The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
NOTES TO CONDENSED
FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Schultze Special Purpose Acquisition Corp.
(the “Company”) is a blank check company incorporated in Delaware on June 11, 2018. The Company was formed for the
purpose of entering into a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other
similar business combination with one or more businesses or entities (“Business Combination”). The Company is not limited
to a particular industry or geographic region for purposes of consummating a Business Combination.
At September 30, 2020, the Company had
not yet commenced any operations. All activity through September 30, 2020 relates to the Company’s formation, its initial
public offering (“Initial Public Offering”), which is described below, and, since the closing of the Initial Public
Offering, the search for a prospective initial Business Combination and the proposed Business Combination with Clever Leaves International
Inc. (“Clever Leaves”), as discussed in Note 6.
The registration statement for the Company’s
Initial Public Offering was declared effective on December 10, 2018. On December 13, 2018, the Company consummated the Initial
Public Offering of 13,000,000 units (“Units” and, with respect to the common stock included in the Units sold, the
“Public Shares”), at $10.00 per Unit, generating gross proceeds of $130,000,000, which is described in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 4,150,000 warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to the Company’s sponsor, Schultze Special Purpose
Acquisition Sponsor, LLC (the “Sponsor”), generating gross proceeds of $4,150,000, which is described in Note 4.
Following the closing of the Initial Public
Offering on December 13, 2018, an amount of $130,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”).
The net proceeds placed in the Trust Account will be invested in U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days
or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination
or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.
Transaction costs amounted to $3,158,259,
consisting of $2,600,000 of underwriting fees and $558,259 of offering costs. In addition, $1,241,389 of cash was held outside
of the Trust Account upon closing of the Initial Public Offering and was available for working capital purposes and repayment of
a Promissory Note (as defined in Note 5) from the Sponsor of $200,000.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair
market value equal to at least 80% of the balance in the Trust Account (excluding taxes payable on income earned on the Trust Account)
at the time of the signing of an agreement to enter into a Business Combination. The Company will only complete a Business Combination
if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the
Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its stockholders
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 stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision
as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the
Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount
then in the Trust Account ($10.00 per Public Share, plus any pro rata interest on the funds held in the Trust Account, which interest
shall be net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to
the Company’s warrants.
In connection with a proposed
Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such
purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business
Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least
$5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the
outstanding shares voted are voted in favor of the Business Combination. If a stockholder vote is not required and the
Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its
Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange
Commission (“SEC”), and file tender offer documents containing substantially the same information as would be
included in a proxy statement with the SEC prior to completing a Business Combination.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Sponsor and the Company’s officers
and directors have agreed (a) to vote their Founder Shares (as defined in Note 5), and any Public Shares purchased during or after
the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Certificate
of Incorporation that would affect the substance or timing of the ability of the public stockholders from converting or selling
their shares to the Company in connection with a Business Combination or of the Company’s obligation to redeem 100% of its
Public Shares if the Company does not complete a Business Combination within 18 months from the closing of the Initial Public Offering,
unless the Company provides the public stockholders with the opportunity to redeem their shares in conjunction with any such amendment;
(c) not to redeem any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection
with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business
Combination if the Company does not seek stockholder approval in connection therewith) and (d) that the Founder Shares shall not
participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor
and the Company’s officers and directors will be entitled to liquidating distributions from the Trust Account with respect
to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination
within the prescribed time frame.
The Company initially had until June 13,
2020 to consummate a Business Combination. On June 9, 2020, the Company held a special meeting in lieu of the 2020 annual stockholder
meeting, pursuant to which the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate
of Incorporation to extend the date by which the Company had to complete a Business Combination from June 13, 2020 to September
30, 2020. In connection with the approval of the extension, stockholders elected to redeem an aggregate of 34,868 shares of the
Company’s common stock. As a result, an aggregate of $356,341 (or approximately $10.22 per share) was released from the Company’s
Trust Account to pay such redeeming stockholders.
On September 30, 2020, the Company
held a special meeting of stockholders pursuant to which the Company’s stockholders approved an amendment to the
Company’s Amended and Restated Certificate of Incorporation to extend the date by which the Company has to complete a
Business Combination from September 30, 2020 to December 31, 2020 (the “Combination Period”). In connection with
the approval of the extension, stockholders elected to redeem an aggregate of 4,473,579 shares of the Company’s common
stock. As a result, an aggregate of $45,690,268 (or approximately $10.21 per share) was released from the Company’s
Trust Account on October 2, 2020 to pay such redeeming stockholders and 11,741,553 shares of common stock are now issued and
outstanding.
If the Company is unable to complete a
Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public
Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
(net of taxes payable and less interest to pay dissolution expenses up to $150,000), divided by the number of then outstanding
Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, dissolve
and liquidate, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law.
In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will
be less than the Initial Public Offering price per Unit ($10.00).
The Sponsor has agreed that it will be
liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a
prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the
Trust Account to below $10.00 per share, except as to any claims by a third party who executed a waiver of any and all rights to
seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial
Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be
responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the
Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers,
prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving
any right, title, interest or claim of any kind in or to monies held in the Trust Account.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Liquidity
The Company has principally financed its
operations from inception using proceeds from the sale of its equity securities to its stockholders prior to the Initial Public
Offering and such amount of proceeds from the sale of the Private Placement Warrants and the Initial Public Offering that were
placed in an account outside of the Trust Account for working capital purposes. As of September 30, 2020, the Company had $134,043
in its operating bank account, $132,467,547 in securities held in the Trust Account to be used for a Business Combination or to
repurchase or redeem its common stock in connection therewith and working capital deficit of approximately $188,000, which excludes
approximately $85,000 of prepaid income taxes and $70,000 of franchise taxes payable that may be paid from interest earned on the
Trust Account.
On July 29, 2020, as amended on October
26, 2020, the Sponsor committed to provide the Company an aggregate of $500,000 in loans in order to finance transaction costs
in connection with a Business Combination. To the extent advanced, the loans will be evidenced by a promissory note, will be non-interest
bearing, unsecured and will only be repaid upon the completion of a Business Combination. The loans may also be convertible into
warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, no amounts
have been borrowed under the commitment.
Based on the foregoing, the Company believes
it will have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or December 31, 2020,
the date that the Company will be required to cease all operations except for the purpose of winding up, if a Business Combination
is not consummated.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC.
Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been
condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not
include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations,
or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments,
consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results
and cash flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019
as filed with the SEC on March 10, 2020, which contains the audited financial statements and notes thereto. The financial information
as of December 31, 2019 is derived from the audited financial statements presented in the Company’s Annual Report on Form
10-K for the year ended December 31, 2019. The interim results for the three and nine months ended September 30, 2020 are not necessarily
indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with
the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Securities Exchange Act of 1934, as amended) 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.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Use of Estimates
The preparation of condensed financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from
the Company’s estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of six months or less when purchased to be cash equivalents. The Company did not have cash equivalents
as of September 30, 2020 and December 31, 2019.
Marketable Securities Held in Trust
Account
At September 30, 2020, substantially all
of the assets held in the Trust Account were held in money market funds, which invest in U.S. Treasury Bills. At December 31, 2019,
substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. Through September 30, 2020, the
Company withdrew an aggregate of $946,143 of interest income from the Trust Account to pay its franchise and income taxes, of which
$230,612 was withdrawn during the nine months ended September 30, 2020.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to
occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value
as temporary equity, outside of the stockholders’ 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.
FASB ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. There were no unrecognized tax benefits as of September 30, 2020 and December 31, 2019. The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment
of interest and penalties at September 30, 2020 and December 31, 2019. 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 may be subject to potential examination by federal, state
and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount
of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s
management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
On March 27, 2020, President Trump signed
the Coronavirus Aid, Relief, and Economic Security “CARES” Act into law. The CARES Act includes several significant
business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL”)
and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss
rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest
limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and
Jobs Act tax provisions. The Company does not believe that the CARES Act will have a significant impact on Company's financial
position or statement of operations.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Net Loss Per Common Share
Net loss per common share is computed by
dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class
method in calculating earnings per share. Shares of common stock subject to possible redemption at September 30, 2020 and 2019,
which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss
per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has
not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase 17,150,000 shares
of common stock, since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted net
loss per common share is the same as basic net loss per common share for the periods presented.
Reconciliation of Net Loss Per Common
Share
The Company’s net (loss) income is
adjusted for the portion of income that is attributable to common stock 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 common
share is calculated as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
|
|
$
|
(255,684
|
)
|
|
$
|
459,977
|
|
|
$
|
(175,298
|
)
|
|
$
|
1,510,593
|
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
(32,959
|
)
|
|
|
(527,363
|
)
|
|
|
(515,317
|
)
|
|
|
(1,727,232
|
)
|
Adjusted net loss
|
|
$
|
(288,643
|
)
|
|
$
|
(67,386
|
)
|
|
$
|
(690,615
|
)
|
|
$
|
(216,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
3,729,861
|
|
|
|
3,666,154
|
|
|
|
3,706,748
|
|
|
|
3,658,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.06
|
)
|
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed
the Federal depository insurance coverage of $250,000. The Company has not experienced losses on this account and management believes
the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recently Issued Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 13,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of one share of common stock and one
warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share of common stock at an exercise
price $11.50 per share (see Note 8). Each Public Warrant will become exercisable 30 days after the completion of the Company’s
initial Business Combination and will expire five years after the completion of the Company’s initial Business Combination
or earlier upon redemption or liquidation. However, if the Company does not complete its initial Business Combination on or prior
to December 31, 2020, the Public Warrants will expire at the end of such period. If the Company is unable to deliver registered
shares of common stock to the holder upon exercise of Public Warrants issued in connection with the 13,000,000 Units during the
exercise period, there will be no net cash settlement of these Public Warrants and the Public Warrants will expire worthless, unless
they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the Public Warrants become
exercisable for cash, the Company may redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per Public
Warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of the
Company’s shares of common stock equals or exceeds $18.00 per share for any 20 trading days within the 30-trading day period
ending on the third trading day before the Company sends the notice of redemption to the warrant holders. The exercise price and
number of shares of common stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including
in the event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. In addition,
if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection
with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.50 per share of
common stock (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60%
of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination
on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average
trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day
on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.50 per
share, the exercise price of the Public Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the
Market Value and the Newly Issued Price.
NOTE 4. PRIVATE PLACEMENT WARRANTS
The Sponsor purchased from the Company
an aggregate of 4,150,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (a purchase price of $4,150,000),
in a private placement that occurred simultaneously with the completion of the Initial Public Offering. Each Private Placement
Warrant entitles the holder to purchase one share of common stock at $11.50 per share. The purchase price of the Private Placement
Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account pending completion of the Company’s
initial Business Combination. The Private Placement Warrants (including the common stock issuable upon exercise of the Private
Placement Warrants) will not be transferable, assignable or salable until the completion of the initial Business Combination and
they will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants
are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the
Company and exercisable by such holders on the same basis as the Public Warrants. Otherwise, the Private Placement Warrants have
terms and provisions that are identical to those of the Public Warrants sold as part of the Units in the Initial Public Offering
and have no net cash settlement provisions. If the Company does not complete a Business Combination, then the proceeds will be
part of the liquidating distribution to the public stockholders and the Private Placement Warrants issued to the Sponsor will expire
worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On September 12, 2018, the Sponsor purchased
4,312,500 shares of common stock (the “Founder Shares”) for $25,000, or approximately $0.006 per share. On December
10, 2018, the Sponsor forfeited 575,000 Founder Shares. The Founder Shares are identical to the common stock included in the Units
sold in the Initial Public Offering except that the Founder Shares are subject to certain transfer restrictions, as described in
more detail below. The Sponsor agreed to forfeit up to 487,500 Founder Shares to the extent that the over-allotment option was
not exercised in full by the underwriters so that the initial stockholders would own 20.0% of the Company’s issued and outstanding
shares after the Initial Public Offering (assuming the initial shareholders did not purchase any shares in the Initial Public Offering).
The underwriters’ over-allotment option expired unexercised on January 24, 2019 and, as a result, 487,500 Founder Shares
were forfeited, resulting in 3,250,000 Founder Shares being issued and outstanding as of January 25, 2019.
The Company’s initial stockholders
have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion
of the Company’s initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination,
the last sale price of the Company’s common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period or (B) the
date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the initial Business
Combination that results in all of the Company’s stockholders having the right to exchange their shares of common stock
for cash, securities or other property.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Promissory Note – Related Party
On September 13, 2018, the Company issued
an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company borrowed an aggregate
principal amount of $200,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) June 30, 2019 or (ii)
the consummation of the Initial Public Offering. The Promissory Note was repaid upon the consummation of the Initial Public Offering
on December 13, 2018.
Administrative Services Arrangement
The Sponsor entered into an agreement,
commencing on December 10, 2018 through the earlier of the Company’s consummation of a Business Combination and its liquidation,
to make available to the Company certain general and administrative services, including office space, utilities and administrative
services, as the Company may require from time to time. The Company has agreed to pay the Sponsor $10,000 per month for these services.
For the each of the three months ended September 30, 2020 and 2019, the Company incurred $30,000 in fees for these services. For
the nine months ended September 30, 2020 and 2019, the Company incurred $90,000 in fees for these services. At each of September
30, 2020 and December 31, 2019, fees amounting to $10,000 are included in accounts payable and accrued expenses in the accompanying
condensed balance sheets.
Working Capital Loans
In order to meet the Company’s working
capital needs following the consummation of the Initial Public Offering, the Sponsor or the Company’s officers or directors
or their affiliates may 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 holder’s discretion, up to $1,500,000 of the notes may be converted
into warrants at a price of $1.00 per warrant. These warrants would be identical to the Private Placement Warrants. If the Company
does not complete a Business Combination, the loans will be forgiven.
On July 29, 2020, as amended on October
26, 2020, the Sponsor committed to provide the Company an aggregate of $500,000 in loans in order to finance transaction costs
in connection with a Business Combination. To the extent advanced, the loans will be evidenced by a promissory note, will be non-interest
bearing, unsecured and will only be repaid upon the completion of a Business Combination. The loans may also be convertible into
warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, no amounts
have been borrowed under the commitment.
NOTE 6. COMMITMENTS
Registration Rights
The holders of the Founder Shares and the
holders of the Private Placement Warrants (which may include warrants granted in connection with working capital requirements following
the Initial Public Offering) and the underlying securities are entitled to registration rights pursuant to a registration rights
agreement entered into on December 10, 2018. The holders of a majority of such securities are entitled to make up to three demands,
excluding short form registration demands, that the Company register such securities under the Securities Act. The holders of a
majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the
date on which the Founder Shares are to be released from escrow. The holders of a majority of the Private Placement Warrants (which
may include warrants granted in connection with working capital requirements following the Initial Public Offering) and the underlying
securities can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In
addition, these holders will have “piggy-back” registration rights to include their securities in other registration
statements filed by the Company subsequent to its completion of a Business Combination. The Company will bear the expenses incurred
in connection with the filing of any such registration statements. The registration rights agreement does not provide for any penalties
associated with delays in registering the securities.
Underwriting Agreement
The Company granted the underwriters a
45-day option to purchase up to 1,950,000 additional Units to cover over-allotments at the Initial Public Offering price, less
the underwriting discounts and commissions of 2.0%. The underwriters’ over-allotment option expired unexercised in January
2019.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Business Combination Marketing Agreement
The Company engaged EarlyBirdCapital,
Inc. as advisor in connection with the Company’s Business Combination to assist it in holding meetings with its stockholders
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 in connection with the potential Business Combination, assist
the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and
public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital, Inc. a cash fee for such services
upon the consummation of an initial Business Combination in an amount equal to $4,550,000; provided that the Company has the right
to allocate up to 35% of the fee to any of the underwriters in the Initial Public Offering or other FINRA member firms it retains
to assist the Company in connection with its initial Business Combination.
Business Combination Agreement
On
July 25, 2020, the Company entered into a Business Combination Agreement (the “Original Agreement”) with Clever Leaves,
Clever Leaves Holdings Inc., a corporation organized under the laws of British Columbia, Canada and a wholly-owned subsidiary
of Clever Leaves (“Holdco”), and Novel Merger Sub Inc., a Delaware corporation (“Merger Sub”) and a direct
wholly-owned subsidiary of Holdco. On November 9, 2020, the parties to the Original Agreement entered into an Amended and Restated
Business Combination Agreement (the “Business Combination Agreement”), pursuant to which the Company agreed to combine
with Clever Leaves in a Business Combination (the “Clever Leaves Business Combination”) that will result in both Clever
Leaves and the Company becoming wholly-owned subsidiaries of Holdco.
Pursuant to the Business Combination
Agreement, each of the following transactions will occur in the following order: (i) pursuant to a court-approved
Canadian plan of arrangement (the “Plan of Arrangement”, and the arrangement pursuant to such Plan of
Arrangement, the “Arrangement”) at the effective time of the Arrangement, based on Arrangement Consideration (as defined in the Business
Combination Agreement) derived from $183,600,000: (a) all of the Clever Leaves
shareholders will exchange their Clever Leaves common shares for Holdco common shares and/or non-voting Holdco common shares
(as determined in accordance with the Business Combination Agreement) and (b) certain Clever Leaves shareholders will receive
up to $2,000,000 in cash in the aggregate (with such amount increasing to (x) $3,000,000, if after giving effect to the
exercise of certain redemption rights and payments related thereto, the funds in the Trust Account plus the proceeds from the
Agreed PIPE (as defined in the Business Combination Agreement) are greater than or equal to $60,000,000 and (y) $4,000,000,
if after giving effect to the exercise of redemption rights and payments related thereto, the funds in the Trust Account plus
the proceeds from the Agreed PIPE are greater than or equal to $90,000,000), such that, immediately following the
Arrangement, Clever Leaves will be a direct wholly-owned subsidiary of Holdco; (ii) on the calendar day immediately
following the consummation of the Arrangement, Merger Sub will merge with and into the Company, with the Company surviving
such merger as a direct wholly-owned subsidiary of Holdco (the “Merger”) and, as a result of the Merger, all of
the shares of the Company’s common stock will be converted into the right to receive Holdco common shares as set forth
in the Business Combination Agreement; (iii) immediately following the consummation of the Merger, Holdco will
contribute 100% of the issued and outstanding capital stock of the Company (as the surviving corporation of the Merger) to
Clever Leaves, such that, the Company will be a direct wholly-owned subsidiary of Clever Leaves; and (iv) immediately
following the contribution of the Company to Clever Leaves, Clever Leaves will contribute 100% of the issued and outstanding
shares of NS US Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Clever Leaves, to the Company.
The consummation of the Clever Leaves Business
Combination is subject to a number of conditions set forth in the Business Combination Agreement including, among others, receipt
of the requisite approval of the Company’s stockholders, the Company having at least $26,000,000 available either in
or outside the Trust Account and the execution of the various transaction agreements.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 1,000,000
shares of $0.0001 par value preferred stock with such designations, voting and other rights and preferences as may be determined
from time to time by the Board of Directors. At September 30, 2020 and December 31, 2019, there were no shares of preferred stock
issued and outstanding.
Common Stock
The Company is authorized to issue 100,000,000
shares of common stock, par value $0.0001 per share. At September 30, 2020 and December 31, 2019, there were 3,755,533 and 3,689,862
shares of common stock issued and outstanding (excluding 12,459,599 and 12,560,138 shares subject to possible redemption), respectively.
SCHULTZE SPECIAL PURPOSE ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 8. 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 at fair value on a recurring basis at September 30, 2020 and December 31, 2019,
indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
|
|
|
September 30,
|
|
|
December 31,
|
|
Description
|
|
Level
|
|
2020
|
|
|
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
132,467,547
|
|
|
$
|
132,389,580
|
|
NOTE 9. SUBSEQUENT EVENTS
The Company evaluates subsequent events
and transactions that occur after the balance sheet date up to the date that the condensed financial statements were issued.
Based upon this review, except as disclosed in this financial statement, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the condensed financial statements.