NOTES
TO CONDENSED FINANCIAL STATEMENTS
(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 February 28, 2017 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 $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 and that
have not executed a waiver agreement with 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 Business Combinations 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 and Private Placement not held in the Trust Account; provided, however, that in order to meet its working capital
needs, 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 Private Placement Unit. If the Company does not complete a Business Combination,
the loans would not be repaid.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 (excluding taxes payable)
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.
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). As of February 28, 2017, the
amount in the Trust Account is $10.15 per Public Share (excluding interest in the amount of approximately $12,000 that
may be released to the Company as described above).
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 to certain obligations and restrictions relating to their securities, including to vote in favor
of any proposed Business Combination and in certain cases 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 (See Note
6). The Representative has also agreed to vote its shares included in the Private Placement Units (the “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 currently 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 rights and warrants included in the Private Placement Units (the “private rights” and
“private warrants” respectively) will not participate in any liquidation distribution with respect to their insider
shares, private shares, private rights or private warrants.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 SEC.
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
months ended February 28, 2017 are not necessarily indicative of the results that may be expected for the year ending November
30, 2017. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual
Report on Form 10-K for the year ended November 30, 2016, filed with SEC on February 28, 2017.
Liquidity
As
of February 28, 2017, the Company had approximately $28,000 in its operating bank account, approximately $12,000 of interest income
held in the Trust Account available to be released to the Company.
Through
February 28, 2017, 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), 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, and interest released from the Trust Account for
working capital purposes.
As
indicated above, 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). In February 2017, one of the Company’s directors
and non-executive Chairman of the Board provided a commitment letter, which was later amended in April 2017, to loan the
Company as needed up to an aggregate of $110,000 for working capital purposes. To date, the Company has not borrowed
any amount under such commitment.
Based
on the foregoing,
management believes that the Company will have sufficient working capital to
meet the Company’s needs
through the earlier of the 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 until September 1, 2017 will be approximately
$228,000 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.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note
3 - Significant Accounting Policies
Emerging
Growth Company
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933,
as amended (“Securities Act”), declared effective or do not have a class of securities registered under the Exchange
Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect
to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which
means that when 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.
Cash
and Cash Equivalents
The
Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution
which, at times may exceed the Federal depository insurance coverage of $250,000. At February 28, 2017, the Company had 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 balance sheet, primarily
due to their short-term nature.
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 February 28, 2017, cash and cash equivalents held in the Trust Account consisted of approximately $40.6 million in United
States Treasury Bills and approximately $630 in cash. At February 28, 2017, there was approximately $12,000 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 features redemption rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary
equity. At all other times, Ordinary Shares are classified as shareholders’ equity. The Company’s Ordinary Shares
features 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 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
(UNAUDITED)
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 3,528,131 and 3,558,519 Ordinary Shares subject to possible redemption for the three months ended February
28, 2017 and February 29, 2016, respectively, 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.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. 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. Actual results could differ from those estimates.
Recent
Accounting Standards
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 $38.2 million, 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.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 Company’s completion of its initial Business Combination, 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.
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 the Initial Public 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.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 the Initial Public 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.
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. In February 2017, one of the Company’s directors
and non-executive Chairman of the Board provided a commitment letter, which was later amended in April 2017, to loan the
Company up to an aggregate of $110,000 for working capital purposes. To date, the Company has not borrowed any amount under
such commitment.
The
Company maintains its principal executive offices in 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. 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 $1,600,000 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.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Unit
Purchase Option
In
November 2015, 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 was approximately $2 million (or $5.01 per unit) using the Black-Scholes option-pricing
model. The fair value of the Unit Purchase Option was 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
and is included in Prepaid Expenses in the accompanying Condensed Balance Sheets as B. Riley has not provided material services
to date.
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. To date, no fees have been incurred in connection with the agreements yet.
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.
Nasdaq Listing
On January 3, 2017,
the Company received a notice from the Listing Qualifications Department of The Nasdaq Stock Market stating that the Company failed
to hold an annual meeting of stockholders within 12 months after its fiscal year ended December 31, 2015, as required by Nasdaq
Listing Rules 5620(a) and 5810(c)(2)(G). The Company submitted a plan to regain compliance pursuant to the procedures set forth
in the Nasdaq Listing Rules on February 13, 2017. On March 2, 2017, Nasdaq notified the Company that based on the Company’s
plan, Nasdaq determined to grant the Company an extension until June 29, 2017 to regain compliance with the rules by holding an
annual meeting of shareholders. If the Company does not hold an annual meeting by such date, the Company’s securities would
be subject to delisting.
ANDINA
ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 February 28, 2017, 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.
As
of February 28, 2017, 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 3,528,131 and 3,537,686 ordinary shares subject to possible conversion
classified as temporary equity in the accompanying Balance Sheet as of February 28, 2017 and November 30, 2016, respectively.
Note
9 - Fair Value Measurements
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
Level
1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market
in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on
an ongoing basis.
Level
2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar
assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level
3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The
following table presents information about the Company’s assets that are measured on a recurring basis as of February 28,
2017, and November 30, 2016 and indicates the fair value hierarchy of the valuation techniques that the Company utilized
to determine such fair value.
|
|
Quoted
Prices in Active Markets
|
|
|
(Level
1)
|
Description
|
|
February
28, 2017
|
|
November
30, 2016
|
Cash and marketable securities
held in Trust Account
|
|
$
|
40,611,976
|
|
|
|
40,651,426
|
|
Approximately
$630 and $44,000 of the balance in the Trust Account was held in cash as of February 28, 2017 and November 30, 2016.
Note
10 - Subsequent Events
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial
statements 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.