NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 1 – Description of Organization
and Business Operations
Black Ridge Acquisition
Corp. (“BRAC” or the “Company”, “we”, “us” and ”our”) was incorporated
in Delaware on May 9, 2017 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 were originally focused on businesses
in the energy or energy-related industries with an emphasis on opportunities in the upstream oil and gas industry in North America,
but are not limited to a particular industry or geographic region.
All activity through
June 30, 2019 relates to the Company’s formation, its Initial Public Offering, described below, identifying a target company
for a Business Combination and the Business Combination contemplated by the Business Combination Agreement (defined below). 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 October 4, 2017.
The registration statement was initially declared effective for 10,000,000 units (“Units” and, with respect to the
common stock included in the Units being offered, the “Public Shares”), but the offering was increased to 12,000,000
Units pursuant to Rule 462(b) under the Securities Act of 1933, as amended. On October 10, 2017, the Company consummated the Initial
Public Offering of 12,000,000 units, generating gross proceeds of $120,000,000. Transaction costs for the Initial Public Offering
amounted to $2,882,226, including $2,400,000 of underwriting fees.
Simultaneous with the
closing of the Initial Public Offering, the Company consummated the sale of 400,000 units (the “Placement Units”) at
a price of $10.00 per Placement Unit in a private placement to the Company’s sponsor and sole stockholder prior to the Initial
Public Offering, Black Ridge Oil & Gas, Inc. (the “Sponsor”), generating gross proceeds of $4,000,000.
Following the closing
of the Initial Public Offering on October 10, 2017, an amount of $120,600,000 ($10.05 per Public Share) from the net proceeds of
the sale of the Units in the Initial Public Offering and the Placement Units was placed in a trust account (“Trust Account”).
On October 18, 2017,
in connection with the underwriters’ exercise of their over-allotment option in full, the Company consummated the sale of
an additional 1,800,000 Units at $10.00 per Unit, and the sale of an additional 45,000 Placement Units at $10.00 per Placement
Unit, generating total proceeds of $18,450,000. Transaction costs, representing underwriting fees on the sale of the over-allotment
Units, were $360,000. Following the closing, an additional $18,090,000 of the net proceeds (10.05 per Public Share) was placed
in the Trust Account, bringing the total aggregate proceeds held in the Trust Account to $138,690,000 (10.05 per Public Share).
All funds in the Trust Account have been and 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 paragraphs (d)(2), (d)(3) and (d)(4) 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.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
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. There is no assurance that the Company will be able to complete a Business Combination successfully. Upon the closing
of the Initial Public Offering and private placement, $10.05 per Public Share was deposited in the Trust Account to be held until
the earlier of (i) the consummation of its initial Business Combination or (ii) the Company’s failure to consummate a Business
Combination within 21 months from the consummation of the Initial Public Offering (the “Combination Period”). Stockholders
subsequently approved an amendment to the Company’s amended and restated certificate of incorporation to extend the Combination
Period by one additional month. Placing funds in the Trust Account may not protect those funds from third party claims against
the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities
it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there
is no guarantee that such persons will execute such agreements. The Trust Account is maintained by a third party trustee. The
remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on
prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account
balance may be released to the Company for any amounts that are necessary to pay the Company’s income and other tax obligations
and up to $50,000 that may be used to pay for the costs of liquidating the Company. The Sponsor has agreed that it will be liable
to ensure that the proceeds in the Trust Account are not reduced below $10.05 per share by the claims of target businesses or
claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold
to the Company, but there is no assurance that the Sponsor will be able to satisfy its indemnification obligations if it is required
to do so. Additionally, the agreement entered into by the Sponsor specifically provides for two exceptions to the indemnity it
has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has
executed an agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any monies
held in the Trust Account, or (2) as to any claims for indemnification by the underwriters of the Initial Public Offering against
certain liabilities, including liabilities under the Securities Act of 1933, as amended.
Initial Business
Combination
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, net of tax obligations, at the time
of the execution of a definitive agreement for such Business Combination.
The Company will provide
the holders of the Public Shares (“Public Stockholders”) with an opportunity to redeem all or a portion of their Public
Shares in connection with a stockholder meeting called to approve the Business Combination, irrespective of whether they vote
for or against the proposed Business Combination, at a per-share price, payable in cash, equal to the aggregate amount then on
deposit in the Trust Account including interest (net of franchise and income taxes payable), divided by the number of then outstanding
Public Shares. The amount in the Trust Account, net of franchise and income taxes payable, currently amounts to approximately
$10.29 per Public Share. The common stock subject to redemption was recorded at a redemption value and classified as temporary
equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity”. 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 a majority of the outstanding
shares voted are voted in favor of the Business Combination.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
The Sponsor has
agreed to vote its Founder Shares (as described in Note 4) and any Public Shares purchased after the Initial Public Offering
in favor of the initial Business Combination, and the Company’s executive officers and directors have also agreed to
vote any Public Shares purchased after the Initial Public Offering in favor of the Initial Business Combination. The Sponsor
entered into a letter agreement, pursuant to which it agreed to waive its redemption rights with respect to the Founder
Shares, shares included in the Placement Units and Public Shares in connection with the completion of the initial Business
Combination. In addition, the Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with
respect to the Founder Shares and shares included in the Placement Units if the Company fails to complete the initial
Business Combination within the prescribed time frame.
Proposed Business Combination
On December 19, 2018,
the Company entered into a business combination agreement (the “Business Combination Agreement”) with Black Ridge
Merger Sub, Corp., a Delaware corporation and wholly-owned subsidiary of the Company formed on December 19, 2018 (“Merger
Sub”), Allied Esports Entertainment, Inc. (“Allied Esports”), Ourgame International Holdings Ltd. (“Ourgame”),
Noble Link Global Limited, a wholly-owned subsidiary of Ourgame (“Noble”), and Primo Vital Ltd., also a wholly-owned
subsidiary of Ourgame (“Primo”), pursuant to which the Company will acquire two of Ourgame’s global esports
and entertainment assets, Allied Esports and WPT Enterprises, Inc. (“WPT”) . The Business Combination Agreement was
subsequently amended on August 5, 2019. See Note 7.
Redemptions Subsequent to Balance Sheet Date
In connection with a special meeting of its stockholders
to extend the date that the Company has to consummate a business combination the holders of 9,246,727 shares of the
Company’s common stock properly exercised their right to convert their shares into cash at a conversion price of
approximately $10.29 per share resulting in $95,125,574 in Trust Account assets being distributed back to shareholders. See
Note 9 – Subsequent Events.
Failure to Consummate a Business Combination
If the Company is unable
to complete the initial Business Combination within the Combination Period, the Company must: (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
(which interest shall be net of franchise and income taxes payable) 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 Company’s remaining stockholders and the Company’s Board of Directors, dissolve and
liquidate, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Note 2 – Significant Accounting Policies
Consolidation Policy
The accompanying unaudited
condensed consolidated financial statements include the accounts of the following legal entities:
Name of entity
|
|
State of Incorporation
|
|
Relationship
|
Black Ridge Acquisition Corp.
|
|
Delaware
|
|
Parent
|
Black Ridge Merger Sub Corp.
|
|
Delaware
|
|
Subsidiary
(1)
|
|
(1)
|
Wholly owned subsidiary formed on December 19, 2018 to facilitate the proposed Business Combination with Allied Esports and Ourgame.
|
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
The parent company, Black Ridge Acquisition
Corp., and Black Ridge Merger Sub Corp. are collectively referred to herein as “the Company” or “Black Ridge”.
All significant intercompany transactions have been eliminated in the preparation of these financial statements.
Basis of Presentation
The accompanying unaudited
condensed consolidated 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 comprehensive presentation of financial
position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated
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 consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K as filed
with the SEC on March 18, 2019. The interim results for the three and six month periods ended June 30, 2019 and 2018 are not necessarily
indicative of the results to be expected for the years ending December 31, 2019 and 2018 or for any future interim periods.
Going concern
The accompanying unaudited
condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of June 30,
2019, the Company had negative working capital of $40,195 (excluding income taxes and franchise fees which may be paid out of
the Trust Account and the notes payable to our sponsor). During the six months ended June 30, 2019, the Company withdrew $893,323
of interest from the Trust account to pay the Company’s income tax and franchise fee obligations. Further, the Company has
incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. The Company’s plans to
consummate an initial Business Combination may not be successful.
Based on the foregoing,
the Company may not have sufficient funds available to operate its business through the mandatory liquidation date or until it
closes an initial business combination and may need to obtain additional financing from its sponsor or other sources in order to
meet its obligations. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. These
matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Emerging growth company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”),
as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
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 accountant standards used.
Cash and cash equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company
did not have any cash equivalents as of June 30, 2019 or December 31, 2018.
Cash and securities held in Trust Account
As of June 30, 2019,
$-0- of cash and $142,048,087 of marketable securities were held in the Trust Account. As of December 31, 2018, $2,312 of cash
and $141,304,995 of marketable securities were held in the Trust Account. During the six months ended June 30, 2019 and 2018,
the Company withdrew $893,323 and $130,621, respectively of interest earned from the Trust account to pay the Company’s
income tax and franchise fee obligations.
Income taxes
The Company accounts
for income taxes under ASC Topic 740 “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred
tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets
and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally
requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will
not be realized.
ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken
or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be
sustained upon examination by taxing authorities. The Company 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 June 30, 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 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 changeover the next twelve months.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
The Company’s
policy for recording interest and penalties associated with income tax audits is to record such expense as a component of income
tax expense. There are no amounts accrued for penalties or interest as of June 30, 2019 or December 31, 2018. Management is currently
unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
The effective rate
differs from the statutory rate primarily due to the impact of state taxes and non-deductible merger costs.
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 (if any) 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, as of June 30, 2019 and December
31, 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.
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. As of June 30, 2019, the Company had not experienced
losses on this account since the Company’s inception and management believes the Company is not exposed to significant risks
on such account.
Net income (loss) per share
Net income
(loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock
outstanding during the period. An aggregate of 13,237,007 and 13,329,334 shares of common stock subject to possible
redemption at June 30, 2019 and June 30, 2018, respectively, have been excluded from the calculation of basic income (loss)
per share since such shares, if redeemed, only participate in their pro rata share of the trust earnings.
The Company's net income
(loss) is also shown adjusted for the portion of income attributable to shares subject to redemption, as these shares only participate
in the income of the trust account less taxes and franchise fees and not the operating losses of the Company.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Accordingly, basic
and diluted net income (loss) per share attributable to shares not subject to redemption is as follows:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
|
|
$
|
338,704
|
|
|
$
|
369,141
|
|
|
$
|
671,115
|
|
|
$
|
603,840
|
|
Less income attributable to shares subject to redemption
|
|
|
(534,961
|
)
|
|
|
(439,359
|
)
|
|
|
(1,141,078
|
)
|
|
|
(796,162
|
)
|
Adjusted net loss
|
|
|
(196,257
|
)
|
|
|
(70,218
|
)
|
|
|
(469,963
|
)
|
|
|
(192,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
4,436,034
|
|
|
|
4,358,691
|
|
|
|
4,424,041
|
|
|
|
4,352,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share attributable to remaining shares
|
|
$
|
(0.04
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
The Company has
not considered the effect of 1) warrants to purchase 14,845,000 shares of common stock, 2) rights that convert to 1,484,500
shares and 3) 600,000 shares included in the underwriters’ unit purchase option sold in Public Offering, Private
Placement or underlying the unit option sold to the underwriter in the calculation of diluted loss per share, since the
exercise of the warrants, receipt of rights and shares is contingent on the occurrence of future events. Additionally, the
Company has not considered the effect of any conversion into units of the convertible notes payable issued to its Sponsor as
that conversion is also contingent on future events.
Use of estimates
The preparation of
financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
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 financial statements.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 3 — Public Offering and Private
Placement
Initial Public Offering
Pursuant to the Initial
Public Offering, the Company sold 13,800,000 Units (including 1,800,000 Units subject to the underwriters’ over-allotment
option) at a purchase price of $10.00 per Unit. Each Unit consists of one share of common stock, one right (“Public Right”)
and one warrant (“Public Warrant”). Each Public Right will convert into one-tenth (1/10) of one share of common stock
upon consummation of a Business Combination (see Note 6). Each Public Warrant entitles the holder to purchase one share of common
stock at an exercise price of $11.50 (see Note 6).
Private Placement
Simultaneous with the
closing of the Initial Public Offering and over-allotment option exercise, the Sponsor purchased an aggregate of 445,000 Placement
Units at a price of $10.00 per Unit (or an aggregate purchase price of $4,450,000). Each Placement Unit consists of one share of
common stock (“Placement Share”), one right (“Placement Right”) and one warrant (each, a “Placement
Warrant”) to purchase one share of the common stock at an exercise price of $11.50 per share. The proceeds from the 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 of the sale of the Placement Units will be used to fund the redemption
of the Public Shares (subject to the requirements of applicable law) and the Placement Rights and Placement Warrants will expire
worthless.
The Placement Units
are identical to the Units sold in the Initial Public Offering except that the Placement Warrants (i) are not redeemable by the
Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the Sponsor or any of its permitted
transferees. In addition, the Placement Units and their component securities may not be transferable, assignable or salable until
after the consummation of a Business Combination, subject to certain limited exceptions.
Note 4 — Related Party Transactions
Founder Shares
In connection with
the organization of the Company, a total of 2,875,000 shares of common stock were sold to the Sponsor at a price of approximately
$0.0087 per share for an aggregate of $25,000 (“Founder Shares”). On October 4, 2017, the Company effected a stock
dividend of 0.2 shares for each of the then outstanding Founder Shares, resulting in the issuance of an additional 575,000 Founder
Shares, bringing the total to 3,450,000 Founder Shares including an aggregate of up to 450,000 Founder Shares that were subject
to forfeiture to the extent that the over-allotment option was not exercised by the underwriters in full or in part. The Sponsor
would have been required to forfeit only a number of Founder Shares necessary to continue to maintain the 20.0% ownership interest
in our shares of common stock after giving effect to the offering and exercise, if any, of the underwriters’ over-allotment
option (excluding the Placement Shares and any shares included in units acquired in the Initial Public Offering). As a result of
the underwriters’ election to exercise their over-allotment option in full on October 18, 2017, the 450,000 Founders Shares
previously subject to forfeiture were no longer subject to forfeiture.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Subject to certain
limited exceptions, 50% of the Founder Shares will not be transferred, assigned, sold until the earlier of: (i) one year after
the date of the consummation of the initial Business Combination or (ii) the date on which the closing price of the Company’s
common stock equals or exceeds $12.50 per share (as adjusted) for any 20 trading days within any 30-trading day period commencing
after the initial Business Combination, and the remaining 50% of the Founder Shares will not be transferred, assigned, sold until
one year after the date of the consummation of the initial Business Combination, or earlier, in either case, if, subsequent to
the Company’s initial Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange, reorganization
or other similar transaction which results in all of shareholders having the right to exchange their common stock for cash, securities
or other property.
Related Party Loans
In order to finance
transaction costs in connection with an intended initial business combination, our sponsor, officers, directors or their affiliates
may, but are not obligated to, loan us funds as may be required. If we consummate an initial business combination, we would repay
such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital
held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment.
Up to $1,500,000 of such loans may be convertible into units of the post business combination entity at a price of $10.00 per unit
at the option of the lender. The units would be identical to the Placement Units.
As of June 30, 2019,
the Sponsor had loaned the Company, in the form of a convertible promissory notes, an aggregate of $750,000 to cover expenses
related to the proposed Business Combination. The notes are unsecured, non-interest bearing and are payable at the consummation
by the Company of a Business Combination. Upon consummation of a Business Combination, the principal balance of the notes may
be converted, at the Sponsor’s option, to units at a price of $10.00 per unit. The terms of the units are identical to the
units issued by the Company in its private placement. If the Sponsor converts the entire principal balance of the convertible
promissory notes, it would receive 75,000 units. If a Business Combination is not consummated, the notes will not be repaid by
the Company and all amounts owed thereunder by the Company will be forgiven except to the extent that the Company has funds available
to it outside of its trust account established in connection with the initial public offering. The issuance of the notes to the
Sponsor were exempt pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
Administrative Service Agreement
Commencing on the effective
date of the Initial Public Offering through the earlier of our consummation of our initial business combination or our liquidation,
the Sponsor makes available to us certain general and administrative services, including office space, utilities and administrative
support, as we may require from time to time. The Company agreed to pay the Sponsor $10,000 per month for these services
.
Management
fee expense of $30,000 was recognized by the Company for both the three months ended June 30, 2019 and 2018 and $60,000 was recognized
by the Company for both the six months ended June, 2019 and 2018.
Accounts Payable - Related Party
Accounts payable –
related party represents balances due to the Sponsor for general expenses paid by the Sponsor on behalf of the Company.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 5 — Commitments
Agreements with underwriters and investment
advisors
The Company engaged
the underwriters as advisors in connection with our initial Business Combination to assist us in holding meetings with our shareholders
to discuss the potential business combination and the target business’ attributes, introduce us to potential investors that
are interested in purchasing our securities, assist us in obtaining shareholder approval for the business combination and assist
us with our press releases and public filings in connection with the business combination. Upon amendment of the agreement on August
5, 2019, the Company will pay the underwriters a cash fee for such services upon the consummation of our initial business combination
in an amount of approximately $2,000,000 and 303,490 shares of the Company’s common stock (exclusive of any applicable finders’
fees which might become payable).
The Company has engaged
an investment advisor to assist us in connection with due diligence, financial analysis and positioning the Company in the capital
markets (the “Capital Markets Fee”) related to the Proposed Business Combination. The Company will pay the investment
advisor a fee of approximately $2,000,000 for due diligence and advisory services upon the consummation of the Proposed Business
Combination. The Company will also pay the Capital Markets Fee of 3% of the cash or securities available for the closing of the
Proposed Business Combination including the proceeds received from the trust account net of cash reserved to fulfill redemption
requests upon the consummation of the Proposed Business Combination. The investment advisor has agreed to take stock at a rate
of $6.59 per share instead of a cash payment.
The Company has engaged
additional investment advisors for financial advisory services related to the Proposed Business Combination. The Company will
pay the investment advisors fees totaling approximately $1,257,500 for financial advisory services upon the consummation of the
Proposed Business Combination. The investment advisors have agreed to take stock at a rate of $6.59 per share instead of a cash
payment.
Registration Rights
Pursuant to a registration
rights agreement entered into on October 4, 2017, the holders of the Founders’ Shares, as well as the holders of the Placement
Units and any units our Sponsor, officers, directors or their affiliates may be issued in payment of working capital loans made
to us (and all underlying securities), are entitled to registration rights. The holders of a majority of these securities are entitled
to make up to two demands that we register such securities. The holders of the majority of the Founders’ Shares can elect
to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock
are to be released from escrow. The holders of a majority of the Placement Units and units issued to our Sponsor, officers, directors
or their affiliates in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration
rights at any time after we consummate a Business Combination. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to our consummation of a Business Combination. We will bear the
expenses incurred in connection with the filing of any such registration statements.
Note 6 — 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 designation, rights and preferences
as may be determined from time to time by the Company’s board of directors. As of June 30, 2019 and December 31, 2018, no
preferred stock is issued or outstanding.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Common Stock
The Company is authorized
to issue 35,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2019 and December 31, 2018, the Company
has issued an aggregate of 17,695,000 shares of common stock, inclusive of 13,237,007 and 13,283,086 shares of common stock, respectively,
subject to possible redemption classified as temporary equity in the accompanying Balance Sheets.
Rights
Each holder of a right
will receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if a holder of such
right converted all ordinary shares held by it in connection with a Business Combination. No fractional shares will be issued upon
exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional
shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase
price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination
in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of rights to receive
the same per share consideration the holders of the shares of common stock will receive in the transaction on an as-converted into
shares of common stock basis and each holder of rights will be required to affirmatively covert its rights in order to receive
1/10 of a share of common stock underlying each right (without paying additional consideration). The shares of common stock issuable
upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company).
If the Company is unable
to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account,
holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from
the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless.
Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of
a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the
rights may expire worthless.
The Placement Rights
are identical to the rights included in the Units sold in the Initial Public Offering, except that, among others, the Placement
Rights and Placement Shares were purchased pursuant to an exemption from the registration requirements of the Securities Act and
will become tradable only after certain conditions are met or the resale of such rights (including underlying securities) is registered
under the Securities Act.
Warrants
The Warrants will become
exercisable 30 days after the consummation of a Business Combination. No Warrants will be exercisable for cash unless the Company
has an effective and current registration statement covering the shares of common stock issuable upon exercise of the Warrants
and a current prospectus relating to such shares. Notwithstanding the foregoing, if a registration statement covering the shares
of common stock issuable upon the exercise of the Warrants is not effective within 30 days from the consummation of a Business
Combination, the 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 the Warrants on a cashless basis pursuant to an available
exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able
to exercise their Warrants on a cashless basis. The Warrants will expire five years from the consummation of a Business Combination
or earlier upon redemption or liquidation.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
The Placement
Warrants are identical to the Warrants underlying the Units being sold in the Initial Public Offering, except the Placement Warrants
are exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such Placement
Warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable by the Company, in
each case so long as they are still held by the Sponsor or its affiliates.
The Company may call
the Warrants for redemption (excluding the Placement Warrants but including any outstanding Warrants issued upon exercise of the
unit purchase option issued to its underwriter), in whole and not in part, at a price of $.01 per Warrant:
|
·
|
at any time while the Warrants are exercisable,
|
|
|
|
|
·
|
upon not less than 30 days’ prior written notice of redemption to each Warrant holder,
|
|
|
|
|
·
|
if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share, for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to Warrant holders, and
|
|
|
|
|
·
|
if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such Warrants at the time of redemption and for the entire 30-day redemption period and continuing each day thereafter until the date of redemption.
|
If the Company calls
the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to do so
on a “cashless basis,” as described in the warrant agreement.
The exercise price
and number of shares of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including
in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However,
the Warrants will not be adjusted for issuances of shares of 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 respect to such Warrants. Accordingly, the Warrants may expire worthless.
Unit Purchase Option
On October 10, 2017,
the Company sold to its underwriter and its designees, for $100, an option to purchase up to 600,000 Units exercisable at $11.50
per Unit (or an aggregate exercise price of $6,900,000) commencing on the consummation of a Business Combination. The unit purchase
option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the effective
date of the registration statement related to the Initial Public Offering. The Units issuable upon exercise of this option are
identical to those offered in the Initial Public Offering. The Company accounted for the unit purchase option, inclusive of the
receipt of $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to stockholders’
equity. The Company estimated the fair value of this unit purchase option to be approximately $1,778,978 (or $2.97 per Unit) using
the Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriters was estimated as
of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.94% and
(3) expected life of five years. The option grants to holders demand and “piggy back” rights for periods of five and
seven years, respectively, from the effective date of the registration statement with respect to the registration under the Securities
Act of 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 exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including
in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the
option will not be adjusted for issuances of ordinary shares at a price below its exercise price.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 7 – Proposed Business Combination
Business Combination Agreement
On December 19, 2018,
the Company entered into the Business Combination Agreement with Merger Sub, Allied Esports, Ourgame, Noble and Primo. The Business
Combination Agreement was amended on August 5, 2019 (see Note 9 - Subsequent Events) and the Business Combination Agreement as
amended is referred to as the Amended Business Combination Agreement.
Subject to the Amended
Business Combination Agreement, (i) Noble will merge with and into Allied Esports (the “Redomestication Merger”) with
Allied Esports being the surviving entity in such merger and (ii) immediately after the Redomestication Merger, Merger Sub will
merge with and into Allied Esports with Allied Esports being the surviving entity of such merger (the “Transaction Merger”
and together with the Redomestication Merger, the “Mergers”).
The Mergers will result
in the Company acquiring two of Ourgame’s global esports and entertainment assets, Allied Esports and WPT. Allied Esports
is a premier esports entertainment company with a global network of dedicated esports properties and content production facilities.
WPT is the creator of the World Poker Tour® (WPT®) – the premier name in internationally televised gaming and entertainment
with brand presence in land-based tournaments, television, online and mobile. The proposed transaction will seek to strategically
combine the globally recognized Allied Esports brand with the three-pronged business model of the iconic World Poker Tour, featuring
in-person experiences, multiplatform content and interactive services, to leverage the high-growth opportunities in the global
esports industry.
Upon consummation of
the Mergers (the “Closing”), the Company will issue to the former owners of Allied Esports and WPT (i) an aggregate
of 11,602,754 shares of common stock, par value $0.0001 per share, of the Company’s common stock and (ii) an aggregate of
3,800,003 warrants to purchase shares of common stock of the Company.
In addition to the
consideration described above, the former owners of Allied Esports and WPT will be entitled to receive their pro rata portion of
an aggregate of an additional 3,846,153 shares of the Company’s common stock if the last sales price of the Company’s
common stock equals or exceeds $13.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for thirty (30) consecutive days at any time during the five (5) year period commencing on the date of the Closing (the “Closing
Date”).
The Business Combination
Agreement, which original called for a debt repayment to Ourgame of $35,000,000 was amended to call for the Company to (i) assume
$10,000,000 of the debt obligations of Ourgame and Noble (including an additional $1,200,000 of accrued interest) and (ii) repay
Ourgame the remaining balance of $23,800,000 by paying $3,500,000 in cash to Ourgame and its designees, issuing to Ourgame and
its designees 2,928,679 shares of the Company’s common stock and Ourgame retaining $1,000,000 of the proceeds of such loans
to pay its transaction expenses incurred in the Merger. In connection with entering into the Amendment, Black Ridge Oil & Gas, Inc. (“BROG”), the Company’s founder, agreed to
transfer an aggregate of 600,000 shares of the Company’s common stock held by it to Ourgame.
Proposed Changes
to the Capital Structure
In connection with
the proposed Business Combination, the Company is seeking shareholder approval to amend its charter to increase the authorized
shares of the Company’s common stock to 65,000,000 shares.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Conditions to Consummation
of the Business Combination
Consummation of the
transactions contemplated by the Amended Business Combination Agreement is subject to certain closing conditions including, among
others, (i) approval by the stockholders of the Company, and (ii) that the Company have available cash in an amount not less than
$22,000,000 after payment to stockholders who elect to redeem their shares of common stock in accordance with the provisions of
the Company’s charter documents.
Termination
The Amended Business
Combination Agreement may be terminated at any time prior to the Closing Date (whether before or after the Company’s shareholder
vote has been obtained) by mutual written consent of the Company and Ourgame and Noble and in certain other limited circumstances,
including if the proposed Business Combination has not been consummated by August 9, 2019 (as amended in the Company’s charter,
see Note 9 - Subsequent Events).
Note 8 – Fair Value of Financial Instruments
Under FASB ASC 820-10-5,
fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a
fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.
Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that
are required for items measured at fair value.
The Company’s
financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels
are as follows:
Level 1 - Inputs are unadjusted
quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
Level 2 - Inputs include quoted
prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield
curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means
(market corroborated inputs).
Level 3 - Unobservable inputs
that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
The following schedule
summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2019
and December 31, 2018:
|
|
Fair Value Measurements at June 30, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in trust account
|
|
$
|
142,048,087
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Cash and cash equivalents
|
|
|
34,837
|
|
|
|
–
|
|
|
|
–
|
|
Total assets
|
|
|
142,082,924
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
142,082,924
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
Fair Value Measurements at December 31, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in trust account
|
|
$
|
141,307,307
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Cash and cash equivalents
|
|
|
133,729
|
|
|
|
–
|
|
|
|
–
|
|
Total assets
|
|
|
141,441,036
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
141,441,036
|
|
|
$
|
–
|
|
|
$
|
–
|
|
There were no transfers
of financial assets or liabilities between Level 1 and Level 2 inputs for the six months ended June 30, 2019.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 9 — Subsequent
Events
The Extension Meeting
On July
9, 2019, BRAC held a special meeting of its stockholders (the “Meeting”). At the Meeting, the Company’s stockholders
considered a proposal to adopt and approve an amendment to the Company’s amended and restated certificate of incorporation
(the “Charter”) to extend the date that the Company has to consummate a business combination (the “Extension”)
to August 10, 2019. The following is a tabulation of the votes with respect to this proposal, which was approved by the Company’s
stockholders:
For
|
Against
|
Abstain
|
Broker Non-Votes
|
12,312,704
|
2,170,573
|
200,000
|
0
|
In
connection with this vote, the holders of 9,246,727 shares of the Company’s common stock properly exercised their
right to convert their shares into cash at a conversion price of approximately $10.29 per share resulting in $95,125,574 in
Trust Account assets being distributed back to shareholders. In connection with the Extension, BROG, loaned $30,000 to the
Company to be placed in the Trust Account for the benefit of the public shares that were not converted. The loan is
non-interest bearing and is evidenced by a promissory note issued by the Company on the same date.
The Company filed the
amendment to the Charter with the Secretary of State of the State of Delaware on July 9, 2019.
Amendment to the Business Combination
Agreement
On August 5,
2019, BRAC entered into an amendment (the “Amendment”) to the Business Combination Agreement. The Amendment
reduces the closing condition originally contained in the Business Combination Agreement requiring the Company to have
minimum cash on hand following the proper exercise of conversion rights by the holders of public shares from at least
$80,000,000 to $22,000,000. The Business Combination Agreement also originally provided for the Company to repay $35,000,000
of indebtedness of Allied Esports and the World Poker Tour owed to Ourgame in cash at the closing of the transactions (the
“Closing”). Pursuant to the Amendment, the parties agreed that instead of paying the full $35,000,000 in cash at
the Closing, the Company would (i) assume $10,000,000 of the debt obligations of Ourgame and Noble (including an additional
$1,200,000 of accrued interest) and (ii) repay Ourgame the remaining balance of $23,800,000 by paying $3,500,000 in cash to
Ourgame and its designees, issuing to Ourgame and its designees 2,928,679 shares of the Company’s common stock and
Ourgame retaining $1,000,000 of the proceeds of such loans to pay its transaction expenses incurred in the Merger. In
connection with entering into the Amendment, BROG agreed to transfer an aggregate of 600,000 shares of the Company’s
common stock held by it to Ourgame.
In connection with
the execution of the Amendment, the parties entered into an amendment and acknowledgment agreement (“Acknowledgment Agreement”)
whereby the terms of the previously issued convertible notes (“Notes”) of Allied Esports and WPT (collectively “AEII/WPT”)
whereby bridge holders provided $14 million to be used for the operations of AEII/WPT were amended. Pursuant to the Acknowledgement
Agreement, the bridge holders have agreed to defer repayment of the Notes to one year and two weeks following the Closing (the
“Maturity Date”). In consideration of agreeing to the deferred repayment, the bridge holders will be paid an additional
six months of interest (i.e., a total of 18 months interest) to the extent any bridge holder elects not to convert their Note to
equity. The Company has agreed to assume the debt under the Notes as part of the mergers contemplated by the Agreement, and agreed
that the debt will be secured by all the assets of the Company following the Closing. The Sponsor has also agreed that it will
not make any further transfer of its securities of the Company, subject to certain exceptions, until the debt is repaid. The Notes
are convertible at any time by a holder between the Closing and the Maturity Date at the “Conversion Price.” The “Conversion
Price” is the lesser of $8.50 per share or the price at which shares are issued to Ourgame or its affiliates in connection
with the mergers.
BLACK RIDGE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
In July and August
2019, the Company and the Sponsor also entered into several share purchase agreements (the “Purchase Agreements”) with
several parties (collectively referred to as the “Purchasers”). Pursuant to the Purchase Agreements, the Purchasers
have agreed to purchase an aggregate of $18,000,000 of shares of the Company’s common stock in open market or privately negotiated
transactions. If the Purchasers are unable to purchase the full $18,000,000 of shares of common stock in open market or privately
negotiated transactions, the Company will issue to the Purchasers newly issued shares at the Closing at a per-share price equal
to the per-share amount held in the Company’s trust account (currently approximately $10.30 per share), and having an aggregate
value equal to the difference between $18,000,000 and the dollar amount of shares purchased by them in the open market or in privately
negotiated transactions. One of the agreements also contains certain restrictions on the use of cash from the purchase. At the
Closing, the Company has agreed to issue to the Purchasers 1.5 shares of common stock for every 10 shares purchased by them under
the Purchase Agreements. Additionally, the Sponsor has agreed to transfer an aggregate of 720,000 shares held by it to the Purchasers.
Pursuant to the Purchase Agreements, the Company is required to file a registration statement with the SEC as promptly as practicable
following Closing to register the resale of any securities purchased by the Purchasers that are not already registered and cause
such registration statement to become effective as soon as possible. The Subscribers included a $3 million investment from Lyle Berman, a member of the board of directors
of both BRAC and the Sponsor and the largest shareholder of the Sponsor. Additionally, $5 million will be held in an escrow account
and its usage will be limited to specific capital projects.