ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
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 December 31, 2019, the Company had not
commenced any operations. All activity for the period from March 15, 2016 (inception) through December 31, 2019 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 generates 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 4) 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 the net proceeds from a $300,000,000 Public Offering
(Note 4) and a $8,750,000 private placement (Note 5). Upon the closing of the Public Offering and the private placement, $300,000,000
is held in the Trust Account with Continental Stock Transfer and Trust Company (the “Trustee”) acting as the trustee
(the “Trust Account”) (as discussed below). See Notes 2 and
6 below regarding approximately $7,108,000 of shareholder redemptions (694,820 shares) paid from the Trust Account in October
2019 in connection with the Extension Amendment, defined below, that extends the date to complete a Business Combination as described
therein.
The Trust Account:
Funds from the Public Offering have been
placed in the Trust Account. The Trust Account will be invested only in U.S. government treasury bills with a maturity of one
hundred and eighty (185) 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
by the Outside Extended Date 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 by the Outside Extended Date (subject to the
requirements of law). See Note 2 below regarding the Extension Amendment
that extends the date to complete a business combination and certain shareholder redemptions paid from the Trust Account as described
therein. The Company may continue to withdraw from the Trust Account amounts necessary for taxes, and for working capital of up
to $750,000 annually (on a pro rata basis), during the period of the Extension Amendment discussed in Note 2.
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, as extended in the Extension Amendment that is further discussed in Note 2 below, 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, and has been, 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 Company only had 24 months from the
closing date of the Public Offering to complete its initial Business Combination. However, as discussed further in Note 2 below,
on October 22, 2019, the shareholders of the Company approved the extension of time to complete the Business Combination, as defined
in Note 2, from November 21, 2019 to December 21, 2019 and thereafter at the Company’s option or upon the Sellers request
up to five times, initially to January 21, 2020, and thereafter by up to four additional 30-day periods ending on May 20, 2020.
The Company has currently exercised three extension options, (i) from December 21, 2019 to January 21, 2020, (ii) from January
21, 2020 to February 20, 2020 and (iii) from February 20, 2020 to March 21, 2020. If the Company does not complete a Business
Combination within this extended 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, and has been, 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.
Going Concern
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards
Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern”, management has determined that the mandatory liquidation and subsequent dissolution, as well as the Company’s
negative working capital position, raises substantial doubt about the Company’s ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after
February 20, 2020 and thereafter at the Company’s option or upon the Sellers request up to four additional 30-day periods,
as extended (as discussed in Note 2).
NOTE 2 – SHARE EXCHANGE AGREEMENT
FOR BUSINESS COMBINATION AND EXTENSION AMENDMENT
On August 23, 2019, the Company entered
into a Share Exchange Agreement (the “Share Exchange Agreement”) with Blue Valor Limited, a company incorporated in
Hong Kong and an indirect, wholly-owned subsidiary of Blue Focus Intelligent Communications Group (“Blue Valor” or
the “Seller”), pursuant to which, subject to the satisfaction or waiver of certain conditions set forth therein, the
Company will, among other things, purchase from the Seller all of the outstanding shares of stock of a wholly-owned holding company
organized in the Cayman Islands, Blue Impact (Cayman) Limited that, at the closing, will hold the Blue Impact group business,
a digital-first, intelligent and integrated global advertising and marketing services company (the “Blue Impact” business).
The Share Exchange Agreement was subsequently amended by that First Amendment
to Share Exchange Agreement dated as of September 27, 2019, to amend certain provisions relating to the Extension Amendment, and
further amended and restated on December 2, 2019, pursuant to which, subject to the satisfaction or waiver of certain conditions
set forth therein, the Seller will transfer all of the equity interests of its wholly-owned subsidiary, Blue Impact Target, in
exchange for shares of Legacy. Upon the closing of the Business Combination, the Company will change its name to Blue Impact
Inc.
For more information about the transactions
contemplated by the Share Exchange Agreement, please see the Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 27, 2019 and the Definitive Proxy Statement filed on September 30, 2019.
Pursuant to the Share
Exchange Agreement, at the closing, the Seller will receive up to 30 million shares of Class A common stock of the Company, subject
to adjustment as set forth below (the “Closing Shares”), and Legacy expects to (a) assume $40 million of net debt
related to the Blue Impact business, (b) assume $48 million of deferred acquisition purchase price obligations, and (c) pay $90
million to purchase or redeem certain minority interests of one of the Blue Impact businesses (“Madhouse”).
The Closing Shares will
be subject to adjustment following closing based on the extent to which, as of the closing date, (a) the net debt of the Blue
Impact business, (b) the deferred acquisition purchase price obligations for the Blue Impact business (excluding Madhouse) and
(c) the amount of the purchase price for the minority interests of Madhouse, are each finally determined to be greater or less
than the targets for such amounts specified in the Share Exchange Agreement. The determinations as of the closing date of the
foregoing amounts will be mutually agreed to by the Seller and a committee of independent directors of the Company with any disagreements
being resolved by a nationally recognized independent public accounting firm jointly selected by the Seller and the Company.
Pursuant to an “earn-out” for
Madhouse, up to $222 million may be payable after the 2022 audit is complete in the form of an incentive-based earn-out tied to
average profit growth of the Madhouse business over the three-year period ending December 31, 2022. The earn-out will be payable
at the Company’s option in cash, stock or a combination thereof if Company’s common stock share price at the time
of payment is greater than $10 per share. If not, then dependent upon the Company’s then-available cash, the earn-out will
be payable in cash or subordinated notes. The Seller has partially and irrevocably assigned a portion of any earn-out payment
to fund a long-term incentive plan to be established for the benefit of designated individuals employed or associated with the
group company business.
The
Company’s Charter and final IPO prospectus dated November 16, 2017, (which was filed with the SEC on November 17, 2017)
provided that the Company had until November 21, 2019 to complete a business combination. In order to provide the Company
additional time to complete the Business Combination, on October 22, 2019 the Company’s shareholders approved an Extension
Amendment (the “Extension Amendment”) in order to extend the deadline to complete the Business Combination from November
21, 2019 to December 21, 2019 and thereafter at the Company’s option or upon the Sellers request up to five times, initially
to January 21, 2020, and thereafter by up to four additional 30-day periods ending on May 20, 2020. The deadline to consummate
the Business Combination is currently extended to March 21, 2020. While
the purpose of the Extension Amendment is to allow the Company more time to complete the proposed Business Combination, if the
Business Combination is terminated the Company may seek to use the Extension to complete an alternative business combination.
The Company may continue to withdraw from the Trust Account amounts necessary for taxes, and for working capital of up to $750,000
annually (on a pro rata basis), during the period of the Extension Amendment.
On October 23, 2019, the Company issued a note (the “Seller
Note”) for the aggregate principal amount of approximately $979,000, to the Seller (including $100,000 provided to the Company
for working capital). Borrowings under the Seller Note will bear interest at a rate equal to the 1-month USD LIBOR interest rate,
plus 1.5%. The Seller Note was issued in connection with the approval by the Company’s stockholders of the Extension Amendment.
In connection with the Extension Amendment, stockholders elected to redeem 694,820 shares of the Company’s Class A common
stock, par value $0.0001 per share, issued in the Company’s initial public offering (the “public shares”), and
29,305,180 public shares remain issued and outstanding following such redemptions. Accordingly, consistent with the Company’s
proxy materials relating to the special meeting, on or about October 23, 2019, the Company made a cash contribution to the Trust
Account in an amount equal to $0.03 for each public share that was not redeemed in connection with the stockholder approval of
the Extension Amendment for the initial extension through December 21, 2019, which equaled an aggregate amount of approximately
$979,000 (including $100,000 provided to Company for costs and expenses). On December 17, 2019, in connection with the Company’s
extension of the date by which the Company has to consummate a business combination from December 21, 2019, to January 21, 2020,
the Company issued an amended and restated note (the “Amended Seller Note”) to the Seller that amended and restated
the Seller Note and received the second Seller Loan from the Seller. Borrowings under the Amended Seller Note will continue to
bear interest at a rate equal to the 1 month USD LIBOR interest rate, plus 1.5% accruing from the date of the applicable borrowings.
Subsequent to December 31, 2019, the Company has extended the date by which it has to consummate a business combination from January 21, 2020 to February
20, 2020, and from February 20, 2020 to March 21, 2020. In connection with each of the first three extensions, the Seller loaned
$979,155.40 to the Company under the Amended Seller Note. Additionally, in connection with the fourth and most recent extension,
the Seller loaned $879,155.40. As a result, Seller will have loaned to the Company a total aggregate amount of $3,816,621.60.
Under the terms of the Share Exchange Agreement,
the Seller agreed to loan (each, a “Seller Loan”) to Legacy the amount of the contributions to be made by Legacy in
connection with the initial extension through December 21, 2019, and for each period of the Extension thereafter; provided, however,
that the Seller is not be required to make any loan to Legacy with respect to any Extension for the purpose of consummating an
initial business combination other than the Business Combination. In addition, the Seller agreed that the Seller Loans may include
additional amounts to cover certain costs and expenses that Legacy will reasonably incur in connection with the continuation of
operations until the earlier of the consummation of the Business Combination or the Extended Date and the total of all such costs
and expenses shall not exceed a total of $300,000 in the aggregate for all Extensions through the Extended Date. No Seller Loan
may exceed $1,000,000 in the aggregate (including loans to fund costs and expenses). The Seller Loans made on or about October
23, 2019, December 21, 2019 and January 21, 2020,, each in the principal amount of approximately $979,000 under the Amended Seller
Note reflects a loan to fund the Company’s Contributions to the Trust Account of approximately $879,000 plus $100,000 to
fund the costs and expenses that the Company reasonably expects incur in connection with the continuation of operations until
the earlier of the consummation of the Business Combination or the Extended Date. As of January 21, 2020, Legacy had borrowed
in respect of its costs and expenses a total of $300,000 in the aggregate.
The Seller Loans will be forgiven by the
Seller if the closing of the Business Combination does not occur and the Trust Account liquidates, except to the extent of any
funds that are available to the Company (i) after such liquidation in accordance with the trust agreement, or (ii) from any other
source. The amount of the Seller Loans will be repayable by the Company to the Seller upon consummation of the Business Combination.
When the Company elected and/or the Seller
requested that the Company extend the date by which the Company has to consummate the Business Combination, the Company has (and
will) publicly announce the Company’s decision no later than the close of business on the last day of the then-current extension
period. In addition, the Company has (and will) make additional Contributions of $0.03 per outstanding public share for each period
of the extension by Legacy at its option and/or at the Seller’s request. The Seller has so far made Contributions of $979,155.40
for each of the first three extensions, and $879,155.40 for the fourth and most recent extension to March 21, 2020, for Contributions
of a total aggregate amount of $3,816,621.60. If the Company elects and/or the Seller requests that the Company extend the date
for either or both of the two remaining 30-day extension periods, the Seller would make Contributions of approximately $879,000,
respectively. If, however, the Seller does not request that we extend beyond March 21, 2020 or any additional 30-day period thereafter
and the Company also determines not to extend or our board of directors otherwise determines that the Company will not be able
to consummate an initial business combination by the Extended Date and does not wish to have an additional Extension, the Company’s
board of directors would wind up our affairs and redeem 100% of the outstanding public shares.
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation:
The accompanying financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”).
All dollar amounts are rounded to the nearest
thousand dollars.
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 periods. 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 periods.
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 years ended December 31, 2019 and 2018:
|
|
Year ended
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net income available to Class A common stockholders:
|
|
|
|
|
|
|
Interest income
|
|
$
|
6,482,000
|
|
|
|
5,559,000
|
|
Less: Income and franchise taxes
|
|
|
(1,520,000
|
)
|
|
|
(1,330,000
|
)
|
Expenses available to be paid
with interest income from Trust (up to a maximum of $750,000 per year)
|
|
|
(125,000
|
)
|
|
|
(1,372,000
|
)
|
Net income available to Class
A common stockholders
|
|
$
|
4,837,000
|
|
|
$
|
2,857,000
|
|
|
|
|
|
|
|
|
|
|
Net income available to Class F common stockholders:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,387,000
|
|
|
$
|
2,806,000
|
|
Less: amount attributable to
Class A common stockholders
|
|
|
(4,837,000
|
)
|
|
|
(2,857,000
|
)
|
Net (loss) available to class
F common stockholders
|
|
$
|
(3,450,000
|
)
|
|
$
|
(51,000
|
)
|
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 revenue and 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 $17,379,000 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. The Company recorded income tax expense of approximately
$1,320,000 and $1,130,000, respectively, in the years ended December 31, 2019 and 2018, primarily related to interest income earned
on the Trust Account net of franchise taxes. The Company’s effective tax rate was approximately 49 % and 29%, respectively,
for each of the years ended December 31, 2019 and 2018. The Company’s effective tax rate differs from the expected income
tax rate due to the start-up costs (discussed above) which are not currently deductible. At December 31, 2019 and 2018, the Company
has a deferred tax asset of approximately $1,080,000 and $355,000, 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.
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 December 31, 2019 and 2018. 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 December 31, 2019 and 2018. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations
by major taxing authorities since inception.
Redeemable Common Stock:
As discussed in Note 4, all of the 30,000,000
common shares sold as part of a Unit in the Public Offering (694,820 of which were redeemed in October 2019 as discussed in Note
2 above leaving 29,305,180 outstanding) 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 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 December
31, 2019 and 2018, 28,344,013 and 28,916,141, respectively, of the 30,000,000 Public Shares (29,305,180 of which were outstanding
at December 31, 2019) were classified outside of permanent equity.
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.
Subsequent Events:
Management has evaluated subsequent events
to determine if events or transactions occurring after the date of the financial statements but before the financial statements
were issued, require potential adjustment to or disclosure in the financial statements and has concluded that all such events
that would require adjustment or disclosure have been recognized or disclosed.
NOTE 4 – 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 5 were forfeited.
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.
See Notes 2 and 6 regarding the 694,820
shares redeemed for approximately $7,108,000 at October 22, 2019 in connection with the Extension Amendment.
NOTE 5 – 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 7). 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 5 and 7) 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 5 and 7, 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.
The Company’s initial stockholder has agreed not to transfer,
assign or sell any of its 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.
Administrative Service Agreement and Services
Agreement
The Company pays $10,000 a month ($120,000
for each of the years ended December 31, 2019 and 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. No amounts were payable at December 31, 2018 or 2019.
NOTE 6 – 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 185 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 December 31, 2019 the proceeds of the
Trust Account were invested in a money market fund that invests solely in U.S. government treasury bills. At December 31, 2018
the proceeds of the Trust Account were invested in U.S. government treasury bills. 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 December
31, 2018 balance sheet 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 December 31, 2019 and 2018 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 December 31, 2019 and 2018 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 value at
|
|
|
|
|
|
Prices in
|
|
|
|
December 31,
|
|
|
Gross Unrealized
|
|
|
Active Markets
|
|
Description
|
|
2019
|
|
|
Holding
Gain
|
|
|
(Level
1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and money market
|
|
$
|
302,529,000
|
|
|
$
|
-
|
|
|
$
|
302,529,000
|
|
|
|
|
|
|
|
|
|
Quoted Price
|
|
|
|
Carrying value at
|
|
|
|
|
|
Prices in
|
|
|
|
December 31,
|
|
|
Gross Unrealized
|
|
|
Active Markets
|
|
Description
|
|
2018
|
|
|
Holding
Loss
|
|
|
(Level
1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and money market
|
|
$
|
1,000
|
|
|
$
|
-
|
|
|
$
|
1,000
|
|
U.S. government treasury bills
|
|
|
304,034,000
|
|
|
|
(7,000
|
)
|
|
|
304,027,000
|
|
Total
|
|
$
|
304,035,000
|
|
|
$
|
(7,000
|
)
|
|
$
|
304,028,000
|
|
On October 22, 2019, in connection with the Extension Amendment,
stockholders elected to redeem 694,820 public shares of the Company’s Class A common stock at approximately $10.23 per share
resulting in a distribution from the Trust Account of approximately $7,108,000. Additionally, during the year ended December 31,
2019, the Company received approximately $1,758,000 (two payments of approximately $879,000) from the Seller representing the payment
of $0.03 per outstanding public share (29,305,180 public shares) for each extension period under the Extension Amendment discussed
further in Note 2. Subsequent to December 31, 2019, the Company has extended the date by which it has to consummate a business combination from January
21, 2020 to February 20, 2020, and from February 20, 2020 to March 21, 2020. In connection with these extensions, the Seller loaned
$979,155.40 and $879,155.40, respectively, to the Company under the Amended Seller Note. As a result of the extensions, the Seller
has loaned to the Company a total aggregate amount of approximately $3,816,621.60.
During the year ended December 31, 2019,
the Company withdrew approximately $2,638,000 from the Trust Account in order to pay 2018 actual and 2019 estimated income taxes
(approximately $1,397,000) and franchise taxes (approximately $420,000) paid in installments and to release approximately $813,000
allowed for working capital (including undistributed amounts from the prior year). The
Company may continue to withdraw from the Trust Account amounts necessary for taxes, and for working capital of up to $750,000
annually (on a pro rata basis), during the period of the Extension Amendment.
During the year ended December 31, 2018
the Company withdrew an aggregate of approximately $1,927,000 from the Trust Account including approximately $750,000 for working
capital and approximately $1,177,000 for payment of federal income and state franchise taxes, including estimated taxes.
NOTE 7 – 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, par value $0.0001, and 10,000,000 shares of Class F common stock, par value $0.0001. 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
8,625,000 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 1,125,000 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. 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 were forfeited.
On October 22, 2019, in connection with
the Extension Amendment, stockholders elected to redeem 694,820 shares of the Company’s Class A common stock, par value
$0.0001 per share, issued in the Company’s initial public offering (the “public shares”). The shares were redeemed
at $10.23 per share, the per share value of the Trust Account at that date resulting in a distribution from the Trust Account
of approximately $7,108,000. As a result, 29,305,180 public shares remain issued and outstanding following such redemptions.
At each of December 31, 2019 and 2018 there
were 7,500,000 shares of Class F common stock issued and outstanding. At December 31, 2019 and 2018 there were 29,305,180 and
30,000,000 shares, respectively, of Class A common stock outstanding (28,344,013 and 28,916,141, 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, par value $0.0001, with such designations, voting and other rights and preferences as may be determined
from time to time by the Board of Directors. At December 31, 2019 and 2018, the rights and preferences have not been determined
and there were no shares of preferred stock issued and outstanding.