ITEM
1. FINANCIAL STATEMENTS
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED
BALANCE SHEETS
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
882,000
|
|
|
$
|
1,353,000
|
|
Prepaid
expenses
|
|
|
62,000
|
|
|
|
42,000
|
|
Total
current assets
|
|
|
944,000
|
|
|
|
1,395,000
|
|
|
|
|
|
|
|
|
|
|
Cash
and investments held in Trust Account
|
|
|
261,658,000
|
|
|
|
260,612,000
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
262,602,000
|
|
|
$
|
262,007,000
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
21,000
|
|
|
$
|
19,000
|
|
Accrued
business combination costs
|
|
|
2,332,000
|
|
|
|
-
|
|
Other
accrued liabilities
|
|
|
181,000
|
|
|
|
108,000
|
|
Accrued
income and franchise taxes
|
|
|
135,000
|
|
|
|
544,000
|
|
Total
current liabilities
|
|
|
2,669,000
|
|
|
|
671,000
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities:
|
|
|
|
|
|
|
|
|
Deferred
underwriting compensation
|
|
|
9,616,000
|
|
|
|
9,616,000
|
|
Total
liabilities
|
|
|
12,285,000
|
|
|
|
10,287,000
|
|
|
|
|
|
|
|
|
|
|
Common
stock subject to possible redemption; 24,288,851 and 24,427,763 shares at June 30, 2018 and December 31, 2017, respectively,
(at value of approximately $10.10 per share)
|
|
|
245,317,000
|
|
|
|
246,720,000
|
|
|
|
|
|
|
|
|
|
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Commitments
and contingencies
|
|
|
|
|
|
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|
|
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Stockholders’
equity:
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|
|
|
|
|
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Preferred
stock, $0.0001 par value; 1,000,000 authorized shares; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.0001 par value; 200,000,000 authorized shares; 7,792,399 and 7,653,487 shares, respectively, issued and
outstanding (excluding 24,288,851 and 24,427,763 shares, respectively, subject to possible redemption)
|
|
|
1,000
|
|
|
|
1,000
|
|
Additional
paid-in-capital
|
|
|
6,121,000
|
|
|
|
4,718,000
|
|
Retained
earnings (accumulated deficit)
|
|
|
(1,122,000
|
)
|
|
|
281,000
|
|
Total
stockholders’ equity
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
262,602,000
|
|
|
$
|
262,007,000
|
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
|
|
Three
Months
ended
June 30,
2018
|
|
|
Three
Months
ended
June
30,
2017
|
|
|
Six
Months
ended
June
30,
2018
|
|
|
The
period
from January 3,
2017 (date
of inception) to
June
30,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
General
and administrative expenses
|
|
|
2,667,000
|
|
|
|
66,000
|
|
|
|
2,963,000
|
|
|
|
66,000
|
|
Loss
from operations
|
|
|
(2,667,000
|
)
|
|
|
(66,000
|
)
|
|
|
(2,963,000
|
)
|
|
|
(66,000
|
)
|
Other
income – Interest income on Trust Account
|
|
|
1,040,000
|
|
|
|
6,000
|
|
|
|
1,962,000
|
|
|
|
6,000
|
|
Loss
before provision for income tax
|
|
|
(1,627,000
|
)
|
|
|
(60,000
|
)
|
|
|
(1,001,000
|
)
|
|
|
(60,000
|
)
|
Provision
for income tax
|
|
|
210,000
|
|
|
|
-
|
|
|
|
402,000
|
|
|
|
-
|
|
Net
loss
|
|
$
|
(1,837,000
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(1,403,000
|
)
|
|
$
|
(60,000
|
)
|
Weighted
average common shares outstanding: Basic and diluted
|
|
|
7,714,000
|
|
|
|
5,660,000
|
|
|
|
7,681,000
|
|
|
|
5,643,000
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Net loss per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.24
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.01
|
)
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY
For
the six months ended June 30, 2018
(unaudited)
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Retained
Earnings
(Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Balance,
December 31, 2017
|
|
|
7,653,487
|
|
|
$
|
1,000
|
|
|
$
|
4,718,000
|
|
|
$
|
281,000
|
|
|
$
|
5,000,000
|
|
Adjustment of proceeds subject to possible
redemption at value of $10.10 per share
|
|
|
138,912
|
|
|
|
-
|
|
|
|
1,403,000
|
|
|
|
-
|
|
|
|
1,403,000
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,403,000
|
)
|
|
|
(1,403,000
|
)
|
Balance,
June 30, 2018 (unaudited)
|
|
|
7,792,399
|
|
|
$
|
1,000
|
|
|
$
|
6,121,000
|
|
|
$
|
(1,122,000
|
)
|
|
$
|
5,000,000
|
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For
the Six
Months Ended
June 30,
2018
|
|
|
The
period from
January 3,
2017 (date of
inception) to
June 30,
2017
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,403,000
|
)
|
|
$
|
(60,000
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Interest
income earned on Trust Account
|
|
|
(1,962,000
|
)
|
|
|
(6,000
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase
in prepaid expenses
|
|
|
(20,000
|
)
|
|
|
(90,000
|
)
|
Increase
in accounts payable and other accrued liabilities
|
|
|
75,000
|
|
|
|
47,000
|
|
Increase
in accrued business combination costs
|
|
|
2,332,000
|
|
|
|
|
|
Decrease
in accrued income and franchise taxes
|
|
|
(409,000
|
)
|
|
|
-
|
|
Net
cash used in operating activities
|
|
|
(1,387,000
|
)
|
|
|
(109,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Withdrawal
from Trust Account for taxes
|
|
|
916,000
|
|
|
|
-
|
|
Cash
deposited in Trust Account
|
|
|
-
|
|
|
|
(227,250,000
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
916,000
|
|
|
|
(227,250,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock to Sponsor
|
|
|
-
|
|
|
|
25,000
|
|
Proceeds
from note payable and advances – related party
|
|
|
-
|
|
|
|
300,000
|
|
Proceeds
from sale of Public Offering Units
|
|
|
-
|
|
|
|
225,000,000
|
|
Proceeds
from sale of Private Placement Warrants
|
|
|
-
|
|
|
|
9,600,000
|
|
Payment
of underwriting discounts
|
|
|
-
|
|
|
|
(4,500,000
|
)
|
Payment
of offering costs
|
|
|
-
|
|
|
|
(232,000
|
)
|
Payment
of notes payable and advances – related party
|
|
|
-
|
|
|
|
(300,000
|
)
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
229,893,000
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(471,000
|
)
|
|
|
2,534,000
|
|
Cash
at beginning of period
|
|
|
1,353,000
|
|
|
|
-
|
|
Cash
at end of period
|
|
$
|
882,000
|
|
|
$
|
2,534,000
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information on cash flows:
|
|
|
|
|
|
|
|
|
Cash
paid for taxes
|
|
$
|
916,000
|
|
|
$
|
-
|
|
See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
Notes to Condensed Financial Statements
(unaudited)
NOTE
1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization
and General:
Hennessy
Capital Acquisition Corp. III (the “Company”) was incorporated in Delaware on January 3, 2017. 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 “Initial 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 January 3, 2017 (date of inception)
to June 30, 2018 relates to the Company’s formation and the initial public offering (“Public Offering”) described
below and, subsequent to the Public Offering, efforts have been directed toward locating and completing a suitable Initial 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 on cash and cash equivalents from the
proceeds derived from the Public Offering. All dollar amounts are rounded to the nearest thousand dollars.
Sponsor
and Financing:
The
Company’s sponsor is Hennessy Capital Partners III LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Public Offering (as described in Note 4) was declared effective by the United States Securities
and Exchange Commission (the “SEC”) on June 22, 2017. The Company intends to finance an Initial Business Combination
with proceeds from the $256,650,000 Public Offering (including $31,650,000 from the underwriters’ partial exercise of their
overallotment option - Note 4) and $9,600,000 private placement (Note 5). Upon the closing of the Public Offering and the private
placement, approximately $259,217,000 was deposited in a trust account with Continental Stock Transfer and Trust Company acting
as trustee (the “Trust Account”) as discussed below. As a result of the underwriters’ exercising less than the
full overallotment option, the Sponsor forfeited 52,500 shares of its common stock as described in Notes 4 and 5.
The
Trust Account:
The
funds in 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 Initial Business Combination or (ii) the distribution of the Trust Account as described below. The funds held outside the
Trust Account may be used to pay for business, legal and accounting due diligence on prospective targets and for general and administrative
expenses.
The
Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay
taxes, if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Initial
Business Combination; (ii) the redemption of 100% of the shares of common stock included in the Units (as defined in Note 4) sold
in the Public Offering if the Company is unable to complete an Initial Business Combination within 18 months from the closing
of the Public Offering (subject to the requirements of law); or (iii) the redemption of the public shares in connection with a
stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing
of the Company’s obligation to redeem 100% of its public shares if it does not complete its Initial Business Combination
by December 28, 2018, which is 18 months from the closing of the Public Offering.
Initial
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
an Initial Business Combination with a Target Business. As used herein, “Target Business” must be 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 Company’s signing a definitive agreement
in connection with the Initial Business Combination. There is no assurance that the Company will be able to successfully effect
an Initial Business Combination.
The
Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of
the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem
their shares, regardless of whether they vote for or against the Initial 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, or (ii) provide stockholders with the opportunity to have their
shares redeemed by 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. The decision as to whether the Company will seek
stockholder approval of the Initial Business Combination or will allow stockholders to redeem 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 NYSE American (formerly known as NYSE MKT) rules. If the Company seeks stockholder approval, it will complete its Initial Business
Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination.
However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less
than $5,000,001 upon consummation of an Initial Business Combination. In such case, the Company would not proceed with the redemption
of its public shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.
If
the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination,
a public stockholder will have the right to redeem its shares for an amount in cash equal to its 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. As a result, such shares of common stock are recorded at redemption amount and classified
as temporary equity upon the completion of the Public Offering, in accordance with FASB ASC 480, “Distinguishing Liabilities
from Equity.”
The
Company only has 18 months from the closing date of the Public Offering to complete the Initial Business Combination. If the Company
does not complete an Initial 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 common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less
up to $100,000 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 creditors and remaining stockholders, as part of its
plan of dissolution and liquidation. The initial stockholders have entered into letter agreements with the Company, pursuant to
which they have waived their rights to participate in any redemption with respect to their initial shares; however, if the initial
stockholders or any of the Company’s officers, directors or affiliates acquire shares of common stock in or after the Public
Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in
the event the Company does not complete an Initial 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.
Liquidation
and Going Concern
The
Company only has 18 months from the closing date of the Public Offering (until December 28, 2018) to complete its Initial Business
Combination. If the Company does not complete an Initial Business Combination by December 28, 2018, the Company will (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 for a per share pro rata portion of the Trust Account, including interest, but less
taxes payable and funds released to the Company for working capital (and less up to $100,000 of interest to pay dissolution expenses)
and (iii) as promptly as possible following such redemption, subject to the approval of the Company’s remaining stockholders
and its Board of Directors, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining
stockholders, as part of its plan of dissolution and liquidation. The Sponsor and each of the Company’s officers and directors,
each of whom holds Founder Shares (defined in Note 5), have entered into letter agreements with the Company, pursuant to which
they have waived their rights to participate in any redemption with respect to their Founder Shares; however, if such initial
stockholders or any of their affiliates acquire shares of common stock in or after the Public Offering, they will be entitled
to a pro rata share of the Trust Account for such shares upon the Company’s redemption or liquidation in the event the Company
does not complete an Initial Business Combination within the required time period.
This
mandatory liquidation and subsequent dissolution 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
December 28, 2018.
In
the event of such liquidation, 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 offering price per Unit in the Public Offering.
NOTE
2 – AGREEMENT FOR BUSINESS COMBINATION
The
Business Combination
On
June 25, 2018, as amended as of July 12, 2018 (and as may be further amended from time to time) we entered into a purchase agreement
(the “Purchase Agreement”) with JFL-NRC-SES Partners, LLC (“JFL Partners”) pursuant to which, among other
things and subject to the terms and conditions contained therein, we will effect an acquisition of all of the issued and outstanding
membership interests of NRC Group Holdings, LLC (together with its subsidiaries, “NRC Group”). As of the date of the
Purchase Agreement, JFL Partners owned all of the issued and outstanding membership interests of NRC Group. Such acquisition and
the other transactions contemplated by the Purchase Agreement are hereafter collectively referred to as the “Business Combination.”
Concurrently
with the execution of the Purchase Agreement, the Company entered into a warrant exchange and forfeiture agreement (the “Sponsor
Warrant Exchange and Share Forfeiture Agreement”) with the Sponsor, which provides for the exchange by the Sponsor of 9,600,000
outstanding placement warrants for 1,920,000 newly issued shares of the Company’s common stock and forfeiture to the Company
of an equivalent number of existing founder shares held by the Sponsor for cancellation.
NRC
Group is a global provider of comprehensive environmental, compliance and waste management services to customers across diverse
industries and end markets to ensure compliance with environmental, health and safety laws around the world. NRC Group’s
principal executive office is in Great River, New York.
The
Business Combination will be accounted for as a reverse merger in accordance with accounting principles generally accepted in
the United States of America. Under this method of accounting, the Company will be treated as the “acquired” company
for financial reporting purposes. This determination was primarily based on NRC Group comprising the ongoing operations of the
combined company and NRC Group’s senior management comprising the senior management of the combined company. For accounting
purposes, we expect that NRC Group will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction
will be treated as a recapitalization of NRC Group (i.e., a capital transaction involving the issuance of stock by the Company
for the stock of NRC Group). Accordingly, the consolidated assets, liabilities and results of operations of NRC Group will become
the historical financial statements of the combined company, and the Company’s assets, liabilities and results of operations
will be consolidated with NRC Group beginning on the acquisition date.
Business
Combination Consideration and Acquisition Financing
Business
Combination Consideration -
Pursuant to the Purchase Agreement, the aggregate purchase price for the proposed Business Combination
is $662.5 million subject to adjustments for (i) NRC Group’s cash, debt, and net working capital, (ii) certain other unpaid
transaction expenses (other than NRC Group’s expenses incurred in connection with the preparation of the proxy statement
in connection with the Business Combination (the “Proxy Statement”) and meetings with our stockholders), (iv) expenses
paid by JFL Partners or its affiliates (including NRC Group) on behalf of the Company, (iv) pre-Closing income taxes, (iv) the
Excess Capital Expenditures Adjustment (as defined in the Purchase Agreement), (vi) and the Aggregate Acquisition Adjustment (as
defined in the Purchase Agreement) (the purchase price and final adjustments as of the closing of the Business Combination (the
“Closing”) being the “Total Purchase Price”) and any post-Closing payment amounts. The Total Purchase
Price consists of the Cash Purchase Price and the Purchase Price Common Stock, each as defined in the Purchase Agreement.
Acquisition
Financing -
Concurrently with the execution of the Purchase Agreement, the Company entered into a Backstop and Subscription
Agreement with an investor, pursuant to which the investor agreed to purchase (i) $75.0 million of Series A Convertible Preferred
Stock (subject to a possible increase of up to an additional $25.0 million) (the “PIPE Financing”) and (ii) up to
$25.0 million of shares of Company common stock in a private placement (the “Backstop Commitment”). The investor will
purchase the shares related to the Backstop Commitment through one or more of (a) open market or privately negotiated transactions
with third parties (including forward contracts), (b) a private placement with consummation concurrently with that of the Business
Combination at a purchase price of $10.25 per share of Company common stock, or (c) a combination thereof. The investor in the
PIPE Financing has agreed to vote any Company common stock that it owns, whether acquired pursuant to the PIPE Financing and Backstop
Commitment or otherwise, in favor of the proposed Business Combination and the other proposals set forth in the Proxy Statement.
The investor in the PIPE Financing has also agreed not to transfer any Company common stock that it owns until the earlier of
the Closing or the public announcement by the Company of the termination of the Purchase Agreement. In consideration for the aggregate
$125.0 million equity commitment, the investor in the PIPE Financing will receive (i) a commitment fee of $2.5 million, which
fee will be paid by JFL Partners or one of its affiliates on behalf of the Company, subject to credit to the Total Purchase Price,
and (ii) upon the Closing, five percent (5%) of the aggregate consideration paid by the investor in the PIPE Financing to acquire
shares of common stock in connection with the Backstop Commitment (if any) (not to exceed five percent (5%) of the total Backstop
Commitment). The investor in the PIPE Financing may also receive up to a three percent (3%) placement and/or funding fee on the
aggregate Series A Convertible Preferred Stock acquired pursuant to the Backstop and Subscription Agreement. In addition, to the
extent the Company enters into one or more other subscription agreements substantially similar to the Backstop and Subscription
Agreement (the “Other Subscription Agreements”) prior to Closing with qualified institutional buyers other than the
initial investor to the Backstop and Subscription Agreement, each such investor will receive five percent (5%) of the aggregate
consideration paid by such investor to acquire shares of common stock in connection with the Other Subscription Agreements (if
any).
Redemption
Offer
Pursuant
to the Company’s existing amended and restated certificate of incorporation (the “existing charter”), in connection
with the Business Combination, holders of the Company’s public shares may elect to have their shares redeemed for cash at
the applicable redemption price per share calculated in accordance with the existing charter (the “Redemption Offer”).
The per share redemption price would have been approximately $10.19 at June 30, 2018.
Representations
and Warranties
The
Purchase Agreement contains a number of representations and warranties made by the Company, on the one hand, and JFL Partners,
on the other hand, made for the benefit of the other, which in certain cases are subject to specified exceptions and qualifications
contained in the Purchase Agreement or in information provided pursuant to certain disclosure schedules to the Purchase Agreement.
The representations and warranties are customary for transactions similar to the Business Combination. Each representation, warranty,
covenant, undertaking and agreement contained in the Purchase Agreement will expire as of, and will not survive, the consummation
of the Business Combination
(except for certain covenants that will survive the consummation
of the Business Combination as set forth in the Purchase Agreement and except for JFL Partners’ representation relating
to the ownership of the shares of NRC Group, which representation will survive for one year after the Closing)
.
Conditions
to Closing of the Business Combination
Consummation
of the transactions contemplated by the Purchase Agreement is subject to customary conditions of the respective parties, including
the approval of the Purchase Agreement and transactions contemplated thereby (including the Business Combination) by the Company’s
stockholders in accordance with the Company’s existing charter and the completion of the Redemption Offer in accordance
with the Proxy Statement. Each redemption of public shares by the Company’s public stockholders will decrease the amount
in the Trust Account, which holds approximately $261.6 million as of June 30, 2018 (before withdrawals of approximately $135,000,
for taxes payable at that date).
In
addition, consummation of the transactions contemplated by the Purchase Agreement is subject to other closing conditions, including,
among others: (i) the expiration or termination of the regulatory waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and certain other regulatory approvals, if any, (ii) the accuracy of the representations and warranties
of the Company and JFL Partners (subject in certain cases to certain materiality, knowledge and other qualifications) and the
performance by the Company and JFL Partners in all material respects of their covenants and agreements required to be performed
under the Purchase Agreement, and (ii) the Company having at least $5,000,001 of net tangible assets (as determined in accordance
with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) remaining after the
closing of the Redemption Offer.
Termination
The
Purchase Agreement may be terminated under certain customary and limited circumstances at any time prior to Closing, including
by either party if the transactions contemplated by the Purchase Agreement have not been completed by November 30, 2018; provided
that the party seeking to terminate shall not have breached in any material respect its obligations in any manner that has proximately
caused the failure to consummate the Business Combination. If the Purchase Agreement is terminated, all further obligations of
the parties under the Purchase Agreement will terminate and will be of no further force and effect (except that certain obligations
related to public announcements, expense reimbursement, provisions concerning the stockholder representative, use, storage and
handling by the Company and its representatives of certain protected confidential information, termination, general provisions
and the confidentiality agreement between the parties will continue in effect), and neither the Company nor JFL Partners will
have any further liability to any other party thereto except for liability for any knowing and intentional breach of the Purchase
Agreement prior to such termination.
Other
Agreements
The
Business Combination also calls for additional agreements, including, among others, the Backstop Subscription Agreement, the
JFL Subscription Agreement, Voting and Support Agreement, lock-up agreements, Registration Rights Agreement, Sponsor Warrant
Exchange and Share Forfeiture Agreement and Investor Rights Agreement, each as defined and described elsewhere in the
preliminary Proxy Statement filed with the SEC on July 20, 2018.
NOTE
3 – 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.
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 election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when an accounting 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 accounting standard at the time private companies adopt the new or revised standard.
Net
Loss Per Common Share:
Net
loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common
shares outstanding during the period (after deducting shares that were subject to forfeiture in connection with the Public Offering),
plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using the treasury
stock method. Shares of common stock subject to possible redemption have been excluded from the calculation of basic and diluted
loss per share for the three and six months ended June 30, 2018, for the three months ended June 30, 2017 and for the period from
January 3, 2017 (date of inception) to June 30, 2017 since such shares, if redeemed, only participate in their pro rata share
of the Trust Account. The Company has not considered the effect of warrants to purchase 28,848,750 shares of common stock sold
in the Public Offering and the concurrent private placement in the calculation of diluted loss per share, since the exercise of
the warrants into shares of common stock is contingent upon the occurrence of future events. For the three and six months ended
June 30, 2018, the three months ended June 30, 2017 and for the period from January 3, 2017 (date of inception) to June 30, 2017,
the fully diluted calculation does not include the shares subject to redemption because they would be antidilutive.
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 Financial Accounting Standards
Board ASC 820 (“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 GAAP 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. Actual results could differ from those estimates.
Offering
Costs:
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A – “Expenses
of Offering”. Offering costs of approximately $14,836,000, consisting principally of underwriting discounts of approximately
$14,116,000 (including approximately $9,616,000 of which payment is deferred) and approximately $720,000 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 taxes. The Company’s costs
are generally considered start-up costs, which are not currently deductible, and, beginning in the three months ended June 30,
2018, Business Combination costs, many of which may not be deductible for income tax purposes. During the three and six months
ended June 30, 2018 the Company recorded income tax expense of approximately $210,000 and $402,000 primarily related to interest
income earned on the Trust Account net of franchise taxes accrued. The Company’s effective tax rate for the three and six
months ended June 30, 2018 was approximately 13% and 40%, respectively, which differs significantly from the expected 21% tax
rate due to the start-up costs (discussed above) which are not currently deductible and the Business Combination costs (also discussed
above), many of which may not be deductible. There was no tax provision for the three months ended June 30, 2017 and for the period
from January 3, 2017 (date of inception) to June 30, 2017 because there was no interest income during that period. 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
$260,000 and $120,000, respectively, (which reflects the lower 21% rate under which those deferred taxes would be expected to
be recovered or settled) primarily related to start-up costs. Management has determined that a full valuation allowance of the
deferred tax asset is appropriate at June 30, 2018 and December 31, 2017.
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 or 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 or 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 tax positions.
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 25,665,000 shares of common stock sold as part of Units 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 ASC 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’s charter
does not specify a maximum redemption threshold, it provides that in no event will the Company 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 will adjust the carrying value at the end of each
reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional
paid-in capital. Accordingly, at June 30, 2018 and December 31, 2017, 24,288,851 and 24,427,763 of the 25,665,000 public shares
were classified outside of permanent equity at 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.
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
In
June and July 2017, the Company closed on the sale of 25,665,000 units at a price of $10.00 per unit (the “Units”)
yielding gross proceeds from the Public Offering of $256,650,000. The closings occurred on June 28, 2017 with respect to 22,500,000
Units and on July 19, 2017 with respect to 3,165,000 Units related to the partial exercise of the underwriters’ over-allotment
option. Each Unit consists of one share of the Company’s common stock, $0.0001 par value and three-quarters of one redeemable
common stock purchase warrant (the “Warrants”). Each whole warrant offered in the Public Offering is exercisable to
purchase one share of our common stock. Only whole warrants may be exercised. Under the terms of the 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. 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 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 Initial Business Combination or 12 months from the closing of
the Public Offering and will expire five years after the completion of the Initial Business Combination or earlier upon redemption
or liquidation. However, if the Company does not complete the Initial Business Combination on or prior to the 18-month period
allotted to complete the Initial Business Combination, the Warrants will expire at the end of such period. If the Company is unable
to deliver registered shares of common stock to the holder upon exercise of the Warrants 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 paid an underwriting discount of approximately 2.0% of the per Unit offering price to the underwriters at the June 28,
2017 closing of the Public Offering ($4,500,000), with an additional fee (the “Deferred Fee”) of approximately 3.5%
of the gross offering proceeds payable upon the Company’s completion of an Initial Business Combination ($7,875,000). Upon
closing of the partial exercise of the over-allotment option, a 5.5% deferred discount on the gross proceeds of the over-allotment
option was accrued for approximately $1,741,000 resulting in the aggregate Deferred Fee of approximately $9,616,000 (approximately
3.7% of the gross offering proceeds). The Deferred Fee will become payable to the underwriters from the amounts held in the Trust
Account solely in the event the Company completes the Initial Business Combination.
In
connection with the exercise of the underwriters’ over-allotment option, 52,500 founder shares were forfeited.
In
addition, in June 2017, the Sponsor paid the Company approximately $9,600,000 in a private placement for the purchase of 9,600,000
warrants at a price of $1.00 per warrant (the “Private Placement Warrants”) - see also Note 5.
Upon
the closing of the Public Offering and the sale of the Private Placement Warrants, an aggregate of approximately $259,217,000
was deposited in the Trust Account.
NOTE
5 – RELATED PARTY TRANSACTIONS
Founder
Shares
During
April 2017, the Sponsor purchased 7,906,250 shares of common stock (the “Founder Shares”) for $25,000, or approximately
$0.003 per share. Thereafter, the Company cancelled a portion of the Founder Shares, resulting in an aggregate of 6,468,750 Founder
Shares outstanding (up to 843,750 of which were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’
over-allotment option was exercised). As a result of the partial cancellations, the per-share purchase price increased to approximately
$0.004 per share. In May 2017, the Sponsor transferred 1,125,000 founder shares to the Company’s officers and director nominees.
The Founder Shares are identical to the common stock included in the Units sold in the Public Offering except that the Founder
Shares are subject to certain transfer restrictions, as described in more detail below. In July 2017, pursuant to an agreement
with the underwriters to limit the ownership by the initial stockholders to 20% of the Company’s issued and outstanding
shares, the Sponsor forfeited 52,500 Founder Shares as a result of the over-allotment option not being exercised in full by the
underwriters.
The
Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier
of (A) one year after the completion of the 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 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.
See
also Note 2 regarding the Sponsor Warrant Exchange and Share Forfeiture Agreement with the Sponsor executed in June 2018 which
provides for the exchange by the Sponsor of 9,600,000 outstanding Private Placement Warrants (which are discussed below) for 1,920,000
newly issued shares of the Company’s common stock and forfeiture to the Company of an equivalent number of existing Founder
Shares held by the Sponsor for cancellation.
Private
Placement Warrants
Upon
the June 28, 2017 closing of the Public Offering, the Sponsor paid the Company approximately $9,600,000 for the purchase of the
9,600,000 Private Placement Warrants at a price of $1.00 per warrant in a private placement. Each Private Placement Warrant entitles
the holder to purchase one share of common stock at $11.50 per share. A portion of the purchase price of the Private Placement
Warrants was added to the proceeds from the Public Offering in funding the amount required to be deposited in the Trust Account
pending completion of the 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
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 an Initial Business Combination, then the proceeds deposited in the Trust Account will be part of
the liquidating distribution to the public stockholders and the Private Placement Warrants issued to the Sponsor will expire worthless.
See
also Founder Shares, above, regarding the Sponsor Warrant Exchange and Share Forfeiture Agreement with the Sponsor executed in
June 2018 and Note 2.
Registration
Rights
The
Company’s initial stockholders and holders of the Private Placement Warrants are entitled to registration rights pursuant
to a registration rights agreement. The Company’s initial stockholders and holders of the Private Placement Warrants will
be 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 will 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. There will be no penalties associated with delays in registering the securities
under the registration rights agreement.
Related
Party Loans
On
March 31, 2017, the Sponsor agreed to loan the Company an aggregate of $300,000 by drawdowns of not less than $10,000 each against
the issuance of an unsecured promissory note (the “Note”) to cover expenses related to the Public Offering. During
2017, the Company borrowed the entire $300,000 available under the Note and the non-interest bearing loans were paid in full on
June 28, 2017.
Administrative
Services Agreement and Other Agreements
The
Company pays $15,000 a month ($45,000 and $90,000, respectively, for the three and six months ended June 30, 2018) for office
space, administrative services and secretarial support to an affiliate of the Sponsor, Hennessy Capital LLC. Services commenced
on June 23, 2017 and will terminate upon the earlier of the consummation by the Company of the Initial Business Combination or
the liquidation of the Company.
Also,
commencing on June 23, 2017 (the date the securities were first listed on the NYSE American), the Company has agreed to compensate
its Chief Financial Officer $25,000 per month prior to the consummation of the Initial Business Combination, of which 50% is payable
in cash currently and 50% in cash upon the successful completion of the Initial Business Combination. Approximately $153,000 and
$78,000, respectively, has been included in other accrued liabilities for the deferred compensation of the Chief Financial Officer
at June 30, 2018 and December 31, 2017.
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 approximately $259,217,000 was deposited into the Trust
Account. The 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, the proceeds of the Trust Account were invested primarily in money market funds meeting certain conditions under
Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest solely in U.S. government treasury obligations. At
December 31, 2017, the proceeds of the Trust Account were invested primarily in U.S. government treasury bills maturing in 2018
yielding interest of between approximately 1.1% and 1.4% per year. 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, 2017 condensed 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 consisted
of U.S. government treasury bills and money market funds that invest only in 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:
Description
|
|
Carrying
value at
June 30,
2018
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Quoted
Price
Prices in
Active Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
and money market funds
|
|
$
|
261,658,000
|
|
|
$
|
-
|
|
|
$
|
261,658,000
|
|
Description
|
|
Carrying
value at
December 31,
2017
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Quoted
Price
Prices in
Active Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
$
|
15,000
|
|
U.S.
government treasury bills
|
|
|
260,597,000
|
|
|
|
21,000
|
|
|
|
260,618,000
|
|
Total
|
|
$
|
260,612,000
|
|
|
$
|
21,000
|
|
|
$
|
260,633,000
|
|
During
the three and six months ended June 30, 2018, the Company withdrew approximately $916,000 from the Trust Account in connection
with the payment of its 2017, and partial estimated 2018, income and franchise taxes.
NOTE
7 – STOCKHOLDERS’ EQUITY
Common
Stock
On
June 22, 2017, the Company amended and restated its amended and restated certificate of incorporation to increase the number of
its authorized shares of common stock from 29,000,000 shares to 200,000,000 shares. The Company may (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 Initial Business Combination to the extent the Company seeks stockholder approval
in connection with its Initial Business Combination. Holders of the Company’s common stock are entitled to one vote for
each share of common stock they own. In June and July 2017, a total of 25,665,000 shares of common stock were issued as part of
the Units in the Public Offering (including Units issued in connection with the partial exercise of the underwriters’ over-allotment
option) and in July 2017, 52,500 founder shares were forfeited resulting in 32,081,250 shares of common stock issued and outstanding
including 24,288,851 and 24,427,763 shares, respectively, subject to redemption at June 30, 2018 and December 31, 2017.
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, there were no shares
of preferred stock issued and outstanding.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
The
Company has entered into engagement letters or agreements with various consultants, advisors, professionals and others in connection
with its Business Combination. The services under these engagement letters and agreements are material in amount and in some instances
a significant component consists of contingent or success fees. In most instances, these engagement letters and agreements specifically
provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account. A substantial portion
of these costs (including contingent or success fees and ongoing accrued transactions costs, but not the $9,616,000 of deferred
underwriting compensation) will be charged to operations in the quarter that an Initial Business Combination is consummated.
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.
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 on January 3, 2017 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 (the “Initial Business Combination”). We intend to effectuate our Initial Business Combination using
cash from the proceeds of our initial public offering in June and July 2017 (the “Public Offering”) and the sale of
warrants in a private placement (the “Private Placement”) that occurred simultaneously with the completion of the
Public Offering (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 an Initial Business Combination:
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may
significantly dilute the equity interest of our stockholders;
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may
subordinate the rights of holders of our common stock if preferred stock is issued with
rights senior to those afforded our common stock;
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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;
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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
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may
adversely affect prevailing market prices for our common stock and/or warrants.
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Similarly,
if we issue debt securities or incur other indebtedness to finance our Initial Business Combination, it could result in:
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a
decrease in the prevailing market prices for our common stock and/or warrants;
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default
and foreclosure on our assets if our operating revenues after an Initial Business Combination
are insufficient to repay our debt obligations;
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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;
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our
immediate payment of all principal and accrued interest, if any, if the debt security
or other indebtedness is payable on demand;
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our
inability to obtain necessary additional financing if the debt security or other indebtedness
contains covenants restricting our ability to obtain such financing while the debt security
or other indebtedness is outstanding;
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our
inability to pay dividends on our common stock;
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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;
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limitations
on our flexibility in planning for and reacting to changes in our business and in the
industry in which we operate;
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increased
vulnerability to adverse changes in general economic, industry and competitive conditions
and adverse changes in government regulation; and
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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.
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At
June 30, 2018, we had approximately $882,000 in cash outside of the Trust Account. We expect to incur significant costs in the
pursuit of our Initial Business Combination and we cannot assure you that our plans to complete our Initial Business Combination
will be successful.
Agreement
for Business Combination
The
Business Combination
On
June 25, 2018, as amended as of July 12, 2018 (and as may be further amended from time to time) we entered into a purchase agreement
(the “Purchase Agreement”) with JFL-NRC-SES Partners, LLC (“JFL Partners”) pursuant to which, among other
things and subject to the terms and conditions contained therein, we will effect an acquisition of all of the issued and outstanding
membership interests of NRC Group Holdings, LLC (together with its subsidiaries, “NRC Group”). As of the date of the
Purchase Agreement, JFL Partners owned all of the issued and outstanding membership interests of NRC Group. Such acquisition and
the other transactions contemplated by the Purchase Agreement are hereafter collectively referred to as the “Business Combination.”
Concurrently
with the execution of the Purchase Agreement, the Company entered into the Sponsor Warrant Exchange and Share Forfeiture Agreement
with the Sponsor, which provides for the exchange by the Sponsor of 9,600,000 outstanding placement warrants for 1,920,000 newly
issued shares of the Company’s common stock and forfeiture to the Company of an equivalent number of existing founder shares
held by the Sponsor for cancellation.
NRC
Group is a global provider of comprehensive environmental, compliance and waste management services to customers across diverse
industries and end markets to ensure compliance with environmental, health and safety laws around the world. NRC Group’s
principal executive office is in Great River, New York.
The
Business Combination will be accounted for as a reverse merger in accordance with accounting principles generally accepted in
the United States of America. Under this method of accounting, the Company will be treated as the “acquired” company
for financial reporting purposes. This determination was primarily based on NRC Group comprising the ongoing operations of the
combined company and NRC Group’s senior management comprising the senior management of the combined company. For accounting
purposes, we expect that NRC Group will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction
will be treated as a recapitalization of NRC Group (i.e., a capital transaction involving the issuance of stock by the Company
for the stock of NRC Group). Accordingly, the consolidated assets, liabilities and results of operations of NRC Group will become
the historical financial statements of the combined company, and the Company’s assets, liabilities and results of operations
will be consolidated with NRC Group beginning on the acquisition date.
Business
Combination Consideration and Acquisition Financing
Business
Combination Consideration -
Pursuant to the Purchase Agreement, the aggregate purchase price for the proposed Business Combination
is $662.5 million subject to adjustments for (i) NRC Group’s cash, debt, and net working capital, (ii) certain other unpaid
transaction expenses (other than NRC Group’s expenses incurred in connection with the preparation of the proxy statement
prepared in connection with the Business Combination (the “Proxy Statement”) and meetings with our stockholders),
(iv) expenses paid by JFL Partners or its affiliates (including NRC Group) on behalf of the Company, (iv) pre-Closing income taxes,
(iv) the Excess Capital Expenditures Adjustment (as defined in the Purchase Agreement), (vi) and the Aggregate Acquisition Adjustment
(as defined in the Purchase Agreement) (the purchase price and final adjustments as of the closing of the Business Combination
(the “Closing”) being the “Total Purchase Price”) and any post-Closing payment amounts. The Total Purchase
Price consists of the Cash Purchase Price and the Purchase Price Common Stock, each as defined in the Purchase Agreement.
Acquisition
Financing -
Concurrently with the execution of the Purchase Agreement, the Company entered into a Backstop and Subscription
Agreement with an investor, pursuant to which the investor agreed to purchase (i) $75.0 million of Series A Convertible Preferred
Stock (subject to a possible increase of up to an additional $25.0 million) (the “PIPE Financing”) and (ii) up to
$25.0 million of shares of Company common stock in a private placement (the “Backstop Commitment”). The investor will
purchase the shares related to the Backstop Commitment through one or more of (a) open market or privately negotiated transactions
with third parties (including forward contracts), (b) a private placement with consummation concurrently with that of the Business
Combination at a purchase price of $10.25 per share of Company common stock, or (c) a combination thereof. The investor in the
PIPE Financing has agreed to vote any Company common stock that it owns, whether acquired pursuant to the PIPE Financing and Backstop
Commitment or otherwise, in favor of the proposed Business Combination and the other proposals set forth in the Proxy Statement. The investor in the PIPE Financing has
also agreed not to transfer any Company common stock that it owns until the earlier of the Closing or the public announcement
by the Company of the termination of the Purchase Agreement. In consideration for the aggregate $125.0 million equity commitment,
the investor in the PIPE Financing will receive (i) a commitment fee of $2.5 million, which fee will be paid by JFL Partners or
one of its affiliates on behalf of the Company, subject to credit to the Total Purchase Price, and (ii) upon the Closing, five
percent (5%) of the aggregate consideration paid by the investor in the PIPE Financing to acquire shares of common stock in connection
with the Backstop Commitment (if any) (not to exceed five percent (5%) of the total Backstop Commitment). The investor in the
PIPE Financing may also receive up to a three percent (3%) placement and/or funding fee on the aggregate Series A Convertible
Preferred Stock acquired pursuant to the Backstop and Subscription Agreement. In addition, to the extent the Company enters into
one or more other subscription agreements substantially similar to the Backstop and Subscription Agreement (the “Other Subscription
Agreements”) prior to Closing with qualified institutional buyers other than the initial investor to the Backstop and Subscription
Agreement, each such investor will receive five percent (5%) of the aggregate consideration paid by such investor to acquire shares
of common stock in connection with the Other Subscription Agreements (if any).
Redemption
Offer
Pursuant
to the Company’s existing amended and restated certificate of incorporation (the “existing charter”), in connection
with the Business Combination, holders of the Company’s public shares may elect to have their shares redeemed for cash at
the applicable redemption price per share calculated in accordance with the existing charter (the “Redemption Offer”).
The per share redemption price would have been approximately $10.19 at June 30, 2018.
Representations
and Warranties
The
Purchase Agreement contains a number of representations and warranties made by the Company, on the one hand, and JFL Partners,
on the other hand, made for the benefit of the other, which in certain cases are subject to specified exceptions and qualifications
contained in the Purchase Agreement or in information provided pursuant to certain disclosure schedules to the Purchase Agreement.
The representations and warranties are customary for transactions similar to the Business Combination. Each representation, warranty,
covenant, undertaking and agreement contained in the Purchase Agreement will expire as of, and will not survive, the consummation
of the Business Combination
(except for certain covenants that will survive the consummation
of the Business Combination as set forth in the Purchase Agreement and except for JFL Partners’ representation relating
to the ownership of the shares of NRC Group, which representation will survive for one year after the Closing)
.
Other
The
consummation of the transactions contemplated by the Purchase Agreement is subject to customary conditions to closing of the respective
parties, as well as provisions for termination under customary and limited circumstances (including failure to complete the transactions
contemplated but the Purchase Agreement by November 30, 2018), as well as various additional agreements, including, among others,
the Backstop and Subscription Agreement, the JFL Subscription Agreement, Voting and Support Agreement, lock-up agreements, Registration
Rights Agreement, Sponsor Warrant Exchange and Share Forfeiture Agreement and Investor Rights Agreement, each as defined and
described elsewhere in the preliminary Proxy Statement filed with the SEC on July 20, 2018.
Results
of Operations
For
the period from January 3, 2017 (date of inception) to June 30, 2018 our activities consisted of formation and preparation for
the Public Offering and subsequent to the Public Offering, efforts have been directed toward locating and completing a suitable
Initial Business Combination. As such, we had no operations or significant operating expenses until July 2017.
Our
normal operating costs include costs associated with our search for an Initial Business Combination, costs associated with our
governance and public reporting, state franchise taxes of approximately $17,000 per month (see below), a charge of $15,000 per
month from our Sponsor for administrative services and approximately $25,000 per month ($12,500 of which is deferred as to payment
until closing of our Initial Business Combination) for compensation to our Chief Financial Officer. In addition, since our operating
costs are not expected to be deductible for federal income taxes, we expect to be subject to federal income taxes on the income
from the Trust Account less franchise taxes. Such federal income taxes would approximate $825,000 per year based on the level
of interest income experienced in the six months ended June 30, 2018 on the average balance in the Trust Account. Further, we
incur approximately $50,000 per quarter ($100,000 per six months) in franchise taxes. However, we are permitted to withdraw interest
earned from the Trust Account for the payment of federal income taxes and franchise taxes. In the three months ended June 30,
2018, our costs increased significantly, as we expected due to professional and consulting fees and travel associated with evaluating
various Initial Business Combination candidates and moving forward with agreements and preparation for a stockholders meeting
to approve the Business Combination. Such costs were approximately $2,300,000 in the three and six months ended June 30, 2018.
Further, now that we have entered into agreements for the Business Combination, our costs are expected to continue at an increased
level in connection with closing the Business Combination as well as additional professional, due diligence and consulting fees
and travel costs that are required in connection with the Business Combination.
Despite
incurring operating costs of $2,667,000 and $2,963,000, respectively, in the three and six months ended June 30, 2018, approximately
$2,300,000 of such costs were related to the Business Combination and relate primarily to services by providers (other than our
independent public accountants) who have agreed to defer their payment until the closing of the Business Combination. As such,
cash used in operations for the six months ended June 30, 2018 was approximately $471,000. Further, the Company believes that
it has sufficient cash to complete the Business Combination. See also Liquidity and Capital Resources regarding commitments.
Our
Public Offering and Private Placement closed on June 28, 2017 and, with respect to the partial exercise of the underwriters’
over-allotment option, on July 19, 2017 as more fully described in “Liquidity and Capital Resources” below. The proceeds
in the Trust Account were invested in a money market fund that invests solely in direct U.S. government obligations meeting the
applicable conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended. In July 2017, the money market fund was
largely liquidated and the trust assets were invested in U.S. government treasury bills which matured on December 21, 2017 (and
were re-invested in U.S. government treasury bills that matured in May 2018) and January 11, 2018 (and were re-invested in U.S.
government treasury bills maturing in May 2018) and yielded approximately 1.4% on a yearly basis. At June 30, 2018, the Trust
Account is invested 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. Interest on the Trust Account was approximately $1,040,000 and $1,962,000
for the three and six months ended June 30, 2018.
Liquidity
and Capital Resources
On
June 28, 2017, we consummated the Public Offering of an aggregate of 22,500,000 Units at a price of $10.00 per unit generating
gross proceeds of approximately $225,000,000 before underwriting discounts and expenses. Simultaneously with the consummation
of the Public Offering, we consummated the Private Placement of 9,600,000 Private Placement Warrants, each exercisable to purchase
one share of our common stock at $11.50 per share, to the Sponsor, at a price of $1.00 per Private Placement Warrant, generating
gross proceeds, before expenses, of approximately $9,600,000. On July 19, 2017, the Company closed on the underwriters’
over-allotment option of 3,165,000 units (a partial exercise), increasing the aggregate initial public offering amount by approximately
$31,650,000 to approximately $256,650,000. The partial exercise of the underwriters’ over-allotment option resulted in the
forfeiture of 52,500 shares by the Sponsor. In addition, the Company incurred an additional deferred underwriting fee of approximately
$1,741,000, and approximately $42,000 of other offering costs, and transferred approximately $316,500 of its funds outside the
Trust Account to the Trust Account.
The
net proceeds from the Public Offering and Private Placement was approximately $261,030,000, net of the non-deferred portion of
the underwriting commissions of $4,500,000 and offering costs and other expenses of approximately $720,000. $259,216,500 of the
proceeds of the Public Offering and the private placement were deposited in the Trust Account and are not available to us for
operations (except amounts to pay taxes). At June 30, 2018, we had approximately $882,000 of cash available outside of the Trust
Account to fund our activities until we consummate an Initial Business Combination.
Until
the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of shares of our
common stock for $25,000 by the Sponsor, and a total of $300,000 loaned by the Sponsor against the issuance of an unsecured promissory
note (the “Note”). These loans were non-interest bearing and were paid in full on June 28, 2017 in connection with
the closing of the Public Offering.
The
Company has entered into engagement letters or agreements with various consultants, advisors, professionals and others in connection
with its Business Combination. The services under these engagement letters and agreements are material in amount and in some instances
a significant component consists of contingent or success fees. In most instances, these engagement letters and agreements specifically
provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
The
Company believes that it has sufficient working capital at June 30, 2018 to fund its operations through December 2018.
The
Company has only until December 28, 2018 to complete the Initial Business Combination. If the Company does not complete an Initial
Business Combination by December 28, 2018, the Company will (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 for a per share pro
rata portion of the Trust Account, including interest, but less taxes payable (and less up to $100,000 of 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 creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and each
of the Company’s officers and directors, each of whom holds founder shares (collectively the “initial stockholders”),
have entered into letter agreements with the Company, pursuant to which they have waived their rights to participate in any redemption
with respect to their founder shares; however, if the initial stockholders or any of their affiliates acquire shares of common
stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s
redemption or liquidation in the event the Company does not complete an Initial Business Combination within the required time
period.
This
mandatory liquidation and subsequent dissolution 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
December 28, 2018.
In
the event of such liquidation, 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.
Off-balance
sheet financing arrangements
We
have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in
transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest
entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We
have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt
or commitments of other entities, or entered into any agreements for non-financial assets.
Contractual
obligations
At
June 30, 2018, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
In connection with the Public Offering, we entered into an Administrative Services Agreement with Hennessy Capital LLC, an affiliate
of our Sponsor, pursuant to which the Company pays Hennessy Capital LLC $15,000 per month for office space, utilities and secretarial
support.
In
addition, commencing on June 23, 2017 (the date the Company’s securities were first listed on the NYSE American), the Company
has agreed to compensate its Chief Financial Officer $25,000 per month prior to the consummation of the Initial Business Combination,
of which 50% is payable in cash currently and 50% in cash upon the successful completion of the Initial Business Combination.
Approximately $153,000 and $78,000, respectively, has been included in other accrued liabilities for the deferred compensation
of the Chief Financial Officer at June 30, 2018 and December 31, 2017.
Upon
completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying or accruing these
monthly fees.
The
Company has entered into engagement letters or agreements with various consultants, advisors, professionals and others in connection
with its Business Combination. The services under these engagement letters and agreements are material in amount and in some instances
a significant component consists of contingent or success fees. In most instances, these engagement letters and agreements specifically
provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account. Contingent or success
fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an Initial Business Combination
is consummated.
Critical
Accounting 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
Loss Per Common Share:
Net
loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common
shares outstanding during the period (after deducting shares that were subject to forfeiture in connection with the Public Offering),
plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using the treasury
stock method. Shares of common stock subject to possible redemption have been excluded from the calculation of basic loss per
share for the three and six months ended June 30, 2018, for the three months ended June 30, 2017 and for the period from January
3, 2017 (date of inception) to June 30, 2017 since such shares, if redeemed, only participate in their pro rata share of the Trust
Account. The Company has not considered the effect of warrants to purchase 28,848,750 shares of common stock sold in the Public
Offering and the concurrent private placement in the calculation of diluted loss per share, since the exercise of the warrants
into shares of common stock is contingent upon the occurrence of future events. For the three and six months ended June 30, 2018,
the three months ended June 30, 2017 and for the period from January 3, 2017 (date of inception) to June 30, 2017, the fully diluted
calculation does not include the shares subject to redemption because they would be antidilutive.
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 accompanying condensed financial
statements.
Offering
Costs
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A- “Expenses
of Offering”. Public Offering costs of approximately $14,836,000 consist of underwriters’ discounts of approximately
$14,116,000 (including approximately $9,616,000 of which payment is deferred) and approximately $720,000 of professional, printing,
filing, regulatory and other costs associated with the Public Offering were charged to additional paid in capital upon completion
of the Public Offering in June and in July 2017.
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 taxes. The Company’s costs
are generally considered start-up costs, which are not currently deductible, and, beginning in the three months ended June 30,
2018, Business Combination costs, many of which may not be deductible for income tax purposes. During the three and six months
ended June 30, 2018 the Company recorded income tax expense of approximately $210,000 and $402,000 primarily related to interest
income earned on the Trust Account net of franchise taxes accrued. The Company’s effective tax rate for the three and six
months ended June 30, 2018 was approximately 13% and 40%, respectively, which differs significantly from the expected 21% tax
rate due to the start-up costs (discussed above) which are not currently deductible and the Business Combination costs (also discussed
above), many of which may not be deductible. There was no tax provision for the three months ended June 30, 2017 and for the period
from January 3, 2017 (date of inception) to June 30, 2017 because there was no interest income during that period. 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
$260,000 and $120,000, respectively, (which reflects the lower 21% rate under which those deferred taxes would be expected to
be recovered or settled) primarily related to start-up costs. Management has determined that a full valuation allowance of the
deferred tax asset is appropriate at June 30, 2018 and December 31, 2017.
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 or 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 or 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
All
of the 25,665,000 shares of common stock sold as part of the Units in the Public Offering contain a redemption feature which allows
for the redemption of such common stock under the Company’s liquidation or tender offer/stockholder approval provisions.
In accordance with FASB ASC 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 does not specify a maximum
redemption threshold, its amended and restated certificate of incorporation provides that in no event will the Company 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 security to equal
the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock
are affected by charges against additional paid-in capital.
At
June 30, 2018, 24,288,851 of the 25,665,000 Public Shares were classified outside of permanent equity at 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.