Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐.
As of June 14, 2019,
32,184,225 shares of the Company’s common stock, par value $0.001 per share, were outstanding.
Certain of the
statements contained in this annual report on Form 10-K constitute “forward-looking statements” for purposes of federal
securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s
expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections,
forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking
statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “project,” “should,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements in this report may include, for example, statements about our:
The forward-looking
statements contained in this report are based on our current expectations and beliefs concerning future developments and their
potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and
uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” elsewhere
in this report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect,
actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except
as may be required under applicable securities laws.
PART I
Item 1. Business
Introduction
We are a blank check
company formed pursuant to the laws of the State of Delaware on April 7, 2016 for the purpose of entering into a merger, stock
exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or
more businesses or entities, which we refer to in this report as the initial business combination. While our efforts in identifying
a prospective target business for our initial business combination are not limited to a particular industry or geographic region,
we have initially focused our search on identifying a prospective target business in the wireless telecommunications industry in
the United States, as described below. As previously disclosed in our current report on Form 8-K filed with the SEC on February
1, 2019, we entered into a Business Combination Agreement (the “Agreement”) on January 31, 2019 with U.S. TelePacific
Holdings Corp., d/b/a TPx Communications (“TPx”) and Tango Merger Sub Corp. (“Merger Sub”), a wholly-owned
subsidiary of the Company, relating to the proposed business combination between the Company and TPx. On May 20, 2019, we mutually
agreed with TPx to terminate the Agreement pursuant to a Termination of Business Combination Agreement dated as of May 20, 2019,
effective as of such date. As a result of the termination of the Agreement, effective as of May 20, 2019, the Agreement is of no
further force or effect, and no party to the Agreement shall have any liability under the Agreement except as otherwise expressly
set forth in the Agreement. We intend to continue to pursue a business combination.
On
January 28, 2019, at the Special Meeting in lieu of the 2019 Annual Meeting of the Company’s Stockholders, our stockholders
approved an amendment to our amended and restated certificate of incorporation to extend the date by which the Company has to
consummate a business combination for an additional three months, from February 1, 2019 to May 1, 2019. The amendment was approved
with 26,352,896 votes cast in favor of the amendment, 122,986 votes cast against the amendment and 323,175 abstentions. In connection
with the special meeting and the resulting amendment to our amended and restated certificate of incorporation, 2,796,290 shares
of our common stock were redeemed from funds available in the trust account established in connection with the Company’s
initial public offering (the “Trust Account”), for a redemption amount of approximately $10.18 per share.
On April 22, 2019,
we announced that our sponsor, had agreed to contribute to us as a loan $0.033 for each share of our common stock issued in our
initial public offering that was not redeemed in connection with the stockholder vote to approve an amendment to our amended and
restated certificate of incorporation to extend the date by which we have to consummate a business combination for an additional
three months, from May 1, 2019 to August 1, 2019. On April 29, 2019, at the Special Meeting of the Company’s Stockholders,
our stockholders approved an amendment to our amended and restated certificate of incorporation to extend the date by which the
Company has to consummate a business combination for an additional three months, from May 1, 2019 to August 1, 2019. The amendment
was approved with 26,163,835 votes cast in favor of the amendment, 2,020,001 votes cast against the amendment and 422,075 abstentions.
In connection with the special meeting and the resulting amendment to our amended and restated certificate of incorporation, 3,831,985
shares of our common stock were redeemed from funds available in the Trust Account, for a redemption amount of approximately $10.33
per share.
On May 31, 2019, we
announced that our sponsor will reduce its contributions to the Trust Account. Our sponsor will continue to pay to the Trust Account
$0.033 per public share that has not been redeemed per month, but the total monthly payment will be no greater than $200,000.
If more than 6,060,606 public shares remain outstanding after redemptions in connection with this adjustment, then the amount
paid per share will be reduced proportionately. In connection with this announcement, we offered our public stockholders the right
to redeem their shares of our common stock for their
pro rata
portion of the funds available in the Trust Account. Our
stockholders have until 5:00 p.m., eastern time, on June 14, 2019 to elect to redeem their public shares.
We
expect that the wireless telecommunications industry will experience significant growth in coming years. Global mobile data traffic
increased by 63% in 2016, and is projected to continue to increase by similar rates for the coming five years, according to the
Cisco Visual Networking Index Forecast. Demands on the total wireless network are expected to reach 1,000 times existing capacity
levels. In fiscal 2017, the total capital expenditure by the four largest carriers (AT&T, Verizon, Sprint and T-Mobile) is
expected to be approximately $50 billion. We believe that these large telecommunications operators are increasingly focusing on
the extreme ends of the industry value chain, in particular the production, ownership, licensing and distribution of content and
the acquisition, retention and exploitation of end-user subscribers, as evidenced by high-profile public transactions such as
the acquisitions by AT&T of Time Warner and DirecTV for $85.4 billion and $48.5 billion, respectively. Additionally,
AT&T has divested itself of its wireless tower portfolio in an approximately $4.85 billion sale to Crown Castle, while simultaneously
entering into lease contacts with terms reaching to 2032 through 2048. We believe that this trend of increasing externalization
of infrastructure-related assets and services, allowing the operators to focus on content and subscriber products and services,
creates significant opportunities for third-party providers, and we intend to focus on acquisition opportunities among such providers
of infrastructure-related assets and services.
We seek to capitalize
on the significant investing and operating experience and contacts of our officers and directors in consummating an initial business
combination. Our Chief Executive Officer, Darrell J. Mays, has over 30 years’ experience in the wireless telecommunications
industry and our President, Dr. Robert Willis, Chairman of the Board, Lawrence E. Mock, Jr., independent directors Bert Ellis,
Suzanne Shank and Karl Krapek and special advisors Rayford Wilkins, Jr., Dr. David Panton and Michael Pietropola, have significant
experience in private investments, ownership and management of businesses of many types, large and small. While we may pursue an
acquisition opportunity in any industry or sector and in any region, we intend to focus on industries that complement our management
team’s background so we can capitalize on their ability to identify, acquire and operate a business. We therefore intend
to initially focus on companies in the wireless telecommunications industry; however, we may decide to enter into an initial business
combination with a target business that is not connected to the wireless telecommunications industry.
We believe our
sponsor’s and management team’s deal sourcing, investing and operating expertise, as well as their network of contacts
will position us to take advantage of opportunities in the wireless telecommunications industry. We believe this expertise and
network of contacts will allow us to generate a number of acquisition opportunities. As a result of their investing and operating
expertise, we believe there are a number of high-quality wireless telecommunications businesses with adequate scale to be attractive
public companies.
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We intend to seek out potential targets that enjoy proven business models and attractive growth
profiles. We also believe our sponsor’s and management team’s extensive experience in deal sourcing from private and
public sources, as well as their advisory and consulting engagements, provide unique insight when identifying potential business
combination opportunities and creating value. We believe their experience and proximity to real-time information positions us to
obtain access to differentiated deal flow, frequently in a non-competitive manner and prior to other parties with an interest in
such transactions.
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The registration statements
for the Company’s initial public offering were declared effective on July 27, 2017. On August 1, 2017, the Company consummated
the initial public offering of 27,000,000 units at $10.00 per unit, generating gross proceeds of $270,000,000.
Simultaneously with
the closing of the initial public offering, the Company consummated the sale of private warrants at a price of $1.00 per warrant
in a private placement to the sponsor, MasTec and EBC, generating gross proceeds of $9,500,000 (the “private placement”).
Following the closing
of the initial public offering on August 1, 2017, an amount of $270,000,000 ($10.00 per unit) from the net proceeds of the sale
of the units in the initial public offering and the private warrants was placed in the Trust Account and will be invested in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the
“Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself
out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a business combination
and (ii) the distribution of the Trust Account, as described below, except that interest earned on the Trust Account can be released
to pay the Company’s income tax obligations.
On August 4, 2017,
the underwriters exercised their over-allotment option in full resulting in an additional 4,050,000 units being issued for $40,500,000,
less the underwriters’ discount of $1,012,500, netting $39,487,500 which was deposited into the Trust Account. In connection
with the underwriters’ exercise of their over-allotment option in full, the Company also consummated the sale of an additional
1,012,500 private warrants at $1.00 per warrant, generating total gross proceeds of $1,012,500 less the advance payment on August
1, 2017 of $600,000 towards that transaction resulting in an additional $412,500 being deposited into the Trust Account and bringing
the balance in the Trust Account on August 4, 2017 to $310,500,000.
Transaction costs
amounted to $8,646,303, consisting of $7,762,500 of underwriting fees, and $883,803 of other costs. In addition, as of March 31,
2019, $135,265 of cash was held outside of the Trust Account, which is available for working capital purposes.
Business Strategy
We expect that the
wireless telecommunications industry will experience significant growth in coming years. Global mobile data traffic increased by
63% in 2016, and is projected to continue to increase by similar rates for the coming five years, according to the Cisco Visual
Networking Index Forecast. Demands on the total wireless network are expected to reach 1,000 times existing capacity levels. In
fiscal 2017, the total capital expenditure by the four largest carriers (AT&T, Verizon, Sprint and T-Mobile) is expected to
be approximately $50 billion. We believe that these large telecommunications operators are increasingly focusing on the extreme
ends of the industry value chain, in particular the production, ownership, licensing and distribution of content and the acquisition,
retention and exploitation of end-user subscribers, as evidenced by high-profile public transactions such as the acquisitions by
AT&T of Time Warner and DirecTV for $85.4 billion and $48.5 billion, respectively. Additionally, AT&T has divested
itself of its wireless tower portfolio in an approximately $4.85 billion sale to Crown Castle, while simultaneously entering into
lease contacts with terms reaching to 2032 through 2048. We believe that this trend of increasing externalization of infrastructure-related
assets and services, allowing the operators to focus on content and subscriber products and services, creates significant opportunities
for third-party providers, and we intend to focus on acquisition opportunities among such providers of infrastructure-related assets
and services.
We will seek to capitalize
on the significant investing and operating experience and contacts of our officers and directors in consummating an initial business
combination. Our Chief Executive Officer, Darrell J. Mays, has over 30 years’ experience in the wireless telecommunications
industry and our President, Dr. Robert Willis, Chairman of the Board, Lawrence E. Mock, Jr., independent directors Bert Ellis,
Suzanne Shank and Karl Krapek and special advisors Rayford Wilkins, Jr., Dr. David Panton and Michael Pietropola, have significant
experience in private investments, ownership and management of businesses of many types, large and small. While we may pursue an
acquisition opportunity in any industry or sector and in any region, we intend to focus on industries that complement our management
team’s background so we can capitalize on their ability to identify, acquire and operate a business. We therefore intend
to initially focus on companies in the wireless telecommunications industry; however, we may decide to enter into an initial business
combination with a target business that is not connected to the wireless telecommunications industry.
We believe our sponsor’s
and management team’s deal sourcing, investing and operating expertise, as well as their network of contacts will position
us to take advantage of opportunities in the wireless telecommunications industry. We believe this expertise and network of contacts
will allow us to generate a number of acquisition opportunities. As a result of their investing and operating expertise, we believe
there are a number of high-quality wireless telecommunications businesses with adequate scale to be attractive public companies.
We intend to seek out potential targets
that enjoy proven business models and attractive growth profiles. We also believe our sponsor’s and management team’s
extensive experience in deal sourcing from private and public sources, as well as their advisory and consulting engagements,
provide unique insight when identifying potential business combination opportunities and creating value. We believe their experience
and proximity to real-time information positions us to obtain access to differentiated deal flow, frequently in a non-competitive
manner and prior to other parties with an interest in such transactions.
Competitive Strengths
Consistent with our
business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating
prospective target businesses. We intend to use these criteria and guidelines in evaluating acquisition opportunities, but we may
decide to enter into our initial business combination with a target business that does not meet any of these criteria and guidelines.
We intend to seek to acquire companies that
we believe:
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have strong competitive positions, proven business models, consistent historical financial performance and attractive growth prospects;
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have limited access to capital markets due to external factors;
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could benefit from the substantial expertise, experience and network of our sponsor and management team, who could assist with, for example, growth strategy, international expansion, operations and the evaluation and integration of acquisitions;
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are well positioned to participate in sector consolidation and would benefit from a public acquisition currency;
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would avoid the potentially onerous terms, such as liquidation preferences, that are often characteristic of late state private growth financing rounds; and
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offer attractive risk-adjusted returns.
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These criteria are not intended to be exhaustive.
Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these
general guidelines as well as other considerations, factors and criteria that our management may deem relevant.
Effecting Our Initial Business Combination
We will either (1) seek
stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to
convert their shares, regardless of whether they vote for or against the proposed business combination, into their pro rata share
of the aggregate amount then on deposit in the Trust Account (net of taxes payable), or (2) provide our stockholders with
the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an
amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), in each
case subject to the limitations described herein. The decision as to whether we will seek stockholder approval of our proposed
business combination or allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our 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 us to seek stockholder approval. Unlike other blank check companies which require stockholder votes and conduct
proxy solicitations in conjunction with their initial business combinations and related conversions of public shares for cash upon
consummation of such initial business combinations even when a vote is not required by law, we will have the flexibility to avoid
such stockholder vote and allow our stockholders to sell their shares pursuant to the tender offer rules of the Securities and
Exchange Commission, or SEC. In that case, we will file tender offer documents with the SEC which will contain substantially the
same financial and other information about the initial business combination as is required under the SEC’s proxy rules. We
will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation
and, solely if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the
business combination.
We have until August
1, 2019 to consummate an initial business combination. If we are unable to consummate an initial business combination within such
time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding
public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including
any interest earned on the funds held in the Trust Account net of interest that may be used by us to pay our franchise and income
taxes payable, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law and
as further described herein, and then seek to dissolve and liquidate. We expect the pro rata redemption price to be approximately
$10.00 per share of common stock, without taking into account any interest earned on such funds. However, we cannot assure you
that we will in fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims
of our public stockholders.
Our initial business
combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets
held in the Trust Account (excluding taxes payable on the income earned on the Trust Account) at the time of the agreement to enter
into the initial business combination. The fair market value of the target or targets will be determined by our board of directors
based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash
flow and/or book value). Even though our board of directors will rely on generally accepted standards, our board of directors will
have discretion to select the standards employed. In addition, the application of the standards generally involves a substantial
degree of judgment. Accordingly, investors will be relying on the business judgment of the board of directors in evaluating the
fair market value of the target or targets. The proxy solicitation materials or tender offer documents used by us in connection
with any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business,
as well as the basis for our determinations. If our board is not able independently to determine the fair market value of the target
business or businesses, we will obtain an opinion from an independent investment banking firm, or another independent entity that
commonly renders valuation opinions on the type of target business we are seeking to acquire, with respect to the satisfaction
of such criteria.
We currently anticipate
structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. We may,
however, structure our initial business combination where we merge directly with the target business or where we acquire less than
100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders
or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires more
than 50% of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient
for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company
owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively
own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business
combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange
for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target;
however, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business
combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than
100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company,
the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account
balance test.
MasTec has indicated
that if, at the time we identify a potential target for a business combination, the transaction requires a commitment of capital,
it will, if requested, consider providing such a commitment. The execution of any binding agreement to provide such additional
financing would be in MasTec’s sole discretion at the time and would be subject to the transaction meeting its investment
criteria and the completion of customary due diligence and documentation. Accordingly, there is no assurance that MasTec will ultimately
agree to provide such additional financing.
Employees
We have three executive
officers. These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as
much time as they deem necessary to our affairs. The amount of time they will devote in any time period will vary based on whether
a target business has been selected for the business combination and the stage of the business combination process the company
is in. Accordingly, once a suitable target business to acquire has been located, management will spend more time investigating
such target business and negotiating and processing the business combination (and consequently spend more time on our affairs)
than had been spent prior to locating a suitable target business. We presently expect our executive officers to devote such amount
of time as they reasonably believe is necessary to our business. We currently have one part-time employee, and we do not intend
to have any full-time employees prior to the consummation of a business combination.
Periodic Reporting and Audited Financial
Statements
We have registered
our units, common stock, rights and warrants under the Securities Exchange Act of 1934 (the “Exchange Act”) and have
reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance
with the requirements of the Exchange Act, our annual report will contain financial statements audited and reported on by our independent
registered public accountants. These filings are available to the public via the Internet at the SEC’s website located at
http://www.sec.gov. You may also read and copy any document that we file with the SEC at the SEC’s public reference room
located at 100 F Street, N.E., Washington, D.C. 20549. For more information, please call the SEC at 1-800-SEC-0330. You may request
a copy of our filings with the SEC (excluding exhibits) at no cost by writing or telephoning us at the following address or telephone
number:
Pensare Acquisition
Corp.
1720 Peachtree Street
Suite 629
Atlanta, GA 30309
Tel: (404) 234-3098
We will provide stockholders
with audited financial statements of the prospective target business as part of any proxy solicitation materials or tender offer
documents sent to stockholders to assist them in assessing the target business. These financial statements will need to be prepared
in accordance with or reconciled to United States generally accepted accounting principles, or GAAP, or international financial
reporting standards as issued by the international accounting standards board, or IFRS, depending on the circumstances, and the
historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting
Oversight Board (United States), or PCAOB. We cannot assure you that any particular target business identified by us as a potential
acquisition candidate will have the necessary financial statements. To the extent that this requirement cannot be met, we may
not be able to acquire the proposed target business.
We may be required
to have our internal control procedures audited for the fiscal year ending March 31, 2020 as required by the Sarbanes-Oxley
Act. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal
controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase
the time and costs necessary to complete any such acquisition.
We are an emerging growth company as defined
in the JOBS Act and will remain such for up to five years. However, if our non-convertible debt issued within a three-year period
exceeds $1.0 billion or our total annual revenues exceed $1.07 billion or the market value of our ordinary shares that are held
by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to
be an emerging growth company as of the following fiscal year. As an emerging growth company, we have elected, under Section 107(b)
of the JOBS Act, to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933,
as amended, or the Securities Act, for complying with new or revised accounting standards.
Item 1A. Risk Factors
Ownership of our
securities involves a high degree of risk. If any of the following events occur, our business, financial condition and operating
results may be materially adversely affected. In that event, the trading price of our securities could decline and a holder of
our securities could lose all or part of its investment. This report also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result
of specific factors, including the risks described below.
We have no operating history and,
accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective.
We have no operating
results to date. Since we do not have an operating history, you have no basis upon which to evaluate our ability to achieve our
business objective, which is to consummate an initial business combination. We will not generate any revenues until, at the earliest,
after the consummation of a business combination.
If we are unable to consummate a
business combination, our public stockholders may be forced to wait until after August 1, 2019 before receiving distributions from
the Trust Account.
We have until August
1, 2019 to complete a business combination. We have no obligation to return funds to investors prior to such date unless (i) we
consummate a business combination prior thereto or (ii) we seek to amend our amended and restated certificate of incorporation
prior to consummation of a business combination, and only then in cases where investors have sought to convert or sell their shares
to us. Only after the expiration of this time period on August 1, 2019 will public security holders be entitled to distributions
from the Trust Account if we are unable to complete a business combination. Accordingly, investors’ funds may be unavailable
to them until after such date and to liquidate your investment, public security holders may be forced to sell their public shares,
rights or warrants, potentially at a loss.
Our public stockholders may not be
afforded an opportunity to vote on our proposed business combination.
We will either (1) seek
stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders may
seek to convert their shares, regardless of whether they vote for or against the proposed business combination, into their pro
rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), or (2) provide our public
stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder
vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable),
in each case subject to the limitations described elsewhere in this report. Accordingly, it is possible that we will consummate
our initial business combination even if holders of a majority of our public shares do not approve of the business combination
we consummate. The decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders
to sell their shares to us in a tender offer will be made by us, solely in our 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 us to seek stockholder approval.
For instance, Nasdaq rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require
us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration
in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of
our outstanding shares, we would seek stockholder approval of such business combination instead of conducting a tender offer.
Our security holders are not entitled
to protections normally afforded to investors of blank check companies.
Since the net proceeds
of our initial public offering and the sale of the private warrants are intended to be used to complete a business combination
with a target business that has not been identified, we may be deemed to be a “blank check” company under the United
States securities laws. However, since we had net tangible assets in excess of $5,000,000 upon the consummation of our initial
public offering and filed a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt
from rules promulgated by the SEC to protect investors of blank check companies such as Rule 419. Accordingly, our security holders
are not afforded the benefits or protections of those rules which would, for example, completely restrict the transferability of
our securities, require us to complete a business combination within 18 months of the effective date of the initial registration
statement and restrict the use of interest earned on the funds held in the Trust Account. Because we are not subject to Rule 419,
our units were immediately tradable upon the consummation of our initial public offering, we will be entitled to withdraw amounts
from the funds held in the Trust Account prior to the completion of a business combination and we may have a longer period of time
to complete such a business combination than we would if we were subject to such rule.
We may issue shares of our capital
stock or debt securities to complete a business combination, which would reduce the equity interest of our stockholders and likely
cause a change in control of our ownership.
Our amended and restated
certificate of incorporation authorizes the issuance of up to 100,000,000 shares of common stock, par value $0.001 per share, and
1,000,000 shares of preferred stock, par value $0.001 per share. As of June 14, 2019, there were 32,681,290 authorized but unissued
shares of common stock available for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding
warrants (including the private warrants), rights and unit purchase options (including the rights and warrants underlying the unit
purchase options). As of June 14, 2019, there were no shares of preferred stock issued and outstanding. Although we have no commitment
as of the date of this report, we may issue a substantial number of additional shares of common stock or shares of preferred stock,
or a combination of common stock and preferred stock, to complete a business combination. The issuance of additional shares of
common stock will not reduce the per-share conversion amount in the Trust Account. The issuance of additional shares of common
stock or preferred stock:
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may significantly reduce the equity interest of our current security holders;
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may subordinate the rights of holders of shares of common stock if we issue shares of preferred
stock with rights senior to those afforded to our shares of common stock;
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may cause a change in control if a substantial number of shares of 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; and
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may adversely affect prevailing market prices for our shares of common stock.
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Similarly, if we issue
debt securities, it could result in:
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default and foreclosure on our assets if our operating revenues after a 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 is payable
on demand; and
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our inability to obtain necessary additional financing if the debt security contains covenants
restricting our ability to obtain such financing while the debt security is outstanding,
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If we incur indebtedness,
our lenders will not have a claim on the cash in the Trust Account and such indebtedness will not decrease the per-share conversion
amount in the Trust Account.
If the funds not being held in trust
are insufficient to allow us to operate until August 1, 2019, we may be unable to complete a business combination.
We believe that the
funds available to us outside of the Trust Account, together with funds that may be made available to us by our sponsor, officers,
directors and their affiliates through loans, will be sufficient to allow us to operate through August 1, 2019, assuming that
a business combination is not consummated during that time. However, we cannot assure you that our estimates will be accurate.
Accordingly, if we use all of the funds held outside of the Trust Account, we may not have sufficient funds available with which
to structure, negotiate or close an initial business combination. In such event, we would need to borrow funds from our sponsor,
officers or directors or their affiliates to operate or may be forced to liquidate. Our sponsor, officers, directors and their
affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount that they deem reasonable
in their sole discretion for our working capital needs; provided, however, that our chief executive officer and managing member
of our sponsor has agreed to fund any shortfalls in working capital prior to the completion of an initial business combination.
Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination,
without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of
$1.00 per warrant. As of June 14, 2019, our sponsor has loaned to us an aggregate of approximately $5.3 million pursuant to promissory
notes as described elsewhere in this Report.
If third parties bring claims against
us, the proceeds held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.00.
Our placing of funds
in trust may not protect those funds from third party claims against us. Although we seek to have all vendors and service providers
we engage and prospective target businesses we negotiate with execute agreements with us waiving any right, title, interest or
claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, they may not execute
such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse against the Trust Account.
A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which
could take priority over those of our public stockholders. If we are unable to complete a business combination and distribute the
proceeds held in trust to our public stockholders, our sponsor has agreed (subject to certain exceptions described in our final
prospectus filed with the SEC on July 31, 2017) that it will be liable to ensure that the proceeds in the Trust Account are not
reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities that are owed money by
us for services rendered or contracted for or products sold to us. However, it may not be able to meet such obligation. Therefore,
the per-share distribution from the Trust Account may be less than $10.00, plus interest, due to such claims.
Additionally, if we
are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds
held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject
to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the
Trust Account, we may not be able to return to our public stockholders at least $10.00 per share. We have not independently verified
whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets
are securities of our company. We have not asked our sponsor to reserve for such indemnification obligations. As a result, if any
such claims were successfully made against the Trust Account, the funds available for our initial business combination and redemptions
could be reduced to less than $10.00 per public share.
Our stockholders may be held liable
for claims by third parties against us to the extent of distributions received by them.
Our amended and restated
certificate of incorporation provides that we will continue in existence only until August 1, 2019. If we have not completed a
business combination by August 1, 2019, we will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at
a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest
earned on the funds held in the Trust Account net of interest that may be used by us to pay our franchise and income taxes payable,
divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and
(iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we
will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable
for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well
beyond the third anniversary of the date of distribution. Accordingly, we cannot assure you that third parties will not seek to
recover from our stockholders amounts owed to them by us.
If we are forced to
file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received
by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer”
or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the Trust Account to our public stockholders promptly after expiration
of the time we have to complete an initial business combination, this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board
may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing
itself and our company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing
the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our directors may decide not to enforce
our sponsor’s indemnification obligations, resulting in a reduction in the amount of funds in the Trust Account available
for distribution to our public stockholders.
In the event that the
proceeds in the Trust Account are reduced below $10.00 per public share and our sponsor asserts that it is unable to satisfy its
obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine
whether to take legal action against our sponsor to enforce such indemnification obligations. While we currently expect that our
independent directors would take legal action on our behalf against our sponsor to enforce such indemnification obligations to
us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular
instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust
Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If we do not file and maintain a
current and effective prospectus relating to the common stock issuable upon exercise of the warrants, holders will only be able
to exercise such warrants on a “cashless basis.”
If we do not file and
maintain a current and effective prospectus relating to the common stock issuable upon exercise of the warrants at the time that
holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that
an exemption from registration is available. As a result, the number of shares of common stock that holders will receive upon exercise
of the warrants will be fewer than it would have been had such holder exercised his warrant for cash. Further, if an exemption
from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise
their warrants for cash if a current and effective prospectus relating to the common stock issuable upon exercise of the warrants
is available. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to
file and maintain a current and effective prospectus relating to the common stock issuable upon exercise of the warrants until
the expiration of the warrants. However, we cannot assure you that we will be able to do so. If we are unable to do so, the potential
“upside” of the holder’s investment in our company may be reduced or the warrants may expire worthless.
A warrantholder will only be able
to exercise a warrant if the issuance of shares of common stock upon such exercise has been registered or qualified or is deemed
exempt under the securities laws of the state of residence of the holder of the warrants.
No warrants will be
exercisable and we will not be obligated to issue shares of common stock unless the shares of common stock issuable upon such exercise
has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the
warrants. If the shares of common stock issuable upon exercise of the warrants are not qualified or exempt from qualification in
the jurisdictions in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants
may be limited and they may expire worthless if they cannot be sold and may be subject to redemption.
We may amend the terms of the warrants
in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding warrants.
Our warrants were issued
in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and
us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any
ambiguity or correct any defective provision. The warrant agreement requires the approval by the holders of at least 50% of the
then outstanding warrants (including the private warrants) in order to make any change that adversely affects the interests of
the registered holders. Accordingly, we would need only 2,506,251, or 16.1%, of the public warrants to vote in favor of a proposed
amendment for it to be approved (assuming the holders of the private warrants all voted in favor of the amendment).
We may amend the terms of the rights
in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding rights.
Our rights were issued
in registered form under a right agreement between Continental Stock Transfer & Trust Company, as rights agent, and us. The
right agreement provides that the terms of the rights may be amended without the consent of any holder to cure any ambiguity or
correct any defective provision. The right agreement requires the approval by the holders of at least 50% of the then outstanding
rights in order to make any change that adversely affects the interests of the registered holders.
Since we have not yet selected a
particular industry or target business with which to complete a business combination, we are unable to currently ascertain the
merits or risks of the industry or business in which we may ultimately operate.
Although we intend
to initially focus our search on identifying a prospective target business in the wireless telecommunications industry, we are
not limited to such industry and may consummate a business combination with a company in any industry we choose. Accordingly, there
is no current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately operate
or the target business which we may ultimately acquire. To the extent we complete a business combination with a financially unstable
company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of those
entities. If we complete a business combination with an entity in an industry characterized by a high level of risk, we may be
affected by the currently unascertainable risks of that industry. Although our management will endeavor to evaluate the risks inherent
in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all of the significant
risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to our security
holders than a direct investment, if an opportunity were available, in a target business.
Our ability to successfully effect
a business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of
whom may join us following a business combination. While we intend to closely scrutinize any individuals we engage after a business
combination, we cannot assure you that our assessment of these individuals will prove to be correct.
Our ability to successfully
effect a business combination is dependent upon the efforts of our key personnel. We believe that our success depends on the continued
service of our key personnel, at least until we have consummated our initial business combination. We cannot assure you that any
of our key personnel will remain with us for the immediate or foreseeable future. In addition, none of our officers are required
to commit any specified amount of time to our affairs and, accordingly, our officers may have conflicts of interest in allocating
management time among various business activities, including identifying potential business combinations and monitoring the related
due diligence. We do not have employment agreements with, or key-man insurance on the life of, any of our officers. The unexpected
loss of the services of our key personnel could have a detrimental effect on us.
Additionally, the role
of our key personnel after a business combination cannot presently be ascertained. Although some of our key personnel may continue
to serve in senior management or advisory positions following a business combination, it is likely that most, if not all, of the
management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after a
business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals
may be unfamiliar with the requirements of operating a public company which could cause us to have to expend time and resources
helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory
issues which may adversely affect our operations.
Our officers and directors may not
have significant experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
Although we intend
to initially focus our search on identifying a prospective target business in the wireless telecommunications industry, which is
where our management team has its most experience, we are not limited to such industry and may consummate a business combination
with a target business in any geographic location or industry we choose. We cannot assure you that our officers and directors will
have enough experience or have sufficient knowledge relating to the jurisdiction of the target or its industry to make an informed
decision regarding a business combination.
Our key personnel may negotiate employment
or consulting agreements with a target business in connection with a particular business combination. These agreements may provide
for them to receive compensation following a business combination and as a result, may cause them to have conflicts of interest
in determining whether a particular business combination is the most advantageous.
Our key personnel will
be able to remain with the company after the consummation of a business combination only if they are able to negotiate employment
or consulting agreements or other appropriate arrangements in connection with the business combination. Such negotiations would
take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation
in the form of cash payments and/or our securities for services they would render to the company after the consummation of the
business combination. The personal and financial interests of such individuals may influence their motivation in identifying and
selecting a target business.
Our officers and directors may allocate
their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our
affairs. This conflict of interest could have a negative impact on our ability to consummate a business combination.
Our officers and directors
are not required to commit their full time to our affairs, which could create a conflict of interest when allocating their time
between our operations and their other commitments. We presently expect each of our employees to devote such amount of time as
they reasonably believe is necessary to our business. We do not intend to have any full-time employees prior to the consummation
of our initial business combination. All of our officers and directors are engaged in other business endeavors and are not obligated
to devote any specific number of hours to our affairs. If our officers’ and directors’ other business affairs require
them to devote more substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs and
could have a negative impact on our ability to consummate our initial business combination. We cannot assure you that these conflicts
will be resolved in our favor.
Our officers and directors may have
a conflict of interest in determining whether a particular target business is appropriate for a business combination.
Our sponsor and MasTec,
which are affiliated with certain of our officers and directors, have agreed to waive their right to convert their founder shares
and any other shares they purchase, or to receive distributions from the Trust Account with respect to their founder shares upon
our liquidation if we are unable to consummate a business combination. Accordingly, the founder shares will be worthless if we
do not consummate a business combination. Additionally, the warrants, including the private warrants held by our sponsor and MasTec,
will expire worthless if we do not consummate a business combination. The personal and financial interests of our directors and
officers, through their interests in our sponsor and MasTec, may influence their motivation in timely identifying and selecting
a target business and completing a business combination. Consequently, our directors’ and officers’ discretion in identifying
and selecting a suitable target business may result in a conflict of interest when determining whether the terms, conditions and
timing of a particular business combination are appropriate and in our stockholders’ best interest.
Certain of our officers have, and
any of our officers and directors or their affiliates may in the future have, outside fiduciary and contractual obligations and,
accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Certain of our directors
have, and any of our officers and directors or their affiliates may in the future have, fiduciary and contractual obligations to
other companies. Accordingly, they may participate in transactions and have obligations that may be in conflict or competition
with the consummation of our initial business combination. As a result, a potential target business may be presented by our management
team to another entity prior to its presentation to us and we may not be afforded the opportunity to engage in a transaction with
such target business.
Nasdaq may delist our securities
from quotation on its exchange which could limit investors’ ability to make transactions in our securities and subject us
to additional trading restrictions.
Our securities are
currently listed on Nasdaq, a national securities exchange. We cannot assure you that our securities will continue to be listed
on Nasdaq in the future prior to an initial business combination. Additionally, in connection with our initial business combination,
it is likely that Nasdaq will require us to file a new initial listing application and meet its initial listing requirements as
opposed to its more lenient continued listing requirements. We cannot assure you that we will be able to meet those initial listing
requirements at that time.
If Nasdaq delists
our securities from trading on its exchange, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity with respect to our securities;
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a determination that our shares of common stock are “penny stock” which will require
brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading
activity in the secondary trading market for our shares of common stock;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities
Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain
securities, which are referred to as “covered securities.” Because our units, common stock, rights and warrants are
currently listed on Nasdaq, our units, common stock, rights and warrants are covered securities. Although the states are preempted
from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion
of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities
in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities
issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these
powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if
we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each
state in which we offer our securities.
We are an “emerging growth
company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make
our shares of common stock less attractive to investors.
We are an “emerging
growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for up to five years.
However, if our non-convertible debt issued within a three-year period exceeds $1.0 billion or annual revenues exceeds $1.07 billion,
or the market value of our shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second
fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an
emerging growth company, we are not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley
Act, we have reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and we
are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption
of new or revised accounting standards that have different effective dates for public and private companies until those standards
apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company
effective dates. We cannot predict if investors will find our shares of common stock less attractive because we may rely on these
provisions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market
for our shares and our share price may be more volatile.
We may only be able to complete one
business combination with the proceeds of our initial public offering and the sale of the private warrants, which will cause us
to be solely dependent on a single business which may have a limited number of products or services.
It is likely we will
consummate a business combination with a single target business, although we have the ability to simultaneously acquire several
target businesses. By consummating a business combination with only a single entity, our lack of diversification may subject us
to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit
from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several
business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success
may be:
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solely dependent upon the performance of a single business, or
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dependent upon the development or market acceptance of a single or limited number of products,
processes or services.
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This lack of diversification
may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate subsequent to a business combination.
Alternatively, if we
determine to simultaneously acquire several businesses, and such businesses are owned by different sellers, we will need for each
of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations,
which may make it more difficult for us, and delay our ability, to complete the business combinations. With multiple business combinations,
we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and
due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation
of the operations and services or products of the acquired companies into a single operating business. If we are unable to adequately
address these risks, it could negatively impact our profitability and results of operations.
The ability of our stockholders to
exercise their conversion rights or sell their shares to us in a tender offer may not allow us to effectuate the most desirable
business combination or optimize our capital structure.
If our business combination
requires us to use substantially all of our cash to pay the purchase price, because we will not know how many stockholders may
exercise conversion rights or seek to sell their shares to us in a tender offer, we may either need to reserve part of the Trust
Account for possible payment upon such conversion, or we may need to arrange third party financing to help fund our business combination.
In the event that the acquisition involves the issuance of our stock as consideration, we may be required to issue a higher percentage
of our stock to make up for a shortfall in funds. Raising additional funds to cover any shortfall may involve dilutive equity financing
or incurring indebtedness at higher than desirable levels. This may limit our ability to effectuate the most attractive business
combination available to us.
In connection with any vote to approve
a business combination, we will offer each public stockholder the option to vote in favor of a proposed business combination and
still seek conversion of his, her or its shares.
In connection with
any vote to approve a business combination, we will offer each public stockholder (but not our sponsor, officers or directors)
the right to have his, her or its shares of common stock converted to cash (subject to the limitations described in our final prospectus
filed with the SEC on July 31, 2017) regardless of whether such stockholder votes for or against such proposed business combination.
This ability to seek conversion while voting in favor of our proposed business combination may make it more likely that we will
consummate a business combination.
In connection with any stockholder
meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their shares
in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult
for them to exercise their conversion rights prior to the deadline for exercising their rights.
In connection with
any stockholder meeting called to approve a proposed initial business combination, each public stockholder will have the right,
regardless of whether he is voting for or against such proposed business combination, to demand that we convert his shares into
a pro rata share of the Trust Account as of two business days prior to the consummation of the initial business combination. We
may require public stockholders who wish to convert their shares in connection with a proposed business combination to either (i) tender
their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using the Depository
Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holders’ option, in each case prior to a date
set forth in the proxy materials sent in connection with the proposal to approve the business combination. In order to obtain a
physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer agent will need to act to
facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical
certificates from the transfer agent. However, because we do not have any control over this process or over the brokers or DTC,
it may take significantly longer than two weeks to obtain a physical stock certificate. While we have been advised that it takes
a short time to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if it takes longer than
we anticipate for stockholders to deliver their shares, stockholders who wish to convert may be unable to meet the deadline for
exercising their conversion rights and thus may be unable to convert their shares.
If, in connection with any stockholder
meeting called to approve a proposed business combination, we require public stockholders who wish to convert their shares to comply
with specific requirements for conversion, such converting stockholders may be unable to sell their securities when they wish to
in the event that the proposed business combination is not approved.
If we require public
stockholders who wish to convert their shares to either (i) tender their certificates to our transfer agent or (ii) deliver their
shares to the transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System
as described above and such proposed business combination is not consummated, we will promptly return such certificates to the
tendering public stockholders. Accordingly, investors who attempted to convert their shares in such a circumstance will be unable
to sell their securities after the failed acquisition until we have returned their securities to them. The market price for our
shares of common stock may decline during this time and you may not be able to sell your securities when you wish to, even while
other stockholders that did not seek conversion may be able to sell their securities.
Because of our structure, other companies
may have a competitive advantage and we may not be able to consummate an attractive business combination.
We expect to encounter
intense competition from entities other than blank check companies having a business objective similar to ours, including venture
capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are well established
and have extensive experience in identifying and effecting business combinations directly or through affiliates. Many of these
competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited
when contrasted with those of many of these competitors. While we believe that there are numerous potential target businesses that
we could acquire with the net proceeds of our initial public offering and the sale of the private warrants, our ability to compete
in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, seeking stockholder
approval or engaging in a tender offer in connection with any proposed business combination may delay the consummation of such
a transaction. Additionally, our outstanding rights and warrants, and the future dilution they potentially represent, may not be
viewed favorably by certain target businesses. Any of the foregoing may place us at a competitive disadvantage in successfully
negotiating a business combination.
We may be unable to obtain additional
financing, if required, to complete a business combination or to fund the operations and growth of the target business, which could
compel us to restructure or abandon a particular business combination.
Although we believe
that the remaining net proceeds of our initial public offering and the sale of the private warrants will be sufficient to allow
us to consummate a business combination, we cannot ascertain the capital requirements for any particular transaction. If the net
proceeds of our initial public offering and the sale of the private warrants prove to be insufficient, because of either the size
of the business combination, the depletion of the available net proceeds in search of a target business or the obligation to convert
into cash a significant number of shares from dissenting stockholders, we will be required to seek additional financing. Such
financing may not be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable
when needed to consummate a particular business combination, we would be compelled to either restructure the transaction or abandon
that particular business combination and seek an alternative target business candidate. In addition, if we consummate a business
combination, we may require additional financing to fund the operations or growth of the target business. The failure to secure
additional financing could have a material adverse effect on the continued development or growth of the target business. None
of our sponsor, officers, directors or stockholders is required to provide any financing to us in connection with or after a business
combination.
Our initial stockholders control
a substantial interest in us and thus may influence certain actions requiring a stockholder vote.
Our initial stockholders
own approximately 18.5% of our issued and outstanding shares of common stock. In addition, our sponsor, officers, directors or
their affiliates could determine in the future to make such purchases in the open market or in private transactions, to the extent
permitted by law, in order to influence the vote or magnitude of the number of stockholders seeking to tender their shares to us.
In connection with any vote for a proposed business combination, our sponsor and initial stockholders, as well as all of our officers
and directors, have agreed to vote the shares of common stock owned by them in favor of such proposed business combination.
Our board of directors
is divided into two classes, each of which will generally serve for a term of two years with only one class of directors being
elected in each year. There may not be an annual meeting of stockholders to elect new directors prior to the consummation of a
business combination, in which case all of the current directors will continue in office until at least the consummation of the
business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a
minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position,
will have considerable influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at
least until the consummation of a business combination.
Our outstanding rights, warrants
and unit purchase options may have an adverse effect on the market price of our common stock and make it more difficult to effect
a business combination.
We issued rights to
receive 3,105,000 shares of common stock and warrants to purchase 15,525,000 shares of common stock as part of the units sold
in our initial public offering and private warrants to purchase 10,512,500 shares of common stock. We also issued unit purchase
options to purchase 1,350,000 units to EBC and its designees which, if exercised, will result in the issuance of 1,350,000 shares
of common stock, rights to receive 135,000 shares of common stock and warrants to purchase an additional 675,000 shares of common
stock. We may also issue other warrants to our sponsor, officers or directors in payment of working capital loans made to us as
described in our final prospectus filed with the SEC on July 31, 2017. To the extent we issue shares of common stock to effect
a business combination, the potential for the issuance of a substantial number of additional shares upon exercise of these rights,
warrants and unit purchase options could make us a less attractive acquisition vehicle in the eyes of a target business. Such
securities, when exercised, will increase the number of issued and outstanding shares of common stock and reduce the value of
the shares issued to complete the business combination. Accordingly, our rights, warrants and unit purchase option may make it
more difficult to effectuate a business combination or increase the cost of acquiring the target business. Additionally, the sale,
or even the possibility of sale, of the shares underlying the rights, warrants or unit purchase option could have an adverse effect
on the market price for our securities or on our ability to obtain future financing.
Because each unit contains one right
to receive one-tenth of one share of our common stock and one-half of one warrant and only a whole warrant may be exercised, the
units may be worth less than units of other blank check companies.
Each unit contains
one right to receive one-tenth of one share of our common stock and one-half of one warrant. Because, pursuant to the warrant agreement,
the warrants may only be exercised for a whole number of shares, only a whole warrant may be exercised at any given time. This
is different from other blank check companies whose units include one share of common stock and one warrant to purchase one whole
share. We established the components of the units in this way in order to reduce the dilutive effect of the rights and warrants
upon completion of a business combination since the warrants will be exercisable in the aggregate for one-half, and the rights
will be convertible into a fraction, of the number of shares compared to units that each contain a warrant to purchase one whole
share, thus making us, we believe, a more attractive business combination partner for target businesses. Nevertheless, this unit
structure may cause our units to be worth less than if they included a warrant to purchase one whole share.
We may redeem unexpired warrants
prior to their exercise at a time that is disadvantageous to the holder, thereby making such warrants worthless.
We have the ability
to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per
warrant, provided that the last reported sales price of the common stock equals or exceeds $18.00 per share (as adjusted for stock
splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day period ending on
the third business day prior to proper notice of such redemption provided that on the date we give notice of redemption and during
the entire period thereafter until the time we redeem the warrants, we have an effective registration statement under the Securities
Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available.
If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify
the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force
warrantholders (i) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous
to do so, (ii) to sell warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to
accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially
less than the market value of such warrants. None of the private warrants will be redeemable by us so long as they are held by
the initial purchasers or their permitted transferees.
Our management’s ability to
require holders of our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of common
stock upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our public
warrants for redemption after the redemption criteria have been satisfied, our management will have the option to require any holder
that wishes to exercise his warrant (including any warrants held by our sponsor, officers or directors or their permitted transferees)
to do so on a “cashless basis.” If our management chooses to require holders to exercise their warrants on a cashless
basis, the number of shares of common stock received by a holder upon exercise will be fewer than it would have been had such holder
exercised his warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s
investment in our company.
If our security holders exercise
their registration rights, it may have an adverse effect on the market price of our shares of common stock and the existence of
these rights may make it more difficult to effect a business combination.
Our initial stockholders
are entitled to demand that we register the resale of the founder shares at any time commencing three months prior to the date
on which their shares may be released from escrow. Additionally, the holders of the private warrants and any warrants our sponsor,
officers, directors, or their affiliates may be issued in payment of working capital loans made to us are entitled to demand that
we register the resale of the private warrants and any other warrants we issue to them (and the underlying shares of common stock)
commencing at any time after we consummate an initial business combination. The presence of these additional shares of common stock
trading in the public market may have an adverse effect on the market price of our securities. In addition, the existence of these
rights may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business, as
the stockholders of the target business may be discouraged from entering into a business combination with us or will request a
higher price for their securities because of the potential effect the exercise of such rights may have on the trading market for
our shares of common stock.
If we are deemed to be an investment
company, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make
it difficult for us to complete a business combination.
A company that, among
other things, is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing,
reinvesting, owning, trading or holding certain types of securities would be deemed an investment company under the Investment
Company Act. Since we will invest the proceeds held in the Trust Account, it is possible that we could be deemed an investment
company. Notwithstanding the foregoing, we do not believe that our anticipated principal activities will subject us to the Investment
Company Act. To this end, the proceeds held in trust may be invested by the trustee only in United States “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S.
government treasury obligations. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements
for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act.
If we are nevertheless
deemed to be an investment company under the Investment Company Act, we may be subject to certain restrictions that may make it
more difficult for us to complete a business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may
have imposed upon us certain burdensome requirements, including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy, compliance policies and procedures and disclosure requirements
and other rules and regulations.
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Compliance with these
additional regulatory burdens would require additional expense for which we have not allotted.
If we do not conduct an adequate
due diligence investigation of a target business, we may subsequently be required to take write-downs or write-offs, restructuring,
and impairment or other charges that could have a significant negative effect on our financial condition, results of operations
and our stock price, which could cause you to lose some or all of your investment.
We must conduct a due
diligence investigation of the target businesses we intend to acquire. Intensive due diligence is time consuming and expensive
due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process. Even if we
conduct extensive due diligence on a target business, this diligence may not reveal all material issues that may affect a particular
target business, and factors outside the control of the target business and outside of our control may later arise. If our diligence
fails to identify issues specific to a target business, industry or the environment in which the target business operates, we may
later be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could
result in our reporting losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to negative market perceptions about us or our common stock. In
addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of
assuming pre-existing debt held by a target business or by virtue of our obtaining debt financing during or subsequent to the business
combination.
The requirement that we complete
an initial business combination by August 1, 2019 may give potential target businesses leverage over us in negotiating a business
combination.
We have until August
1, 2019 to complete an initial business combination. Any potential target business with which we enter into negotiations concerning
a business combination will be aware of this requirement. Consequently, such target business may obtain leverage over us in negotiating
a business combination, knowing that if we do not complete a business combination with that particular target business, we may
be unable to complete a business combination with any other target business. This risk will increase as we get closer to the time
limit referenced above.
We may not obtain a fairness opinion
with respect to the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board
of directors in approving a proposed business combination.
We will only be required
to obtain a fairness opinion with respect to the target business that we seek to acquire if it is an entity that is affiliated
with any of our officers, directors or sponsor. In all other instances, we will have no obligation to obtain an opinion. Accordingly,
investors will be relying solely on the judgment of our board of directors in approving a proposed business combination.
Resources could be spent researching
acquisitions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge
with another business.
It is anticipated that
the investigation of each specific target business and the negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require substantial management time and attention and substantial costs for accountants,
attorneys and others. If a decision is made not to complete a specific business combination, the costs incurred up to that point
for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific
target business, we may fail to consummate the business combination for any number of reasons including those beyond our control.
Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts
to locate and acquire or merge with another business.
Compliance with the Sarbanes-Oxley
Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.
For as long as we remain
an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation
requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with
the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target
company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The
development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time
and costs necessary to complete any such acquisition. Furthermore, any failure to implement required new or improved controls,
or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future,
could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause
investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of
our stock.
If we effect a business combination
with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact
our operations.
We may effect a business
combination with a company located outside of the United States. If we did, we would be subject to any special considerations or
risks associated with companies operating in the target business’s home jurisdiction, including any of the following:
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rules and regulations or currency conversion or corporate withholding taxes on individuals;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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tax issues, such as tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations and exchange controls;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
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deterioration of political relations with the United States.
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We cannot assure you
that we would be able to adequately address these additional risks. If we were unable to do so, our operations might suffer.
If we effect a business combination
with a company located outside of the United States, the laws applicable to such company will likely govern all of our material
agreements and we may not be able to enforce our legal rights.
If we effect a business
combination with a company located outside of the United States, the laws of the country in which such company operates will govern
almost all of the material agreements relating to its operations. We cannot assure you that the target business will be able to
enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the
enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States.
The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business,
business opportunities or capital. Additionally, if we acquire a company located outside of the United States, it is likely that
substantially all of our assets would be located outside of the United States and some of our officers and directors might reside
outside of the United States. As a result, it may not be possible for investors in the United States to enforce their legal rights,
to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil
liabilities and criminal penalties of our directors and officers under federal securities laws.
Provisions in our amended and restated
certificate of incorporation and bylaws and Delaware law may inhibit a takeover of us, which could limit the price investors might
be willing to pay in the future for our common stock and could entrench management.
Our amended and restated
certificate of incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders
may consider to be in their best interests. Our board of directors is divided into two classes, each of which generally serves
for a term of two years with only one class of directors being elected in each year. As a result, at a given annual meeting only
a minority of the board of directors may be considered for election. Since our “staggered board” may prevent our stockholders
from replacing a majority of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited
stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors has the ability to designate
the terms of and issue new series of preferred stock.
We are also subject
to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may
make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium
over prevailing market prices for our securities.
Because we must furnish our stockholders
with target business financial statements prepared in accordance with U.S. generally accepted accounting principles or international
financial reporting standards, we will not be able to complete a business combination with prospective target businesses unless
their financial statements are prepared in accordance with such standards.
The federal proxy
rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests
include historical and/or pro forma financial statement disclosure in periodic reports. These financial statements may be required
to be prepared in accordance with, or be reconciled to, GAAP or IFRS, depending on the circumstances, and the historical financial
statements may be required to be audited in accordance with the standards of the PCAOB. We will include the same financial statement
disclosure in connection with any tender offer documents we use, whether or not they are required under the tender offer rules.
Additionally, to the extent we furnish our stockholders with financial statements prepared in accordance with IFRS, such financial
statements will need to be audited in accordance with U.S. GAAP at the time of the consummation of the business combination. These
financial statement requirements may limit the pool of potential target businesses we may acquire.
Changes in laws or regulations, or
a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws
and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC
and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming
and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes
could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with
applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of
operations.
There may be tax consequences to our business combinations
that may adversely affect us.
While we expect to undertake any merger
or acquisition so as to minimize taxes both to the acquired business and/or asset and us, such business combination might not meet
the statutory requirements of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a
transfer of shares or assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
Our amended and restated certificate of incorporation
provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum
for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated
certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions
against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court
of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have
consented to service of process on such stockholder’s counsel. Any person or entity purchasing or otherwise acquiring any
interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended
and restated certificate of incorporation.
This choice of forum provision may limit
a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors,
officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court
were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable
or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which
could harm our business, operating results and financial condition.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We currently maintain
our principal executive offices at 1720 Peachtree Street, Suite 629, Atlanta, GA 30309. The cost for this space is included in
the $20,000 per-month fee our sponsor charges us for general and administrative services pursuant to a letter agreement between
us and our sponsor. We believe, based on rents and fees for similar services in Atlanta, GA, that the fee charged by our sponsor
is at least as favorable as we could have obtained from an unaffiliated person. We consider our current office space, combined
with the other office space otherwise available to our executive officers, adequate for our current operations.
Item 3. Legal
Proceedings
There is no material
litigation, arbitration, governmental proceeding or any other legal proceeding currently pending or known to be contemplated against
us or any members of our management team in their capacity as such, and we and the members of our management team have not been
subject to any such proceeding in the ten years preceding the date of this report.
Item 4. Mine
Safety Disclosures
Not applicable.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
Our
current directors and executive officers are as follows:
Name
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Age
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Position
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Lawrence
E. Mock, Jr.
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72
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Chairman
of the Board
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Darrell
J. Mays
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55
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Chief
Executive Officer
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Dr.
Robert Willis
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50
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President
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John
Foley
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69
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Chief
Financial Officer
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Jose
Mas
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47
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Director
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Bertram
Ellis, Jr.
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65
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Director
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Suzanne
Shank
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57
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Director
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Karl
Krapek
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70
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Director
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Dennis
Lockhart
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72
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Director
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Dr.
Klaas Baks
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46
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Director
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Lawrence
E. Mock, Jr.
, our Chairman of the Board, is currently Managing Partner of Navigation Capital Partners, Inc., an Atlanta-based
private equity firm which he founded in partnership with Goldman Sachs in 2006. From 1995 to 2006, Mr. Mock served as President
and Chief Executive Officer of Mellon Ventures, Inc., which he founded in partnership with Mellon Financial Corporation, to make
private equity and venture capital investments in operating companies. From 1983 to 1995, he was founder and Chief Executive Officer
of River Capital, Inc. Mr. Mock holds a Master of Science degree from Florida State University and a Bachelor of Arts degree from
Harvard College.
Darrell
J. Mays
, our Chief Executive Officer, was the Founder and Chief Executive Officer of nsoro, a turnkey wireless installation
services provider, from 2003 to 2008, which was acquired by MasTec in August 2008. Mr. Mays has served as an executive of MasTec
since 2008, during which period the revenues and EBITDA of MasTec’s communications division, of which nsoro is a component,
increased to approximately $2.3 billion and $245.0 million in 2016, respectively. Mr. Mays holds a Bachelor of Arts degree in
Business from Georgia State University.
Dr.
Robert Willis
, our President, became the President of nsoro in 2007. In such capacity, he negotiated the acquisition of the
business by MasTec and, following its acquisition, served in an advisory role from 2010 through July 2016. From December 2013
until December 2015, Dr. Willis served as Chairman of U.S. Shale Solutions, Inc., a shale services company which he founded in
2013. Prior to nsoro, Dr. Willis served as Chief Executive Officer of Foxcode Inc., a merchant-banking firm, from 2004 until November
2015, in which capacity he was principal on multiple debt and equity transactions. In July 2004, Dr. Willis founded Gaming VC,
S.A., an online gaming enterprise which completed a GBP 81 million initial public offering in London in 2004, and served as a
member of its board and as its Finance Director until 2007. Prior to that, Dr. Willis was the founder and Chief Executive Officer
of Alpine Computer Systems, Inc., a systems integration engineering company established in the 1980s that grew rapidly and
was acquired by Delphi Group plc. in 1996, at which time he became Senior Vice President and Chief Information Officer of the
parent company. Dr. Willis was a member of a three-man North American roll-up M&A team which ultimately acquired approximately
25 businesses. After an ADR NASDAQ offering, the company was acquired by Adecco Group AG. Dr. Willis subsequently reacquired the
company and then merged it into Aimnet Solutions Inc., backed by Mellon Ventures and William E. Simon & Sons. The business
was ultimately acquired by Cognizant Inc., a large public IT services company. Dr. Willis was awarded a Doctorate in Humane Letters
(Hon.) from Newbury College in Boston, MA, in May 2001.
John
Foley
, our Chief Financial Officer, was the former Chief Financial Officer of nsoro MasTec from 2007 until his retirement
in December 2015. During his tenure, Mr. Foley oversaw the financial integration of seven acquisitions. He also held executive
positions which were responsible for the financial and operations at Burger King, Diageo PLC and Chiquita Brands International,
Inc. Mr. Foley holds a Bachelor of Science degree in Finance from Boston College, where he graduated with honors.
Jose
Mas
has served on our board of directors since July 2017. He has served as a director and Chief Executive Officer of MasTec
since 2007. MasTec is a leading infrastructure construction company operating mainly throughout North America across a range of
industries. MasTec’s primary activities include the engineering, building, installation, maintenance and upgrade of communications,
energy and utility infrastructure, such as: wireless, wireline/fiber, satellite communications and customer fulfillment activities;
petroleum and natural gas pipeline infrastructure; electrical utility transmission and distribution; conventional and renewable
power generation; and industrial infrastructure. As of March 31, 2017, MasTec had over 18,500 employees and 500 locations, and
generated over $5.1 billion in revenue in 2016, more than five times greater than its 2006 revenues. Mr. Mas was also appointed
to the Board of Directors of Helmerich & Payne, Inc. on March 1, 2017. Mr. Mas holds a Master of Business Administration and
Bachelor of Business Administration degree from the University of Miami.
U.
Bertram Ellis, Jr.
has served on our board of directors as an independent director since July 2017. He has served as the Chairman
and Chief Executive Officer of Ellis Capital, a diversified investment firm, since 1984. In addition, Mr. Ellis was the Founder
and Chief Executive Officer of ACT III Broadcasting from 1986 to 1991, which sold for $530 million and Ellis Communication from
1993 to 1996, which sold for $840 million. Mr. Ellis holds a Master of Business Administration from the University of Virginia
Darden Business School and a Bachelor of Arts from the University of Virginia.
Suzanne
Shank
has served on our board of directors as an independent director since July 2017. She has served as Chairman, Chief Executive
Officer and majority owner of Siebert Cisneros Shank & Co., a full-service investment bank that has managed or co-managed
over $2 trillion in transactions, since 1996. Ms. Shank holds a Master of Business Administration from the Wharton School at the
University of Pennsylvania and a Bachelor of Science from the Georgia Institute of Technology.
Karl
Krapek
has served on our board of directors as an independent director since July 2017. He has served as the Lead Director
at Prudential Financial, Inc. since 2014, and a Director since 2008, and Director of Northrop Grumman Corporation since 2008.
From 2002 to 2009, he was the President and Chief Operations Officer of United Technologies Corporation, or UTC, which has a market
capitalization of approximately $90 billion. Mr. Krapek has served as an Executive Vice President of UTC since 1997 and as a Director
of UTC from 1997 to 2007. Mr. Krapek holds a Master of Science from Purdue University and Bachelor of Science from Kettering University.
Dennis
Lockhart
has served on our board of directors as an independent since July 2017. He recently retired from his position as
president and Chief Executive Officer of the Federal Reserve Bank of Atlanta, a position he held from 2007 to 2017. Earlier, he
was a professor at Georgetown University, School of Foreign Service, from 2003 to 2007. Prior to this, he held senior positions
at Heller Financial Inc. and Citicorp (now Citigroup). Mr. Lockhart holds a Master of Arts from Johns Hopkins University and a
Bachelor of Arts from Stanford University.
Dr.
Klaas Baks
has served on our board of directors as an independent since July 2017. He is the Co-Founder and Executive Director
of the Emory Center for Alternative Investments, which was formed in 2008. He also serves as the Atlanta Chair of TIGER 21, which
is a peer-to-peer network of high net worth wealth creators, since 2014. In addition, he has been an Associate Professor in the
Practice of Finance at Emory University’s Goizueta Business School since 2002. Dr. Baks has a Doctoral degree from the Wharton
School at the University of Pennsylvania and a Masters of Arts degree from Brown University.
Special
Advisors
Rayford
Wilkins, Jr.
, our Special Advisor, served as Chief Executive Officer of AT&T Diversified Businesses and Chairman and President
of AT&T International. Prior to these positions, he served as Group President Marketing and Sales. In addition, he occupied
various positions associated with the wireless industry at SBC Group and has held several leadership roles in his more than 30-year
career at AT&T and its predecessor companies. Mr. Wilkins is currently a director at Morgan Stanley, Valero Energy and Caterpillar.
Dr.
David Panton
, our Special Advisor, has served as Chairman and Chief Executive Officer of Panton Equity Partners, a private
equity firm, since founding it in 2012. Prior to that, he was a partner of Navigation Capital Partners, an Atlanta-based private
equity firm which he founded in partnership with Goldman Sachs in 2006. He has 20 years of investment banking and private equity
experience and has sourced and led over 20 control transactions in various industries (including the telecom, media and technology
industry) with an aggregate enterprise value of over $5 billion, including successful sales of portfolio companies to buyers such
as Dell Inc., the Blackstone Group, and One Equity Partners.
Michael
Pietropola
, our Special Advisor, has served as President of Pietropola Consulting, a telecommunications consulting firm, since
October 2015. Previously, he served as Vice President of Construction & Engineering for AT&T from January 2012 to October
2015, and as Vice President of Network Services for AT&T (and Cingular prior to its acquisition by AT&T) from June 2007
to January 2012.
Designated
Director
MasTec
has the right to designate a director to our board of directors. MasTec’s initial designee on our board of directors was
Mr. Jose Mas. Prior to the consummation of our initial business combination, we will nominate MasTec’s designee for election
at each annual meeting, so long as MasTec beneficially owns not less than 25% of the founders’ shares and private warrants
that it owns at the time of the closing of our initial public offering. MasTec may waive its right to designate a director and
instead have the right to have a board observer attend all of the meetings of our board of directors and receive all information
provided to our board of directors, subject to such board observer executing an appropriate confidentiality agreement with us.
Number
and Terms of Office of Officers and Directors
Our
board of directors is divided into two classes with only one class of directors being elected in each year and each class (except
for those directors appointed prior to our first annual meeting of stockholders) serving a two-year term. The term of office of
the first class of directors, consisting of Messrs. Ellis, Krapek and Lockhart and Dr. Baks, expired at our first annual meeting
of stockholders. On January 28, 2019, in connection with the special meeting in lieu of the 2019 annual meeting of stockholders,
Messrs. Ellis, Krapek and Lockhart and Dr. Baks were re-elected to our board of directors, with each such director to serve until
the second annual meeting of stockholders following the special meeting in lieu of the 2019 annual meeting of stockholders or
until his successor is elected and qualified. The term of office of the second class of directors, consisting of Ms. Shank and
Messrs. Mays, Mock and Mas, will expire at the second annual meeting of stockholders. We may not hold the second annual meeting
of stockholders until after we consummate our initial business combination.
Our
officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific
terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated
bylaws as it deems appropriate. Our amended and restated bylaws provide that our officers may consist of a Chairman of the Board,
Chief Executive Officer, President, Chief Financial Officer, Secretary and such other officers (including, without limitation,
Vice Presidents, Assistant Secretaries and a Treasurer) as may be determined by the board of directors.
Committees
of the Board of Directors
Our
board of directors has three standing committees: an audit committee, a nominating committee and a compensation committee.
Audit
Committee
We
have an audit committee comprised of Messrs. Lockhart and Baks and Ms. Shank, each of whom is an independent director. Mr. Lockhart
serves as the Chairman of the audit committee. Each member of the audit committee is financially literate, and our board of directors
has determined that Mr. Lockhart qualifies as an “audit committee financial expert” as defined in applicable SEC rules because
he meets the requirement for past employment experience in finance or accounting, requisite professional certification in accounting
or comparable experience. The responsibilities of our audit committee include:
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●
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reviewing
and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board
whether the audited financial statements should be included in our Form 10-K
|
|
●
|
discussing
with management and the independent auditor significant financial reporting issues and
judgments made in connection with the preparation of our financial statements;
|
|
●
|
discussing
with management major risk assessment and risk management policies;
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●
|
monitoring
the independence of the independent auditor;
|
|
●
|
verifying
the rotation of the lead (or coordinating) audit partner having primary responsibility
for the audit and the audit partner responsible for reviewing the audit as required by
law;
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●
|
reviewing
and approving all related-party transactions;
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●
|
inquiring
and discussing with management our compliance with applicable laws and regulations;
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●
|
pre-approving
all audit services and permitted non-audit services to be performed by our independent
auditor, including the fees and terms of the services to be performed;
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●
|
appointing
or replacing the independent auditor;
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●
|
determining
the compensation and oversight of the work of the independent auditor (including resolution
of disagreements between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work;
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|
●
|
establishing
procedures for the receipt, retention and treatment of complaints received by us regarding
accounting, internal accounting controls or reports which raise material issues regarding
our financial statements or accounting policies; and
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|
●
|
approving
reimbursement of expenses incurred by our management team in identifying potential target
businesses.
|
Nominating
Committee
Our
nominating committee consists of Messrs. Lockhart and Krapek and Ms. Shank, each of whom is an independent director under Nasdaq’s
listing standards. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on
our board of directors. The nominating committee considers persons identified by its members, management, shareholders, investment
bankers and others.
The
guidelines for selecting nominees, which are specified in our Nominating Committee Charter, generally provide that persons to
be nominated:
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●
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should
have demonstrated notable or significant achievements in business, education or public
service;
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●
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should
possess the requisite intelligence, education and experience to make a significant contribution
to the board of directors and bring a range of skills, diverse perspectives and backgrounds
to its deliberations; and
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●
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should
have the highest ethical standards, a strong sense of professionalism and intense dedication
to serving the interests of our shareholders.
|
The
nominating committee will consider a number of qualifications relating to management and leadership experience, background, integrity
and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee
may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise
from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of
board members. The nominating committee does not distinguish among nominees recommended by shareholders and other persons.
Compensation
Committee
Our
compensation committee consists of Messrs. Ellis, Baks and Krapek, each of whom is an independent director under Nasdaq’s
listing standards. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include,
but are not limited to:
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reviewing
and approving on an annual basis the corporate goals and objectives relevant to our Chief
Executive Officer’s compensation, evaluating our Chief Executive Officer’s
performance in light of such goals and objectives and determining and approving the remuneration
(if any) of our Chief Executive Officer’s based on such evaluation;
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●
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reviewing
and approving the compensation of all of our other executive officers;
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●
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reviewing
our executive compensation policies and plans;
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●
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implementing
and administering our incentive compensation equity-based remuneration plans;
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●
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assisting
management in complying with our proxy statement and annual report disclosure requirements;
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●
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approving
all special perquisites, special cash payments and other special compensation and benefit
arrangements for our executive officers and employees;
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●
|
if
required, producing a report on executive compensation to be included in our annual proxy
statement; and
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●
|
reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors.
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Code
of Ethics and Committee Charters
We
have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics,
our audit committee charter, our nominating committee charter and our compensation committee charter as exhibits to our registration
statement. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov.
In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments
to or waivers of certain provisions of our Code of Ethics in a current report on Form 8-K.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officer, directors and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in ownership with the SEC. Officers, directors and ten
percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on
copies of such forms received, we believe that, during the fiscal year ended March 31, 2018, all filing requirements applicable
to our officer, directors and greater than ten percent beneficial owners were complied with.
Item
11. Executive Compensation
No
executive officer has received any cash compensation for services rendered to us. We have entered into a Strategic Services Agreement
with John Foley, our Chief Financial Officer, pursuant to which we have agreed to pay Mr. Foley consulting fees of $500 per hour
for any hours of consulting services provided by Mr. Foley in excess of ten hours per month. The Strategic Services Agreement
has an initial term of two years commencing on the date of our final prospectus, as filed with the SEC on July 31, 2017, subject
to earlier termination by either party. Mr. Foley also received a grant of profits interests in our sponsor. We are obligated
to make the same payments to our Special Advisors pursuant to Strategic Services Agreements we have entered into with each of
them, and each of our Special Advisors and Dr. Willis has also received a grant of profits interest in our sponsor.
The
profits interests in our sponsor that were granted to Dr. Willis, Mr. Foley and our Special Advisors are Class B Membership Units
in our sponsor that were assigned to such individuals by Mr. Mays, who holds the remaining Class B Membership Units. The value
of these profits interests, if any, will be wholly dependent on the value, following the consummation of our initial business
combination, of the founders’ shares and the private warrants held by our sponsor. At that time, the holders of the Class
B Membership Units would be entitled to receive distributions from the sponsor, which may consist of a portion of the founders’
shares and private warrants or the proceeds obtained by the sponsor upon the sale thereof, to the extent available after the holders
of Class A Membership Units in the sponsor shall have received distributions equal to a multiple of their initial capital contributions
in the sponsor. Accordingly, the value of the profits interests is related to our performance, because if the prices of our shares
and warrants increase, the value of the profits interests will increase (assuming that the holders of Class A Membership Units
have received the full amount of distributions payable to them). The profits interests (or, in the case of Dr. Willis and Mr.
Panton, a portion of the profits interests) are subject to partial forfeiture if the recipient ceases providing services to us
prior to the first anniversary of the consummation of our initial business combination, or if the value of the distributions received
by the recipient on account of such profits interests would exceed a specified value.
Commencing
on July 27, 2017, through the acquisition of a target business, we will pay our sponsor an aggregate fee of up to $20,000 per
month for providing us with office space and certain office and secretarial services. However, this arrangement is solely for
our benefit and is not intended to provide our executive officers or directors compensation in lieu of a salary.
Other
than the administrative fee of up to $20,000 per month, the compensation payable to Mr. Foley pursuant to the Strategic Services
Agreement described above and the repayment of any loans made by our sponsor to us, no compensation or fees of any kind, including
finder’s, consulting fees and other similar fees, will be paid to our sponsor, members of our management team or their respective
affiliates, for services rendered prior to or in connection with the consummation of our initial business combination (regardless
of the type of transaction that it is). However, they will receive repayment of any loans from our sponsor, officers and directors
for working capital purposes and reimbursement for any out-of-pocket expenses incurred by them in connection with activities on
our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and
business combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses
to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.
After
our initial business combination, members of our management team who remain with us may be paid consulting, management or other
fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the
proxy solicitation materials furnished to our stockholders. It is unlikely the amount of such compensation will be known at the
time of a stockholder meeting held to consider an initial business combination, as it will be up to the directors of the post-combination
business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the
time of its determination in a Current Report on Form 8-K, as required by the SEC.
Compensation
Committee Interlocks and Insider Participation
None.
Compensation
Committee Report
Our
compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with management. Based on that review and discussion, the compensation committee recommended to the Company’s board
of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.
U.
Bertram Ellis, Jr.
Dr.
Klaas Baks
Karl
Krapek
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth information regarding the beneficial ownership of our ordinary shares as of June 14, 2019, by:
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each
person known by us to be the beneficial owner of more than 5% of our outstanding ordinary
shares;
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●
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each
of our officers and directors; and
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●
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all
our officers and directors as a group.
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Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all
ordinary shares beneficially owned by them. The following table does not reflect record or beneficial ownership of the sponsor
warrants as these warrants are not exercisable within 60 days of the date of this Form 10-K.
We
have based our calculation of the percentage of beneficial ownership on 32,184,225 ordinary shares outstanding on June 14, 2019.
Name and Address of Beneficial Owner
(1)
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|
Number of Ordinary
Shares
Beneficially
Owned
|
|
|
Percentage of
Outstanding
Ordinary
Shares
|
|
Pensare Sponsor Group, LLC
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5,818,500
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(2)
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18.1
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%
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Darrell J. Mays
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|
|
5,818,500
|
(2)
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18.1
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%
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Lawrence E. Mock, Jr.
(3)
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-
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-
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Dr. Robert Willis
(3)
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-
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-
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John Foley
(3)
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|
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-
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-
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Jose Mas
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-
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|
-
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U. Bertram Ellis, Jr.
|
|
|
27,000
|
|
|
|
*
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Suzanne Shank
|
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27,000
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|
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*
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Karl Krapek
|
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|
27,000
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|
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*
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|
Dennis Lockhart
|
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|
27,000
|
|
|
|
*
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|
Dr. Klaas Baks
|
|
|
27,000
|
|
|
|
*
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|
All directors and executive officers as a group (ten individuals)
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|
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5,953,500
|
|
|
|
18.5
|
%
|
Polar Asset Management Partners, Inc.
(4)
|
|
|
3,167,755
|
|
|
|
9.8
|
%
|
Weiss Asset Management
(5)
|
|
|
2,968,772
|
|
|
|
9.2
|
%
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Barclays PLC
(6)
|
|
|
2,400,000
|
|
|
|
7.5
|
%
|
Lighthouse Investment Partners, LLC
(7)
|
|
|
2,320,595
|
|
|
|
7.2
|
%
|
Davidson Kempner Capital Management LP
(8)
|
|
|
1,849,800
|
|
|
|
5.7
|
%
|
|
(1)
|
Unless
otherwise indicated, the business address of each of the persons and entities is 1720
Peachtree Street, Suite 629, Atlanta, GA 30309.
|
|
(2)
|
Represents
shares held by Pensare Sponsor Group, LLC, of which Mr. Mays is the managing member.
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|
(3)
|
Mr.
Mock, Dr. Willis and Mr. Foley hold economic interests in Pensare Sponsor Group, LLC
and pecuniary interests in the securities held by Pensare Sponsor Group, LLC. Each of
Mr. Mock, Dr. Willis and Mr. Foley disclaims beneficial ownership of such securities
except to the extent of his pecuniary interest therein.
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|
(4)
|
According
to a Schedule 13G filed with the SEC on February 12, 2019 on behalf of Polar Asset Management
Partners Inc., a Canadian corporation (“Polar Partners”), which serves as
an investment manager to Polar Multi Strategy Master Fund, a Cayman Islands exempted
company (“PMSMF”) and certain managed accounts (together with PMSMF, the
“Polar Vehicles”) with respect to the shares held by Polar Vehicles. The
business address of this stockholder is 401 Bay Street, Suite 1900, PO Box 19, Toronto,
Ontario M5H 2Y4, Canada.
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|
(5)
|
According
to a Schedule 13G/A filed with the SEC January 18, 2019 on behalf of BIP GP LLC, a Delaware
limited liability company (“BIP GP”), Weiss Asset Management LP, a Delaware
limited partnership (“Weiss Asset Management”), WAM GP LLC, a Delaware limited
liability company (“WAM GP”), and Andrew M. Weiss, Ph.D., a United States
citizen (“Andrew Weiss”). Shares reported for BIP GP include shares beneficially
owned by a private investment partnership (the “Partnership”) of which BIP
GP is the sole general partner. Weiss Asset Management is the sole investment manager
to the Partnership. WAM GP is the sole general partner of Weiss Asset Management. Andrew
Weiss is the managing member of WAM GP and BIP GP. Shares reported for WAM GP, Andrew
Weiss and Weiss Asset Management include shares beneficially owned by the Partnership
(and reported above for BIP GP). The business address of BIP GP LLC, Weiss Asset Management,
WAM GP and Andrew Weiss is 222 Berkeley St., 16th Floor, Boston, Massachusetts 02116.
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|
(6)
|
According
to a Schedule 13G filed with the SEC February 14, 2019 on behalf of Barclays PLC, an
English public limited company, Barclays Capital Inc. a Connecticut corporation, and
Barclays Bank PLC, an English public limited company. The securities are reported by
Barclays PLC, as a parent holding company, are owned, or may be deemed to be beneficially
owned, by Barclays Capital Inc., a broker or dealer registered under Section 15 of the
Act, Barclays Bank PLC, a non-US banking institution registered with the Financial Conduct
Authority authorized by the Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority in the United Kingdom. Barclays
Capital Inc. and Barclays Bank PLC, are wholly-owned subsidiaries of Barclays PLC. The
principal business address of Barclays PLC and Barclays Bank PLC is 1 Churchill Place,
London, E14 5HP, England. The principal business address of Barclays Capital Inc. is
745 Seventh Avenue, New York, NY 10019.
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|
(7)
|
According
to a Schedule 13G filed with the SEC February 1, 2019 on behalf of Lighthouse Investment
Partners, LLC, a Delaware limited liability company (“Lighthouse”), MAP 214
Segregated Portfolio, a segregated portfolio of LMA SPC (“MAP 214”), a Cayman
Island segregated portfolio company, and MAP 136 Segregated Portfolio, a segregated portfolio
of LMA SPC (“MAP 136”), a Cayman Island segregated portfolio company. Lighthouse
serves as the investment manager of MAP 214 and MAP 136. Because Lighthouse may be deemed
to control MAP 214 and MAP 136, Lighthouse may be deemed to beneficially own, and to
have the power to vote or direct the vote of, and the power to direct the disposition
of the Issuer’s Shares held by Lighthouse, MAP 214 and MAP 136. The business address
of this stockholder is 3801 PGA Boulevard, Suite 500, Palm Beach Gardens, Florida 33410.
|
|
(8)
|
According
to a Schedule 13G filed with the SEC February 11, 2019 on behalf of Davidson Kempner
Partners, a New York limited partnership (“DKP”), Davidson Kempner Institutional
Partners, L.P., a Delaware limited partnership (“DKIP”), Davidson Kempner
International, Ltd., a British Virgin Islands business company (“DKIL”),
Davidson Kempner Capital Management LP, a Delaware limited partnership and a registered
investment adviser with the SEC (“DKCM”) and Messrs. Thomas L. Kempner, Jr.
and Anthony A. Yoseloff. DKCM acts as investment manager to each of DKP, DKIP and DKIL.
Messrs Kempner, Jr. and Yoseloff, through DKCM, are responsible for the voting and investment
decisions relating to the securities held by DKP, DKIP and DKIL. The business address
of this stockholder is c/o Davidson Kempner Capital Management LP, 520 Madison Avenue,
30th Floor, New York, New York 10022.
|
Item
13. Certain Relationships and Related Transactions, and Director Independence
In
May 2016, our sponsor purchased 10,000 shares of our common stock for an aggregate purchase price of $11.00. In May 2017, our
sponsor and certain other persons purchased an aggregate of 7,177,500 shares of our common stock for an aggregate purchase price
of $24,990 in cash, or approximately $0.0035 per share. In June 2017, our sponsor transferred 1,575,000 founder shares to MasTec
for the same purchase price originally paid for such shares. In July 2017, we effected a stock dividend with respect to our common
stock of 575,000 shares thereof, resulting in our initial stockholders holding an aggregate of 7,762,500 founder shares.
Simultaneously
with the closing of our initial public offering, our sponsor, MasTec and EBC purchased from us an aggregate of 10,512,000
private warrants for a total purchase price of $10,512,500, each in a private placement. Each private placement warrant
entitles the holder to purchase of one share of common stock at $11.50 per share. Continental Stock Transfer & Trust
Company deposited the purchase price into the Trust Account simultaneously with the consummation of the initial public
offering. The private warrants are identical to the warrants included in the units sold in our initial public offering except
that the private warrants: (i) will not be redeemable by us and (ii) may be exercised for cash or on a cashless basis, as
described in this prospectus, so long as they are held by the initial purchasers or any of their permitted transferees. The
purchasers of the private warrants have agreed not to transfer, assign or sell any of their private warrants or the common
stock issuable upon exercise of the private warrants (except to certain permitted transferees), until after the completion of
our initial business combination.
In
order to meet our working capital needs, our sponsor, officers and directors may, but are not obligated to, loan us funds, from
time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by
a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or,
at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant. The
warrants would be identical to the private warrants. If we do not complete a business combination, the loans will be forgiven.
On June 8, 2018 and
February 6, 2019, the Company’s sponsor loaned the Company $1,000,000 and $40,000, respectively, for working capital purposes.
On February 11, 2019, the Company’s sponsor advanced the Company an additional $317,628 for working capital purposes. On
April 10, 2019 and May 9, 2019, our sponsor advanced the Company $150,000 and $250,000, respectively, for working capital purposes.
These working capital loans are evidenced by a promissory note, which is payable without interest upon consummation of a Business
Combination or, at the holder’s discretion, up to $1,500,000 of the notes may be converted into warrants of the Company at
a conversion price of $1.00 per warrant. Each warrant will contain terms identical to those of the warrants issued in the private
placement, entitling the holder thereof to purchase one share of common stock, par value $0.001, at an exercise price of $11.50
per share as more fully described in the prospectus for the IPO dated July 27, 2017.
The
holders of our founder shares as well as the holders of the private warrants and any warrants our sponsor, officers, directors
or their affiliates may be issued in payment of working capital loans made to us (and all underlying securities), are entitled
to registration rights pursuant to a registration rights agreement entered into on July 27, 2017. The holders of a majority of
these securities are entitled to make up to three demands that we register such securities. The holders of the majority of the
founder shares can elect to exercise these registration rights at any time commencing three months prior to the date on which
these shares of common stock are to be released from escrow. The holders of a majority of the private warrants or warrants issued
in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration rights at any
time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Our
sponsor, which is affiliated with our officers and directors, has agreed that, through the earlier of our consummation of our
initial business combination or our liquidation, it will make available to us certain general and administrative services, including
office space, utilities and administrative support, as we may require from time to time. We have agreed to pay our sponsor an
aggregate of up to $20,000 per month for these services. Accordingly, our officers and directors will benefit from the transaction
to the extent of their interest in our sponsor. However, this arrangement is solely for our benefit and is not intended to provide
our officers or directors compensation in lieu of a salary. We believe, based on rents and fees for similar services in the Atlanta
area, that the fee charged by our sponsor is at least as favorable as we could have obtained from an unaffiliated person.
We
have entered into a Strategic Services Agreement with John Foley, our Chief Financial Officer, pursuant to which we have agreed
to pay Mr. Foley consulting fees of $500 per hour for any hours of consulting services provided by Mr. Foley in excess of ten
hours per month. The Strategic Services Agreement has an initial term of two years commencing on July 27, 2017, subject to earlier
termination by either party. Mr. Foley also received a grant of profits interests in our sponsor. We are obligated to make the
same payments to our Special Advisors pursuant to Strategic Services Agreements we have entered into with each of them, and each
of our Special Advisors and Dr. Willis has also received a grant of profits interest in our sponsor.
Other
than the administrative fee of up to $20,000 per month and the compensation payable to Mr. Foley pursuant to the Strategic Services
Agreement, no compensation or fees of any kind, including finder’s, consulting fees and other similar fees, will be paid
to our sponsor, members of our management team or their respective affiliates, for services rendered prior to or in connection
with the consummation of our initial business combination (regardless of the type of transaction that it is). However, such individuals
will receive the repayment of any loans from our sponsor, officers and directors for working capital purposes and reimbursement
for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target
businesses, performing business due diligence on suitable target businesses and business combinations as well as traveling to
and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit
on the amount of out-of-pocket expenses reimbursable by us.
After
our initial business combination, members of our management team who remain with us may be paid consulting, management or other
fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the
proxy solicitation materials furnished to our stockholders. It is unlikely the amount of such compensation will be known at the
time of a stockholder meeting held to consider an initial business combination, as it will be up to the directors of the post-combination
business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the
time of its determination in a Current Report on Form 8-K, as required by the SEC.
All
ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms
believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require
prior approval by a majority of our uninterested “independent” directors or the members of our board who do not have
an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel.
We will not enter into any such transaction unless our disinterested “independent” directors determine that the terms
of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from
unaffiliated third parties.
In
addition, the Company holds a Commitment Letter from its Chief Executive Officer and managing member of the sponsor, whereby the
managing member of the sponsor commits to funding any working capital shortfalls through the earlier of an initial business combination
or the Company’s liquidation. The loans would be issued as required and each loan would be evidenced by a promissory note,
up to an aggregate of $750,000. The loans will be non-interest bearing, unsecured and payable upon the consummation of the Company’s
initial business combination or at the holder’s discretion, convertible into warrants of the Company at a price of $1.00
per warrant. If the Company does not complete a business combination, any such loans will be forgiven. As of March 31, 2019, the
Company had no promissory notes outstanding related to this commitment.
On January 16, 2019,
the Company announced that its sponsor had agreed to contribute to the Company as a loan $0.033 for each public share that was
not redeemed in connection with the stockholder vote to approve an amendment to the Company’s amended and restated certificate
of incorporation to extend the date by which the Company has to consummate a business combination for an additional three months,
from February 1, 2019 to May 1, 2019, for each calendar month (commencing on February 2, 2019 and on the second day of each subsequent
month), or portion thereof, that is needed by the Company to complete a Business Combination from February 2, 2019 until May 1,
2019. On February 1, 2019, the Company signed a promissory note agreeing to pay up to $2,797,117 of advances to be made by the
Company’s sponsor to cover contribution payments due to the Trust Account. On April 29, 2019, the Company held a special
meeting of stockholders at which time the stockholders of the Company approved an amendment to the Company’s amended and
restated certificate of incorporation to extend the date by which the Company has to consummate a business combination for an additional
three months, from May 1, 2019 to August 1, 2019. On April 22, 2019, the Company announced that its sponsor, had agreed to contribute
as a loan, $0.033 for each share of common stock issued in the initial public offering that was not redeemed in connection with
the stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation to extend
the date by which they have to consummate a business combination for an additional three months, from May 1, 2019 to August 1,
2019. The contribution was deposited in the trust account established in connection with the Company’s initial public offering.
On May 9, 2019, the Company signed a promissory note agreeing to repay $805,916 for an advance made by the Company’s sponsor
as an additional contribution payment to the Trust Account. On May 31, 2019, the Company announced that the sponsor will reduce
its contributions to the Trust Account. The sponsor will continue to pay to the Trust Account $0.033 per public share that has
not been redeemed per month, but the total monthly payment will be no greater than $200,000. If more than 6,060,606 public shares
remain outstanding after redemptions in connection with this adjustment, then the amount paid per share will be reduced proportionately.
In connection with this announcement, the Company offered the public stockholders the right to redeem their shares of common stock
for their pro rata portion of the funds available in the Trust Account.
Related
Party Policy
Our
Code of Ethics requires us to avoid, wherever possible, all related party transactions that could result in actual or
potential conflicts of interests, except under guidelines approved by the board of directors (or the audit committee).
Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may be to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any
(a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our
shares of common stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or
will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10%
beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests
that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a
person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Our
audit committee, pursuant to its written charter, will be responsible for reviewing and approving related-party transactions to
the extent we enter into such transactions. The audit committee will consider all relevant factors when determining whether to
approve a related party transaction, including whether the related party transaction is on terms no less favorable to us than
terms generally available from an unaffiliated third-party under the same or similar circumstances and the extent of the related
party’s interest in the transaction. No director may participate in the approval of any transaction in which he is a related
party, but that director is required to provide the audit committee with all material information concerning the transaction.
We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire
that elicits information about related party transactions.
These
procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents
a conflict of interest on the part of a director, employee or officer. To further minimize conflicts of interest, we have agreed
not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors
including (i) an entity that is either a portfolio company of, or has otherwise received a material financial investment
from, any private equity fund or investment company (or an affiliate thereof) that is affiliated with any of the foregoing, (ii) an
entity in which any of the foregoing or their affiliates are currently passive investors, (iii) an entity in which any of
the foregoing or their affiliates are currently officers or directors, or (iv) an entity in which any of the foregoing or
their affiliates are currently invested through an investment vehicle controlled by them, unless we have obtained an opinion from
an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type of
target business we are seeking to acquire, and the approval of a majority of our disinterested independent directors that the
business combination is fair to our unaffiliated stockholders from a financial point of view.
Director
Independence
Nasdaq
listing standards require that a majority of our board of directors be independent. An “independent director” is defined
generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship
which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent
judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Mock, Ellis, Krapek,
Lockhart, Baks and Ms. Shank are “independent directors” as defined in the Nasdaq listing.
Item
14. Principal Accountant Fees and Services.
The
aggregate fees billed to our Company by Marcum LLP for the year ended March 31, 2019 and for the year ended March 31, 2018 are
as follows:
|
|
Year Ended
March 31, 2019
|
|
|
Year Ended
March 31, 2018
|
|
Audit Fees
(1)
|
|
$
|
58,014
|
|
|
$
|
63,176
|
|
Audit-Related Fees
(2)
|
|
$
|
-
|
|
|
$
|
-
|
|
Tax Fees
(3)
|
|
$
|
-
|
|
|
$
|
-
|
|
All Other Fees
(4)
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
|
|
$
|
58,014
|
|
|
$
|
63,176
|
|
|
(1)
|
Audit
Fees consist of fees incurred for the audits of our annual financial statements and financial statements included in our registration
statement on Form S-1, for the review of our unaudited interim consolidated financial statements included in our quarterly reports
on Form 10-Q for the first three quarters of the fiscal year and for fees incurred related to other SEC filings.
|
|
(2)
|
Audit-Related
Fees consist of fees incurred for accounting consultations, due diligence in connection with planned acquisitions and research
services.
|
|
(3)
|
Tax
Fees consist of fees incurred for tax compliance, planning and advisory services and due diligence in connection with planned
acquisitions.
|
|
(4)
|
All
Other Fees consist of products and services provided, other than the products and services described in the other rows of the
foregoing table.
|
Our
audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by Marcum LLP,
including the fees and terms thereof (subject to the
de minimus
exceptions for non-audit services described in
the Exchange Act which are approved by the audit committee prior to the completion of the audit). The audit committee may
form and delegate authority to one or more of its members when appropriate, including the authority to grant pre-approvals of
audit and permitted non-audit services, provided that decisions of such members to grant pre-approvals shall be presented to the
audit committee at its next scheduled meeting.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Pensare Acquisition Corp. (the “Company”),
is a blank check company incorporated in Delaware on April 7, 2016. The Company was formed for the purpose of acquiring, through
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization, exchangeable share transaction
or other similar business transaction, one or more operating businesses or assets that the Company has not yet identified (a “Business
Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating
a Business Combination, the Company intends to focus on businesses in the wireless telecommunications industry in the United States.
All activity through March 31, 2019 relates
to the Company’s formation, its initial public offering (“Initial Public Offering”) described below, identifying
a target company for a Business Combination, and performing due diligence thereon. As previously disclosed in the current report
on Form 8-K filed with the SEC on February 1, 2019, the Company entered into a Business Combination Agreement (the “Agreement”)
on January 31, 2019 with U.S. TelePacific Holdings Corp., d/b/a TPx Communications (“TPx”) and Tango Merger Sub Corp.
(“Merger Sub”), a wholly-owned subsidiary of the Company, relating to the proposed business combination between the
Company and TPx. On May 20, 2019, the Company mutually agreed with TPx to terminate the Agreement pursuant to a Termination of
Business Combination Agreement dated as of May 20, 2019, effective as of such date. As a result of the termination of the Agreement,
effective as of May 20, 2019, the Agreement is of no further force or effect, and no party to the Agreement shall have any liability
under the Agreement except as otherwise expressly set forth in the Agreement. The Company intends to continue to pursue a Business
Combination.
On January 28, 2019, at the Special Meeting
in lieu of the 2019 Annual Meeting of the Company’s Stockholders, the stockholders approved an amendment to its amended and
restated certificate of incorporation to extend the date by which the Company has to consummate a business combination for an additional
three months, from February 1, 2019 to May 1, 2019. The amendment was approved with 26,352,896 votes cast in favor of the amendment,
122,986 votes cast against the amendment and 323,175 abstentions. In connection with the special meeting and the resulting amendment
to our amended and restated certificate of incorporation, 2,796,290 shares of our common stock were redeemed from funds available
in the trust account established in connection with the Company’s initial public offering (the “Trust Account”),
for a redemption amount of approximately $10.18 per share.
On April 22, 2019, the Company announced
that its sponsor, had agreed to contribute as a loan, $0.033 for each share of common stock issued in the initial public offering
that was not redeemed in connection with the stockholder vote to approve an amendment to the Company’s amended and restated
certificate of incorporation to extend the date by which it has to consummate a business combination for an additional three months,
from May 1, 2019 to August 1, 2019. On April 29, 2019, at the Special Meeting of the Company’s Stockholders, the stockholders
approved an amendment to its amended and restated certificate of incorporation to extend the date by which the Company has to consummate
a business combination for an additional three months, from May 1, 2019 to August 1, 2019. The amendment was approved with 26,163,835
votes cast in favor of the amendment, 2,020,001 votes cast against the amendment and 422,075 abstentions. In connection with the
special meeting and the resulting amendment to our amended and restated certificate of incorporation, 3,831,985 shares of our common
stock were redeemed from funds available in the Trust Account, for a redemption amount of approximately $10.33 per share.
On May 31, 2019, the Company announced
that the sponsor will reduce its contributions to the Trust Account. The sponsor will continue to pay to the Trust Account $0.033
per public share that has not been redeemed per month, but the total monthly payment will be no greater than $200,000. If more
than 6,060,606 public shares remain outstanding after redemptions in connection with this adjustment, then the amount paid per
share will be reduced proportionately. In connection with this announcement, the Company offered the public stockholders the right
to redeem their shares of common stock for their
pro rata
portion of the funds available in the Trust Account. The stockholders
will have until 5:00 p.m., eastern time, on June 14, 2019 to elect to redeem their public shares.
The registration statements for the Company’s
Initial Public Offering were declared effective on July 27, 2017. On August 1, 2017, the Company consummated the Initial Public
Offering of 27,000,000 units (“Units” and with respect to the shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), included in the Units, the “Public Shares”) at $10.00 per Unit,
generating gross proceeds of $270,000,000, which is described in Note 4.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 9,500,000 private placement warrants (“Private Placement Warrants”)
at a price of $1.00 per warrant in a private placement to the Company’s sponsor, Pensare Sponsor Group, LLC (the “Sponsor”),
MasTec, Inc. (“MasTec”) and EarlyBirdCapital, Inc. (“EBC”), generating gross proceeds of $9,500,000, which
is described in Note 5.
Following the closing of the Initial Public
Offering on August 1, 2017, an amount of $270,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial
Public Offering and the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested
in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended
(the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds
itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule
2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account, as described below, except that interest earned on the Trust Account can be released
to pay the Company’s tax obligations.
On August 4, 2017, the underwriters exercised
their over-allotment option in full resulting in an additional 4,050,000 Units being issued for $40,500,000, less the underwriters’
discount of $1,012,500, netting $39,487,500, which was deposited into the Trust Account. In connection with the underwriters’
exercise of their over-allotment option in full, the Company also consummated the sale of an additional 1,012,500 Private Placement
Warrants at $1.00 resulting in a total of $310,500,000 held in the Trust Account.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (continued)
On August 7, 2017, the Company announced
that the holders of the Company’s units may elect to separately trade the Common Stock, warrants and rights underlying the
units commencing on August 8, 2017. No fractional warrants will be issued upon separation of the units only whole warrants will
trade. Those units that are not separated will continue to trade on the NASDAQ Capital Market under the symbol “WRLSU”
and the Common Stock, warrants and rights are expected to trade under the symbols “WRLS,” “WRLSW” and “WRLSR”,
respectively.
Transaction costs amounted to $8,646,303,
consisting of $7,762,500 of underwriting fees, and $883,803 of other costs. In addition, as of March 31, 2019, $139,265 of cash
was held outside of the Trust Account, available for working capital purposes.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of its Initial Public Offering and Private Placement Warrants
(subject to terms and conditions set forth in the certain trust agreement), although substantially all of the net proceeds are
intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able
to successfully effect a Business Combination.
The Company will provide its stockholders
with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i)
in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision
as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the
Company, solely in its discretion. The stockholders will be entitled to redeem their Public Shares for a pro rata portion of the
amount then on deposit in the Trust Account, net of taxes payable (initially $10.00 per share, plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no
redemption rights upon the completion of a Business Combination with respect to the Company’s warrants or rights. The Common
Stock subject to redemption has been recorded at redemption value and classified as temporary equity upon the completion of the
Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001
upon such consummation of a Business Combination and, in the case of a stockholder vote, a majority of the outstanding shares voted
are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to
hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate
of Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”),
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of
the transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to
the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Initial Stockholders
(as defined below) have agreed to vote their Founder Shares (as defined in Note 6), and any Public Shares held by them in favor
of approving a Business Combination and not to redeem any shares. Additionally, each public stockholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the proposed transaction.
The Company will have until August
1, 2019 to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
earned (net of taxes payable), divided by the number of then outstanding Public Shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any),
subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of
the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby
a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements
of applicable law.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
1.
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
(continued)
The Sponsor and other holders of
Founder Shares prior to the Initial Public Offering (the “Initial Stockholders”) have agreed to (i) waive their
redemption rights with respect to their Founder Shares and Public Shares in connection with the consummation of a Business
Combination, (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder
Shares if the Company fails to consummate a Business Combination within the Combination Period and (iii) not to propose an
amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing
of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination
within the Combination Period, unless the Company provides the public stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment. However, the Initial Stockholders will be entitled to liquidating
distributions with respect to any Public Shares acquired if the Company fails to consummate a Business Combination and
liquidates within the Combination Period. In the event of such distribution, it is possible that the per share value of all
the assets available for distribution (including Trust Account assets) will be less than the $10.00 per Unit in the
Offering.
In order to protect the amounts held in
the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a
transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims
by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust
Account or to any claims under the Company’s indemnity of the underwriters of the Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust
Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent
auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company
waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
2. LIQUIDITY
As of March 31, 2019, the Company had $135,265
in its operating bank accounts, $290,454,757 in cash and marketable securities held in the Trust Account to be used for a Business
Combination, to repurchase or convert stock, or to pay corporate taxes in connection therewith and a working capital deficit of
$8,278,795. As of March 31, 2019, $6,885,174 of the amount deposited in the Trust Account represented interest income, which is
available to pay the Company’s tax obligations. To date, the Company has withdrawn $336,274 of interest from the Trust Account
in order to pay the Company’s tax obligations.
Until the consummation of a Business Combination,
the Company will be using the funds not held in the Trust Account for identifying and evaluation of prospective acquisition candidates,
performing due diligence on prospective target businesses, paying for travel expenditures, selecting target businesses to acquire,
and structuring, negotiating and consummating the Business Combination.
On June 8, 2018 the Sponsor loaned the
Company $1,000,000 for working capital purposes. On February 11, 2019, the Sponsor advanced the Company an additional $317,628
for working capital purposes. On April 10, 2019 and May 9, 2019, the Sponsor advanced the Company $150,000 and $250,000, respectively,
for working capital purposes. Each of these working capital loans is evidenced by a promissory note, and are payable without interest
upon consummation of a Business Combination or, at the holder’s discretion, the notes may be converted into warrants (“Warrants”)
at a conversion price of $1.00 per Warrant, with a limitation to convert only up to $1.5 million of notes. Each Warrant will contain
terms identical to those of the warrants issued in the private placement, entitling the holder thereof to purchase one share of
Common Stock at an exercise price of $11.50 per share as more fully described in the prospectus for the IPO dated July 27, 2017.
On April 22, 2019, the Company announced that its sponsor, had
agreed to contribute as a loan, $0.033 for each share of common stock issued in the initial public offering that was not redeemed
in connection with the stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation
to extend the date by which it has to consummate a business combination for an additional three months, from May 1, 2019 to August
1, 2019. On April 29, 2019, at the Special Meeting of the Company’s Stockholders, the stockholders approved an amendment
to its amended and restated certificate of incorporation to extend the date by which the Company has to consummate a business combination
for an additional three months, from May 1, 2019 to August 1, 2019. The amendment was approved with 26,163,835 votes cast in favor
of the amendment, 2,020,001 votes cast against the amendment and 422,075 abstentions. In connection with the special meeting and
the resulting amendment to our amended and restated certificate of incorporation, 3,831,985 shares of our common stock were redeemed
from funds available in the Trust Account, for a redemption amount of approximately $10.33 per share.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
2. LIQUIDITY (continued)
On May 31, 2019, the Company announced
that the Company’s sponsor would reduce its contributions to the trust account established in connection with the Company’s
initial public offering (the “Trust Account”). The Company’s sponsor will continue to pay the Trust Account $0.033
per Public Share that has not been redeemed per month, but the total monthly payment will be no greater than $200,000. The Company
is currently active in discussion with a target company regarding a potential business combination that is anticipated to require
an amount of funding less than the current balance of the Trust Account to consummate the business combination. There can be no
assurance that the Company will enter into a business combination agreement with the target company or that this or an other potential
business combination will be completed.
In connection with the Extension, the Sponsor
advanced $1,938,349 in additional contributions to the trust account for the period from April 1, 2019 through June 2, 2019. These
loans shall be payable without interest upon consummation of a Business Combination.
The Sponsor advanced the Company $150,000
on April 19, 2019 and $250,000 on May 19, 2019 for working capital purposes. These loans shall be payable without interest upon
consummation of a Business Combination.
Promissory notes payable – related
party were $3,222,373 and $0, at March 31, 2019 and 2018, respectively. For the year ended March 31, 2019, $1,864,745 of the proceeds of the funds borrowed were treated as an investment of cash in the Trust Account.
In addition, two of the Company’s
service providers had agreed to defer the payment of fees owed to them until the consummation of a Business Combination, which
amounted to $4,814,028 as of March 31, 2019. Such fees are included in accounts payable and accrued expenses in the accompanying
balance sheet at March 31, 2019. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs for
the next two months (through August 1, 2019) following the date from when the financial statements are issued.
In addition, the Company holds a Commitment
Letter from its Chief Executive Officer and managing member of the Sponsor, whereby the managing member of the Sponsor commits
to funding any working capital shortfalls through the earlier of an initial business combination or the Company’s liquidation.
The loans would be issued as required and each loan would be evidenced by a promissory note, up to an aggregate of $750,000. The
loans will be non-interest bearing, unsecured and payable upon the consummation of the Company’s initial business combination
or at the holder’s discretion, convertible into warrants of the Company at a price of $1.00 per warrant, up to a maximum
of $182,372. If the Company does not complete a business combination, any such loans will be forgiven.
The Company may raise additional
capital through loans or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The
Company’s officers and directors and the Sponsor may, but, except as described above, are not obligated to, loan the Company
funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working
capital needs.
None of the Sponsor, stockholders, officers
or directors, or third parties is under any obligation to advance funds to, or invest in, the Company, except for the $750,000
commitment discussed above. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to
raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily
be limited to curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company
cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. Even if the
Company can obtain sufficient financing or raise additional capital, it only has until August 1, 2019 to consummate a business
combination. There is no assurance that the Company will be able to do so prior to August 1, 2019.
3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying consolidated financial
statements are presented in conformity with accounting principles generally accepted in the united States of America (“GAAP”)
and pursuant to the rules and regulations of the SEC.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Emerging growth company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified
by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not emerging growth companies including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b) (1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period, which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company,
which is neither an emerging growth company nor an emerging growth company, which has opted out of using the extended transition
period, difficult or impossible because of the potential differences in accounting standards used.
Use of estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash and cash equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of March 31, 2019 and March 31, 2018.
Cash and marketable securities held
in Trust Account
At March 31, 2019 and March 31, 2018, the
assets held in the Trust Account were held in cash and U.S. Treasury Bills and are classified as trading securities.
Common stock subject to possible redemption
The Company accounts for its Common Stock
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” Common Stock subject to mandatory redemption (if any) is classified as a
liability instrument and is measured at fair value.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Conditionally redeemable Common Stock (including
Common Stock that features redemption rights that are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times,
common stock is classified as stockholders’ equity. The Common Stock features certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2019
and March 31, 2018, Common Stock subject to possible redemption is presented at redemption value as temporary equity, outside of
the stockholders’ equity section of the Company’s balance sheets.
Income taxes
The Company complies with the accounting
and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities.
At March 31, 2019, management had determined
that it is more likely than not, that its deferred income tax asset, which previously had been reduced by a valuation allowance,
will be realized within the next year. The deferred income tax asset of $216,000 arose from tax benefits related to net operating
losses not previously utilized.
ASC Topic 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as
income tax expense. As of March 31, 2019 and March 31, 2018, there were no unrecognized tax benefits and no amounts accrued for
interest and penalties.
The Company is currently not aware of any
issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject to potential
examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include
questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal,
state and city tax laws. The Company has identified its Federal tax return and its State tax returns in Delaware, Georgia, Louisiana,
New York, and North Carolina as “major” tax jurisdictions. The Company’s management does not expect that the
total amount of unrecognized tax benefits will materially change over the next year.
Net loss per common share
The Company complies with accounting and
disclosure requirements ASC Topic 260, “Earnings Per Share.” Net loss per common share is computed by dividing net
loss by the weighted average number of common shares outstanding for the period. Shares of Common Stock subject to possible redemption
at March 31, 2019 and March 31, 2018 have been excluded from the calculation of basic income (loss) per share since such shares,
if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect
of (1) warrants sold in the Initial Public Offering and private placement to purchase 15,525,000 and 10,512,500 shares of Common
Stock, respectively, (2) rights sold in the Initial Public Offering that convert into 3,105,000 shares of Common Stock, (3) the
unit purchase option of 1,350,000 Units sold to the underwriters, exercisable at $10.00 per Unit, which consists of 1,350,000
shares of Common Stock, 675,000 warrants (convertible into 675,000 shares of Common Stock), and 1,350,000 rights (convertible
into 135,000 shares of Common Stock) and, 4) the $1,317,628 promissory note, which is payable without interest upon consummation
of a Business Combination or, at the holder’s discretion, which may be converted into warrants (“Warrants”)
at a conversion price of $1.00 per Warrant, entitling the holder thereof to purchase one share of Common Stock, par value $0.001,
at an exercise price of $11.50 per share, in the calculation of diluted loss per share, since the exercise of the warrants, the
conversion of the rights into shares of Common Stock and conversion of the working capital loan are contingent upon the occurrence
of a future event. As a result, diluted loss per common share is the same as basic loss per common share for the periods.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reconciliation of net loss per common share
The Company’s net income is adjusted
for the portion of income that is attributable to Common Stock subject to redemption, as these shares only participate in the income
of the Trust Account and not the losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:
|
|
For
the Year Ended
March 31, 2019
|
|
|
For
the Year Ended
March 31, 2018
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
989,799
|
|
|
$
|
(2,520,045
|
)
|
|
|
|
|
|
|
|
|
|
Less: Income attributable to common shares subject to redemption (a)
|
|
|
(4,841,402
|
)
|
|
|
(1,386,915
|
)
|
Adjusted loss
|
|
$
|
(3,851,603
|
)
|
|
$
|
(3,906,960
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
8,563,373
|
|
|
|
6,790,097
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.45
|
)
|
|
$
|
(0.58
|
)
|
|
|
|
|
|
|
|
|
|
(a) Interest Income
|
|
$
|
5,281,923
|
|
|
$
|
1,603,251
|
|
Less: Income Taxes*
|
|
|
163
|
|
|
|
31,425
|
|
Less: Franchise Taxes
|
|
|
212,569
|
|
|
|
152,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,069,191
|
|
|
|
1,419,253
|
|
Percentage of common shares subject to redemption to total common shares
|
|
|
95.51
|
%
|
|
|
97.72
|
%
|
Income attributable to common shares subject to redemption
|
|
$
|
4,841,402
|
|
|
$
|
1,386,915
|
|
|
*
|
Excludes any benefit derived from deferred income tax asset.
|
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration of credit risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed
the Federal depository insurance coverage of $250,000. At March 31, 2019 and March 31, 2018, the Company had not experienced losses
on this account and management believes the Company is not exposed to significant risks on such account.
Fair value of financial instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Recently issued accounting pronouncements
Management does not believe that any recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s
consolidated financial statements.
4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering
the Company sold 27,000,000 units at a purchase price of $10.00 per Unit. Each Unit consists of one share of Common Stock, par
value of $0.001 of the Company (“Common Stock”), one right (“Public Right”) and one-half of one redeemable
warrant (“Public Warrant”). Each Public Right will convert into one-tenth (1/10) of one share of Common Stock upon
consummation of a Business Combination (see Note 8). Each whole Public Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $11.50 (see Note 8).
On August 4, 2017, the over-allotment option
was exercised in full and the underwriters purchased 4,050,000 additional Units at $10.00 per Unit, generating gross proceeds of
$40,500,000.
Proceeds of $310,500,000 from the Initial
Public Offering and Private Placement Warrants are held in the trust account, along with any additional interest earned thereon
not used to pay for taxes.
5. PRIVATE PLACEMENT
Simultaneously with the Initial Public
Offering, the Sponsor, MasTec and EBC purchased 9,500,000 Private Placement Warrants at $1.00 per warrant in a private placement
generating gross proceeds of $9,500,000. Simultaneously with the sale of the over-allotment Units, the Company consummated the
sale of an additional 1,012,500 warrants at $1.00 per warrant, generating gross proceeds of $1,012,500. The proceeds from the sale
of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering to be held in the Trust Account.
If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private
Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and
the Private Placement Warrants will expire worthless. The Private Placement Warrants are identical to the Warrants sold in the
Offering except that the Private Placement Warrants (i) will not be redeemable by the Company and (ii) may be exercised for cash
or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees. In addition, the
Private Placement Warrants and their component securities may not be transferable, assignable or salable until 30 days after the
consummation of a Business Combination, subject to certain limited exceptions.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
6. RELATED PARTY TRANSACTIONS
Founder Shares
In May 2016, the Company issued 10,000
shares of Common Stock to the Sponsor for $10.
In May 2017, the Company issued an additional
7,177,500 shares of Common Stock to the Sponsor and certain other persons (collectively, the “Founder Shares”) for
an aggregate purchase price of $24,990, or approximately $0.0035 per share. In June 2017, the Sponsor transferred 1,575,000 of
such shares to MasTec for the same purchase price originally paid for such shares. In July 2017, the company effected a stock dividend
with respect to the Common Stock of 575,000 shares, resulting in the Initial Stockholders holding an aggregate of 7,762,500 shares.
All share and per share, amounts have been retroactively restated to reflect the stock dividend. The Founder Shares included an
aggregate of up to 1,012,500 shares that were subject to forfeiture by the Initial Stockholders to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the Initial Stockholders would own, on an as-converted basis, 20%
of the Company’s issued and outstanding shares after the Offering. As a result of the underwriters’ election to exercise
their over-allotment option in full on August 4, 2017, 1,012,500 Founder shares are no longer subject to forfeiture.
The Initial Stockholders have agreed that,
subject to certain limited exceptions, the Founder Shares will not be transferred, assigned or sold until one year after the date
of the consummation of a Business Combination or earlier if, subsequent to a Business Combination, the last sales price of the
Company’s Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations) for any 20 trading days within any 30-trading day period.
Related Party Loans
On June 8, 2018, the Sponsor advanced the
Company $1,000,000 for working capital purposes. On February 11, 2019, the Sponsor advanced the Company an additional $317,628
for working capital purposes. On April 10, 2019 and May 9, 2019, the Sponsor advanced the Company $150,000 and $250,000, respectively,
for working capital purposes. The Working Capital Loans, evidenced by a promissory note, are payable without interest upon consummation
of a Business Combination or, at the holder’s discretion, up to $1,500,000 of the notes may be converted into warrants (“Warrants”)
at a conversion price of $1.00 per Warrant. Each Warrant will contain terms identical to those of the warrants issued in the private
placement, entitling the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share as more
fully described in the prospectus for the IPO dated July 27, 2017.
In order to finance transaction costs in
connection with a Business Combination, the Sponsor, the Company’s officers and directors may, but are not obligated to,
loan the Company funds from time to time or at any time, as may be required (“Working Capital Loans”). Each Working
Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either be paid upon consummation of a Business
Combination, without interest, or, at the holder’s discretion, up to $1,500,000 of the Working Capital Loans may be converted
into Warrants at a price of $1.00 per Warrant. The Warrants would be identical to the Private Placement Warrants.
The Company received a Commitment Letter
from the managing member of the Sponsor, Pensare Sponsor Group, LLC (“PSG”), whereby the managing member of PSG commits
to funding any working capital shortfalls through the earlier of an initial business combination or the Company’s liquidation.
The loans would be issued as required and a promissory note, up to an aggregate of Seven Hundred and Fifty Thousand Dollars ($750,000),
would evidence each loan. The loans will be non-interest bearing, unsecured and payable upon the consummation of the Company’s
initial business combination or at the holder’s discretion, up to $500,000 of the commitment may be convertible into warrants
of the Company at a price of $1.00 per warrant. If the Company does not complete a business combination, any such loans will be
forgiven. As of March 31, 2019, the Company had no promissory notes outstanding related to this commitment.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
6. RELATED PARTY TRANSACTIONS (continued)
On January 16, 2019, the Company announced that the Sponsor
had agreed to contribute to the Company as a loan $0.033 for each public share that was not redeemed in connection with the stockholder
vote to approve an amendment to the Company’s amended and restated certificate of incorporation to extend the date by which
the Company has to consummate a business combination for an additional three months, from February 1, 2019 to May 1, 2019, for
each calendar month (commencing on February 2, 2019 and on the second day of each subsequent month), or portion thereof, that is
needed by the Company to complete a Business Combination from February 2, 2019 until May 1, 2019. On February 1, 2019, the Company
signed a promissory note agreeing to pay up to $2,797,117 of advances to be made by the Sponsor to cover contribution payments
due to the Trust Account. On April 29, 2019, the Company held a special meeting of stockholders at which time the stockholders
of the Company approved an amendment to the Company’s amended and restated certificate of incorporation to extend the date
by which the Company has to consummate a business combination for an additional three months, from May 1, 2019 to August 1, 2019.
On April 22, 2019, the Company announced that the Sponsor, had agreed to contribute as a loan, $0.033 for each share of common
stock issued in the initial public offering that was not redeemed in connection with the stockholder vote to approve an amendment
to the Company’s amended and restated certificate of incorporation to extend the date by which they have to consummate a
business combination for an additional three months, from May 1, 2019 to August 1, 2019. The contribution was deposited in the
trust account established in connection with the Company’s initial public offering. On May 9, 2019, the Company signed a
promissory note agreeing to repay $805,916 for an advance made by the Sponsor as an additional contribution payment to the Trust
Account. On May 31, 2019, the Company announced that the Sponsor will reduce its contributions to the Trust Account. The Sponsor
will continue to pay to the Trust Account $0.033 per public share that has not been redeemed per month, but the total monthly payment
will be no greater than $200,000. If more than 6,060,606 public shares remain outstanding after redemptions in connection with
this adjustment, then the amount paid per share will be reduced proportionately. In connection with this announcement, the Company
offered the public stockholders the right to redeem their shares of common stock for their pro rata portion of the funds available
in the Trust Account.
Promissory notes payable – related
party were $3,222,373 and $0, at March 31, 2019 and 2018, respectively.
Related Party Fees
The Company has incurred related party
administrative fees of $20,000 per month beginning August 2017. These costs have been included in the operating costs in the company’s
statements of operations. The administrative fees incurred and paid by the Company were $240,000 and $160,000 for the years ending
March 31, 2019 and 2018, respectively.
7. COMMITMENTS
Registration Rights
The holders of the Founder Shares, Private
Placement Warrants (and their underlying securities) and any warrants that may be issued upon conversion of the Working Capital
Loans (and their underlying securities) will be entitled to registration rights pursuant to a registration rights agreement to
be signed prior to or on the effective date of the Initial Public Offering. The holders of a majority of these securities will
be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition,
the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent
to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to
Rule 415 under the Securities Act. However, the registration rights agreement will provide that the Company will not permit any
registration statement filed under the Securities Act to become effective until termination of the applicable lock up period. The
Company will bear the expenses incurred in connection with the filing of any such registration statements.
Business Combination Marketing Agreement
The Company has engaged EBC as an advisor
in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss a potential
Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested
in purchasing securities, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company
with its press releases and public filings in connection with a Business Combination. The Company will pay EBC a cash fee for such
services upon the consummation of an initial Business Combination in an amount equal to 3.5% of the gross proceeds of the offering
(exclusive of any applicable finders’ fees which might become payable); provided that the Company has the right to allocate
up to 30% of the fee to any of the underwriters in the offering or other FINRA member firms the Company retains to assist it in
connection with its initial Business Combination.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
8. STOCKHOLDERS’ EQUITY
Preferred Stock
—
The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.001. At March 31, 2019 and March 31, 2018,
there were no shares of preferred stock issued or outstanding.
Common Stock
—
The Company is authorized to issue 100,000,000 shares of Common Stock with a par value of $0.001 per share. Holders of the Company’s
Common Stock are entitled to one vote for each share. As of March 31, 2019 and March 31, 2018, there were 9,033,268 and 8,469,986,
respectively, shares of Common Stock issued and outstanding, (excluding 26,982,942 and 30,342,514 shares of common stock subject
to possible redemption).
Rights
— Each
holder of a right will receive one-tenth (1/10) of one share of Common Stock upon consummation of a Business Combination, even
if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional shares will
be issued upon exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to
receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included
in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement
for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the
holders of rights to receive the same per share consideration the holders of the Common Stock will receive in the transaction on
an as-converted into Common Stock basis and each holder of a right will be required to affirmatively covert its rights in order
to receive 1/10 share underlying each right (without paying additional consideration). The shares issuable upon exchange of the
rights will be freely tradable (except to the extent held by affiliates of the Company).
If the Company is unable to complete a
Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights
will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are
no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination.
Additionally, in no event will the Company be required to net cash settle the rights.
Warrants
— Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or; provided
in each case that the Company has an effective registration statement under the Securities Act covering the shares of Common Stock
issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that
as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will
use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares
of Common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become
effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the
expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if
a registration statement covering the shares of Common stock issuable upon exercise of the Public Warrants is not effective within
90 business days immediately following the consummation of a Business Combination, warrant holders may, until such time as there
is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration
statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided
that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise
their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or
earlier upon redemption or liquidation.
The Private Placement Warrants are identical
to the Public Warrants underlying the Units being sold in the Offering, except that the Private Placement Warrants and the Common
Stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants
will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public
Warrants.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
8. STOCKHOLDERS’ EQUITY (continued)
The Company may redeem the Public Warrants (except with respect
to the Placement Warrants):
|
●
|
in whole and not in
part;
|
|
●
|
at a price of $0.01
per warrant;
|
|
●
|
at any time during the
exercise period;
|
|
●
|
upon a minimum of 30
days’ prior written notice of redemption;
|
|
●
|
if, and only if, the last sale price of the Company’s
Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading
day prior to the date on which the Company sends the notice of redemption to the warrant holders; and
|
|
●
|
if, and only if, there is a current registration statement
in effect with respect to the shares of Common Stock underlying such warrants.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares
of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock
dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance
of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates
the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor
will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants.
Accordingly, the warrants may expire worthless.
Unit Purchase Options
—
The Company sold to EBC and its co-underwriters, for $100, an option to purchase up to 1,350,000 units exercisable at $10.00 per
Unit (or an aggregate exercise price of $13,500,000) commencing on the consummation of a Business Combination. The unit purchase
option may be exercised for cash or on a cashless basis, at the holder’s option, and expires on July 27, 2022. The Units
issuable upon exercise of this option are identical to those offered in the Offering. The Company has accounted for the unit purchase
option, inclusive of the receipt of $100 cash payment, as an expense of the Offering resulting in a charge directly to stockholders’
equity.
The Company estimated that the fair value
of this unit purchase option was approximately $4,547,505 (or $3.37 per Unit) using a Black-Scholes option-pricing model. The fair
value of the unit purchase option granted to the underwriters was estimated as of the date of grant using the following assumptions:
(1) expected volatility of 35%, (2) risk-free interest rate of 1.80% and (3) expected life of five years. The option and the 1,350,000
Units have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA’s
NASDAQ Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period
(including the foregoing 180-day period) following the date of Offering except to any underwriter and selected dealer participating
in the Offering and their bona fide officers or partners. The option grants to holders demand and “piggy back” rights
for periods of five and seven years, respectively, from the effective date of the registration statement with respect to the registration
under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear
all fees and expenses attendant to registering the securities, other than underwriting commissions, which will be paid for by the
holders themselves. The exercise price and number
of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend,
or the Company’s recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for
issuances of Common Stock at a price below its exercise price.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
9. FAIR VALUE MEASUREMENTS
The Company follows guidance in ASC 820
for its financial assets and liabilities that are re-measured at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize
the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal
assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify
assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or
liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of
Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets
or liabilities in markets that are not active.
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions
that market participants would use in pricing the asset or liability.
|
The following
table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31,
2018 and March 31, 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such
fair value:
Description
|
|
Level
|
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
290,454,757
|
|
|
$
|
312,103,251
|
|
10. INCOME TAX
On December 31, 2017, the U.S. Tax Cuts and Job Acts of 2017 (“Tax Reform”) was signed into
law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other
changes. ASC Topic 740 requires companies to recognize the effect of tax law changes in the period of enactment; therefore, the
Company would be required to revalue its deferred tax assets and liabilities at December 31, 2017 at the new rate. The SEC issued
Staff Accounting Bulletin No. 118 (SAB 118”) to address the application of GAAP in situations when a registrant does not
have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting
for certain tax effects of Tax Reform.
The
financial statement impact related to the adoption of Tax Act 2017 had no impact on the total provision for income tax expense
(benefit) for the year ending March 31, 2018 and 2017.
PENSARE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2019
10. INCOME TAX (continued)
The Company’s net deferred tax assets
are as follows:
|
|
Year Ended March 31, 2019
|
|
|
Year Ended March 31, 2018
|
|
Deferred tax asset
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
378,831
|
|
|
$
|
543,458
|
|
Total deferred tax assets
|
|
|
378,831
|
|
|
|
543,458
|
|
Valuation allowance
|
|
|
(162,831
|
)
|
|
|
(543,458
|
)
|
Deferred tax asset, net of allowance
|
|
$
|
216,000
|
|
|
$
|
-
|
|
The income tax benefit (provision)
consist of the following:
|
|
Year Ended March 31, 2019
|
|
|
Year Ended March 31, 2018
|
|
Federal
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
(164,627
|
)
|
|
|
543,458
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(163
|
)
|
|
$
|
(183,998
|
)
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
380,627
|
|
|
|
(543,458
|
)
|
Income tax benefit (provision)
|
|
$
|
215,837
|
|
|
$
|
(183,998
|
)
|
A reconciliation of federal income tax rate to the Company’s
effective tax rate at March 31, 2019 is as follows:
|
|
Year Ended March 31, 2019
|
|
|
Year Ended March 31, 2018
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
21.00
|
%
|
|
|
0.0
|
%
|
State taxes, net of federal tax benefit
|
|
|
0.02
|
%
|
|
|
0.0
|
%
|
Permanent items
|
|
|
0.27
|
%
|
|
|
0.0
|
%
|
Change in valuation allowance
|
|
|
(49.18
|
)%
|
|
|
0.0
|
%
|
State Franchise taxes
|
|
|
0.00
|
%
|
|
|
7.88
|
%
|
Income tax provision (benefit)
|
|
|
(27.89
|
)%
|
|
|
7.88
|
%
|
As of March 31, 2019, the Company has a
federal net operating loss carryforward of approximately $1,804,000, which expires in year 2038. Upon confirmation of an ownership
change, the net operating loss would be reduced and any remaining net operating loss utilization would be subject to an annual
limitation under Section 382 of the Internal Revenue Code.
A valuation allowance has been established
to offset the net deferred tax asset to the extent the Company has determined that it is more likely than not that the future tax
benefits will be realized.
The Company files a federal income tax
return and separate income tax returns in various states. For federal and certain states, the 2016 through 2018 tax years remain
open for examination by the tax authorities under the normal three-year statute of limitations.
11. SUBSEQUENT EVENT
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to
the date that the financial statements were issued. Except as follows,
the Company did not identify subsequent events that would have
required adjustment or disclosure in the financial statements other than the following. On April 22, 2019, the Company announced
that its sponsor, had agreed to contribute as a loan, $0.033 for each share of common stock issued in the initial public offering
that was not redeemed in connection with the stockholder vote to approve an amendment to the Company’s amended and restated
certificate of incorporation to extend the date by which it has to consummate a business combination for an additional three months,
from May 1, 2019 to August 1, 2019. On April 29, 2019, at the Special Meeting of the Company’s Stockholders, the stockholders
approved an amendment to its amended and restated certificate of incorporation to extend the date by which the Company has to
consummate a business combination for an additional three months, from May 1, 2019 to August 1, 2019. The amendment was approved
with 26,163,835 votes cast in favor of the amendment, 2,020,001 votes cast against the amendment and 422,075 abstentions. In connection
with the special meeting and the resulting amendment to our amended and restated certificate of incorporation, 3,831,985 shares
of our common stock were redeemed from funds available in the Trust Account, for a redemption amount of approximately $10.33 per
share.
On
May 31, 2019, the Company announced that the Company’s sponsor would reduce its contributions to the trust account established
in connection with the Company’s initial public offering (the “Trust Account”). The Company’s sponsor
will continue to pay the Trust Account $0.033 per Public Share that has not been redeemed per month, but the total monthly payment
will be no greater than $200,000. The Company is currently active in discussion with a target company regarding a potential business
combination that is anticipated to require an amount of funding less than the current balance of the Trust Account to consummate
the business combination. There can be no assurance that the Company will enter into a business combination agreement with the
target company or that this or an other potential business combination will be completed.
In
connection with the Extension, the Sponsor advanced $1,938,349 in additional contributions to the trust account for the period
from April 1, 2019 through June 2, 2019. These loans shall be payable without interest upon consummation of a Business Combination.
The Sponsor advanced the Company $150,000 on April 19, 2019
and $250,000 on May 19, 2019 for working capital purposes. These loans shall be payable without interest upon consummation of
a Business Combination.