Notes to Condensed Financial Statements
May 31, 2016
(Unaudited)
Note 1 - Organization, Plan of Business Operations
Andina Acquisition
Corp. II (the “Company”) was incorporated in the Cayman Islands on July 1, 2015 as a blank check company for the purpose
of effecting a merger, share exchange, asset acquisition, share 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 are not limited to a particular industry or geographic region, although the Company is currently
focusing on target businesses in the Andean region of South America and in Central America.
All activity through
May 31, 2016 relates to the Company’s formation, the initial public offering described below and the search for a Business
Combination candidate. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of
the risks associated with early stage and emerging growth companies.
The registration
statement for the Company’s initial public offering (“Initial Public Offering”) was declared effective on
November 24, 2015. The Company consummated the Initial Public Offering of 4,000,000 units (“Units”) at $10.00 per
unit on December 1, 2015, generating gross proceeds of approximately $40.0 million. Offering costs were approximately $1.8
million, inclusive of $454,000 of deferred offering costs incurred prior to the closing of the Initial Public Offering (Note
4).
Simultaneously with
the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
310,000 Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, of which 265,000 Private
Placement Units were sold to certain shareholders of the Company and their affiliates and designees, and 45,000 Private Placement
Units were sold to EarlyBirdCapital, Inc. (“EBC”), the representative of the underwriters in the Initial Public Offering,
generating gross proceeds of $3.1 million (Note 5).
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, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination.
An aggregate amount
of $40.6 million ($10.15 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private
Placement Units in the Private Placement was placed in a United States-based trust account (“Trust Account”) at UBS
maintained by Continental Stock Transfer & Trust Company, acting as trustee, and is invested in U.S. government treasury
bills, until the earlier of: (i) the consummation of a Business Combination or (ii) the Company’s failure to consummate a
Business Combination by June 1, 2017 (or September 1, 2017 if the Company has entered into a letter of intent, memorandum of understanding
or definitive agreement with a target business for a Business Combination by June 1, 2017 and a Business Combination has not yet
been consummated by such date). One of the Company’s Directors has agreed that he will be liable under certain circumstances
to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities
that are owed money by the Company for services rendered, contracted for or products sold to the Company. However, such Director
may not be able to satisfy those obligations should they arise.
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. In addition, (i) interest income earned on the funds in the Trust Account may
be released to the Company to pay its income or other tax obligations and (ii) any remaining interest earned on the funds in the
Trust Account may be released to the Company for its working capital requirements. With these exceptions, expenses incurred by
the Company may be paid prior to a Business Combination only from the net proceeds of the Initial Public Offering not held in the
Trust Account; provided, however, that in order to meet its working capital needs following the consummation of the Initial Public
Offering, the Company’s shareholders prior to the Initial Public Offering (the “Initial Shareholders”), officers
and directors or their affiliates may, but are not obligated to, loan the Company 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 the Company’s initial Business Combination, without interest, or, at the lender’s discretion,
up to $500,000 of the notes may be converted upon consummation of the Company’s Business Combination into additional Private
Placement Units at a price of $10.00 per unit. If the Company does not complete a Business Combination, the loans would not be
repaid.
Pursuant to the Nasdaq
Capital Markets listing rules, the Company’s initial Business Combination must be with a target business or businesses whose
collective fair market value is at least equal to 80% of the balance in the Trust Account at the time of the execution of a definitive
agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. The fair
market value of the target will be determined by the Company’s 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 target business
or businesses that the Company acquires may have a collective fair market value substantially in excess of 80% of the Trust Account
balance. In order to consummate such a Business Combination, the Company may issue a significant amount of its debt or equity securities
to the sellers of such business and/or seek to raise additional funds through a private offering of debt or equity securities.
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
May 31, 2016
(Unaudited)
In connection with
any proposed initial Business Combination, the Company will either (1) seek shareholder approval of such initial Business Combination
at a meeting called for such purpose at which holders of the outstanding ordinary shares sold in the Initial Public Offering (“Public
Shareholders”) may seek to convert such shares (“Public 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 Public Shareholders with the opportunity to sell their Public Shares to the Company by means of
a tender offer (and thereby avoid the need for a shareholder 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). If the Company determines to engage in a tender offer, such
tender offer will be structured so that each Public Shareholder may tender any or all of his, her or its Public Shares rather than
some pro rata portion of his, her or its shares. In that case, the Company will file tender offer documents with the Securities
and Exchange Commission (“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. The decision as to whether the Company will seek
shareholder approval of a proposed Business Combination or will allow shareholders to sell their shares to it in a tender offer
will be made by the Company based on a variety of factors such as the timing of the transaction and whether the terms of the transaction
would otherwise require it to seek shareholder approval. The Company will consummate an initial Business Combination only if it
has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, solely if it seeks shareholder
approval, a majority of the outstanding ordinary shares voted are voted in favor of the Business Combination.
The Initial Shareholders
have agreed (i) to vote any shares they hold (including the shares included in the Private Placement Units (“private shares”))
in favor of any proposed Business Combination and (ii) not to convert any shares in connection with a shareholder vote to approve,
or sell their shares to the Company in any tender offer in connection with, a proposed initial Business Combination; provided that
certain of the Initial Shareholders will be permitted to convert, or sell any Public Shares they may purchase after the Initial
Public Offering to the Company, in connection with a proposed Business Combination. The Representative has also agreed to vote
its private shares in favor of any proposed Business Combination.
Notwithstanding the
foregoing, a Public Shareholder, together with any affiliate of his or any other person with whom he is acting in concert or as
a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)
will be restricted from seeking conversion rights with respect to 20% or more of the ordinary shares sold in the Initial Public
Offering without the prior consent of the Company. Accordingly, all shares in excess of 20% of the shares sold in the Initial Public
Offering held by a holder will not be converted to cash.
The Company’s
Amended and Restated Memorandum and Articles of Association provides that the Company will continue in existence only until June
1, 2017 (or September 1, 2017 if the Company has entered into a letter of intent, memorandum of understanding or definitive agreement
with a target business for a Business Combination by June 1, 2017 and a Business Combination has not yet been consummated by such
date). If the Company has not completed a Business Combination by such date, it will trigger the automatic liquidation of the Trust
Account and the voluntary liquidation of the Company. In such event, holders of Public Shares will share ratably in the Trust
Account, including any interest not previously released to the Company, and any net assets remaining available for distribution
to them after payment of liabilities. The Representative and the holders of the insider shares (as defined in Note 5), private
shares, and private rights will not participate in any liquidation distribution with respect to their insider shares, private shares
or private rights.
Note 2 -
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”)
for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting
of normal accruals) considered for a fair presentation have been included. Operating results for the three and six months ended
May 31, 2016 are not necessarily indicative of the results that may be expected for the year ending November 30, 2016. For further
information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 8-K,
filed with Securities and Exchange Commission on December 3, 2015 and the Company’s Annual Report on Form 10-K for the year
ended November 30, 2015, filed with Securities and Exchange Commission on February 26, 2016.
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
May 31, 2016
(Unaudited)
Liquidity
As of May 31,
2016, the Company had a cash balance of approximately $141,000. Through May 31, 2016, the Company’s liquidity needs
were satisfied through receipt of approximately $686,000 from the sale of the Units held outside of the Trust Account upon
closing of the Initial Public Offering, $25,000 from the sale of the insider shares (as described in Note 6), and advances
from a director in an aggregate amount of $139,000, which was repaid on December 1, 2015 from the proceeds received upon
closing of the Initial Public Offering.
The Company intends
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 for expenses relating thereto, upon consummation of the initial Business Combination.
To the extent that the Company’s capital stock is used in whole or in part as consideration to effect the initial 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
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 operating expenses or finders’ fees which the Company
had incurred prior to the completion of the initial Business Combination if the funds available to the Company outside of the Trust
Account were insufficient to cover such expenses.
If needed to finance
transaction costs in connection with searching for a target business or consummating an intended initial Business Combination,
the Initial Shareholders, officers, directors or their affiliates may, but are not obligated to, loan the Company funds as may
be required. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of the Company’s
initial Business Combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted
upon consummation of the Company’s initial Business Combination into additional Private Placement Units at a price of $10.00
per Unit (which, for example, would result in the holders being issued 57,142 Ordinary Shares if $500,000 of notes were so converted
as the rights included in the Units would result in an additional 7,142 shares being issued, as well as 50,000 Warrants to purchase
25,000 Ordinary Shares).
Based on the foregoing,
management believes that the Company will have sufficient working capital and borrowing capacity to meet the Company's needs through
the earlier of consummation of a Business Combination or June 1, 2017 (or September 1, 2017 if the Company has entered into a letter
of intent, memorandum of understanding or definitive agreement with a target business for a Business Combination by June 1, 2017
and a Business Combination has not yet been consummated by such date). The Company anticipates that its uses of cash for the next
twelve months will be approximately $95,000 of expenses for the search for target businesses and for the legal, accounting and
other third-party expenses attendant to the due diligence investigations, structuring and negotiating of a Business Combination.
Note 3 - Significant Accounting Policies
Cash and Marketable Securities Held in Trust Account
The amounts held in
the Trust Account represent substantially all of the proceeds of the Initial Public Offering and are classified as restricted assets
since such amounts can only be used by the Company in connection with the consummation of a Business Combination. As of May 31,
2016, cash and cash equivalents held in the Trust Account consisted of approximately $40.7 million in United States Treasury Bills
and approximately $900 in cash. At May 31, 2016, there was approximately $102,000 of interest income held in the Trust Account
available to be released to the Company.
Ordinary Shares Subject to Possible
Conversion
The Company
accounts for its ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity
.” Ordinary shares
subject to mandatory redemption (if any) 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 Conversion at the conversion value are presented as temporary equity, outside of the shareholders’
equity section of the Company’s balance sheet.
ANDINA
ACQUISITION CORP. II
Notes
to Condensed Financial Statements
May
31, 2016
(Unaudited)
Offering Costs
Offering costs consist
principally of legal, accounting and underwriting costs incurred through the balance sheet date that are directly related to the
Initial Public Offering. Offering costs amounting to approximately $1.8 million (including $1.3 million in underwriters’
fees) were charged to shareholder’s equity upon completion of the Initial Public Offering.
Net Loss per Share
Loss per share is
computed by dividing net loss by the weighted-average number of Ordinary Shares outstanding during the period. An aggregate of
3,546,161 Ordinary Shares subject to possible redemption at May 31, 2016, have been excluded from the calculation of basic loss
per ordinary share since such Ordinary Shares, if redeemed, only participate in their pro rata share of the trust earnings. The
Company has not considered the effect of (i) warrants sold in the Public Offering and Private Placement to purchase 2,155,000 Ordinary
Shares of the Company, (ii) rights to acquire 615,713 Ordinary Shares of the Company and (iii) 400,000 Ordinary Shares, warrants
to purchase 200,000 Ordinary Shares and rights to acquire 57,142 Ordinary Shares included in the unit purchase option sold to the
underwriter, in the calculation of diluted loss per share, since the exercise of the unit purchase option and warrants as well
as the conversion of rights is contingent on the occurrence of future events.
Recent Accounting Pronouncements
Management does not
believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect
on the accompanying financial statements.
Note 4 - Initial Public Offering
On December 1, 2015,
the Company consummated the Initial Public Offering of 4,000,000 Units. The Units were sold at an offering price of $10.00 per
Unit, generating net proceeds of approximately $38.7 million during the six months ended May 31, 2016, net of offering costs of
approximately $1.8 million, inclusive of $454,000 of deferred offering costs
incurred prior to the closing of the Initial Public Offering.
Each Unit consists
of one ordinary share in the Company, one right to receive one-seventh (1/7) of a share upon consummation of an initial Business
Combination and one redeemable warrant (“Warrant”) to purchase one half of one ordinary share for $11.50 per full share.
No fractional shares will be issued. In the event the Company will not be the surviving company upon completion of an initial Business
Combination, each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the 1/7
of a share underlying each right upon consummation of the Business Combination. There is no length of time within which an investor
must affirmatively elect to convert the rights. However, until a holder affirmatively elects to convert his, her or its rights,
the right certificates held by such holder will not represent the ordinary shares they are convertible for but instead will simply
represent the right to receive such ordinary shares.
Each Warrant entitles
the holder to purchase one-half of one ordinary share at a price of $11.50 per full ordinary share commencing on the later of the
Company’s completion of its initial Business Combination or November 24, 2016, and expiring five years from the completion
of the Company’s initial Business Combination. The Company will not issue fractional shares. As a result, investors must
exercise Warrants in multiples of two Warrants, at a price of $11.50 per full share, subject to adjustment, to validly exercise
the Warrants. The Company may redeem the Warrants at a price of $0.01 per Warrant upon 30 days’ notice, only in the event
that the last sale price of the ordinary shares is at least $24.00 per share for any 20 trading days within a 30-trading day period
(“30-Day Trading Period”) ending on the third day prior to the date on which notice of redemption is given, provided
there is a current registration statement in effect with respect to the ordinary shares underlying such Warrants commencing five
business days prior to the 30-Day Trading Period and continuing each day thereafter until the date of redemption. If the Company
redeems the Warrants as described above, management will have the option to require all holders that wish to exercise Warrants
to do so on a “cashless basis.” In accordance with the warrant agreement relating to the Warrants sold and issued in
the Initial Public Offering the Company is only required to use its best efforts to maintain the effectiveness of the registration
statement covering the Warrants. If a registration statement is not effective within 90 days following the consummation of a 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 an
available exemption from registration under the Securities Act. In the event that a registration statement is not effective at
the time of exercise or no exemption is available for a cashless exercise, the holder of such Warrant shall not be entitled to
exercise such Warrant for cash and in no event (whether in the case of a registration statement being effective or otherwise) will
the Company be required to net cash settle the Warrant exercise. Additionally, in no event will the Company be required to net
cash settle the Rights.
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
May 31, 2016
(Unaudited)
If the Company is
unable to complete an initial Business Combination within the required time period and the Company redeems the Public Shares for
the funds held in the Trust Account, holders of rights and warrants will not receive any of such funds for their rights and warrants
and the rights and warrants will expire worthless.
Note 5 - Private Placement
Simultaneously with
the consummation of the Initial Public Offering, the Company consummated the Private Placement of 310,000 Private Placement Units,
at $10.00 per Private Placement Unit for a total purchase price of $3.1 million. Of the Private Placement Units, 265,000 were purchased
by Initial Shareholders and their affiliates and designees and 45,000 were purchased by EBC. The Private Placement Units are identical
to the units sold in the Initial Public Offering except the warrants included in the Private Placement 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 initial purchasers or their permitted
transferees. Additionally, because the warrants included in the Private Placement Units were issued in a private transaction, the
holders and their transferees will be allowed to exercise such warrants for cash even if a registration statement covering the
ordinary shares issuable upon exercise of such warrants is not effective and receive unregistered ordinary shares. Furthermore,
the purchasers have agreed (A) to vote the private shares in favor of any proposed Business Combination, (B) not to propose, or
vote in favor of, an amendment to the Company’s proposed amended and restated memorandum and articles of association to be
effected prior to the completion of this offering with respect to its pre-Business Combination activities prior to the consummation
of such a Business Combination unless the Company provides dissenting Public Shareholders with the opportunity to convert their
Public Shares in connection with any such vote, (C) not to convert any private shares for cash from the Trust Account in connection
with a shareholder vote to approve a proposed initial Business Combination (or to sell such shares to the Company in any tender
offer the Company may engage in) or a vote to amend the provisions of the Company’s amended and restated memorandum and articles
of association relating to shareholders’ rights or pre-Business Combination activity and (D) that the private shares shall
not participate in any liquidating distribution upon winding up if a Business Combination is not consummated. The purchasers have
also agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to certain permitted transferees)
until the completion of an initial Business Combination.
Note 6 - Related Party Transactions
Initial Shares
In July 2015, the
Company issued 1,150,000 ordinary shares (the “insider shares”) to the Initial Shareholders for an aggregate purchase
price of $25,000. The insider shares held by the Initial Shareholders included an aggregate of 150,000 shares repurchased for an
aggregate purchase price of $0.01 and cancelled by the Company in December 2015 upon receiving notice that the underwriters’
over-allotment option was not exercised in full.
The insider shares
are identical to the ordinary shares included in the Units sold in the Initial Public Offering. However, the initial shareholders
have agreed (subject to certain exceptions) (A) to vote their insider shares (as well as any public shares acquired in or after
this offering) in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the amended
and restated memorandum and articles of association with respect to pre-Business Combination activities prior to the consummation
of such a Business Combination unless the Company provides dissenting public shareholders with the opportunity to convert their
public shares into the right to receive cash from the trust account in connection with any such vote, (C) not to convert any insider
shares (as well as any other shares acquired in or after the Initial Public Offering) into the right to receive cash from the Trust
Account in connection with a shareholder vote to approve a proposed initial Business Combination (or sell any shares they hold
to the Company in a tender offer in connection with a proposed initial Business Combination) or a vote to amend the provisions
of the amended and restated memorandum and articles of association relating to shareholders’ rights or pre-Business Combination
activity and (D) that the insider shares shall not participate in any liquidating distribution upon winding up if a business combination
is not consummated. Additionally, the Initial Shareholders have agreed not to transfer, assign or sell any of the insider shares
(except to certain permitted transferees) until (1) with respect to 50% of the insider shares, the earlier of one year after the
date of the consummation of initial Business Combination and the date on which the closing price of ordinary shares equals or exceeds
$12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days
within any 30-trading day period commencing after initial business combination and (2) with respect to the remaining 50% of the
insider shares, one year after the date of the consummation of initial Business Combination, or earlier, in either case, if, subsequent
to initial business combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction which
results in all of shareholders having the right to exchange their ordinary shares for cash, securities or other property.
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
May 31, 2016
(Unaudited)
Related Party Transactions
Prior to the closing
of the Initial Public Offering, a director has advanced an aggregate of approximately $139,000 to cover expenses related to the
Company’s formation and the Initial Public Offering. The Company repaid this amount on December 1, 2015 from the proceeds received
upon closing of the Initial Public Offering.
The Company maintains
the principal executive offices at office space provided to us at no cost by a third party affiliated with one of the Company’s
directors.
The Company is also
permitted to pay consulting fees to its officers, directors, shareholders or their affiliates for assisting us in consummating
our initial business combination in an amount not to exceed an aggregate of $500,000.
Note 7 - Commitments and Contingencies
Underwriting Agreement
On November 24, 2015,
the Company entered into an agreement with EBC (“Underwriting Agreement”), pursuant to which the Company paid an underwriting
discount of $1.3 million as an underwriting discount. The Company has further engaged EBC to assist the Company with its
initial Business Combination. Pursuant to this arrangement, the Company anticipates that EBC will assist the Company in holding
meetings with shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the
Company to potential investors that are interested in purchasing the Company’s securities, assist the Company in obtaining
shareholder approval for the Business Combination and assist the Company with its press releases and public filings in connection
with the Business Combination. The Company will pay EBC a cash fee of 4% of the gross proceeds of the Initial Public Offering for
such services upon the consummation of its initial Business Combination (exclusive of any applicable finders’ fees which
might become payable); provided that up to 25% of the fee may be allocated at the Company’s sole discretion to one or more
advisors that assist the Company in identifying and consummating an initial Business Combination. The Company will also reimburse
EBC for up to $20,000 of its reasonable costs and expenses incurred by it (including reasonable fees and disbursements of counsel)
in connection with the performance of its services pursuant to the agreement; provided, however, all expenses in excess of $5,000
in the aggregate shall be subject to prior written approval, which approval will not be unreasonably withheld.
Unit Purchase Option
The Company sold to
EBC and its designees for $100, unit purchase options to purchase an aggregate of 400,000 units (collectively, the “Unit
Purchase Option”). The Unit Purchase Option is exercisable at $10.00 per unit, commencing on the later of the consummation
of a Business Combination and November 24, 2016. The Unit Purchase Option expires on November 24, 2020. Since the option is not
exercisable until the consummation of a Business Combination at the earliest, and the rights will result in the issuance of shares
upon consummation of a Business Combination, the option will effectively represent the right to purchase an aggregate 457,142 ordinary
shares (which includes the 57,142 ordinary shares issuable for the rights included in the units, as well as 400,000 warrants to
purchase 200,000 ordinary shares for $11.50 per share). The Unit Purchase Option grants to the holders demand and “piggy
back” registration rights for periods of five and seven years, respectively, from November 24, 2015 with respect to 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 Company accounted
for the fair value of the Unit Purchase Option, inclusive of the receipt of a $100 cash payment, as an expense of the Initial Public
Offering resulting in a charge directly to shareholders’ equity. The Company estimated that the fair value of the Unit Purchase
Option is approximately $2 million (or $5.01 per unit) using the Black-Scholes option-pricing model. The fair value of the Unit
Purchase Option is estimated as of the date of grant using the following assumptions: (1) expected volatility of 57.71%, (2) risk-free
interest rate of 1.52%, and (3) expected life of five years. The Unit Purchase Option may be exercised for cash or on a “cashless”
basis, at the holder’s option, such that the holder may use the appreciated value of the Unit Purchase Option (the difference
between the exercise prices of the Unit Purchase Option and the market price of the Units and underlying ordinary shares) to exercise
the Unit Purchase Option without the payment of any cash. The Company will have no obligation to net cash settle the exercise of
the Unit Purchase Option or underlying rights and warrants.
Advisory Agreements
On October 8, 2015,
the Company engaged B. Riley & Co. LLC (“B. Riley”) to provide certain advisory services in connection with the
Company’s initial Business Combination in exchange for $250,000 in service fees, which were paid in December 2015.
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
May 31, 2016
(Unaudited)
The Company has also
signed agreements with individuals in the business community of their respective countries (the “Originators”) to supplement
the efforts of the management team on its search of targets for a potential Business Combination. The agreements with the
Originators are for a period of three to six months. In exchange for the services, the Company agreed to pay the Originators
a finder’s fee of 0.75% of the transaction value, payable upon the completion of a Business Combination. The aggregated amount
of the finders’ fee for the Financial Advisor and the Originators should be below 2.8% of the amount invested by the Company
in the target company.
Registration Rights
The Initial Shareholders
and purchasers of the private Placement Units are entitled to registration rights with respect to their securities, pursuant to
an agreement dated as of November 24, 2015. The holders of the majority of the insider shares can elect to exercise these registration
rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The
holders of a majority of the Private Placement Units (or underlying securities) issued in payment of working capital loans made
to the Company can elect to exercise these registration rights at any time after the Company consummates a Business Combination.
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.
Note 8 - Shareholder Equity
Preferred Shares
The Company is authorized
to issue 1,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may
be determined from time to time by the Company’s board of directors.
As of May 31, 2016,
there are no preferred shares issued or outstanding.
Ordinary Shares
The Company is authorized
to issue 100,000,000 ordinary shares with a par value of $0.0001 per share.
In July 2015, the
Company issued 1,150,000 insider shares to the Initial Shareholders for an aggregate purchase price of $25,000. The insider shares
held by the Initial Shareholders included an aggregate of 150,000 shares repurchased for an aggregate purchase price of $0.01 and
cancelled by the Company in December 2015 upon receiving notice that the underwriters’ over-allotment option was not exercised.
As of May 31, 2016,
after the consummation of the Initial Public Offering and the Private Placement, the Company has an aggregate of 5,310,000 ordinary
shares outstanding, inclusive of 3,546,161 ordinary shares subject to possible conversion classified as temporary equity in the
accompanying Balance Sheet.
Note 9 - Subsequent Events
The Company evaluates
subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements are filed
for potential recognition or disclosure. Based upon this review, the Company did not identify any subsequent events that would
have required adjustment or disclosure in the financial statements.