10-Q 1 f10q0919_albertonacquisition.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended September 30, 2019

 

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: 001-38715

 

ALBERTON ACQUISITION CORPORATION

(Exact name of registrant as specified in its charter)

 

British Virgin Islands   N/A
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

Room 1001, 10/F, Capital Center

151 Gloucester Road

Wanchai, Hong Kong

(Address of principal executive offices)

 

+852 2117 1621

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Units, each consisting of one ordinary share,
one redeemable warrant, and one right
  ALACU   The Nasdaq Stock Market LLC
Ordinary shares, no par value   ALAC   The Nasdaq Stock Market LLC
Redeemable warrants, each warrant exercisable
for one-half (1/2) of one ordinary share
  ALACW   The Nasdaq Stock Market LLC
Rights, each to receive one-tenth (1/10) of one ordinary share   ALACR   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant has (1) 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 every Interactive Data File required to be submitted 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 such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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 Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging Growth Company

 

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 Exchange Act). Yes ☒  No ☐

 

As of November 13, 2019, there were 14,689,750 ordinary shares of the Company, no par value per share, issued and outstanding.

 

 

  

 

 

 

ALBERTON ACQUISITION CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2019

 

TABLE OF CONTENTS

 

    Page
Part I. Financial Information  
  Item 1. Financial Statements (Unaudited) 1
  Condensed Balance Sheets (Unaudited) 1
  Condensed Statements of Operations (Unaudited) 2
  Condensed Statements of Changes in Shareholders’ Equity (Unaudited) 3
  Condensed Statements of Cash Flows (Unaudited) 4
  Notes to Condensed Financial Statements (Unaudited) 5
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
  Item 4. Controls and Procedures 18
Part II Other Information  
  Item 1. Legal Proceedings 19
  Item 1A. Risk Factors 19
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
  Item 3. Defaults upon Senior Securities 19
  Item 4. Mine Safety Disclosures 19
  Item 5. Other Information 19
  Item 6. Exhibits 20
Signatures 21

  

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

ALBERTON ACQUISITION CORPORATION

CONDENSED BALANCE SHEETS

 

   September 30,   December 31, 
   2019   2018 
   (unaudited)   (audited) 
Assets        
Cash  $1,237,095   $452,409 
Prepaid assets       13,762 
Total Current Assets   1,237,095    466,171 
           
Cash and investments held in Trust Account   117,324,145    115,324,251 
Total Assets  $118,561,240   $115,790,422 
           
Liabilities and Shareholders’ Equity          
Accounts payable and accrued expenses  $5,675   $10,089 
Due to related parties       2,379 
Promissory note   1,148,800     
Promissory note - related party   300,000    300,000 
Total Current Liabilities   1,454,475    312,468 
           
Deferred underwriting compensation   4,020,797    4,020,797 
Total Liabilities   5,475,272    4,333,265 
           
Commitments and Contingencies          
           
Ordinary shares subject to possible redemption, 10,586,284 and 10,603,302 shares at September 30, 2019 and December 31, 2018 (at conversion value of $10.21 and $10.04 per share), respectively   108,085,960    106,457,153 
           
Shareholders’ Equity:          
Preferred shares, no par value; 100,000,000 shares authorized; no shares issued and outstanding        
Ordinary shares, no par value; 300,000,000 shares authorized; 4,103,466 and 4,086,448 shares (excluding 10,586,284 and 10,603,302 shares subject to possible redemption) at September 30, 2019 and December 31, 2018, respectively   3,029,489    4,658,296 
Retained earnings   1,970,519    341,708 
Total Shareholders’ Equity   5,000,008    5,000,004 
           
Total Liabilities and Shareholders’ Equity  $118,561,240   $115,790,422 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

1

 

 

ALBERTON ACQUISITION CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

  

Three Months
Ended

September 30,

  

Nine Months Ended

September 30,

   From February 16, 2018 (Inception) to September 30, 
   2019   2018   2019   2018 
                 
Operating costs  $80,795   $21,814   $371,681   $24,632 
Loss from operations   (80,795)   (21,814)   (371,681)   (24,632)
                     
Other income                    
Interest income – bank   146        598     
Interest income   617,233        1,999,894     
Total other income   617,379        2,000,492     
                     
Net income (loss)  $536,584   $(21,814)  $1,628,811   $(24,632)
Less: income attributable to ordinary shares subject to possible redemption   (568,780)       (1,842,902)    
Adjusted loss  $(32,196)  $(21,814)  $(214,091)  $(24,632)
                     
Basic and diluted weighted average shares outstanding (1)   4,104,181    880,220    4,095,763    357,590 
                     
Basic and diluted net loss per share  $(0.01)  $(0.025)  $(0.05)  $(0.069)

 

(1)Excludes an aggregate of up to 10,586,284 ordinary shares subject to possible redemption at September 30, 2019 and 375,000 shares at September 30, 2018 that were subject to forfeiture to the extent that over-allotment option was not exercised in full or in part by the underwriters.

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

2

 

 

ALBERTON ACQUISITION CORPORATION

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

 

THREE MONTHS ENDED SEPTEMBER 30, 2018 AND FOR THE PERIOD FROM FEBRUARY 16, 2018 (INCEPTION) THROUGH SEPTEMBER 30, 2018

 

   Ordinary Shares (1)   Accumulated   Shareholders’ 
   Shares   Capital   Deficit   Deficit 
                 
Balance – February 16, 2018 (inception)      $   $   $ 
                     
Issuance of ordinary shares to one director upon formation on March 23, 2018   1             
                     
Balance – March 31, 2018 (unaudited)   1   $   $   $ 
                     
Net loss           (2,818)   (2,818)
                     
Balance – June 30, 2018 (unaudited)   1   $    (2,818)   (2,818)
                     
Repurchase of ordinary shares issued to one director   (1)            
                     
Issuance of ordinary shares   2,875,000    19,550        19,550 
                     
Net loss           (21,814)   (21,814)
                     
Balance – September 30, 2018 (unaudited)   2,875,000   $19,550   $(24,632)  $(5,082)

 

(1)Excluded up to 375,000 shares that were subject to forfeiture to the extent that over-allotment option was not exercised in full or in part by the underwriters.

 

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

 

   Ordinary Shares   Retained   Shareholders’ 
   Shares   Capital   Earnings   Equity 
                 
Balance – January 1, 2019   4,086,448   $4,658,296   $341,708   $5,000,004 
                     
Change in ordinary shares subject to possible redemption   10,018    (535,015)       (535,015)
                     
Net income           535,012    535,012 
                     
Balance – March 31, 2019 (unaudited)   4,096,466    4,123,281    876,720    5,000,001 
                     
Change in ordinary shares subject to possible redemption   7,715    (557,213)       (557,213)
                     
Net income           557,215    557,215 
                     
Balance – June 30, 2019 (unaudited)   4,104,181    3,566,068    1,433,935    5,000,003 
                     
Change in ordinary shares subject to possible redemption   (715)   (536,579)       (536,579)
                     
Net income           536,584    536,584 
                     
Balance – September 30, 2019 (unaudited)   4,103,466   $3,029,489   $1,970,519   $5,000,008 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.  

 

3

 

 

ALBERTON ACQUISITION CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

 

   Nine Months Ended September 30,   From February 16, 2018 (Inception) to September 30, 
   2019   2018 
   (unaudited)   (unaudited) 
         
Cash Flows from Operating Activities:        
Net income (loss)  $1,628,811   $(24,632)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Interest earned on investments held in Trust Account   (1,999,894)    
Changes in current assets and current liabilities:          
Prepaid assets   13,762     
Accounts payable and accrued expenses   (4,414)    
Due to related parties   (2,379)    
Net cash used in operating activities   (364,114)   (24,632)
           
Cash Flows from Financing Activities:          
Proceeds from sale of ordinary shares to initial shareholders       19,550 
Proceeds from promissory note – related party        300,000 
Proceeds from promissory note   1,148,000     
Advances from related party       254 
Payments of deferred offering costs       (231,277)
Net cash provided by financing activities   1,148,800    88,527 
           
Net Change in Cash   784,686    63,895 
Cash – Beginning of period   452,409     
Cash – End of period  $1,237,095   $63,895 
           
Supplemental Disclosure of Non-cash Financing Activities:          
Change in value of ordinary shares subject to possible redemption  $1,628,807   $ 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

Note 1 — Organization and Business Operations

 

Organization and General

 

Alberton Acquisition Corporation (the “Company”) is a blank check company incorporated on February 16, 2018, under the laws of British Virgin Islands 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 businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business will not be limited to an industry or geographic location.

 

As of September 30, 2019, the Company had not yet commenced any operations. The Company has selected December 31 as its fiscal year end.

 

Financing

 

The registration statement for the Company’s initial public offering (the “Initial Public Offering” as described in Note 3) was declared effective by the United States Securities and Exchange Commission (“SEC”) on October 23, 2018. On October 26, 2018, the Company consummated the Initial Public Offering of 10,000,000 units at $10.00 per unit (“Units” or “Public Units” and, with respect to the ordinary shares included in the Public Units offered, the “Public Shares”), generating gross proceeds of $100,000,000, which is described in Note 3.

 

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 300,000 units (the “Private Units”) at a price of $10.00 per Unit in a private placement to the Company’s sponsor (the “Sponsor”), generating gross proceeds of $3,000,000, which is described in Note 4.

 

On November 20, 2018, the underwriters exercised the over-allotment option in part and purchased 1,487,992 Public Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $14,879,920. Simultaneously with the sale of the over-allotment Public Units, the Company consummated the private placement of an additional 29,760 Private Units at a price of $10.00 per Unit, generating total additional gross proceeds of $297,600.

 

Trust Account

 

Following the closing of the Initial Public Offering on October 26, 2018, an amount of $100,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Public Units in the Initial Public Offering and the Private Units was placed in a trust account (“Trust Account”). Following the closing of underwriters’ exercise of over-allotment option on November 20, 2018, an additional $14,879,920 of net proceeds ($10.00 per Unit) was placed in the Trust Account, bringing the aggregate proceeds held in the Trust Account to $114,879,920.

 

The funds in the Trust Account are 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 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 Company’s failure to consummate a Business Combination by October 26, 2019 (or April 26, 2020 if the Company fully extends the period of time to consummate a Business Combination). Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek all vendors, service providers, prospective target businesses or other entities it engages, to execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to pay the Company’s tax obligations.

 

Business Combination

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the Private Units, although substantially all the net proceeds are intended to be generally applied toward consummating a Business Combination. The Company’s 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 any deferred underwriter’s fees and taxes payable on the income earned on the Trust Account), which the Company refers to as the 80% test, at the time of the signing of an agreement to enter into a Business Combination. However, 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. 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% test.

 

5

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

The Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The shareholders 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 tax obligations).

 

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 a majority of the issued and outstanding shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to Amended and Restated Memorandum and Articles of Association, 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 shareholder approval of the transaction is required by law, or the Company decides to obtain shareholder 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 shareholder approval in connection with a Business Combination, the Initial Shareholders (defined in Note 5 - Related Party Transactions) have agreed to vote their initial shares and private shares, as well as any Public Shares acquired in or after the Initial Public Offering, in favor of any proposed Business Combination. Additionally, each public shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

 

The amount in the Trust Account (less the aggregate nominal par value of the shares of the Company’s public shareholders) under the Companies Law will be treated as share premium which is distributable under the Companies Law provided that immediately following the date on which the proposed distribution is proposed to be made, the Company is able to pay the debts as they fall due in the ordinary course of business. If the Company is forced to liquidate the Trust Account, the public shareholders would be distributed the amount in the Trust Account calculated as of the date that is two days prior to the distribution date (including any accrued interest).

 

The Initial Shareholders have agreed to (i) vote their insider shares (as well as any Public Shares acquired in or after the Initial Public Offering) in favor of any proposed Business Combination, (ii) waive their conversion rights with respect to their initial share (as well as any other shares acquired in or after the Initial Public Offering) in connection with the consummation of a Business Combination, (iii) waive their rights to liquidating distributions from the Trust Account with respect to their initial shares if the Company fails to consummate a Business Combination within the Combination Period, and (iv) not propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association 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 shareholders with the opportunity to redeem their shares in conjunction with any such amendment.

 

Liquidation

 

The Company has until 12 months from October 26, 2018 to consummate a Business Combination, however, if the Company anticipates that it may not be able to consummate a Business Combination by such deadline, it may extend the period to consummate a Business Combination by an additional three months (for a total of up to 18 months to complete a Business Combination). Pursuant to the terms of the Company’s Amended and Restated Memorandum and Articles of Association and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company, in order to extend the time available for the Company to consummate the Business Combination, the Company’s insiders or their affiliates or designees, upon five days advance notice prior to each applicable deadline, must deposit into the trust account $1,148,799 on or prior to the date of such applicable deadline. The insiders will receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that the Company is unable to close a Business Combination unless there are funds available outside the Trust Account to do so. Such notes would either be paid upon consummation of the Business Combination, or, at the lender’s discretion, converted upon consummation of the Business Combination into additional Private Units at a price of $10.00 per unit. The Company’s shareholders have approved the issuance of the Private Units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of the Business Combination. In the event that the Company receives notice from its insiders five days prior to an applicable deadline of their intent to effect an extension, the Company intends to issue a press release announcing such intention at least three days prior to such applicable deadline. In addition, the Company intends to issue a press release the day after such applicable deadline announcing whether the funds had been timely deposited. The Company’s insiders and their affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete the Business Combination. To the extent that some, but not all, of the Company’s insiders, decide to extend the period of time to consummate the Business Combination, such insiders (or their affiliates or designees) may deposit the entire amount required. If the Company is unable to consummate the Business Combination within such time period, the Company will, as promptly as possible but not more than ten business days thereafter, redeem 100% of its outstanding public shares for a pro rata portion of the funds held in the Trust Account and then seek to dissolve and liquidate. In such event, the public warrants and rights will expire and will be worthless.

 

6

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

On October 18, 2019, the Company deposited $1,148,799.20 as Extension Funds into its trust account to extend the period to consummate a Business Combination until January 24, 2020. The Extension Funds were proceeds of a note in the principal amount of $1,148,800 (the “Note”) the Company issued to Global Nature Investment Holdings Limited (“Global Nature”), a company incorporated under the laws of the Cayman Islands, its registered assignees or successor in interest (the “Payee”). The Note was issued in connection with a non-binding letter of intent entered into by and between Alberton and Global Nature on September 13, 2019, to consummate a potential business combination with Global Nature (the “LOI”). (see Note 6).

 

Emerging Growth Company

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (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 shareholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial 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.

 

Note 2 — Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC. The accompanying unaudited condensed financial statements have been prepared in accordance with US GAAP for interim financial statements and Article 8 of Regulation S-X. They do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows. Operating results as presented are not necessarily indicative of the results to be expected for a full year. The unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the period from February 16, 2018 (inception) through December 31, 2018.

 

Use of Estimates

 

The preparation of financial statements in conformity with US 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 expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2019 and December 31, 2018.

 

Investments Held in Trust Account

 

At September 30, 2019 and December 31, 2018, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.

 

7

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

Ordinary Shares Subject to Possible Redemption

 

The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheets.

 

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’s management determined that the British Virgin Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits as of September 30, 2019 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 is subject to income tax examinations by major taxing authorities since inception.

 

The Company is considered an exempted British Virgin Islands Company and is presently not subject to income taxes or income tax filing requirements in the British Virgin Islands or the United States. As such, the Company’s tax provision is zero for the period presented.

 

Net Loss per Ordinary Share

 

The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares issued and outstanding for the period. Ordinary shares subject to possible redemption at September 30, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic and diluted loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. At September 30, 2019, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the income of the Company. As a result, diluted loss per ordinary share is the same as basic loss per ordinary shares for the period presented.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

 

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 condensed balance sheets, primarily due to their short-term nature.

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

 

8

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

Note 3 — Initial Public Offering

 

Public Units

 

Pursuant to the Initial Public Offering on October 26, 2018, the Company sold 10,000,000 Units at a purchase price of $10.00 per Unit. On November 20, 2018, in connection with the underwriters’ exercise of their over-allotment option, the Company consummated the sale of an additional 1,487,992 Public Units at $10.00 per Unit. Each Unit consists of one ordinary share, one redeemable warrant (“Public Warrant”), and one right (“Public Right”). Each whole redeemable warrant entitles the holder to purchase one half of one ordinary share at an exercise price of $11.50 (see Note 8). Every 10 Public Rights will convert automatically into one ordinary share upon consummation of a Business Combination (see Note 8).

 

If the Company does not complete its Business Combination within the necessary time period described in Note 1, the Public Warrants and Public Rights will expire and be worthless. Since the Company is not required to net cash settle the Public Warrants and Public Rights, and the Public Warrants and Public Rights are convertible upon the consummation of the Business Combination, management determined that the Public Warrants and Public Rights are classified within shareholders’ equity as “Additional paid-in capital” upon their issuance in accordance with ASC 815-40. The proceeds from the sale are allocated to Public Shares and Public Warrants and Public Rights based on the relative fair value of the securities in accordance with ASC 470-20-30. The value of the Public Shares, Public Warrants and Public Rights was based on the closing price paid by investors.

 

At the closing of the Initial Public Offering and over-allotment option, the Company paid an upfront underwriting discount of $2,000,000 and $297,598, 2.0% of the per unit offering price to the underwriter, respectively, with an additional fee of $3,500,000 and $520,797 (the “Deferred Discount”), 3.5% of the gross offering proceeds payable upon the completion of the Business Combination, respectively. The Deferred Discount will become payable to the underwriter from the amounts held in the Trust Account solely in the event the Company completes its Business Combination. In the event that the Company does not close a Business Combination, the underwriter has waived its right to receive the Deferred Discount. The underwriter is not entitled to any interest accrued on the Deferred Discount. Total offering costs were $3,060,924, which consist of $2,297,598 of underwriter’s commissions and $763,325 of other offering costs.

 

Purchase Option

 

On October 26, 2018, the Company sold the underwriter (and its designees), for $100, an option to purchase up to 500,000 Units exercisable at $11.50 per Unit (or an aggregate exercise price of $5,750,000) commencing on the consummation of a Business Combination. The purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the effective date of the registration statement related to the Initial Public Offering. The Units issuable upon exercise of this option are identical to those offered in the Initial Public Offering, with 500,000 ordinary shares, warrants to purchase 250,000 shares and rights to receive 50,000 ordinary shares that may be issued upon exercise of the option.

 

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 shareholders’ equity. The Company estimated the fair value of this unit purchase option to be approximately $1,603,060 (or $3.206 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 38%, (2) risk-free interest rate of 2.29% (the interest rate on a three-month US Treasury Bill on October 26, 2018) and (3) expected life of five years.

 

Note 4 — Private Placements

 

Simultaneously with the Initial Public Offering, the Company’s Sponsor purchased an aggregate of 300,000 Private Units at $10.00 per Unit (for a total purchase price of $3,000,000). On November 20, 2018, in connection with the underwriters’ partial exercise of their over-allotment option, the Company consummated the sale of additional 29,760 Private Units, generating gross proceeds of $297,600. The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust Account.

 

The Private Units are identical to the units sold in the Initial Public Offering except the Private Units are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor or its permitted transferees. The purchasers of the Private Units have agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to the same permitted transferees as the founder shares) until the completion of the Business Combination.

 

If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law).

 

9

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

Note 5 — Related Party Transactions

 

Founder Shares

 

In August 2018, the Company issued 1,725,000 Class B ordinary shares to its initial shareholders as founder shares, of which an aggregate of 1,650,000 Class B ordinary shares were issued for an aggregate purchase price of $17,250 or 0.010454545 per share, and an aggregate of 75,000 Class B ordinary shares were issued for services rendered. On September 10, 2018, the Company issued an additional 1,150,000 Class B ordinary shares to its initial shareholders as founder shares, of which an aggregate of 1,135,000 Class B ordinary shares were issued for an aggregate purchase price of $2,300 or approximately 0.00202643 per share, and an aggregate of 15,000 Class B ordinary shares were issued for services rendered. On September 14, 2018, the Company’s initial shareholders converted all of their Class B ordinary shares, constituting all of the outstanding Class B ordinary shares of the Company, into Class A ordinary shares and, immediately thereafter, the Company amended and restated its Memorandum and Articles of Association to eliminate the Class B ordinary shares and re-designate the Class A ordinary shares as “ordinary shares.” As a result, prior to the Initial Public Offering, the Company’s initial shareholders held 2,875,000 founder shares. The 2,875,000 founder shares included an aggregate of up to 375,000 ordinary shares subject to forfeiture to the extent that the over-allotment option was not exercised by the underwriters in full or in part. On November 20, 2018, as a result of the underwriters’ partial exercise of their over-allotment option, 3,002 founder shares were forfeited.

 

The founder shares are identical to the ordinary shares included in the units sold in the Initial Public Offering. However, the Initial Shareholders have agreed to (A) to vote any shares owned by them in favor of any proposed Business Combination, (B) not to convert any shares in connection with a shareholder vote to approve a proposed initial Business Combination or any amendment to the Company’s charter documents prior to consummation of an initial Business Combination, or sell any shares to the Company in a tender offer in connection with a proposed initial Business Combination and (C) that the founder shares shall not participate in any liquidating distribution from the Trust Account upon winding up if a Business Combination is not consummated.

 

Additionally, subject to certain limited exceptions, the Initial Shareholders have agreed not to transfer, assign or sell any of the founder shares (except to certain permitted transferees) until, with respect to 50% of the founder shares, the earlier of (i) six months after the date of the consummation of a Business Combination, or (ii) the date on which the closing price of the Company’s ordinary shares 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, and with respect to the remaining 50% of the founder shares, upon six months after the date of the consummation of a Business Combination, or earlier, in each case, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s shareholders having the right to exchange their ordinary shares for cash, securities or other property. 

 

Related Party Advances

 

In the Company’s formation process, the Sponsor advanced HK$22,000, equivalent to US$2,818, to pay for the legal expenses associated with the business registration. On September 5, 2018, the Sponsor advanced the Company an additional HK$1,985 (equivalent to US$256) for bank service charges. The Company repaid the Sponsor $2,818 and $256 on July 6, 2018 and December 28, 2018, respectively. On October 19, 2018, the Company’s Sponsor advanced the Company an additional $71,000 for costs associated with the Initial Public Offering. Such advances were non-interest bearing and were repaid by the Company on November 15, 2018.

 

To participate in the private placement in connection with the Initial Public Offering, the Company’s Sponsor made a deposit of $3,299,979 (net of a bank service charge) into the Company’s escrow account on October 21, 2018. Because the Company’s underwriter did not exercise its over-allotment option in full and cancelled the remaining portion on November 20, 2018, the Company’s Sponsor subscribed to a total of 329,760 Private Units for $3,297,600, and the remaining $2,379 was repaid by the Company to the Sponsor as of March 31, 2019.

 

Related Party Loans

 

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be converted into units of the post Business Combination entity at a price of $10.00 per unit. The units would be identical to the Private Units. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.

  

On July 6, 2018, the Sponsor loaned the Company $300,000 under a promissory note, a portion of which was used to pay for costs associated with the Initial Public Offering. The loan is non-interest bearing, unsecured and due at the closing of a Business Combination. As of September 30 ,2019, there was $300,000 outstanding under the promissory note. 

 

10

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

Administrative Service Fee

 

The Company has agreed, commencing on August 1, 2018, to pay the Sponsor, a monthly fee of an aggregate of $1,000 for general and administrative services including office space, utilities and secretarial support, due before the first day of each month. This arrangement will terminate upon the completion of a Business Combination or a distribution of the Trust Account to the public shareholders. For the three and nine months ended September 30, 2019, the Company incurred administrative fees of $3,000 and $9,000, respectively. At September 30, 2019, $2,000 of such fees is included in accounts payable and accrued expenses in the accompanying condensed balance sheets.

 

Note 6 — Promissory Note

 

On September 18, 2019, the Company issued an unsecured promissory Note in the aggregate principal amount of $1,148,800 to Global Nature. The Note was issued in connection with the LOI entered into by and between Global Nature and the Company on September 13, 2019, to consummate a potential business combination with Global Nature. The Note is non-interest bearing and is payable on the date on which the Company consummates its initial Business Combination with Global Nature or another qualified target company (a “Qualified Business Combination” and such date, the “Maturity Date”), subject to certain mandatory repayment arrangement set forth in the Note. The principal balance may be prepaid at any time without penalty. As of September 30, 2019, there was $1,148,800 outstanding under the Note.

 

Pursuant to the Note, in the event that Global Nature notifies the Company that it does not wish to proceed with the Qualified Business Combination (the “Withdrawal Request”), the Company shall only be obligated to repay the Note as follows: (i) 50% of the principal amount of the Note as soon as possible with best efforts but no later than 5 business days after a Business Combination with another target if the Withdrawal Request is given from after October 18, 2019; or (ii) the full principal amount of the Note as soon as possible with best efforts but no later than 5 business days after a Business Combination or the date of expiry of the term of the Company (whichever is earlier), if the parties have not entered into a definitive agreement with regard to the Qualified Business Combination within 45 days from the date of the Note as a result of the disagreement on the valuation of the Qualified Business Combination. The Company has not received any Withdrawal Request as of the date of these financial statements.

 

All amounts owed by the Company under the Note become immediately due and payable upon an event of default, which includes the Company’s failure to pay the principal amount due within 5 business days of the Maturity Date and the Company’s voluntary or involuntary bankruptcy.

 

Notwithstanding the issuance of the Note and the non-binding LOI, the Company has not entered into any definitive agreements, for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar Business Combination with one or more businesses or entities.

 

Note 7 — Cash and Investments Held in Trust Account

 

As of September 30, 2019 and December 31, 2018, investments in the Company’s Trust Account consisted of $37,331 and $31,335 in United States Money Market funds and $117,286,814 and $114,848,797 in U.S. Treasury Securities, respectively. The Company classifies its United States Treasury and equivalent securities as held-to-maturity in accordance with FASB ASC 320 “Investments — Debt and Equity Securities.” Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed balance sheets and adjusted for the amortization or accretion of premiums or discounts.

 

11

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

The gross holding gains and fair value of held-to-maturity securities at September 30, 2019 and December 31, 2018 are as follows:

 

   Amortized Cost   Gross
Holding
Gain
   Fair Value 
September 30, 2019            
U.S. Money Market  $37,331   $   $37,331 
U.S. Treasury Securities   117,286,814    42,946    117,329,760 
   $117,324,145   $42,946   $117,367,091 
                
December 31, 2018               
U.S. Money Market  $31,335   $   $31,335 
U.S. Treasury Securities   114,848,797    444,119    115,292,916 
   $114,880,132   $444,119   $115,324,251 

 

Note 8 — Commitments and Contingencies

 

Registration Rights

 

Pursuant to a registration rights agreement entered into on October 23, 2018, the holders of the founder shares, Private Units (and underlying securities) and units that may be issued in payment of Working Capital Loans (and all underlying securities) are entitled to registration rights. The holders of a majority-in-interest of these securities are entitled to make up to two demands that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Deferred Underwriter Commission

 

The Company is obligated to pay the underwriters a deferred underwriting discounts and commissions equal to 3.5% of the gross proceeds of the Initial Public Offering. Upon completion of the Business Combination, $4,020,797 (with consideration of the underwriters’ exercise of their over-allotment option on November 20, 2018) will be paid to the underwriters from the funds held in the Trust Account. No discounts or commissions will be paid with respect to the purchase of the private units.

  

Note 9 — Shareholders’ Equity

 

Preferred Shares - The Company is authorized to issue 100,000,000 shares of no par value preferred shares, with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2019 and December 31, 2018, there are no preferred shares designated, issued or outstanding.

 

Ordinary Shares - The Company is authorized to issue 300,000,000 ordinary shares, no par value. As of September 30, 2019 and December 31, 2018, the Company had issued an aggregate of 4,103,466 and 4,086,448 ordinary shares, excluding 10,586,284 and 10,603,302 shares of ordinary shares subject to possible redemption, respectively.

 

Warrants - Each warrant entitles the registered holder to purchase one-half (1/2) of one ordinary share at a price of $11.50 per whole ordinary share, subject to adjustment as discussed below, at any time commencing on the later of the completion of the Business Combination or 12 months from the date of the effective date of the registration statement. However, no warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within a specified period following the consummation of the Company’s 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. In such event, each holder would pay the exercise price by surrendering the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the ordinary shares for the 20 trading days ending on the third trading day immediately prior to the date of exercise. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The warrants will expire on the fifth anniversary of the closing of the initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

 

12

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

The warrants issued in the Private Units (“Private Warrants”) are identical to the Public Warrants sold in the Initial Public Offering except the Private Warrants will be non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees.

 

The Company may call the warrants for redemption (excluding the private warrants and any warrants issued to its initial shareholders, officers or directors in payment of working capital loans made to the Company, but including outstanding warrants issued upon exercise of the unit purchase option issued to Chardan Capital Markets LLC), in whole and not in part, at a price of $0.01 per warrant,

 

at any time after the warrants become exercisable,

 

upon not less than 30 days’ prior written notice of redemption to each warrant holder,

 

if, and only if, the reported last sale price of the ordinary shares equals or exceeds $16.00 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 the notice of redemption to warrant holders; and

 

if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants.

 

The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.

 

If the Company calls the warrants for redemption as described above, management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.”

 

Rights - Each holder of a right will receive one-tenth (1/10) of one ordinary share upon consummation of a Business Combination, even if a holder of such right converted all ordinary shares held by it in connection with a Business Combination. No fractional shares will be issued upon exchange of the rights. No additional consideration will be required to be paid by a holder of rights 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 ordinary shares will receive in the transaction on an as-converted into ordinary shares basis and each holder of rights will be required to affirmatively covert its rights in order to receive 1/10 of a share underlying each right (without paying additional consideration). The shares issuable upon exchange 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, the rights may expire worthless.

 

The rights included in the Private Units sold in the private placement are identical to the rights included in the Units sold in the Initial Public Offering, except that, among others, the rights including the shares issuable upon exchange of such rights, are being purchased pursuant to an exemption from the registration requirements of the Securities Act and will become tradable only after certain conditions are met or the resale of such rights (including underlying securities) is registered under the Securities Act. Please refer to Note 5 Private Placement for more details.

 

13

 

 

ALBERTON ACQUISITION CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

 

Note 10 — Reconciliation of Loss per Ordinary Share  

 

The Company’s net income (loss) is adjusted for the portion of income that is attributable to ordinary shares subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per share is:

 

   Three Months Ended
September 30,
   Nine Months Ended September 30,   From February 16, 2018 (Inception) to September 30, 
   2019   2018   2019   2018 
                 
Net income (loss)  $536,584   $(21,814)  $1,628,811   $(24,632)
Less: income attributable to ordinary shares subject to possible redemption (1)   (568,780)       (1,842,902)    
Adjusted net loss  $(32,196)  $(21,814)  $(214,091)  $(24,632)
Basic and diluted weighted average shares outstanding (2)   4,104,181    880,220    4,095,763    357,590 
Basic and diluted net loss per ordinary share  $(0.01)  $(0.03)  $(0.05)  $(0.07)

 

(1) Income attributable to ordinary shares subject to possible redemption was calculated in portion of the interest income earned in Trust Account, which would be distributed to shareholders in the event they choose to exercise their redemption rights at the closing of a Business Combination.
(2) Excludes an aggregate of up to 10,586,284 shares subject to possible redemption at September 30, 2019 and 375,000 shares at September 30, 2018 that were subject to forfeiture to the extent that over-allotment option was not exercised in full or in part by the underwriters.

 

Note 11 — Subsequent Events

 

The Company’s management reviewed all material events that have occurred after the balance sheet date through the date which these financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

 

14

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.  References to “we”, “us”, “our” or the “Company” are to Alberton Acquisition Corporation, except where the context requires otherwise.  The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.

 

Overview

 

We were incorporated on February 16, 2018 under the laws of British Virgin Islands 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 businesses or entities. The Company’s efforts to identify a prospective target business are not limited to a particular industry or geographic location. We have not selected any target business for our initial business combination.

 

We presently have no revenue, have had losses since inception from incurring formation and operating costs and have had no operations other than identifying and evaluating suitable acquisition transaction candidates. We have relied upon the sale of our securities and loans from Hong Ye Hong Kong Shareholding Co., Limited (our “Sponsor”) to fund our operations.

 

On October 26, 2018, we consummated our initial public offering of 10,000,000 units. Each unit consists of one ordinary share, one redeemable warrant to purchase one-half of one ordinary share and one right to receive 1/10 of an ordinary share upon the consummation of our initial business combination. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $100,000,000. On October 26, 2018, simultaneously with the consummation of the initial public offering, we consummated a private placement with our Sponsor of 300,000 private units at a price of $10.00 per private unit, generating total proceeds of $3,000,000. On November 20, 2018, the underwriters exercised the over-allotment option in part and purchased 1,487,992 over-allotment option units at an offering price of $10.00 per unit, generating gross proceeds of $14,879,920. On November 20, 2018, simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 29,760 private units to our Sponsor, generating gross proceeds of $297,600. On November 20, 2018, the underwriters waived their right to exercise the reminder of the over-allotment option. In connection with such waiver, an aggregate of 3,002 founder shares held by our initial shareholders were forfeited.

 

A total of $114,879,920 of the net proceeds from the initial public offering (including the partial exercise of the over-allotment option) and the private placements were deposited in a trust account established for the benefit of the Company’s public shareholders.

 

Our management has broad discretion with respect to the specific application of the net proceeds of initial public offering and the private placements, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.

 

Recent Developments

 

We initially had until October 25, 2019 to consummate a Business Combination. However, if we anticipated that we may not be able to consummate a Business Combination by October 25, 2019, we may extend the period of time to consummate a Business Combination by an additional three months (for a total of 18 months to complete a Business Combination). In order to extend the time available for us to consummate a Business Combination, the insiders or their affiliates or designees must deposit into the Trust Account $1,148,799 on or prior to the date of the applicable deadline. 

 

On September 18, 2019, we issued an unsecured promissory note in the amount of $1,148,800 (the “Note”) to Global Nature Investment Holdings Limited (“Global Nature”) to fund a three-month extension payment and, accordingly, $1,148,799 was deposited into the Trust Account. We now have until January 24, 2020 to consummate a Business Combination. The Note was issued in connection with a non-binding letter of intent entered into by and between Global Nature and us on September 13, 2019, to consummate a potential business combination with Global Nature (the “LOI”). Global Nature is a wholly owned subsidiary of CITIC Capital, an alternative investment management and advisory company that manages over USD29 billion of capital across 100 funds and investment products through its multi-asset class platform covering private equity, real estate, structured investment & finance, and asset management.

 

The Note is non-interest bearing and is payable on the date on which we consummate its initial business combination with Global Nature or another qualified target company (a “Qualified Business Combination” and such date, the “Maturity Date”), subject to certain mandatory repayment arrangement set forth in the Note. The principal balance may be prepaid at any time without penalty.

 

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Pursuant to the Note, in the event that Global Nature notifies us that it does not wish to proceed with the Qualified Business Combination (the “Withdrawal Request”), we shall only be obligated to repay the Note as follows: (i) 50% of the principal amount of the Note as soon as possible with best efforts but no later than 5 business days after our business combination if the Withdrawal Request is given from after October 18, 2019; or (ii) the full principal amount of the Note as soon as possible with best efforts but no later than 5 business days after our business combination or the date of expiry of the term of us (whichever is earlier), if the parties have not entered into a definitive agreement with regard to the Qualified Business Combination within 45 days from the date of the Note as a result of the disagreement on the valuation of the Qualified Business Combination. We have not received any Withdrawal Request as of the date of this report.

 

All amounts owed by us under the Note become immediately due and payable upon an event of default, which includes our failure to pay the principal amount due within 5 business days of the Maturity Date and our voluntary or involuntary bankruptcy. Pursuant to the Note, Global Nature waived all rights, title, interest or claim in, or to, any distribution of, or from, the trust account in which the proceeds from (i) our initial public offering (“IPO”) and (ii) the sale of the units issued in a private placement that occurred prior to the effectiveness of the IPO were placed.

 

Notwithstanding the issuance of the Note and the non-binding LOI, we have not entered into any definitive agreements, for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities.

 

The foregoing is a brief description of the material terms and conditions of the Note, a copy of which is attached as Exhibit to the current report on Form 8-K filed with the Securities and Exchange Commission on September 24, 2019.

 

On October 11, 2019, in order to satisfy Nasdaq listing standards that the majority of the Board of Directors (the “Board”) of the Company be independent, Mr. Keqing (Kevin) Liu tendered his resignation from his position as a director of the Company effective immediately. The Board accepted Mr. Liu’s resignation, effective immediately. Mr. Liu’s decision did not result from a disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

On the same day, Ms. Guan Wang tendered her resignation from her position as the Secretary to the Board. The Board accepted Ms. Wang’s resignation and appointed Mr. Keqing (Kevin) Liu as the Secretary of the Board (without any voting power) to fill the vacancy created by the resignation of Ms. Guan Wang, effective immediately.

 

In addition, on October 11, 2019, pursuant to relevant Nasdaq rules, the Board reviewed the independence of Mr. Howard Jiang as a board member and concluded that each of Mr. Jiang, Mr. John W. Allen and Mr. Harry Edelson, respectively, is qualified as an independent director under the relevant Nasdaq rules. The Board has also concluded that it is in the best interest of the Company that each of its existing committees consists solely of independent directors. As a result, the Board accepted the resignation of Mr. Bin (Ben) Wang from his position as a member of each of Audit Committee and Nominating Committee and appointed Mr. Howard Jiang to fill the vacancy. Furthermore, the Board also appointed the chairman of its existing committees.

 

As a result, the Board is composed with a majority of independent directors and each committee of the Board is composed solely with independent directors as set forth below:

 

Committees    Members (All Independent Directors)
Audit Committee   Harry Edelson (Chairman) John W. Allen Howard Jiang
Compensation Committee   John W. Allen (Chairman) Harry Edelson Howard Jiang
Nominating Committee   Howard Jiang  (Chairman) Harry Edelson John W. Allen

  

On October 11, 2019, the Board also approved the Company’s Audit Committee Charter, Compensation Committee Charter, and Corporate Governance and Nominating Committee Charter.

 

Copies of the Charter for each of the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee are enclosed as Exhibit 99.1, 99.2 and 99.3 respectively to this Form 10-Q.

 

Results of Operations

 

Our entire activity from inception up to October 26, 2018 was related to the Company’s formation, the initial public offering and general and administrative activities. Since the initial public offering, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We generate non-operating income in the form of interest income on investments. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

 

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For the three months ended September 30, 2019, we had net income of $536,584, consisting of $617,233 of interest income from investments in our trust account and $146 of interest income from deposits in our corporate bank account, offset by $80,795 of operating costs, consisting mostly of general and administrative expenses.  

 

For the nine months ended September 30, 2019, we had net income of $1,628,811, consisting of $1,999,894 of interest income from investments in our trust account and $598 of interest income from deposits in our corporate bank account, offset by $371,681 of operating costs, consisting mostly of general and administrative expenses.  

 

Liquidity and Capital Resources

 

For the nine months ended September 30, 2019, cash used in operating activities was $364,114. As of September 30, 2019, we had cash outside the trust account of $1,237,095 available for working capital needs. All remaining cash is held in the trust account and is generally unavailable for our use, prior to an initial business combination, and is restricted for use either in a business combination or to redeem ordinary shares. As of September 30, 2019, none of the amount on deposit in the trust account was available to be withdrawn as described above.

  

Through September 30, 2019, the Company’s liquidity needs were satisfied through receipt of $19,550 from the sale of the insider shares, $300,000 loaned by the Sponsor to the Company under a certain unsecured promissory note, advances from our Sponsor and an affiliate of our sponsor in an aggregate amount of $71,256 which were repaid after the initial public offering, and the net proceeds from the initial public offering and private placement held outside the trust account. On July 6, 2018, the Sponsor loaned the Company $300,000 pursuant to a non-interest bearing promissory note, which will be repaid promptly after the date on which the Company consummates a business combination.

 

Until consummation of the business combination, we will be using the funds not held in the trust account, and any additional funding that may be loaned to us by our Sponsor, for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.

 

If our estimates of the costs of undertaking in-depth due diligence and negotiating business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate its business prior to the business combination and will need to raise additional capital. In this event, our officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we consummate an initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us upon consummation of the business combination, or, at the lender’s discretion, up to $1,500,000 of such loans may be convertible into units of the post business combination entity at a price of $10.00 per unit. In the event that the initial 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 for such repayment. The terms of such loans by our initial shareholders, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.

 

Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial 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 consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2019, we did not have any off-balance sheet arrangements. We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.

 

Contractual Obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $1,000 for general and administrative services including office space, utilities and secretarial support. We began incurring these fees on August 1, 2018 and will continue to incur these fees monthly until the earlier of the completion of the business combination or our liquidation.

 

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Critical Accounting Policies

 

Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our unaudited financial information. We describe our significant accounting policies in Note 2 - Significant Accounting Policies, of the Notes to Unaudited Financial Statements included in this report. Our unaudited financial statements have been prepared in accordance with US GAAP for interim financial reporting. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, the results of its operations and its cash flows. Operating results as presented are not necessarily indicative of the results to be expected for a full year. Certain of our accounting policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with US GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

The net proceeds of our initial public offering and the sale of the private units held in the trust account are invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2019, 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 and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.

 

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 and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any material legal proceedings and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.

 

Item 1A. Risk Factors

 

As a smaller reporting company, we are not required to make disclosures under this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

 

None. 

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

  

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Item 6. Exhibits.

 

Exhibit No.   Description
     
3.1   Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.2 to Amendment No.3 to the Registration Statement on Form S-1/A filed with the Securities & Exchange Commission on October 23, 2018)
     
10.1   Promissory Note, dated September 18, 2019, made by Alberton Acquisition Corporation in favor of Global Nature Investment Holdings Limited (incorporated by reference to Exhibit 99.1 to the Current Report of 8-K filed with the Securities & Exchange Commission on September 24, 2019)
     
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
     
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
     
32**   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
99.1   Audit Committee Charter (incorporated by reference to Exhibit 99.1 to the registrant’s current report on Form 8-K filed on October 17, 2019)
     
99.2   Compensation Committee Charter(incorporated by reference to Exhibit 99.2 to the registrant’s current report on Form 8-K filed on October 17, 2019)
     
99.3   Nominating and Corporate Governance Committee Charter (incorporated by reference to Exhibit 99.3 to the registrant’s current report on Form 8-K filed on October 17, 2019)
     
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.

 

**In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 herewith are deemed to accompany this Form 10-Q and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act.

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

  ALBERTON ACQUISITION CORPORATION
     
Date: November 13, 2019 By: /s/ Bin (Ben) Wang
    Bin (Ben) Wang
    Chief Executive Officer
(Principal executive officer)
     
Date: November 13, 2019 By: /s/ Keqing (Kevin) Liu
    Keqing (Kevin) Liu
    Chief Financial Officer
(Principal financial and accounting officer)

 

 

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