan would be evidenced by a promissory note. The Working
Capital Loans would either be paid upon consummation of a Business
Combination, without interest, or, at the holder’s
discretion, up to $1,500,000 of the Working Capital Loans may be
converted into units at a price of $10.00 per unit. The units would
be identical to the Private Placement Units. In the event that a
Business Combination does not close, the loans will be forgiven.
There were no outstanding Working Capital Loans at December 31,
2017.
6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a
registration rights agreement entered into on November 20, 2017,
the holders of the Founder Shares, Private Placement Units (and
their underlying securities), Representative Shares (as defined
below) and any Units that may be issued upon conversion of the
Working Capital Loans (and their underlying securities) are
entitled to registration rights. The holders of a majority of these
securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. The
holders of the majority of the Founder’s Shares can elect to
exercise these registration rights at any time commencing three
months prior to the date on which these shares of common stock are
to be released from escrow. The holders of a majority of the
Private Placement Units or Units issued to the Sponsor, officers,
directors or their affiliates in payment of Working Capital Loans
made to the Company (in each case, including the underlying
securities) can elect to exercise these registration rights at any
time after the Company consummates a Business Combination. In
addition, the holders will 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. Notwithstanding
anything to the contrary, EarlyBirdCapital, Inc.
(“EarlyBirdCapital”) and its designees may participate
in a “piggy-back” registration during the seven year
period beginning on the effective date of the registration
statement. However, the registration rights agreement will provide
that the Company will not permit any registration statement filed
under the Securities Act to become effective until termination of
the applicable lock-up period. The Company will bear the expenses
incurred in connection with the filing of any such registration
statements.
Business Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital as an advisor in connection
with a Business Combination to assist the Company in holding
meetings with its stockholders to discuss a potential Business
Combination and the target business’ attributes, introduce
the Company to potential investors that are interested in
purchasing securities, assist the Company in obtaining stockholder
approval for the Business Combination and assist the Company with
its press releases and public filings in connection with a Business
Combination. The Company will pay EarlyBirdCapital a cash fee for
such services upon the consummation of a Business Combination in an
amount equal to 4.0% of the gross proceeds of the Initial Public
Offering (exclusive of any applicable finders’ fees which
might become payable).
7. STOCKHOLDERS’ EQUITY
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of
preferred stock with a par value of $0.001 per share with such
designation, rights and preferences as may be determined from time
to time by the Company’s Board of Directors. At December 31,
2017, there were no shares of preferred stock issued or
outstanding.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
Common Stock —
The Company is authorized to issue 100,000,000 shares of common
stock with a par value of $0.001 per share. Holders of the
Company’s common stock are entitled to one vote for each
share. At December 31, 2017, there were 2,590,985 shares of common
stock issued and outstanding (excluding 6,444,515 shares of common
stock subject to possible redemption), of which 225,000 shares were
subject to forfeiture to the extent that the underwriter’s
over-allotment option was not exercised in full so that the
Company’s Initial Stockholders would own 20% of the issued
and outstanding shares after the Initial Public Offering (assuming
the Initial Stockholders do not purchase any Public Shares in the
Initial Public Offering and excluding the Private Placement Units
and the Representative Shares). As a result of the
underwriters’ election to fully exercise their over-allotment
option on November 29, 2017, 225,000 Founder Shares are no longer
subject to forfeiture.
Rights — Each
holder of a right will receive one-tenth (1/10) of one share of
common stock upon consummation of a Business Combination, even if
the holder of such right redeemed all shares held by it in
connection with a Business Combination. No fractional shares will
be issued upon conversion of the rights. No additional
consideration will be required to be paid by a holder of rights in
order to receive its additional shares upon consummation of a
Business Combination, as the consideration related thereto has been
included in the Unit purchase price paid for by investors in the
Initial Public Offering. If the Company enters into a definitive
agreement for a Business Combination in which the Company will not
be the surviving entity, the definitive agreement will provide for
the holders of rights to receive the same per share consideration
the holders of the common stock will receive in the transaction on
an as-converted into common stock basis and each holder of a right
will be required to affirmatively convert its rights in order to
receive 1/10 share underlying each right (without paying additional
consideration). The shares issuable upon conversion of the rights
will be freely tradable (except to the extent held by affiliates of
the Company).
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 rights will not receive any of such funds
with respect to their rights, nor will they receive any
distribution from the Company’s assets held outside of the
Trust Account with respect to such rights, and the rights will
expire worthless. Further, there are no contractual penalties for
failure to deliver securities to the holders of the rights upon
consummation of a Business Combination. Additionally, in no event
will the Company be required to net cash settle the rights.
Accordingly, holders of the rights might not receive the shares of
common stock underlying the rights.
Warrants —
Public Warrants may only be exercised for a whole number of shares.
No fractional shares will be issued upon exercise of the Public
Warrants. The Public Warrants will become exercisable on the later
of the completion of a Business Combination and November 22, 2018;
provided in that the Company has an effective registration
statement under the Securities Act covering the shares of common
stock issuable upon exercise of the Public Warrants and a current
prospectus relating to them is available. The Company has agreed
that as soon as practicable, the Company will use its best efforts
to file with the SEC a registration statement for the registration,
under the Securities Act, of the shares of common stock issuable
upon exercise of the Public Warrants. The Company will use its best
efforts to cause the same to become effective and to maintain the
effectiveness of such registration statement, and a current
prospectus relating thereto, until the expiration of the Public
Warrants in accordance with the provisions of the warrant
agreement. Notwithstanding the foregoing, if a registration
statement covering the shares of common stock issuable upon
exercise of the Public Warrants is not effective 90 days following
the consummation of 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. The Public
Warrants will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation.
The
Company may redeem the Public Warrants:
●
in whole and not
in part;
●
at a price of
$0.01 per warrant;
●
at any time
during the exercise period;
●
upon a minimum
of 30 days’ prior written notice of redemption;
and
●
if, and only if,
the last sale price of the Company’s common stock equals or
exceeds $21.00 per share for any 20 trading days within a
30-trading day period ending on the third business day prior to the
date on which the Company sends the notice of redemption to the
warrant holders.
●
If, and only if,
there is a current registration statement in effect with respect to
the shares of common stock underlying such warrants.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
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 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 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.
Representative Shares
At the
closing of the Initial Public Offering, the Company issued
EarlyBirdCapital and its designees 120,000 Representative Shares.
On November 29, 2017, the Company issued an additional 18,000
Representative Shares for no consideration. The Company accounted
for the Representative Shares as an expense of the Initial Public
Offering resulting in a charge directly to stockholders’
equity. The Company determined the fair value of Representative
Shares to be $1,380,000 based upon the offering price of the Units
of $10.00 per Unit. The underwriter has agreed not to transfer,
assign or sell any such shares until the completion of a Business
Combination. In addition, the underwriter and its designees have
agreed (i) to waive their redemption rights with respect to such
shares in connection with the completion of a Business Combination
and (ii) to waive their rights to liquidating distributions from
the Trust Account with respect to such shares if the Company fails
to complete a Business Combination within the Combination
Period.
The
shares have been deemed compensation by FINRA and are therefore
subject to a lock-up for a period of 180 days pursuant to Rule
5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA
Rule 5110(g)(1), these securities will not be the subject of any
hedging, short sale, derivative, put or call transaction that would
result in the economic disposition of the securities by any person
for a period of 180 days immediately following the date of the
Initial Public Offering, nor may they be sold, transferred,
assigned, pledged or hypothecated for a period of 180 days
immediately following the Initial Public Offering except to any
underwriter and selected dealer participating in the Initial Public
Offering and their bona fide officers or partners.
Unit Purchase Option
On
November 22, 2017, the Company sold to EarlyBirdCapital, for $100,
an option to purchase up to 600,000 Units exercisable at $10.00 per
Unit (or an aggregate exercise price of $6,000,000) commencing on
the later of November 20, 2018 and the consummation of a Business
Combination. The unit purchase option may be exercised for cash or
on a cashless basis, at the holder’s option, and expires five
years from November 20, 2017. The Units issuable upon exercise of
this option are identical to those offered in the Initial Public
Offering. The Company accounted for the unit purchase option,
inclusive of the receipt of $100 cash payment, as an expense of the
Initial Public Offering resulting in a charge directly to
stockholders’ equity. The Company estimated the fair value of
this unit purchase option to be approximately $2,042,889 (or $3.40
per Unit) using the Black-Scholes option-pricing model. The fair
value of the unit purchase option granted to the underwriters was
estimated as of the date of grant using the following assumptions:
(1) expected volatility of 35%, (2) risk-free interest rate of
2.05% and (3) expected life of five years. The option and such
units purchased pursuant to the option, as well as the common stock
underlying such units, the rights included in such units, the
common stock that is issuable for the rights included in such
units, the warrants included in such units, and the shares
underlying such warrants, have been deemed compensation by FINRA
and are therefore subject to a 180-day lock-up pursuant to Rule
5110(g)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the
option may not be sold, transferred, assigned, pledged or
hypothecated for a one-year period (including the foregoing 180-day
period) following the date of Initial Public Offering except to any
underwriter and selected dealer participating in the Initial Public
Offering and their bona fide officers or partners. The option
grants to holders demand and “piggy back” rights for
periods of five and seven years, respectively, from the effective
date of the registration statement with respect to the registration
under the Securities Act of the securities directly and indirectly
issuable upon exercise of the option. The Company will bear all
fees and expenses attendant to registering the securities, other
than underwriting commissions which will be paid for by the holders
themselves. The exercise price and number of units issuable upon
exercise of the option may be adjusted in certain circumstances
including in the event of a stock dividend, or the Company’s
recapitalization, reorganization, merger or consolidation. However,
the option will not be adjusted for issuances of common stock at a
price below its exercise price.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
8. INCOME TAX
The
Company’s net deferred tax assets are as
follows:
Deferred tax
asset
|
|
Net operating loss
carryforward
|
$21,062
|
Unrealized loss on
securities
|
995
|
Total deferred tax
assets
|
22,057
|
Valuation
allowance
|
(22,057)
|
Deferred tax asset,
net of allowance
|
$—
|
The
income tax provision (benefit) consists of the
following:
Federal
|
|
Current
|
$—
|
Deferred
|
(22,057)
|
|
|
State
|
|
Current
|
$—
|
Deferred
|
—
|
Change in valuation
allowance
|
22,057
|
Income tax
provision (benefit)
|
$—
|
As
of December 31, 2017, the Company had U.S. federal and state net
operating loss carryovers (“NOLs”) of $100,293
available to offset future taxable income. These NOLs expire
beginning in 2034. In accordance with Section 382 of the Internal
Revenue Code, deductibility of the Company’s NOLs may be
subject to an annual limitation in the event of a change in control
as defined under the regulations.
In
assessing the realization of the deferred tax assets, management
considers whether it is more likely than not that some portion of
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which temporary
differences representing net future deductible amounts become
deductible. Management considers the scheduled reversal of deferred
tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. After consideration of all of
the information available, management believes that significant
uncertainty exists with respect to future realization of the
deferred tax assets and has therefore established a full valuation
allowance. For the period from September 18, 2017 (inception)
through December 31, 2017, the change in the valuation allowance
was $22,057.
A
reconciliation of the federal income tax rate to the
Company’s effective tax rate at December 31, 2017 is as
follows:
Statutory federal
income tax rate
|
(34.0)%
|
State taxes, net of
federal tax benefit
|
0.0%
|
Deferred tax rate
change
|
13.0%
|
Change in valuation
allowance
|
21.0%
|
Income tax
provision (benefit)
|
0.0%
|
The
Company files income tax returns in the U.S. federal jurisdiction
in various state and local jurisdictions and is subject to
examination by the various taxing authorities. The Company’s
tax returns for the period from September 18, 2017 (inception)
through December 31, 2017 remain open and subject to examination.
The Company considers Florida to be a significant state tax
jurisdiction.
9. 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.
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO BALANCE SHEET
DECEMBER 31, 2017
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
December 31, 2017, and indicates the fair value hierarchy of the
valuation inputs the Company utilized to determine such fair
value:
Description
|
|
|
Assets:
|
|
|
Marketable
securities held in Trust Account
|
1
|
$69,029,443
|
10. SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur
after the balance sheet date up to the date that the 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 financial statements.
In
January 2018, the Company withdrew $23,135 of interest income to
pay its franchise tax obligations.