ITEM
1. FINANCIAL STATEMENTS
LEGACY
ACQUISITION CORP.
CONDENSED
BALANCE SHEETS
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June 30,
2018
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December 31,
2017
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(unaudited)
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ASSETS
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Current assets –
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Cash
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$
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1,813,000
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$
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1,752,000
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|
Prepaid expenses and other assets
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131,000
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|
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136,000
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|
Total assets
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1,944,000
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1,888,000
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Non-current assets –
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Cash and investments held in Trust Account
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301,332,000
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300,403,000
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Total assets
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$
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303,276,000
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$
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302,291,000
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities –
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Accounts payable
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$
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8,000
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$
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186,000
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Accrued expenses
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25,000
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95,000
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Accrued franchise and income taxes
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25,000
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155,000
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Total current liabilities
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58,000
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436,000
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Other liabilities –
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Deferred underwriting compensation
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10,500,000
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10,500,000
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Total liabilities
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10,558,000
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10,936,000
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Common stock subject to possible redemption; 28,771,790 and 28,635,526 shares, respectively, at June 30, 2018 and December 31, 2017 (at approximately $10.00 per share)
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287,718,000
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286,355,000
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding
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-
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-
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Class A Common stock, $0.0001 par value, 100,000,000 authorized, shares, 30,000,000 shares issued at June 30, 2018 and December 31, 2017, 1,228,210 and 1,364,474 shares, outstanding (excluding 28,771,790 and 28,635,526 shares, respectively, subject to possible redemption at June 30, 2018 and December 31, 2017
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-
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-
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Class F Common stock, $0.0001 par value, 10,000,000
authorized shares, 7,500,000 shares issued and outstanding
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1,000
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1,000
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Additional paid-in-capital
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3,678,000
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5,040,000
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Retained earnings (accumulated deficit)
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1,321,000
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(41,000
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)
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Total stockholders’ equity
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5,000,000
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5,000,000
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Total liabilities and stockholders’ equity
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$
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303,276,000
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$
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302,291,000
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See
accompanying notes to condensed financial statements
LEGACY
ACQUISITION CORP.
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
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Three months ended
June 30,
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Six months ended
June 30,
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2018
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2017
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2018
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2017
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Revenues
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$
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-
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$
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-
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$
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-
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$
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-
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General and administrative expenses
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270,000
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20,000
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558,000
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47,000
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Loss from operations
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(270,000
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)
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(20,000
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)
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(558,000
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)
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(47,000
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)
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Interest income on Trust Account
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1,279,000
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-
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2,355,000
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-
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Income (loss) before income taxes
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1,009,000
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(20,000
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)
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1,797,000
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$
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(47,000
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)
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Provision for income taxes
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(220,000
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)
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-
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(435,000
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)
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-
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Net income (loss)
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$
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789,000
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$
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(20,000
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)
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$
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1,362,000
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(47,000
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)
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Two Class Method for Per Share Information:
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Weighted average class A common shares outstanding – basic and diluted
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30,000,000
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-
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30,000,000
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-
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Net income per class A common stock – basic and diluted
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$
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0.03
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$
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0.00
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$
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0.05
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$
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0.00
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Weighted average class F common shares
outstanding
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7,500,000
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7,500,000
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7,500,000
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7,500,000
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Net income (loss) per class F common stock –
basic and diluted
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$
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0.00
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$
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0.00
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$
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0.00
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$
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(0.01
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)
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See
accompanying notes to condensed financial statements
LEGACY
ACQUISITION CORP.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’
EQUITY
For
the six months ended June 30, 2018
(unaudited)
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Common Stock
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Class A
Shares
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Amount
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Class F
Shares
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Amount
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Additional
Paid-in
Capital
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Retained
Earnings
(Accumulated
Deficit)
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Stockholders’
Equity
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Balances, December 31, 2017
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1,364,474
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$
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-
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7,500,000
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$
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1,000
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5,040,000
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(41,000
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)
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5,000,000
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Change in Class A common stock subject to possible redemption
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(136,264
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)
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-
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-
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-
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(1,362,000
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)
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-
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(1,362,000
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)
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Net income
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-
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-
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-
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-
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-
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1,362,000
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1,362,000
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Balances, June 30, 2018
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1,228,210
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$
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-
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7,500,000
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$
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1,000
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$
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3,678,000
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$
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1,321,000
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$
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5,000,000
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See
accompanying notes to condensed financial statements
LEGACY
ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
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Six months ended
June 30,
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2018
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2017
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Net income (loss)
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$
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1,362,000
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$
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(47,000
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)
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Costs paid directly to vendors by Sponsor
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-
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6,000
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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Trust income in Trust Account
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(2,355,000
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)
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|
-
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Changes in operating assets and liabilities:
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Decrease in accounts payable and accrued expenses
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(248,000
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)
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18,000
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Decrease in accrued taxes
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(130,000
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)
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-
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Decrease in prepaid expenses
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5,000
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|
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-
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Net cash used in operating activities
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(1,366,000
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)
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(23,000
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)
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Cash flows from financing activities:
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Withdrawal from Trust Account for taxes and working capital
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1,427,000
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-
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Proceeds from note payable to Sponsor
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-
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183,000
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Payment of offering costs
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|
-
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(115,000
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)
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Net cash provided by financing activities
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|
1,427,000
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|
68,000
|
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|
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Net increase in cash
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61,000
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|
|
45,000
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Cash at beginning of period
|
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|
1,752,000
|
|
|
|
26,000
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|
Cash at end of period
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|
$
|
1,813,000
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|
$
|
71,000
|
|
|
|
|
|
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Cash paid for taxes
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|
$
|
677,000
|
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|
$
|
-
|
|
|
|
|
|
|
|
|
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Supplemental disclosure of non-cash financing activities:
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|
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|
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Deferred offering costs included in note payable to Sponsor
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$
|
-
|
|
|
$
|
115,000
|
|
See
accompanying notes to condensed financial statements
LEGACY
ACQUISITION CORP.
Notes to Financial Statements
NOTE
1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization
and General:
Legacy
Acquisition Corp. (the “Company”) was incorporated in Delaware on March 15, 2016. 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 an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At
June 30, 2018, the Company had not commenced any operations. All activity for the period from March 15, 2016 (inception) through
June 30, 2018 relates to the Company’s formation and the initial public offering (“Public Offering”) described
below, and subsequent to the Public Offering, searching for a potential business combination. The Company will not generate any
operating revenues until after completion of the initial Business Combination, at the earliest. The Company will generate non-operating
income in the form of interest income from the proceeds derived from the Public Offering.
Sponsor
and Financing:
The
Company’s sponsor is Legacy Acquisition Sponsor I LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s Public Offering (as described in Note 3) was declared effective by the United
States Securities and Exchange Commission (the “SEC”) on November 16, 2017. The Company intends to finance a Business
Combination with proceeds from a $300,000,000 public offering (Note 3) and a $8,750,000 private placement (Note 4). Upon the closing
of the Public Offering and the private placement, $300,000,000 was deposited in the Trust Account with Continental Stock Transfer
and Trust Company (the “Trustee”) acting as the trustee (the “Trust Account”) (as discussed below).
The
Trust Account:
Funds
from the Public Offering have been placed in the Trust Account. The Trust Account may be invested only in U.S. government treasury
bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the
Trust Account until the earlier of (i) the consummation of the Business Combination or (ii) the distribution of the Trust Account
as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due
diligence on prospective Business Combinations and continuing general and administrative expenses.
The
Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay
taxes and up to $750,000 per year for working capital purposes, if any, none of the funds held in trust may be released until
the earlier of: (i) the completion of the initial Business Combination; or (ii) the redemption of any public shares properly tendered
in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify
the substance and timing or the Company’s obligation to redeem 100% of its public shares if the Company does not complete
its initial business combination within 24 months from the closing of the Public Offering or (iii) the redemption of 100% of the
shares of Class A common stock included in the Units sold in the Public Offering if the Company is unable to complete a Business
Combination within 24 months from the closing of the Public Offering (subject to the requirements of law).
Business
Combination:
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering,
although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating
a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” means one or
more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less
any deferred underwriting commissions and taxes payable on interest earned) at the time of the signing of a definitive agreement
in connection with the Business Combination. Furthermore, there is no assurance that the Company will be able to successfully
effect a Business Combination within 24 months from the closing of the Public Offering, if at all.
The
Company, after signing a definitive agreement for an initial Business Combination, will either (i) seek stockholder approval of
the Business Combination at a meeting called for such purpose in connection with which stockholders holding Class A common stock
may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their
pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation
of the initial Business Combination, including interest but less taxes payable and up to $750,000 per year which may be released
for working capital purposes, or (ii) provide stockholders holding Class A common stock with the opportunity to sell their shares
to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their
pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the
tender offer, including interest but less taxes payable and up to $750,000 per year which may have been released for working capital.
The decision as to whether the Company will seek stockholder approval of the initial Business Combination or will allow stockholders
to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of
factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to
seek stockholder approval unless a vote is required by New York Stock Exchange (“NYSE”) rules. If the Company seeks
stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted
are voted in favor of the Business Combination. However, in no event will the Company redeem its public shares of Class A common
stock in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of the Business Combination.
In such case, the Company would not proceed with the redemption of its public shares of Class A common stock and the related Business
Combination, and instead may search for an alternate Business Combination.
If
the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public
stockholder will have the right to redeem its Class A common stock for an amount in cash equal to such stockholder’s pro
rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the
initial Business Combination, including interest but less taxes payable and up to $750,000 per year which may have been released
to the Company to fund working capital requirements. As a result, such shares of Class A common stock are recorded at redemption
amount and classified as temporary equity in the accompanying balance sheet, in accordance with FASB ASC 480, “Distinguishing
Liabilities from Equity.” The amount in the Trust Account at June 30, 2018 and December 31, 2017 is $10.05 and $10.01, respectively,
per public common share but does not reflect withdrawals permitted for income taxes payable and working capital.
The
Company will only have 24 months from the closing date of the Public Offering to complete its initial Business Combination. If
the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for
the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the
public shares of Class A common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes
payable and up to $750,000 per year which may be released for working capital (less up to $50,000 of such net interest to pay
dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s
net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The initial stockholder has entered
into a letter agreement with the Company, pursuant to which it has waived its right to participate in any redemption with respect
to its initial shares; however, if the initial stockholder or any of the Company’s officers, directors or affiliates acquire
shares of Class A common stock after the Public Offering, they will be entitled to a pro rata share of the Trust Account, with
respect to such public shares, upon the Company’s redemption or liquidation in the event the Company does not complete a
Business Combination within the required time period.
In
the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution
(including Trust Account assets) will be less than the initial public offering price per Unit in the Public Offering.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation:
The
accompanying unaudited condensed interim financial statements of the Company are presented in U.S. dollars in conformity with
accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations
of the SEC and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of the financial position as of June 30, 2018, and the results of operations and cash flows
for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance
with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results
for a full year. All dollar amounts are rounded to the nearest thousand dollars.
The
accompanying unaudited condensed interim financial statements should be read in conjunction with the Company's audited financial
statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
Emerging
Growth Company
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a 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 an election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard.
Net
Income (Loss) per Common Share
Net
income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average
number of common shares outstanding for the period. The Company has not considered the effect of the warrants sold in the initial
public offering and Private Placement to purchase an aggregate of 23,750,000 Class A ordinary shares in the calculation of diluted
income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income
(loss) per common share is the same as basic loss per common share for the period.
The
Company’s statements of operations include a presentation of income (loss) per share for common stock subject to redemption
in a manner similar to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted
for Class A common stock is calculated by dividing the interest income earned on the Trust Account, net of income tax expense,
franchise tax expense and funds available to be withdrawn from Trust for working capital purposes (up to a maximum of $750,000
annually), by the weighted average number of Class A common stock outstanding for the period. Net income (loss) per common share,
basic and diluted, for Class F common stock is calculated by dividing the net income (loss), less income attributable to Class
A Common Stock, by the weighted average number of Class F common stock outstanding for the period. Net income (loss) available
to each class of common stockholders is as follows for the three and six months ended June 30, 2018:
|
|
Period ended June 30,
2018
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
Net income available to Class A common stockholders:
|
|
|
|
|
|
|
Interest income
|
|
$
|
1,279,000
|
|
|
$
|
2,355,000
|
|
Less: Income and franchise taxes
|
|
|
(269,000
|
)
|
|
|
(535,000
|
)
|
Expenses available to be paid with Interest income from Trust
|
|
|
(221,000
|
)
|
|
|
(458,000
|
)
|
Net income available to Class A common stockholders
|
|
$
|
789,000
|
|
|
$
|
1,362,000
|
|
|
|
|
|
|
|
|
|
|
Net income available to Class F common stockholders:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
789,000
|
|
|
$
|
1,362,000
|
|
Less: amount attributable to Class A common stockholders
|
|
|
(789,000
|
)
|
|
|
(1,362,000
|
)
|
Net income available to class F common stockholders
|
|
$
|
-
|
|
|
$
|
-
|
|
Concentration
of Credit Risk:
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial
Instruments:
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the financial statements.
Use
of Estimates:
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires the Company’s 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 amount of expenses
during the reporting periods. Actual results could differ from those estimates.
Deferred
Offering Costs:
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A – “Expenses
of Offering”. Offering costs of approximately $17,387,000 consisted principally of underwriter discounts of $16,500,000
(including $10,500,000 of which payment is deferred) and approximately $887,000 of professional, printing, filing, regulatory
and other costs, have been charged to additional paid-in-capital upon completion of the Public Offering.
Income
Taxes:
The
Company follows the asset and liability method of accounting for income taxes under FASB 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.
The
Company’s current taxable income consists of interest income on the Trust Account net of franchise taxes. The Company’s
general and administrative costs are generally considered start-up costs and are not currently deductible. During the three and
six months ended June 30, 2018, the Company recorded income tax expense of approximately $266,000 and $481,000, respectively,
primarily related to interest income earned on the Trust Account net of franchise taxes. The Company’s effective tax rate
for the three and six months ended June 30, 2018 was approximately 22% and 24%, respectively, which differs from the expected
income tax rate due to the start-up costs (discussed above) which are not currently deductible. On December 22, 2017, the Tax
Cut and Jobs Act was enacted into law resulting in a reduction in the federal corporate income tax rate from 35% to 21% for years
beginning in 2018. At June 30, 2018 and December 31, 2017, the Company has a deferred tax asset of approximately $170,000 and
$66,000, respectively, primarily related to start-up costs. Management has determined that a full valuation allowance of the deferred
tax asset is appropriate at this time. The amount of the reduction of the deferred tax asset (before write off) resulting from
the lower rate under which those deferred taxes would be expected to be recovered or settled was not material.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2018 and December
31, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and penalties at June 30, 2018 and December 31, 2017. 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.
Redeemable
Common Stock:
As
discussed in Note 3, all of the 30,000,000 common shares sold as part of a Unit in the Public Offering contain a redemption feature
which allows for the redemption of common shares under the Company’s Liquidation or Tender Offer/Stockholder Approval provisions.
In accordance with FASB 480, redemption provisions not solely within the control of the Company require the security to be classified
outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s
equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption
threshold, its charter provides that in no event will it redeem its Public Shares in an amount that would cause its net tangible
assets (stockholders’ equity) to be less than $5,000,001.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the
end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by adjustments
to additional paid-in capital. Accordingly, at June 30, 2018 and December 31, 2017, 28,771,790 and 28,635,526, respectively, of
the 30,000,000 Public Shares were classified outside of permanent equity at its redemption value.
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.
NOTE
3 – PUBLIC OFFERING
On
November 21, 2017, the Company closed on the Public Offering and sale of 30,000,000 units at a price of $10.00 per unit (the “Units”).
Each Unit consists of one share of the Company’s Class A common stock, $0.0001 par value and one redeemable common stock
purchase warrant (the “Warrants”). Under the terms of a warrant agreement, the Company has agreed to use its best
efforts to file a new registration statement under the Securities Act, following the completion of the initial Business Combination.
Each Warrant entitles the holder to purchase one half of one share of Class A common stock at a price of $5.75 (11.50 per whole
share). No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be
entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number
the number of shares of Class A common stock to be issued to the warrant holder. Each Warrant will become exercisable on the later
of 30 days after the completion of the Company’s initial Business Combination or 12 months from the closing of the Public
Offering and will expire five years after the completion of the Company’s initial Business Combination or earlier upon redemption
or liquidation. However, if the Company does not complete its initial Business Combination on or prior to the 24-month period
allotted to complete the Business Combination, the Warrants will expire at the end of such period. If the Company is unable to
deliver registered shares of Class A common stock to the holder upon exercise of Warrants issued in connection with the 30,000,000
public units during the exercise period, there will be no net cash settlement of these Warrants and the Warrants will expire worthless,
unless they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the warrants become
exercisable, the Company may redeem the outstanding warrants in whole and not in part at a price of $0.01 per warrant upon a minimum
of 30 days’ prior written notice of redemption, only in the event that the last sale price of the Company’s shares
of common stock equals or exceeds $18.00 per share for any 20 trading days within the 30-trading day period ending on the third
trading day before the Company sends the notice of redemption to the warrant holders.
The
Company granted the underwriters in the Public Offering a 45-day option to purchase up to 4,500,000 additional Units to cover
any over-allotment, at the initial public offering price less the underwriting discounts and commissions. On November 27, 2017,
the Company was advised by the underwriters’ that the overallotment option would not be exercised. As such, the 1,125,000
shares subject to forfeiture which are described in Note 4 have been reflected as forfeited in the accompanying financial statements
during the year ended December 31, 2017.
The
Company paid an underwriting discount of 2% of the per Unit offering price to the underwriters at the closing of the Public Offering
($6,000,000), with an additional fee (the “Deferred Discount”) of 3.5% of the gross offering proceeds ($10,500,000)
payable upon the Company’s completion of a Business Combination. The Deferred Discount will become payable to the underwriters
from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
NOTE
4 – RELATED PARTY TRANSACTIONS
Founder
Shares
In
October 2016, the Sponsor purchased 8,625,000 shares of Class F common stock (the “Founder Shares”) for $25,000, or
approximately $0.001 per share (see Note 6). The Founder Shares are identical to the Class A common stock included in the Units
being sold in the Public Offering except that the Founder Shares are convertible under the circumstances described below and subject
to certain transfer restrictions, as described in more detail below. The Sponsor agreed to forfeit up to 1,125,000 Founder Shares
to the extent that the over-allotment option was not exercised in full by the underwriters (see Notes 3 and 5) so that the initial
stockholder would own 20.0% of the Company’s issued and outstanding shares after the Public Offering. As discussed further
in Notes 3 and 5, on November 27, 2017, the underwriters’ notified the Company that they would not exercise the overallotment
option and, as such, the 1,125,000 shares that were subject to forfeiture were forfeited as of the closing of the Public Offering
on November 21, 2017. The Founder Shares will automatically convert into shares of Class A common stock at the time of the Business
Combination on a one-for-one basis, subject to adjustment as described in the Company’s amended and restated certificate
of incorporation.
In
addition, in October 2016, the Sponsor also provided $1,000 as an initial advance under the related party loan that is discussed
below.
The
Company’s initial stockholder has agreed not to transfer, assign or sell any of their Founder Shares until the earlier of
(A) one year after the completion of the Company’s initial Business Combination, or earlier if, subsequent to the Company’s
initial Business Combination, the last sale price of the Company’s common stock equals or exceeds $12.00 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 the Company’s initial Business Combination or (B) the date on which the Company
completes a liquidation, merger, stock exchange or other similar transaction after the initial Business Combination that results
in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other
property (the “Lock Up Period”).
Private
Placement Warrants
Upon
the closing of the Public Offering on November 21, 2017, the Sponsor paid the Company $8,750,000 for the private placement purchase
from the Company of 17,500,000 warrants at $0.50 per warrant (the “Private Placement Warrants”). Each Private Placement
Warrant entitles the holder to purchase one-half of one share of Class A common stock at $5.75 ($11.50 per whole share). A portion
of the purchase price of the Private Placement Warrants has been added to the proceeds from the Public Offering held in the Trust
Account pending completion of the Company’s initial Business Combination. The Private Placement Warrants (including the
common stock issuable upon exercise of the Private Placement Warrants) are not transferable, assignable or salable until 30 days
after the completion of the initial Business Combination and are non-redeemable so long as they are held by the Sponsor or its
permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants
included in the Units being sold in the Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that
are identical to those of the Warrants sold as part of the Units in the Public Offering and have no net cash settlement provisions.
If
the Company does not complete a Business Combination within the required time period, then the proceeds will be part of the liquidating
distribution to the public stockholders and the Warrants issued to the Sponsor will expire worthless.
Registration
Rights
The
Company’s initial stockholder and holders of the Private Placement Warrants are entitled to registration rights (in the
case of the Founder Shares, only after conversion to shares of Class A common stock) pursuant to a registration rights agreement
dated November 16, 2017. The Company’s initial stockholder and holders of the Private Placement Warrants are entitled to
make up to three demands, excluding short form registration demands, that the Company register such securities for sale under
the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in
other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing
of any such registration statements.
Related
Party Loans and Costs
As
of December 31, 2016, the Company’s Sponsor had agreed to loan the Company an aggregate of $485,000 by drawdowns of not
less than $10,000 each against the issuance of an unsecured promissory note (the “Note”) to cover expenses related
to this Public Offering and the Company’s organizational and initial financing activities. This loan was non-interest bearing
and, as amended on June 30, 2017, payable on the earlier of December 31, 2017 or the completion of the Public Offering.
The
initial drawdown under the Note was on December 31, 2016 for approximately $285,000 representing the amount charged by the Sponsor
and its affiliates for services related to the Public Offering and for the Company’s organizational and initial financing
activities, plus the $1,000 advance made in October 2016 discussed above. Such costs included consulting and administrative fees,
formation costs, costs of initiating the Public Offering, including professional retentions, as well as travel and other administrative
costs. On October 20, 2017, the Note was amended and restated to increase the amount available under the Note by $100,000, from
$485,000 to $585,000, and the Company borrowed an additional $100,000, increasing the amount outstanding under the Note from approximately
$474,000 to approximately $574,000. In total, during 2017 an additional approximately $289,000 was borrowed under the Note.
Upon
the closing of the Public Offering on November 21, 2017, $100,000 of this note was repaid and the remaining approximately $474,000
was converted into Private Placement Warrants as a part of the $8,750,000 paid by the Sponsor for the Private Placement Warrants.
Administrative
Service Agreement and Services Agreement
The
Company pays $10,000 a month ($30,000 and $60,000, respectively, for the three and six months ended June 30, 2018) for office
space, accounting services, utilities and secretarial support provided by the Sponsor subsequent to the date the Company’s
securities were first listed on the NYSE. Such monthly fee will terminate upon the earlier of the consummation by the Company
of an initial Business Combination or the liquidation of the Company.
NOTE
5 – TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The
Company complies with FASB ASC 820, Fair Value Measurements, 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.
Upon
the closing of the Public Offering and the private placement, a total of $300,000,000 was deposited into the Trust Account. All
proceeds in the Trust Account may be invested in either U.S. government treasury bills with a maturity of 180 days or less or
in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, and that
invest solely in U.S. government treasury obligations.
At
June 30, 2018 and December 31, 2017, the proceeds of the Trust Account were invested in U.S. government treasury bills. U.S. government
treasury bills held at June 30, 2018 mature in August 2018 and yield interest of approximately 1.8%. The Company classifies its
U.S. government treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments
– Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability
and intent to hold until maturity. Held-to-maturity U.S. government treasury bills are recorded at amortized cost on the accompanying
June 30, 2018 and December 31, 2017 balance sheets and adjusted for the amortization of discounts.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis as
of June 30, 2018 and December 31, 2017 and indicates the fair value hierarchy of the valuation techniques the Company utilized
to determine such fair value. Since all of the Company’s permitted investments at June 30, 2018 and December 31, 2017 consist
of U.S. government treasury bills or money market funds holding U.S. government treasury bills, fair values of its investments
are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities as
follows:
|
|
|
|
|
|
|
|
Quoted Price
|
|
|
|
Carrying
|
|
|
|
|
|
Prices in
|
|
|
|
value at
June 30,
|
|
|
Gross Unrealized
|
|
|
Active Markets
|
|
Description
|
|
2018
|
|
|
Holding Gain
|
|
|
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and money market
|
|
$
|
2,000
|
|
|
|
-
|
|
|
$
|
2,000
|
|
U.S. government treasury bills
|
|
|
301,330,000
|
|
|
$
|
55,000
|
|
|
|
301,385,000
|
|
total
|
|
$
|
301,332,000
|
|
|
$
|
55,000
|
|
|
$
|
301,387,000
|
|
|
|
|
|
|
|
|
|
Quoted
Price
|
|
|
|
Carrying
|
|
|
|
|
|
Prices
in
|
|
|
|
value at
December 31,
|
|
|
Gross
Unrealized
|
|
|
Active
Markets
|
|
Description
|
|
2017
|
|
|
Holding Gain
|
|
|
(Level
1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
U.S.
government treasury bills
|
|
$
|
300,403,000
|
|
|
$
|
18,000
|
|
|
$
|
300,421,000
|
|
The
U.S. government treasury bills held at June 30, 2018 mature in August 2018. During the three and six months ended June 30, 2018,
in April and May 2018, the Company withdrew an aggregate of approximately $1,427,000 from the trust including approximately $750,000
for working capital and $677,000 for payment of federal income and state franchise taxes, including estimated taxes.
NOTE
6 – STOCKHOLDERS’ EQUITY
Common
Stock
The
authorized common stock of the Company is 110,000,000 shares, including 100,000,000 shares of Class A common stock and 10,000,000
shares of Class F common stock. Upon completion of the Public Offering, the Company will likely (depending on the terms of the
initial Business Combination) be required to increase the number of shares of common stock which it is authorized to issue at
the same time as its stockholders vote on the Business Combination to the extent the Company seeks stockholder approval in connection
with its initial Business Combination. Holders of the Company’s common stock vote together as a single class and are entitled
to one vote for each share of common stock.
In
October 2016, the Sponsor purchased 5,750,000 shares of Class F common stock (the “Founder Shares”) for $25,000, or
approximately $0.004 per share. The Sponsor had agreed to forfeit up to 750,000 Founder Shares to the extent that the over-allotment
option is not exercised in full by the underwriters. The forfeiture would be adjusted to the extent that the over-allotment option
is not exercised in full by the underwriters so that the initial stockholder will own 20% of the Company’s issued and outstanding
shares after the Public Offering.
During
September 2017, the Company effected a 1.5 for 1 stock dividend of 2,875,000 Class F shares, resulting in the initial stockholders
holding an aggregate of 8,625,000 Founder Shares. The stock dividend also adjusted the shares subject to forfeiture from 750,000
to 1,125,000, to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares
represented 20.0% of the Company’s issued and outstanding shares after the Public Offering. Outstanding shares and per share
amounts have been retroactively restated for the September 2017 stock dividend for all periods presented. On November 27, 2017,
the Company was advised by the underwriters’ that the overallotment option would not be exercised. As such, the 1,125,000
shares subject to forfeiture are considered as forfeited in the accompanying financial statements as of December 31, 2017. As
such at June 30, 2018 and December 31, 2017 there were 7,500,000 shares of Class F common stock issued and outstanding and 30,000,000
shares of Class A common stock outstanding (28,771,790 and 28,635,526, respectively, of which are classified outside of equity
as redeemable common stock).
Preferred
Stock
The
Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences
as may be determined from time to time by the Board of Directors. At June 30, 2018 and December 31, 2017, the rights and preferences
have not been determined and there were no shares of preferred stock issued and outstanding.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with the condensed financial statements and the notes thereto contained elsewhere in this report. This management’s discussion
and analysis should also be read in conjunction with the management’s discussion and analysis and the financial statements
for the year ended December 31, 2017 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission
on March 29, 2018.
Special
Note Regarding Forward-Looking Statements
All
statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s
financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.
When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking
statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information
currently available to, the Company’s management. Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors detailed in our filings with the SEC.
Overview
We
are a blank check company incorporated as a Delaware corporation and 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. We have
reviewed, and continue to review, a number of opportunities for the purpose of entering into a business combination with an operating
business, but we have not selected any specific business combination target and we are not able to determine as of the date of
this Form 10-Q whether we will complete a business combination with any of the target businesses that we have reviewed or with
any other target business. We intend to effectuate our initial business combination using cash from the proceeds of our initial
public offering and the private placement of the private placement warrants, our capital stock, debt or a combination of cash,
stock and debt.
The
issuance of additional shares of our stock in a business combination:
|
●
|
may
significantly dilute the equity interest of investors in our initial public offering, which dilution would increase if the
anti-dilution provisions in the Class F common stock resulted in the issuance of shares of Class A common stock on a greater
than one-to-one basis upon conversion of the shares of Class F common stock;
|
|
●
|
may
subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common
stock;
|
|
●
|
could
cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other
things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of
our present officers and directors;
|
|
●
|
may
have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a
person seeking to obtain control of us; and
|
|
●
|
may
adversely affect prevailing market prices for our Class A common stock and/or warrants.
|
Similarly,
if we issue debt securities, it could result in:
|
●
|
default
and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our
debt obligations;
|
|
●
|
acceleration
of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
|
|
●
|
our
immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
|
|
●
|
our
inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain
such financing while the debt security is outstanding;
|
|
●
|
our
inability to pay dividends on our common stock;
|
|
●
|
using
a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for
dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
|
|
●
|
limitations
on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
|
|
●
|
increased
vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government
regulation; and
|
|
●
|
limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution
of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
|
As
indicated in the accompanying financial statements, at June 30, 2018 we had $1,813,000 in cash. We expect to incur significant
costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial
business combination will be successful.
Results
of Operations and Known Trends or Future Events
We
have neither engaged in any operations nor generated any revenues to date. Our primary activities since inception have been organizational
activities and those necessary to prepare for our initial public offering which was consummated on November 21, 2017. Since that
time, our activities have also included the initial activities in our search for a business combination.
During
the three and six months ended June 30, 2017, we incurred approximately $27,000 and $47,000, respectively, for such formation
and organizational activities and we had no interest income or related income taxes. Since November 21, 2017, our activities have
included activities associated with our search for a business combination candidate and our costs have included the professional,
insurance and other costs associated with operating a public company.
In
the three and six months ended June 30, 2018 our principal operating expenses included approximately $85,000 and $196,000, respectively,
for the professional, insurance and listing costs associated with our public reporting, approximately $50,000 and $100,000, respectively,
in franchise taxes, approximately $84,000 and $162,000, respectively, in consulting and travel costs associated with our search
for a business combination candidate and approximately $30,000 and $60,000, respectively, ($10,000 per month) in administrative
fees to our Sponsor. Further, during the three and six months ended June 30, 2018, the Company generated approximately $1,496,000
and $2,574,000, respectively, of interest income on the U.S. government treasury bill investments in the Trust Account. Such interest
income is currently taxable and results in a provision for income taxes of approximately $266,000 and $481,000, respectively in
the three and six months ended June 30, 2018 since the majority of our operating expenses are considered start-up costs and are
not currently deductible. The Company periodically withdraws funds from the Trust Account to fund the payment of income and franchise
taxes.
Following
the closing of our initial public offering in November 2017, we have not generated, and will not generate, any operating revenues
until after completion of our initial business combination. As discussed above, we currently generate non-operating income in
the form of interest income on cash and cash equivalents after our initial public offering and such income generates a currently
payable provision for income taxes on such income since our operating expenses are considered start-up expenses and are not currently
deductible. In addition to our taxes, administrative fees to our Sponsor and costs associated with our public reporting, we expect
to incur increased expenses for our due diligence and other costs of identifying, documenting and closing a business combination
and such costs are expected to be very significant and will vary with the stage of development of a business combination. We intend
to pay, and are paying, our income and franchise taxes from the income of the Trust Account and we are permitted to draw $750,000
annually from the Trust Account for working capital.
Liquidity
and Capital Resources
Prior
to the completion of our initial public offering, our liquidity needs were satisfied through receipt of $25,000 from the sale
of the founder shares to our Sponsor and, as amended in October 2017, up to $585,000 in loans from our Sponsor $574,000 of which
had been loaned, including $285,000 loaned to December 31, 2016 and $289,000 loaned during the year ended December 31, 2017 representing
(a) the amount charged by our sponsor and its affiliates for services related to our formation and to our initial public offering
and for consulting services provided by third parties to the Sponsor related to our initial public offering, as well as (b) approximately
$289,000 loaned directly to us in 2017.
The
net proceeds from (i) the sale of the Units in our initial public offering, after deducting offering expenses of approximately
$887,000 and underwriting commissions of $6,000,000 (excluding deferred underwriting commissions of $10,500,000), and (ii) the
sale of the private placement warrants for a purchase price of $8,750,000, are approximately $301.6 million. Of this amount, $300.0
million was placed in the Trust Account, which includes up to $10,500,000 of deferred underwriting commissions. The remaining
approximately $1,600,000 was available to us for working capital and is not held in the Trust Account.
We
intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on
the trust account (which interest shall be net of taxes payable and up to $750,000 released to us annually to fund working capital
requirements and excluding deferred underwriting commissions) to complete our initial business combination. We may withdraw interest
to pay taxes, if any, and up to $750,000 to fund working capital requirements annually. Delaware franchise tax is based on our
authorized shares or on our assumed par and non-par capital, whichever yields a lower result. Our annual franchise tax obligation
is expected to be capped at the maximum amount of annual franchise taxes payable by us as a Delaware corporation of $200,000.
Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust
Account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business
combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth strategies.
As
of June 30, 2018, we have available to us approximately $1,813,000 of proceeds held outside the Trust Account which includes the
permitted 2018 annual $750,000 draw from the Trust Account which was made during the three months ended June 30, 2018, as well
as certain amounts we may draw from the Trust Account to fund our working capital requirements in the future (as described above).
We believe that such sources of liquidity are adequate to fund our operations for at least the next 12 months. We will use these
funds primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel
to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination,
pay our professional and other costs of being a public company, and to pay taxes to the extent the interest earned on the trust
account is not sufficient to pay our taxes. We do not expect to have any capital expenditures during 2018, except as may be incurred
in connection with our initial business combination (if any).
In
order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination,
our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds
as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our
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 warrants of the post business combination entity at a price of $0.50 per warrant at the option of the lender.
The warrants would be identical to the placement warrants issued to our Sponsor, including as to exercise price, exercisability
and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements
exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our sponsor
as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek
access to funds in our Trust Account.
Unless
and until we complete an initial business combination, we expect our primary liquidity requirements during the 24 month period
subsequent to our Public Offering to include legal, accounting, due diligence, travel and other expenses associated with structuring,
negotiating and documenting successful business combinations; legal and accounting fees related to regulatory reporting requirements;
NYSE and other regulatory fees; office space, administrative, consulting and support services provided under an agreement with
our Sponsor and other working capital needs. In addition, we expect to use a portion of the funds not being placed in trust to
pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment
or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around
for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed
business combination. If we entered into an agreement where we paid for the right to receive exclusivity from a target business,
the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the
terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether
as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting
due diligence with respect to, prospective target businesses.
We
do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However,
if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial
business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our
business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business
combination or because we become obligated to redeem a significant number of our public shares upon completion of our business
combination, in which case we may issue additional securities or incur debt in connection with such business combination.
Critical
Account
ing Policies
The
preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ
from those estimates. The Company has identified the following as its critical accounting policies:
Emerging
Growth Company
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a 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 an election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard.
Net
Income (Loss) per Common Share
Net
income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average
number of common shares outstanding for the period. The Company has not considered the effect of the warrants sold in the initial
public offering (including the consummation of the over-allotment) and private placement to purchase an aggregate of 23,750,000
Class A ordinary shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under
the treasury stock method. As a result, diluted income (loss) per common share is the same as basic loss per common share for
the period.
The
Company’s statements of operations include a presentation of income (loss) per share for common stock subject to redemption
in a manner similar to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted
for Class A common stock is calculated by dividing the interest income earned on the Trust Account, net of income tax expense,
franchise tax expense and funds available to be withdrawn from Trust for working capital purposes (up to a maximum of $750,000
annually), by the weighted average number of Class A common stock outstanding for the period. Net income (loss) per common share,
basic and diluted, for Class F common stock is calculated by dividing the net income (loss), less income attributable to Class
A Common Stock, by the weighted average number of Class F common stock outstanding for the period. Net income (loss) available
to each class of common stockholders is as follows for the three and six months ended June 30, 2018:
|
|
Period ended June 30,
2018
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
Net income available to Class A common stockholders:
|
|
|
|
|
|
|
Interest income
|
|
$
|
1,498,000
|
|
|
$
|
2,574,000
|
|
Less: Income and franchise taxes
|
|
|
(316,000
|
)
|
|
|
(581,000
|
)
|
Expenses available to be paid with Interest income from Trust (up to a Maximum of $750,000 per year
|
|
|
(221,000
|
)
|
|
|
(458,000
|
)
|
Net income available to Class A common stockholders
|
|
$
|
789,000
|
|
|
|
1,362,000
|
|
|
|
|
|
|
|
|
|
|
Net income available to Class F common stockholders:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
789,000
|
|
|
$
|
1,362,000
|
|
Less: amount attributable to Class A common stockholders
|
|
|
(789,000
|
)
|
|
|
(1,362,000
|
)
|
Net income available to class F common stockholders
|
|
$
|
-
|
|
|
$
|
-
|
|
Financial
Instruments:
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the financial statements.
Deferred
Offering Costs:
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A – “Expenses
of Offering”. Offering costs of approximately $17,387,000 consisted principally of underwriter discounts of $16,500,000
(including $10,500,000 of which payment is deferred) and approximately $887,000 of professional, printing, filing, regulatory
and other costs, have been charged to additional paid-in-capital upon completion of the public offering.
Income
Taxes:
The
Company follows the asset and liability method of accounting for income taxes under FASB 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.
The
Company’s currently taxable income consists of interest income on the Trust Account net of franchise taxes. The Company’s
general and administrative costs are generally considered start-up costs and are not currently deductible. During the three and
six months ended June 30, 2018, the Company recorded income tax expense of approximately $266,000 and $481,000, respectively,
primarily related to interest income earned on the Trust Account net of franchise taxes. The Company’s effective tax rate
for the three and six months ended June 30, 2018 was approximately 22% and 24%, respectively, which differs from the expected
income tax rate due to the start-up costs (discussed above) which are not currently deductible. On December 22, 2017, the Tax
Cut and Jobs Act was enacted into law resulting in a reduction in the federal corporate income tax rate from 35% to 21% for years
beginning in 2018. At June 30, 2018 and December 31, 2017, the Company has a deferred tax asset of approximately $175,000 and
$60,000, respectively, primarily related to start-up costs. Management has determined that a full valuation allowance of the deferred
tax asset is appropriate at this time. The amount of the reduction of the deferred tax asset (before write off) resulting from
the lower rate under which those deferred taxes would be expected to be recovered or settled was not material.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2018 and December
31, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and penalties at June 30, 2018 and December 31, 2017. 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.
Redeemable
Common Stock:
As
discussed in Note 3, all of the 30,000,000 common shares sold as part of a Unit in the public offering contain a redemption feature
which allows for the redemption of common shares under the Company’s Liquidation or Tender Offer/Stockholder Approval provisions.
In accordance with FASB 480, redemption provisions not solely within the control of the Company require the security to be classified
outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s
equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption
threshold, its charter provides that in no event will it redeem its Public Shares in an amount that would cause its net tangible
assets (stockholders’ equity) to be less than $5,000,001.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the
end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by adjustments
to additional paid-in capital. Accordingly, at June 30, 2018 and December 31, 2017, 28,771,790 and 28,635,526, respectively, of
the 30,000,000 Public Shares were classified outside of permanent equity at its redemption value of $10.10 per share.
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.