NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Forum
Merger II Corporation (the “Company”) was incorporated in Delaware on May 4, 2018. The Company was formed for the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses (the “Business Combination”).
The
Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. 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.
At
September 30, 2018, the Company had not commenced any operations. All activity through September 30, 2018 related to the Company’s
formation, its initial public offering (the “Initial Public Offering”), which is described below, and identifying
a target company for a Business Combination.
The
registration statement for the Company’s Initial Public Offering was declared effective on August 2, 2018. On August 7,
2018, the Company consummated the Initial Public Offering of 20,000,000 units (“Units” and, with respect to the shares
of Class A common stock included in the Units offered, the “Public Shares”), generating total gross proceeds of $200,000,000,
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of an aggregate of 655,000 units (the “Private
Placement Units”) at a price of $10.00 per unit in a private placement to Forum Investors II LLC (the "Sponsor")
and the underwriters, generating total gross proceeds of $6,550,000, which is described in Note 4.
Following
the closing of the Initial Public Offering on August 7, 2018, an amount of $200,000,000 ($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 Units was placed in a trust account
(“Trust Account”) which 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 selected by the Company meeting the conditions
of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business
Combination or (ii) the distribution of the Trust Account, as described below.
Transaction
costs amounted to $11,532,114, consisting of $4,000,000 of underwriting fees, $7,000,000 of deferred underwriting fees and $532,114
of other costs. In addition, at September 30, 2018, $1,921,521 of cash was held outside of the Trust Account and is available
for working capital purposes.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied
generally toward consummating a Business Combination. The Company must complete an initial Business Combination having an aggregate
fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting fees and taxes
payable on interest earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The
Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to
successfully effect a Business Combination.
The
Company will provide its holders of the outstanding Public Shares (the “public 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 public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount
then in the Trust Account ($10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its franchise and income tax obligations). There will be no redemption rights upon
the completion of a Business Combination with respect to the Company’s warrants. The Company will proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and,
if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a
stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal
reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated
Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange
Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however,
stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business
or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules
and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination,
the Company’s Sponsor has agreed to vote its Founder Shares (as defined below in Note 5), Private Placement Shares (as defined
in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination.
Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against
the proposed transaction.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
If
the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer
rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming
its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The
Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares, Private Placement Shares and Public
Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended
and Restated Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation to redeem
100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision
relating to stockholders’ rights or pre-business combination activity, unless the Company provides the public stockholders
with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The
Company has until February 7, 2020 to consummate a Business Combination (the “Combination Period”). 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 not more than ten business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and income
taxes (less up to $100,000 of interest to pay dissolution expenses), 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 liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors,
dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to
the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination
Period.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares and Private Placement Shares if the Company
fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after
the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company
fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to
their deferred underwriting fees (see Note 6) held in the Trust Account in the event the Company does not complete a Business
Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust
Account that will be available to fund the redemption of the Public Shares. 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 $10.00 per share.
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent
any claims by a third party 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 amount of funds in the Trust Account to below (i)
$10.00 per share or (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the
Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets. This liability will not apply
with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to
any monies held in the Trust Account or 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”). Moreover, 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.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
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 10 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 complete 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 prospectus for
its Initial Public Offering as filed with the SEC on August 3, 2018, as well as the Company’s Current Report on Form
8-K, as filed with the SEC on August 8, 2018. The interim results for the period from May 4, 2018 (inception) through
September 30, 2018 are not necessarily indicative of the results to be expected for the period from May 4, 2018 (inception)
through December 31, 2018 or for any future 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 of 2002, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, 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.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could
differ significantly from those estimates.
Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2018.
Marketable
Securities Held in Trust Account
At
September 30, 2018, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
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, at
September 30, 2018, common stock subject to possible redemption is presented at redemption value as temporary equity, outside
of the stockholders’ equity section of the Company’s balance sheet.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
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. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for
interest and penalties as of September 30, 2018. 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.
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, 2018, which are
not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share
since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered
the effect of warrants sold in the Initial Public Offering and private placement to purchase 20,655,000 shares of Class A common
stock in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future
events. As a result, diluted loss per common share is the same as basic loss per common share for the periods.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Reconciliation
of Net Loss per Common Share
The
Company’s net income (loss) 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,
2018
|
|
|
For the Period
from May 4, 2018
(inception)
Through
September 30,
2018
|
|
Net income
|
|
$
|
339,680
|
|
|
$
|
337,533
|
|
Less: Income attributable to common stock subject to redemption
|
|
|
(416,186
|
)
|
|
|
(416,186
|
)
|
Adjusted net loss
|
|
$
|
(76,506
|
)
|
|
$
|
(78,653
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
5,969,097
|
|
|
|
5,650,780
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations 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. At September 30, 2018, the Company had not experienced
losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily
due to their short-term nature.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s consolidated financial statements.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 20,000,000 Units at a price of $10.00 per Unit. Each Unit consists of one
share of Class A common stock and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder
to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and the underwriters purchased an aggregate of 655,000 Private
Placement Units at a price of $10.00 per Private Placement Unit, for an aggregate purchase price of $6,550,000, of
which 555,000 Private Placement Units were purchased by the Sponsor and 100,000 Private Placement Units were purchased by the
underwriters. Each Private Placement Unit consists of one share of Class A common stock (“Private Placement
Share”) and one warrant (each, a “Private Placement Warrant”). Each Private Placement Warrant is
exercisable to purchase one share of Class A common stock at an exercise price of $11.50. The proceeds from the Private
Placement Units were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does
not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units
will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private
Placement Units and the Private Placement Warrants will be worthless.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
May 16, 2018, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common
stock for an aggregate price of $25,000. The Founder Shares will automatically convert into Class A common stock upon the consummation
of a Business Combination on a one-for-one basis, subject to adjustments, as described in Note 7.
The
Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the Sponsor would own, on an as-converted basis, 20% of the Company’s
issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the
Initial Public Offering and excluding the Private Placement Shares). On September 21, 2018, the underwriters’
over-allotment option expired unexercised, and, as a result 750,000 Founder Shares were forfeited resulting in an aggregate of
5,000,000 Founder Shares outstanding at September 30, 2018.
The
Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of its Founder Shares until the
earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination,
(x) if the last sale price of the Class A common stock equals or exceeds $12.00 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 commencing
at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital
stock exchange or other similar transaction 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.
Administrative
Services Agreement
The Company entered into an agreement with
an affiliate of the Sponsor whereby, commencing on August 7, 2018 through the earlier of the Company’s consummation of a
Business Combination and its liquidation, the Company agreed to pay the affiliate $15,000 per month for office space, utilities
and secretarial and administrative support. For the three months ended September 30, 2018 and for the period from May 4, 2018 (inception)
through September 30, 2018, the Company incurred $30,000 in fees for these services, of which such amount is included in accounts
payable and accrued expenses in the accompanying condensed balance sheet at September 30, 2018.
Related
Party Loans
On
May 16, 2018, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to
which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and
payable on the earlier of December 31, 2018 or the completion of the Initial Public Offering. The Promissory Note was repaid upon
the consummation of the Initial Public Offering on August 7, 2018.
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the
Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may
be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the
Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would
be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company
may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust
Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if
any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,200,000
of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00
per unit. The units would be identical to the Private Placement Units.
NOTE
6. COMMITMENTS
Registration
Rights
Pursuant
to a registration rights agreement entered into on August 7, 2018, the holders of the Founder Shares (and any shares of Class
A common stock issuable upon conversion of the Founder Shares), Private Placement Units, Private Placement Shares, Private Placement
Warrants (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants), and securities
that may be issued upon conversion of Working Capital Loans are entitled to registration rights requiring the Company to register
such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of
the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register
such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale
such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company
will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable
lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Underwriting
Agreement
The
underwriters were paid a cash underwriting fee of $4,000,000. In addition, the underwriters are entitled to a deferred underwriting
fee of $0.35 per Unit, or $7,000,000 in the aggregate. The deferred fee will be forfeited by the underwriters solely in
the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred
Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001
per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s
board of directors. At September 30, 2018, there were no shares of preferred stock issued or outstanding.
Common
Stock
Class
A Common Stock
— The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value
of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2018, there
were 1,658,578 shares of Class A common stock issued or outstanding, excluding 18,996,422 shares of common stock subject to possible
redemption.
Class
B Common Stock
— The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001
per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2018, there were 5,000,000
shares of Class B common stock issued and outstanding.
Holders
of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote
of stockholders except as required by law.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business
Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted
(unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect
to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all
shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all
shares of common stock outstanding upon the completion of the Initial Public Offering (not including the shares of Class A common
stock underlying the private placement units) plus all shares of Class A common stock and equity-linked securities issued or deemed
issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to
any seller in a Business Combination, any private placement-equivalent securities issued, or to be issued, to any seller in a
Business Combination, any private placement equivalent securities issued to the Sponsor or its affiliates upon conversion of loans
made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number
of shares of Class A common stock, subject to adjustment as provided above, at any time.
Warrants
—The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration
statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current
prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business
days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement
for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants.
The Company will use its best efforts to cause the same to become effective and to maintain a current prospectus relating to those
shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration
statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60
th
business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective
registration statement and during any period when the Company will have failed to maintain an effective registration statement,
exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.
Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act,
the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required
to file or maintain in effect a registration statement, and in the event the Company does not so elect, the Company will use its
best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If
that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
FORUM MERGER II CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2018
(Unaudited)
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption; and
|
|
●
|
if,
and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for
any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption
to the warrant holders.
|
|
●
|
If,
and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying
such warrants.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and
number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not
be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination
Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds
with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust
Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Placement Warrants will be
identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants
and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable
or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally,
the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial
purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers
or their 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.
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, 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:
Description
|
|
Level
|
|
|
September 30,
2018
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
200,593,716
|
|
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, the Company did not identify any subsequent events that would have required
adjustment or disclosure in the financial statements.