Attached files
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| 8-K - JetPay Corp | v223426_8k.htm |
| EX-99.2 - JetPay Corp | v223426_ex99-2.htm |
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Exhibit No.
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Description
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99.1
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Audited Balance Sheet.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of Universal Business Payment Solutions Acquisition Corporation
We have audited the accompanying balance sheet of Universal Business Payment Solutions Acquisition Corporation (a company in the development stage) (the “Company”) as of May 13, 2011. The balance sheet is the responsibility of the Company’s management. Our responsibility is to express an opinion on the balance sheet based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Universal Business Payment Solutions Acquisition Corporation (a company in the development stage), as of May 13, 2011, in conformity with accounting principles generally accepted in the United States of America.
/s/ Marcum llp
New York, NY
May 19, 2011
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Universal Business Payment Solutions Acquisition Corp (a compamy in the development stage)
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Balance Sheet
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May 13, 2011
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Assets
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Current assets - Cash and cash equivalents
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$ | 348,851 | ||
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Cash and cash equivalents held in Trust
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72,720,000 | |||
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Total assets
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$ | 73,068,851 | ||
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Liabilities and Stockholders’ Equity
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Current Liabilities
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Accounts payable and accrued expenses
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$ | 62,537 | ||
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Note payable to stockholder
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125,000 | |||
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Total current liabilities
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187,537 | |||
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Common Stock, subject to possible redemption, 11,171,999 shares at redemption value
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67,702,314 | |||
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Commitments and Contingencies
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Stockholders’ Equity
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Preferred stock, $0.001 par value
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Authorized 1,000,000 shares, none issued
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Common Stock, $0.001 par value
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Authorized 100,000,000 shares; issued and outstanding 4,278,001 (which excludes 11,171,999 shares subject to possible redemption)
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4,278 | |||
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Additional paid-in capital
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5,176,259 | |||
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Deficit accumulated during the development stage
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(1,537 | ) | ||
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Total Stockholders’ Equity
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5,179,000 | |||
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Total Liabilities and Stockholders’ Equity
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$ | 73,068,851 | ||
(1) Includes an aggregate of 450,000 shares subject to forfeiture by the initial shareholders to the extent that the underwriter's over-allottment option is not exercised in full and 750,000 shares (or 862,500 shares if the underwriters over-allotment option is exercised in full) subject to forfeiture in the event the company does not satisfy the conditions required to redeem any outstanding warrants.
The accompanying notes are an integral part of this Balance Sheet.
Universal Business Payment Solutions Acquisition Corporation
(A Company In the Development Stage)
NOTES TO FINANCIAL STATEMENTS
Note 1 —Organization and Plan of Business Operations
Universal Business Payment Solutions Acquisition Corporation (the ‘‘Company’’) was incorporated in the State of Delaware on November 12, 2010 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more operating businesses, or control of such operating business, or businesses, through contractual arrangements.
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (‘‘US GAAP’’) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the ‘‘SEC’’).
At May 13, 2011, the Company had not yet commenced any operations. All activity through May 13, 2011 relates to the Company’s formation and the initial public offering described below. The Company has selected September 30 as its fiscal year-end.
The Company is considered to be a development stage company and as such, the financial statements are prepared in accordance with the Accounting Standards Codification (‘‘ASC’’) topic 915 ‘‘Development Stage Entities.’’ The Company is subject to all of the risks associated with development stage companies.
The registration statement for the Company’s initial public offering (“Offering”) was declared effective on May 9, 2011. The Company consummated the Offering on May 13, 2011 and received proceeds net of transaction costs of $69,414,664 which is discussed in Note 3 (‘‘Initial Public Offering’’) and $3,480,000 from the private placement to the initial stockholders of the Company and underwriters (‘‘Insider Warrants’’) which is described in Note 4 (“Insider Warrants”). The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and Insider Warrants, although substantially all of the net proceeds are intended to be generally applied toward consummating a business combination with an operating business (‘‘Business Combination’’). Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. An amount of $72,720,000 (including the $3,480,000 of proceeds from the sale of Insider Warrants) is being held in a trust account (‘‘Trust Account’’) and invested in United States treasuries having a maturity of 180 days or less until the earlier of (i) the consummation of its first Business Combination, (ii) the Company’s failure to consummate a Business Combination within the prescribed time and (iii) the Common Stock trades at or below $5.75 per share, subject to certain criteria discussed below. In the event that the Common Stock trades at or below $5.75 per share, there will be released from the Trust Account amounts necessary for the Company to purchase up to $1.9 million worth of shares each month up to an aggregate amount of 50% of the shares sold in the offering (6,000,000 shares, or 6,900,000 shares if the over-allotment option, described in Note 6, is exercised in full) at any time commencing July 10, 2011 and ending on date on which the Company announces the execution of a definitive agreement for a Business Combination. Purchases will be made only in open market transactions pursuant to a 10b5-1 plan entered into by the Company on May 9, 2011 which requires the Company to maintain a limit order for the shares at $5.75 per share during the purchase period until the maximum number of shares have been purchased. It is intended that purchases will comply with the technical requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended, although purchases may not actually be effected under Rule 10b-18 (the “Share Repurchase Plan”). All shares purchased by the Company will be cancelled. The placing of funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, prospective target businesses or other entities it engages, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account, there is no guarantee that they will execute such agreements. The Company’s Chief Executive Officer has agreed that he will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company. However, there can be no assurance that he will be able to satisfy those obligations should they arise. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to fund working capital requirements as well as for any amounts that are necessary to pay the Company’s tax obligations.
F-4
Universal Business Payment Solutions Acquisition Corporation
(A Company In the Development Stage)
NOTES TO FINANCIAL STATEMENTS
The Company, after signing a definitive agreement for the acquisition of a target business, is required to provide stockholders who acquired shares in the Offering (‘‘Public Stockholders’’) with the opportunity to redeem their Public Shares for a pro rata share of the Trust Account. In the event that stockholders owning 93.1% or more of the shares sold in the Offering exercise their redemption rights (the “Redemption Threshold”) described below or are sold to the Company for cancellation under the Share Repurchase Plan, or if a majority vote against the Business Combination, the Business Combination will not be consummated. The Restated Certificate of Incorporation of the Company provides that a Public Stockholder, together with any affiliate or other person with whom such Public Stockholder is acting in concert or as a ‘‘group’’ (within the meaning of Section 13 of the Securities Act of 1934, as amended), will be restricted from seeking redemption with respect to an aggregate of more than 10% of the shares sold in the Offering (but only with respect to the amount over 10% of the shares sold in the Offering). A ‘‘group’’ will be deemed to exist if Public Stockholders (i) file a Schedule 13D or 13G indicated the presence of a group or (ii) acknowledge to the Company that they are acting, or intend to act, as a group. All of the Company’s stockholders prior to the Offering, including all of the officers and directors of the Company (‘‘Initial Stockholders’’), have waived any redemption rights they may have in connection with the Business Combination.
With respect to a Business Combination which is consummated, any Public Stockholder can demand that the Company redeem his or her shares. Public Stockholders seeking redemption will have his or her shares redeemed for a pro rata share of the Trust Account (initially anticipated to be approximately $6.06 per share). Accordingly, Public Stockholders holding up to 11,171,999 (or 12,847,799 at a price initially anticipated to be $6.03 per share if the over-allotment option described in Note 6 is exercised in full) of the aggregate number of shares owned by all Public Stockholders may seek redemption of their shares in the event of a Business Combination. However, if the Company has repurchased up to 50% of the shares sold in the Offering, the Redemption Threshold will be reduced in direct proportion to the percentage of shares purchased by the Company. In addition, the Redemption Threshold may be further limited by the terms and conditions of a proposed initial Business Combination. In this event, the Company would disclose the number of shares it purchased and the revised Redemption Threshold in the materials distributed to its shareholders in connection with the vote to approve a Business Combination.
If the Company has not completed a Business Combination by November 9, 2012 or February 9, 2013 if a definitive agreement has been executed by November 9, 2012 and a Business Combination has not been consummated by February 9, 2013, the Company will liquidate and distribute its remaining assets, including the Trust Fund, to the Public Stockholders and its corporate existence will cease except for the purpose of winding up its affairs. In the event of a liquidation, the Public Stockholders will be entitled to receive a full pro rata interest in the Trust Account (initially anticipated to be approximately $6.06 per share (or $6.03 per share if the over-allotment option is exercised in full), plus any pro rata interest earned on the Trust Fund not previously released to the Company). The Company will pay the costs of liquidation from remaining assets outside of the Trust Account. If such funds are insufficient, the Company’s Chief Executive Officer has agreed to advance the funds necessary to complete the liquidation.
Note 2 —Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash balances that at times may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.
F-5
Universal Business Payment Solutions Acquisition Corporation
(A Company In the Development Stage)
NOTES TO FINANCIAL STATEMENTS
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (‘‘ASC 740’’). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on November 12, 2010, the evaluation was performed for upcoming 2010 tax year which will be the only period subject to examination. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material changes to its financial position.
The Company’s policy for recording interest and penalties associated with audits is to record such interest and penalties as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the period from November 12, 2010 (inception) through May 13, 2011. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets or liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date through the date the financial statements were publicly available. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as discussed in Note 5.
F-6
Universal Business Payment Solutions Acquisition Corporation
(A Company In the Development Stage)
NOTES TO FINANCIAL STATEMENTS
Note 3 —Initial Public Offering
On May 13, 2011 the Company sold 12,000,000 units (“Units”) at a price of $6.00 per unit in the Offering. Each unit consists of one share of the Company’s common stock, par value $0.001, and one warrant (‘‘Warrants’’). Each Warrant entitles the holder to purchase one share of the Company’s common stock at a price of $6.90 commencing on the later of our completion of a Business Combination and May 9, 2012 and expiring on the earlier of (1) five years from the date on which a business combination is completed, (2) the liquidation of the trust account if we have not completed a business combination within the required time periods or (3) earlier upon redemption. The Company may redeem the Warrants at a price of $0.01 per Warrant upon 30 days notice (‘‘30-Day Redemption Period’’) while the Warrants are exercisable, only in the event that the last sale price of the shares is at least $9.50 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which notice of redemption (‘‘Redemption Notice’’) is given, provided that a current registration statement is in effect (and a prospectus is available for use) with respect to the shares underlying such warrants at least five business days prior to the Redemption Notice and for the entire 30-Day Redemption Period (including the date of redemption). If the Company redeems the Warrants as described above, management will have the option to require any holder that wishes to exercise his Warrant to do so on a ‘‘cashless basis.’’ In such event, the holder would pay the exercise price by surrendering his Warrants for that number of shares equal to the quotient obtained by dividing (x) the product of the number of shares underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the ‘‘fair market value’’ (defined below) by (y) the fair market value. The ‘‘fair market value’’ shall mean the average reported last sale price of the shares for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to holders of Warrants. In accordance with the warrant agreement relating to the Warrants to be sold and issued in the Offering the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in the event that a registration is not effective at the time of exercise, the holder of such Warrant shall not be entitled to exercise such Warrant for cash and in no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to net cash settle the Warrant exercise. However, if the Company has not filed with the SEC a registration statement covering the shares issuable upon exercise of the Warrants and a prospectus relating to such shares by the 6-month anniversary of the consummation of the Initial Business Combination, commencing on that day, warrant holders may, until such time as there is an effective registration statement and during any period thereafter when the Company has failed to maintain an effective registration statement, exercise warrants on a cashless basis, provided that such cashless exercise is exempt from the registration requirements of the Securities Act. The Company does not believe that such an exemption is currently available.
The Company paid the underwriters in the Offering an underwriting discount of 3.0% ($2,160,000) of the gross proceeds of the Offering. The Company also issued a unit purchase option, for $100, to EarlyBirdCapital, Inc. (‘‘EBC’’) or its designees to purchase 600,000 units at an exercise price of $6.60 per unit. The units issuable upon exercise of this option are identical to the units sold in the Offering, with the exception of containing a provision for cashless exercise by EBC. The Company has accounted for the fair value of 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 estimates that the fair value of this unit purchase option is approximately $1,053,551 ($1.76 per unit) using a Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriter is estimated as of the date of grant using the following assumptions: (1) expected volatility of 35.0%, (2) risk-free interest rate of 2.07% and (3) expected life of 5 years. The unit purchase option may be exercised for cash or on a ‘‘cashless’’ basis, at the holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described above), such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the Units and underlying shares) to exercise the unit purchase option without the payment of any cash. The Company will have no obligation to net cash settle the exercise of the unit purchase option or the Warrants underlying the unit purchase option. The holder of the unit purchase option will not be entitled to exercise the unit purchase option or the Warrants underlying the unit purchase option unless a registration statement covering the securities underlying the unit purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the unit purchase option or underlying Warrants, the unit purchase option or Warrants, as applicable, will expire worthless.
F-7
Universal Business Payment Solutions Acquisition Corporation
(A Company In the Development Stage)
NOTES TO FINANCIAL STATEMENTS
Note 4 – Insider Warrants
Simultaneously with the Offering, certain of the Initial Stockholders of the Company and underwriters purchased 6,960,000 Insider Warrants at $0.50 per warrant (for an aggregate purchase price of $3,480,000) from the Company. All of the proceeds received from these purchases will be placed in the Trust. The Insider Warrants are identical to the warrants underlying the Units sold in the Offering except that: (i) the Insider Warrants were purchased pursuant to an exemption from the registration requirements of the Securities Act, (ii) the Insider Warrants are non-redeemable and (iii) the Insider Warrants are exercisable for cash or on a ‘‘cashless’’ basis, in each case, if held by the initial holders or permitted transferees. The transfer restriction does not apply to transfers made pursuant to registration or an exemption that is occasioned by operation of law or for estate planning purposes, while remaining in escrow.
The Initial Stockholders and the holders of the Insider Warrants (or underlying shares) are entitled to registration rights with respect to their founding shares and Insider Warrants (or underlying shares) pursuant to agreements signed May 13, 2011. The holders of the majority of the founding shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Insider Warrants (or underlying shares) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition, the Initial Stockholders and holders of the Insider Warrants (or underlying shares) have certain ‘‘piggy-back’’ registration rights on registration statements filed after the Company’s consummation of a Business Combination.
Note 5 —Notes Payable to Stockholders
The Company issued a, $125,000 principal amount unsecured promissory note to UBPS Services, LLC, an entity controlled by one of the Initial Stockholders on December 6, 2010. The note is non-interest bearing and is payable on the earlier of December 6, 2011 or the consummation of the Offering. The Company repaid this Note in full on May 19, 2011.
Note 6 —Commitments
The Company granted the underwriter a 45 day option to purchase up to an additional 1,800,000 Units to cover over-allotments if any.
The Company presently occupies office space provided by an affiliate of the Company’s Chairman and Chief Executive Officer. Such affiliates have agreed that, until the Company consummates a Business Combination, they will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time. The Company has agreed to pay such affiliates an aggregate of $7,500 per month for such services commencing on May 9, 2011.
Pursuant to letter agreements executed May 13, 2011 with the Company and the underwriter, the Initial Stockholders have waived their right to receive distributions with respect to their founding shares upon the Company’s liquidation.
F-8
Universal Business Payment Solutions Acquisition Corporation
(A Company In the Development Stage)
NOTES TO FINANCIAL STATEMENTS
The Company has engaged EBC on a non-exclusive basis, to act as its advisor and investment banker in connection with its initial Business Combination and to provide it with assistance in negotiating and structuring the terms of its initial Business Combination. The Company will pay EBC a cash fee of $2,070,000 for such services upon the consummation of its initial Business Combination.
Note 7 —Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors.
As of May 13, 2011, there are 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.
In connection with the organization of the Company, on December 6, 2010, a total of 3,450,000 shares of the Company’s shares of common stock were sold to the Initial Stockholders at a price of $0.00725 per share for an aggregate of $25,000 (the “Founder’s Shares”).
As of May 13, 2011, 15,450,000 shares of common stock were issued and outstanding, of which 450,000 shares are subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full so that the Company’s Initial Stockholders will own 20% of the issued and outstanding shares after the Offering. In addition, 750,000 of the such shares (or 862,500 shares if the underwriters’ over-allotment option is exercised in full) are subject to forfeiture in the event that the Company does not satisfy the conditions required to redeem any outstanding Warrants as described in Note 3.
F-9