Attached files
As
filed with the U.S. Securities and Exchange Commission on
November 14, 2017.
Registration No. 333-220947
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BIG ROCK PARTNERS ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware
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6770
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82-2844431
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(State or other jurisdiction ofincorporation or
organization)
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(Primary Standard Industrial Classification Code
Number)
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(I.R.S. EmployerIdentification Number)
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2645 N. Federal Highway
Suite 230
Delray Beach, Florida 33483
(310) 734-2300
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive
offices)
Richard Ackerman
Chairman, President and Chief Executive Officer
Big Rock Partners Acquisition Corp.
c/o Big Rock Partners Sponsor, LLC
2645 N. Federal Highway
Suite 230
Delray Beach, Florida 33483
(310) 734-2300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Michael Francis, Esq.
Christina C. Russo, Esq.
Akerman LLP
Three Brickell City Centre
98 Southeast Seventh Street
Suite 1100
Miami, Florida 33131
(305) 374-5600
(305) 374-5095 — Facsimile
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David Alan Miller, Esq.
Jeffrey M. Gallant, Esq.
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 818-8800
(212) 818-8881 — Facsimile
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date
of this registration statement.
If any
of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following
box. ☐
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
(Do not check if a smaller reporting company)
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Smaller
reporting company
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☒
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Emerging
growth company
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☒
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities
Act. ☐
CALCULATION OF REGISTRATION FEE
Title
of each Class of
Security
being registered
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Amount
being
Registered
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Proposed
Maximum
Offering
Price
Per
Security(1)
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Proposed
Maximum
Aggregate
Offering
Price(1)
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Amount
of
Registration
Fee
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Units, each
consisting of one share of common stock, $0.001 par value, one
right entitling the holder to receive one-tenth (1/10) of one
share of common stock, and one-half of one
warrant
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|
5,750,000
Units(2)
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$10.00
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$57,500,000
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$7,159
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Shares of common
stock included as part of the units(3)
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5,750,000
Shares(4)
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-
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-
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(7)
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Rights included as part of the
units
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5,750,000
Rights
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-
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-
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(7)
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Warrants included
as part of the units
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2,875,000
Warrants(5)
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-
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-
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(7)
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Shares of
common stock underlying the rights included as part of the
Units
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575,000
Shares
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-
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-
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(7)
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Representative’s
shares of common stock(3)
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115,000
Shares(6)
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$10.00
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$1,150,000
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$144
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Units underlying
Representative's Unit Purchase Option (“Representative's
Units")
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500,000
Units
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$10.00
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$5,000,000
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$623
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Shares of common
stock included as part of the Representative's Units
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500,000
Shares
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-
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-
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(7)
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Rights
included as part of the Representative's Units
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500,000
Rights
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-
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-
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(7)
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Warrants included as part of the
Representative's Units
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250,000
Warrants
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-
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-
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(7)
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Shares of common stock underlying Rights
included as part of the Representative's Units
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50,000
Shares
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-
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-
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(7)
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Total
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$63,650,000
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$ 7,926(8)
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(1)
Estimated solely for the purpose of calculating
the registration fee.
(2)
Includes 750,000 units, consisting of 750,000
shares of common stock, 750,000 rights and
375,000 warrants underlying such units, which
may be issued upon exercise of a 45-day option granted to the
underwriters to cover over-allotments, if any.
(3)
Pursuant to Rule 416 under the Securities Act,
there are also being registered an indeterminable number of
additional securities as may be issued to prevent dilution
resulting from stock splits, stock dividends or similar
transactions.
(4)
Includes 750,000 shares of common stock which may
be issued upon exercise of a 45-day option granted to the
underwriters to cover over-allotments, if any.
(5)
Includes 375,000 warrants which may
be issued upon exercise of a 45-day option granted to the
underwriters to cover over-allotments, if any.
(6)
Includes 15,000 shares of common stock which may
be issued to the Representative on exercise of a 45-day option
granted to the underwriters to cover over-allotments, if
any.
(7)
Pursuant to Rule 457(g) under the Securities Act,
no additional fee.
(8)
Previously paid.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
The information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 14,
2017
PRELIMINARY PROSPECTUS
$50,000,000
Big
Rock Partners Acquisition Corp.
5,000,000
Units
Big
Rock Partners Acquisition Corp. is a blank check company formed 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 as a “target business.” Our
efforts to identify a prospective target business will not be
limited to a particular industry or geographic region, although we
intend to initially focus our search on identifying a prospective
target business in the senior housing and care industry in the
United States. We do not have any specific business combination
under consideration and we have not (nor has anyone on our behalf),
directly or indirectly, contacted any prospective target business
or had any substantive discussions, formal or otherwise, with
respect to such a transaction. If we are unable to consummate an
initial business combination within 12 months from the
closing of this offering (or up to 18 months from the closing
of this offering if we extend the period of time to consummate a
business combination by the full amount of time, as described in
more detail in this prospectus), we will, as promptly as
reasonably possible but not more than ten business days thereafter,
redeem 100% of the outstanding shares of common stock that were
sold as part of the units in this offering, which we refer to
collectively as our 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.
This is an initial public offering of our securities. Each unit
that we are offering has a price of $10.00 and consists of one
share of common stock, one right and one-half of
one warrant. Each right entitles the holder thereof to
receive one-tenth (1/10) of one share of common stock upon the
consummation of an initial business combination, as described in
more detail in this prospectus. Each whole
warrant entitles the holder to purchase one share of common stock
at a price of $11.50. Each whole warrant will become
exercisable on the later of the completion of an initial business
combination and 12 months from the closing of this offering and
will expire on the fifth anniversary of our completion of an
initial business combination, or earlier upon redemption or
liquidation. We have granted to EarlyBirdCapital, Inc., the
representative of the underwriters, a 45-day option to purchase up
to an additional 750,000 units to cover over-allotments, if
any.
Big
Rock Partners Sponsor, LLC, which we refer to throughout this
prospectus as our “sponsor” has committed to purchase
from us an aggregate of 225,000 units, or “private placement
units,” at $10.00 per unit (for a total purchase price of
$2,250,000). These purchases shall take place on a private
placement basis that will occur simultaneously with the
consummation of this offering. Our sponsor has also agreed that if
the over-allotment option is exercised by the underwriters in full
or in part, it will purchase from us up to an additional 18,750
private placement units at a price of $10.00 per unit in an amount
necessary to maintain in the trust account at $10.00 per unit sold
to the public in this offering. These additional private placement
units will be purchased in a private placement that will occur
simultaneously with the purchase of units resulting from the
exercise of the over-allotment option. The private placement units
are identical to the units being sold in this offering, subject to
certain limited exceptions as described in this prospectus. The
proceeds from the sale of the private placement units will be added
to the proceeds of this offering and placed in an account in the
United States maintained by Continental Stock Transfer & Trust
Company, as trustee.
We have
agreed to issue to EarlyBirdCapital (and/or its designees) 100,000
shares of common stock (or 115,000 shares of common stock if the
underwriters’ over-allotment option is exercised in full) and
an option to purchase up to 500,000 units exercisable at $10.00 per
unit (or an aggregate exercise price of $5,000,000) upon the
consummation of this offering. The shares and option and underlying
securities are deemed to be underwriters’ compensation by
FINRA pursuant to Rule 5110 of the FINRA Manual. Please see the
section titled “Underwriting” for further information
relating to these securities.
There
is presently no public market for our units, shares of common
stock, rights or warrants. We have
applied to have our units listed on the Nasdaq Capital Market, or
Nasdaq, under the symbol “BRPAU” on or promptly after
the date of this prospectus. The common stock,
rights and warrants comprising the units will begin
separate trading on the 90th day following the date of this
prospectus unless EarlyBirdCapital informs us of its decision to
allow earlier separate trading, subject to our filing a Current
Report on Form 8-K with the Securities and Exchange Commission
containing an audited balance sheet reflecting our receipt of the
gross proceeds of this offering and the sale of the private
placement units and issuing a press release announcing when such
separate trading will begin. Once the securities comprising the
units begin separate trading, the common stock,
rights and warrants will be traded on Nasdaq under the
symbols “BRPA,” "BRPAR" and
“BRPAW.”
We are
an “emerging growth company” as defined in the
Jumpstart Our Business Startups Act and will therefore be subject
to reduced public company reporting requirements.
Investing in our securities involves a high degree of risk. See
“Risk Factors” beginning on page 14 of this prospectus for a discussion of
information that should be considered in connection with an
investment in our securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
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Per Unit
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Total
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Public Offering
Price
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$10.00
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$50,000,000
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Underwriting
Discount(1)
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$0.25
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$1,250,000
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Proceeds to Big
Rock Partners Acquisition Corp. (before expenses)
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$9.75
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$48,750,000
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__________
(1)
The underwriters will receive compensation in addition to the
underwriting discount, including as described above. Please see the
section titled “Underwriting” for further information
relating to the underwriting arrangements agreed to between us and
the underwriters in this offering.
Upon
consummation of the offering, $10.00 per unit sold to the public in
this offering (regardless of whether the over-allotment option is
exercised in full or part) will be deposited into a U.S.-based
trust account at [●], maintained by Continental Stock
Transfer & Trust Company, acting as trustee. Except as
described in this prospectus, these funds will not be released to
us until the earlier of the completion of a business combination
and our redemption of our public shares (which may not occur until
, 2019).
The
underwriters are offering the units on a firm commitment basis. The
underwriters expect to deliver the units to purchasers on or about
, 2017.
Sole Book-Running
Manager
EarlyBirdCapital,
Inc.
I-Bankers Securities,
Inc.
, 2017
BIG ROCK PARTNERS ACQUISITION CORP.
TABLE OF CONTENTS
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Page
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Prospectus Summary
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1
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Summary Financial Data
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13
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Risk Factors
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14
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Cautionary Note Regarding Forward-Looking Statements
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29
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Use of Proceeds
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30
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Dividend Policy
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33
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Dilution
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34
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Capitalization
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36
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Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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37
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Proposed Business
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41
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Management
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56
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Principal Stockholders
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62
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Certain Transactions
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64
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Description Of Securities
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66
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Shares Eligible for Future Sale
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72
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Certain Material U.S. Federal Income Tax
Considerations
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74
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Underwriting
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81
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Legal Matters
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89
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Experts
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89
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Where You Can Find Additional Information
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89
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Index to Financial Statements
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F-1
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Unless otherwise
indicated, information contained in this prospectus concerning the
senior housing and care industry is based on information from the
NIC Investment Guide, Investing in Seniors Housing & Care
Properties, Fourth Edition.
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not, authorized
anyone to provide you with different information. We are not, and
the underwriters are not, making an offer of these securities in
any jurisdiction where the offer is not permitted.
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PROSPECTUS SUMMARY
This summary only highlights the more detailed information
appearing elsewhere in this prospectus. As this is a summary, it
does not contain all of the information that you should consider in
making an investment decision. You should read this entire
prospectus carefully, including the information under “Risk
Factors” and our financial statements and the related notes
included elsewhere in this prospectus, before investing. References
in this prospectus to “we,” “us” or
“our company” refer to Big Rock Partners Acquisition
Corp. References in this prospectus to our “public
shares” are to shares of our common stock sold as part of the
units in this offering (whether they are purchased in this offering
or thereafter in the open market) and references to “public
stockholders” refer to the holders of our public shares,
including our sponsor (as defined below), officers and directors to
the extent they purchase public shares, provided that their status
as “public stockholders” shall only exist with respect
to such public shares. References in this prospectus to our
“management” or our “management team” refer
to our officers, directors and director nominees and references to
our “sponsor” or our “initial stockholder”
refer to Big Rock Partners Sponsor, LLC, a company affiliated with
our Chairman, President and Chief Executive Officer. References in
this prospectus to our “founder’s shares” refer
to our shares of common stock initially purchased by our sponsor in
a private sale prior to this offering. References in this
prospectus to our “private placement units” refer to
the units we are selling in a private placement simultaneously with
the closing of this offering. Unless we tell you otherwise, the
information in this prospectus assumes that the underwriters will
not exercise their over-allotment option.
General
We are
a blank check company formed pursuant to the laws of the State of
Delaware on September 18, 2017 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. While our
efforts in identifying a prospective target business for our
initial business combination will not be limited to a particular
industry or geographic region, we intend to initially focus our
search on identifying a prospective target business in the senior
housing and care industry in the United States, as described below.
We do not have any specific business combination under
consideration and we have not had any substantive discussions,
formal or otherwise, with respect to such a
transaction.
Business Strategy
The
senior housing and care industry provides both housing and an array
of services to seniors, generally to those over the age of 75. Care
segments are commonly divided into four categories:
●
Independent
Living;
●
Assisted
Living;
●
Memory Care;
and
●
Nursing
Care.
In the
U.S., there currently are approximately 23,400 investment grade
senior housing and care properties containing 3 million units. The
total value of the investment grade senior housing and care
property market is estimated at $372 billion. The average age of
residents in senior housing is approximately in the mid-80s, while
the average move-in age is in the low to mid-80s. The sizes of the
80+ and 85+ populations are expected to increase at a rate of
approximately 1.5%-2% annually during the remainder of the decade.
The latter part of the 2020s is expected to see the beginning of
significant acceleration in this population, with the 80+
population growth rate averaging roughly 4.5% from 2025 through
2029. As such, we believe there are significant opportunities to
acquire senior housing property management companies that are
positioned for growth. These operating companies may have leasehold
and/or fee ownership of senior housing communities.
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 Chairman,
President and Chief Executive Officer, Richard Ackerman, has over
35 years of real estate experience with 18 years in senior housing.
Prior to starting Big Rock Partners (“BRP”), an
opportunistic real estate investment firm founded in 2004 that has
invested in and managed over $800 million in assets since its
formation, Mr. Ackerman was Head of the Los Angeles office for
Apollo Real Estate Advisors (“Apollo”), a global
private equity firm. Our Chief Financial Officer, Lori Wittman,
also has over 35 years of real estate experience and was most
recently the Chief Financial Officer of Care Capital Properties
(“CCP”), a public healthcare real estate investment
trust with a diversified portfolio of triple-net leased properties
focused on the post-acute sector, which merged with Sabra
Healthcare REIT, Inc. Prior to CCP, Ms. Wittman was Senior Vice
President of Capital Markets and Investor Relations at Ventas, Inc.
(“Ventas”), a leading real estate investment trust with
a diverse portfolio of more than 1,600 assets in the United States,
Canada and the United Kingdom consisting of seniors housing
communities, medical office buildings, skilled nursing facilities,
hospitals and other properties. Our Chief Investment Officer and
Corporate Secretary, Bennett Kim, has over 20 years of real estate
experience and worked with Mr. Ackerman at Apollo. Through BRP,
Messrs. Ackerman and Kim are currently developing $200 million of
senior housing in Florida, which consists of independent living,
assisted living and memory care. Also, our independent director
nominees, Richard Birdoff, Michael Fong, Stuart
Koenig, Albert G. Rex and Troy T. Taylor, have significant
experience in private investments, ownership and management of
businesses of many types, large and small.
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1
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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 senior
housing and care industry in the United States; however, we may
decide to enter into an initial business combination with a target
business that is not connected to the senior housing and care
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 senior housing and care industry. We believe
this expertise and network of contacts will allow us to generate a
number of acquisition opportunities. We believe there are a number
of high quality senior housing 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 engagements, provide unique insight when identifying
potential business combination opportunities and creating value. We
believe their experience and deep understanding of various markets
in the senior housing and care industry positions us
to obtain access to potential targets in such
markets, frequently in a non-competitive manner
and prior to other parties.
Acquisition Criteria
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:
●
have strong
competitive positions, proven business models, consistent
historical financial performance and attractive growth
prospects;
●
have limited
access to capital markets due to external factors;
●
could benefit from
the substantial expertise, experience and network of our sponsor
and management team, who could assist with, for example, growth
strategy, operations, and the evaluation and integration of
acquisitions;
●
are well
positioned to participate in sector consolidation and would benefit
from a public acquisition currency;
●
would avoid the
potentially onerous terms, such as liquidation preferences, that
are often characteristic of late state private growth financing
rounds; and
●
offer attractive
risk-adjusted returns.
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 a 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. 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.
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2
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We
will have until 12 months from the closing of this
offering to consummate an initial business combination.
However, if we anticipate that we may not be able to consummate our
initial business combination within 12 months, we may extend the
period of time to consummate a business combination up to two
times, each by an additional three months (for a total of up to 18
months to complete a business combination). Pursuant to the terms
of our amended and restated certificate of incorporation and the
trust agreement to be entered into between us and Continental Stock
Transfer & Trust Company on the date of this prospectus, in
order to extend the time available for us to consummate our initial
business combination, our sponsor or its affiliates or designees,
upon five days advance notice prior to the applicable deadline,
must deposit into the trust account $500,000, or up to $575,000 if
the underwriters’ over-allotment option is exercised in full
($0.10 per share in either case) on or prior to the date of the
applicable deadline, for each three month extension (or up to an
aggregate of $1,000,000 (or up to $1,150,000 if the
underwriters’ over-allotment option is exercised in full), or
$0.20 per share, if we extend for the full six months). In the
event that we receive notice from our sponsor five days prior to
the applicable deadline of their intent to effect an extension, we
intend to issue a press release announcing such intention at least
three days prior to the applicable deadline. In addition, we intend
to issue a press release the day after the applicable deadline
announcing whether or not the funds had been timely deposited. Our
sponsor and its affiliates or designees are not obligated to fund
the trust account to extend the time for us to complete our 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 (regardless of
whether or not the underwriters exercise their over-allotment
option), 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
of 1940, as amended, or 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.
Our Acquisition Process
In
evaluating a prospective target business, we expect to conduct a
thorough due diligence review that will encompass, among other
things, meetings with incumbent management and employees, document
reviews, inspection of facilities, as well as a review of financial
and other information that will be made available to us. We also
expect to utilize our management team’s operational and
capital planning experience.
We are
not prohibited from pursuing an initial business combination with a
company that is affiliated with our sponsor, officers or directors.
In the event we seek to complete our initial business combination
with a company that is affiliated with our sponsor, officers or
directors, we, or a committee of independent directors, 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, that our initial
business combination is fair to our company from a financial point
of view.
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3
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Our Management Team
Richard Ackerman, our Chairman,
President and Chief Executive Officer, formed BRP in 2004. BRP is
an opportunistic real estate investment firm that has invested in
and managed over $800 million in assets since its formation. In
2012, BRP began to focus on senior housing development as there was
a distinct supply – demand imbalance and fragmentation in
senior housing developers, and formed Big Rock Senior Housing, a
national leader in developing and managing new Class A senior
housing communities of $50 million and more. Mr. Ackerman serves as
the Senior Managing Principal of BRP and Big Rock Senior Housing.
Prior to BRP, Mr. Ackerman served as the Head of the Los
Angeles office of Apollo, overseeing all investments on the U.S.
West Coast and Japan for the global private equity firm, and in
August 1999, he was appointed by Apollo as the Chief Executive
Officer of Atlantic Gulf Communities Corporation (an Apollo
portfolio company). Mr. Ackerman was responsible for turning around
one of Apollo’s largest investments, Summerville Senior
Living. Summerville was then one of the largest private
assisted living operators in the nation. Prior to Apollo,
Mr. Ackerman served as President and co-founder of Crocker
Realty Trust, a private REIT, and Crocker Realty Investors, a
publicly traded REIT.
Lori B. Wittman, our Chief Financial
Officer and a director, most recently served as the Executive Vice
President and Chief Financial Officer of CCP, a public healthcare
real estate investment trust with a diversified portfolio of
triple-net leased properties focused on the post-acute sector. Ms.
Wittman previously served as Senior Vice President, Capital Markets
and Investor Relations of Ventas, a leading real estate investment
trust with a diverse portfolio of more than 1,600 assets in the
United States, Canada and the United Kingdom consisting of seniors
housing communities, medical office buildings, skilled nursing
facilities, hospitals and other properties. She was also formerly
the Chief Financial Officer and Managing Principal of BRP and held
various capital markets and finance positions with General Growth
Properties, Inc., Heitman, Homart Development Company, Citibank and
Mellon Bank.
Bennett Kim, our Chief Investment
Officer and Corporate Secretary, has served as the Managing
Principal of Big Rock Senior Housing since January 2016. Mr.
Kim was also the Chief Investment Officer at BRP from May 2006 to
July 2014 and was responsible for acquisitions, development, asset
management, and dispositions. Mr. Kim previously served
as the Head of Acquisitions for Carefree Communities, the fifth
largest national owner and operator of manufactured housing
communities and RV parks with 103 communities and 28,000 sites. He
also previously served as a Vice President at Apollo and was
responsible for new investments and investment management including
the development of a $400 million mixed-use project that consists
of two hotels, two condominium towers, retail, office and
structured parking. Mr. Kim also formulated work-out strategies for
one of the largest assisted living companies in the nation while at
Apollo. Mr. Kim was also an Assistant Vice President at Oaktree
Capital Management, where he evaluated and executed investments in
the U.S. and Japan for funds then totaling $1.7 billion of
equity.
Richard
J. Birdoff, who will serve as
one of our directors upon consummation of this
offering, has served as
President of RD Management and Realty Investors Development Corp.
(“RD Management”), a privately held retail real estate
developer and manager, since January 2015. Mr. Birdoff is
responsible for all aspects of the day-to-day operations of the
company including development, construction, acquisitions, sales
and dispositions. Mr. Birdoff joined RD Management in 1991 as a
principal and Executive Vice President and since 1994, he has
developed in excess of 10,000,000 sq. ft. of shopping centers. Mr.
Birdoff previously served on the Board of Directors of Crocker
Realty Investors, a Florida based publicly held real estate
investment trust.
Michael Fong, who will serve as one of
our directors upon consummation of this offering, serves as the
Chairman and Chief Executive Officer of JF International Ltd., a
private equity firm he founded since 2003. JF International invests
and manages a diversified portfolio of worldwide investments in
real estate and operating companies. In 2015, JF International
joined with BRP to invest in the luxury senior housing sector. Mr.
Fong was previously the Managing Director of The ALJ Group, which
is based in Jeddah, Kingdom of Saudi Arabia and is one of the
largest privately held business enterprises in the Middle East. Mr.
Fong also previously served as the President of Jaymont Properties,
Inc., a real estate development and management company with a
substantial portfolio of premier office and mixed used properties
located in the central business district of major cities such as
New York, Boston, San Francisco, Orlando, Chicago, and Miami. Mr.
Fong also previously served in management positions with Intercap
Investments, Inc., Interfin Investments, Inc., DuPont Walston, Inc.
and EDS.
Stuart F. Koenig who will serve as
one of our directors upon consummation of this offering, has over
forty years of diversified experience in the real estate,
investment banking and financial services industries. Mr. Koenig
most recently served as a Senior Partner in the real estate
division of Ares Management, LP, a global alternative asset manager
with over $100 billion of assets under management, from 2013 to
2016. Mr. Koenig served as Chair of the Investment Committees of
the real estate funds of Ares, which collectively had $8 billion
under management. From 1995 to 2013, Mr. Koenig served as the
Global Chief Financial Officer, Chief Administrative Officer and
Senior Partner of AREA Property Partners, a global real estate
investment and asset management firm that raised and invested
approximately $14 billion of client equity in more than 600
transactions across all sectors of real estate. Mr. Koenig helped
negotiate and execute the sale of AREA to Ares Management in 2013.
Prior to AREA, Mr. Koenig worked in various positions in investment
banking including Goldman Sachs & Co. (1986-1994) and EF Hutton
Inc. (1981-1986).
Albert G. Rex, who will serve as one of
our directors upon consummation of this offering, has served as the
Managing Director of Walker & Dunlop, a commercial real estate
finance company, since May 2012. In this role, Mr. Rex has been
involved in over 1500 loans totaling more than $15 billion in
transactions. Mr. Rex has over 40 years of experience in the
financing and equity aspects of commercial real estate development
throughout the U.S. with a focus on the Southeast region. Mr. Rex
spent the majority of his career as a Managing Partner with Carey
Kramer, a company he helped found in 1983 and ultimately owned
solely from 2001 until it merged with Collateral Real Estate
Capital in 2005. Collateral later merged with Laureate Capital, LLC
in 2007, to form Grandbridge Real Estate Capital, LLC, a
wholly-owned subsidiary of BB&T.
Troy T. Taylor, who will serve as one
of our directors upon consummation of this offering, has served as
President of Algon Group, an advisory firm he founded, since 2002.
Algon Group is a specialized financial firm providing sophisticated
financial advisory services to stakeholders with complex,
challenging, and financially distressed situations. Mr. Taylor has
25 years of experience including investment banking, restructuring
(both in Chapter 11 and out of court) and senior management. Mr.
Taylor has served as the Chief Restructuring Officer, Chief
Executive Officer or Lead Financial Advisor in a broad range of
industries including manufacturing, distribution, hospitality, real
estate and retail. He has also served as a member of the Board of
Directors of several public and private companies, including
Keystone Consolidated Industries, Inc., Barjan, Inc., and
1-800-AutoTow, Inc. He currently serves as Vice Chairman of
Hyperion Bank located in Philadelphia. Before 2002, Mr. Taylor
served in various capacities with GMA Partners, Inc., KPMG Peat
Marwick, LLP, Morgan Keegan & Company, Inc., Oppenheimer &
Co., Inc. and Thomson McKinnon Securities, Inc.
For
more information regarding our management team’s experience,
please see “Management” beginning on page
56.
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4
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Members of our
management team will indirectly own shares of our common stock, or
other instruments, such as warrants, linked to our common stock,
following this offering and, accordingly, may have a conflict of
interest in determining whether a particular target business is an
appropriate business with which to effectuate our initial business
combination. Further, each of our officers and directors may have a
conflict of interest with respect to evaluating a particular
business combination if the retention or resignation of any such
officers and directors was included by a target business as a
condition to any agreement with respect to our initial business
combination.
As
more fully discussed in “Management — Conflicts of
Interest,” if any of our officers or directors becomes aware
of an initial business combination opportunity that falls within
the line of business of any entity to which he or she has
pre-existing fiduciary or contractual obligations, he or she may be
required to present such initial business combination opportunity
to such entity prior to presenting such initial business
combination opportunity to us. Certain of our officers and
directors currently have certain relevant fiduciary duties or
contractual obligations. We do not believe, however, that any
fiduciary duties or contractual obligations of our executive
officers would materially undermine our ability to complete our
initial business combination. Our officers and directors have
agreed to present to us all target business opportunities that have
a fair market value of at least 80% of the assets held in the trust
account (excluding taxes payable on the income accrued in the trust
account) at the time of the agreement to enter into the initial
business combination, subject to any pre-existing fiduciary or
contractual obligations.
Our
sponsor, executive officers, directors and director nominees have
agreed not to participate in the formation of, or become an officer
or director of, any other blank check company until we have entered
into a definitive agreement regarding our initial business
combination or we have failed to complete our initial business
combination within the required timeframe.
JOBS Act
We are
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”). As
such, we are eligible to 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 of 2002 (the “Sarbanes-Oxley Act”),
reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, and exemptions from the
requirements of holding a non-binding advisory vote on executive
compensation and stockholder approval of any golden parachute
payments not previously approved. If some investors find our
securities less attractive as a result, there may be a less active
trading market for our securities and the prices of our securities
may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an
“emerging growth company” can take advantage of the
extended transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting
standards. In other words, an “emerging growth company”
can delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. We have
elected to take advantage of the benefits of this extended
transition period.
Private Placements
In
September 2017, our sponsor purchased 1,437,500 shares of our
common stock for an aggregate purchase price of $25,000, or
approximately $0.017 per share. We refer to the 1,437,500 shares
purchased prior to this offering by our initial stockholder
throughout this prospectus as the “founder’s
shares.” The founder’s shares include an aggregate of
up to 187,500 shares subject to forfeiture to the extent that the
underwriters’ over-allotment option is not exercised in full
or in part, so that our initial stockholder will continue to own
20% of our issued and outstanding shares after this offering
(assuming such stockholder does not purchase units in this
offering).
In
addition, our sponsor has committed to purchase an aggregate of
225,000 private placement units at a price of $10.00 per unit
($2,250,000 in the aggregate) in a private placement that will
occur simultaneously with the closing of this offering. Our sponsor
has also agreed that if the over-allotment option is exercised by
the underwriters in full or in part, it will purchase from us at a
price of $10.00 per unit up to an additional 18,750 private
placement units in an amount necessary to maintain in the trust
account at $10.00 per unit sold to the public in this offering.
These additional private placement units will be purchased in a
private placement that will occur simultaneously with the purchase
of units resulting from the exercise of the over-allotment option.
The private placement units are identical to the units being sold
in this offering, except that the warrants contained in the private
placement units: (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 our sponsor or any of its
permitted transferees. The proceeds from the sale of the private
placement units will be added to the proceeds of this offering and
placed in a U.S.-based trust account at with Continental Stock
Transfer & Trust Company, as trustee. If we do not complete an
initial business combination within 12 months from the
closing of this offering (or up to 18 months from the closing
of this offering if we extend the period of time to consummate a
business combination by the full amount of time as described
herein), the proceeds from the sale of the private placement
units will be included in the liquidating distribution to our
public stockholders and the private placement
units (including the common stock, warrants and rights unerlying
such units) will be worthless. The foregoing purchases will
only be made by the purchasers if they are able to do so in
accordance with Regulation M and Sections 9(a)(2) and 10(b) and
Rule 10b-5 of the Exchange Act.
We
have also agreed to issue to EarlyBirdCapital (and/or its
designees) 100,000 shares of common stock (or 115,000 shares of
common stock if the underwriters’ over-allotment option is
exercised in full) and, for $100, an option to purchase up to
500,000 units exercisable at $10.00 per unit (or an aggregate
exercise price of $5,000,000) upon the consummation of this
offering. The option is exercisable commencing on the later of the
consummation of our initial business combination and the first
anniversary of the date of this prospectus. The shares of common
stock and option and underlying securities are deemed to be
underwriters’ compensation by FINRA pursuant to Rule 5110 of
the FINRA Manual.
Our
executive offices are located at 2645 N. Federal Hwy, Suite 230,
Delray Beach, Florida 33483, and our telephone number is
(310) 734-2300.
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5
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The
Offering
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Securities
offered
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5,000,000 units, at
$10.00 per unit, each unit consisting of one share of common
stock, one right to receive one-tenth (1/10) of one share of
common stock upon the consummation of an initial business
combination, subject to the conditions described in this
prospectus, and one-half of one
warrant.
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Listing
of our securities and proposed symbols
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We
anticipate the units, and the shares of common stock,
rights and warrants once they begin separate trading, will
be listed on Nasdaq under the symbols “BRPAU,”
“BRPA,” "BRPAR" and
“BRPAW,” respectively.
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Trading
commencement and separation of common stock, rights
and warrants
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The
units will begin trading on or promptly after the date of this
prospectus. The common stock, rights and warrants
comprising the units will begin separate trading on the 90th day
following the date of this prospectus unless EarlyBirdCapital, Inc.
informs us of its decision to allow earlier separate trading,
subject to our having filed the Current Report on Form 8-K
described below and having issued a press release and filed a
Current Report on Form 8-K announcing when such separate trading
will begin.
Once
the shares of common stock, rights and warrants
commence separate trading, holders will have the option to continue
to hold units or separate their units into the component pieces.
Holders will need to have their brokers contact our transfer agent
in order to separate the units into shares of common stock,
rights and warrants. No fractional warrants will be
issued upon separation of the units and only whole warrants will
trade. Accordingly, unless you purchase two units, you will not be
able to receive or trade a whole warrant.
In no
event will the common stock, rights and warrants be
traded separately until we have filed a Current Report on Form 8-K
with the SEC containing an audited balance sheet reflecting our
receipt of the gross proceeds at the closing of this offering. We
will file the Current Report on Form 8-K promptly after the closing
of this offering, which is anticipated to take place three business
days from the date of this prospectus. If the underwriters’
over-allotment option is exercised following the initial filing of
such Current Report on Form 8-K, a second or amended Current Report
on Form 8-K will be filed to provide updated financial information
to reflect the exercise of the underwriters’ over-allotment
option. We will also include the Form 8-K, or amendment thereto, or
in a subsequent Form 8-K, information indicating if
EarlyBirdCapital has allowed separate trading of the common
stock, rights and warrants prior to the 90th day after
the date of this prospectus.
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Units:
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Number
outstanding before this offering
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0
units
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Number
outstanding after this offering and sale of private placement
units
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5,225,000
units
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Shares
of common stock:
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Number
outstanding before this offering
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1,437,500
shares(1)
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Number
to be outstanding after this offering and sale of private placement
units
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6,575,000
shares(2)(3)
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_______________________
(1) This number includes an aggregate of up to 187,500
founder’s shares that are subject to forfeiture if the
over-allotment option is not exercised by the underwriters in
full.
(2) Assumes the over-allotment option has not been exercised
and an aggregate of 187,500 founder’s shares have been
forfeited.
(3) Excludes shares of common stock underlying the
underwriters’ unit purchase option but includes 100,000
shares of common stock issuable to EarlyBirdCapital upon the
consummation of this offering.
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6
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Rights:
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Number outstanding
before this offering |
0
rights
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Number to be
outstanding after this offering and private
placement
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5,225,000
rights
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Warrants:
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Number
outstanding before this offering
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0
warrants
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Number
to be outstanding after this offering and sale of private placement
units
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2,612,500
warrants
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Exercisability
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Each
whole warrant will become exercisable on the later of
the completion of an initial business combination and 12 months
from the closing of this offering. The warrants will expire at 5:00
p.m., New York City time, on the fifth anniversary of our
completion of an initial business combination, or earlier upon
redemption. The period of time from the date the warrants will
first become exercisable until the expiration of the warrants shall
hereafter be referred to as the “exercise
period.”
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Exercise
price
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$11.50.
No warrants will be exercisable for cash unless we have an
effective and current registration statement covering the shares of
common stock issuable upon exercise of the warrants and a current
prospectus relating to such shares of common stock. Notwithstanding
the foregoing, if a registration statement covering the shares of
common stock issuable upon exercise of the warrants is not
effective within a specified period following the consummation of
our initial business combination, warrant holders may, until such
time as there is an effective registration statement and during any
period when we 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 of 1933, as amended, or 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.
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Redemption
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We may
redeem the outstanding warrants (excluding the warrants contained
in the private placement units and any warrants included in
additional private units we may issue to our sponsor, officers or
directors upon conversion of working capital loans as described in
this prospectus, but including any outstanding warrants issued upon
exercise of the unit purchase option issued to EarlyBirdCapital
and/or its designees) 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 sales price of our shares of common stock equals or
exceeds $21.00 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations) for any 20
trading days within a 30 trading day period ending three business
days before we send the notice of redemption; 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
foregoing conditions are satisfied and we issue a notice of
redemption, each warrant holder can exercise his, her or its
whole warrant prior to the scheduled redemption date.
However, the price of the shares of common stock may fall below the
$21.00 trigger price as well as the $11.50 warrant exercise price
after the redemption notice is issued.
If we
call the warrants for redemption as described above, our management
will have the option to require all holders that wish to exercise
warrants to do so on a “cashless basis.” In such event,
each holder would pay the exercise price by surrendering the
warrants for that number of shares of common stock equal to the
quotient obtained by dividing (x) the product of the number of
shares of common stock 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 of common stock for
the five trading days ending on the third trading day prior to the
date on which the notice of redemption is sent to the holders of
warrants.
None of
the warrants contained in the private placement units will be
redeemable by us so long as they are held by our sponsor or its
permitted transferees.
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7
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Rights:
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Terms
of Rights:
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Each holder of a right will receive one-tenth (1/10) of one share
of common stock upon consummation of our initial business
combination. In the event we will not be the surviving entity upon
completion of our initial business combination, each holder of a
right will be required to affirmatively convert its rights in order
to receive the 1/10 share of common stock underlying each right
(without paying any additional consideration). If we are unable to
complete an initial business combination within the required time
period and we redeem the public shares for the funds held in the
trust account, holders of rights will not receive any such funds in
exchange for their rights and the rights will expire worthless. We
will not issue fractional shares upon exchange of the rights. If,
upon conversion of the rights, a holder would be entitled to
receive a fractional interest in a share, we will, upon exchange,
comply with Section 155 of the Delaware General Corporation Law, as
further described herein. We will make the determination of how we
are treating fractional shares at the time of our initial business
combination and will include such determination in the proxy
materials we will send to stockholders for their consideration of
such initial business
combination.
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Founder’s
shares
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Our
initial stockholder has purchased an aggregate of 1,437,500
founder’s shares for an aggregate purchase price of $25,000,
or approximately $0.017 per share. The 1,437,500 founder’s
shares includes an aggregate of up to 187,500 shares of common
stock subject to forfeiture to the extent that the over-allotment
option is not exercised by the underwriters in full or in part. The
holder of the founder’s shares will be required to forfeit
only a number of shares of common stock necessary to continue to
maintain the 20% ownership interest in our shares of common stock
after giving effect to the offering (assuming such stockholder does
not purchase units in this offering) and exercise, if any, of the
underwriters’ over-allotment option. The holder of the
founder’s shares has agreed (A) to vote any shares owned by
it in favor of any proposed business combination and (B) not to
convert any shares in connection with a stockholder vote to approve
a proposed initial business combination or sell any shares to us in
a tender offer in connection with a proposed initial business
combination.
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Restrictions
on transfer of founder’s shares
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On the
date of this prospectus, the founder’s shares will be placed
into an escrow account maintained in New York, New York by
Continental Stock Transfer & Trust Company, acting as escrow
agent. Subject to certain limited exceptions, these shares will not
be transferred, assigned, sold or released from escrow until one
year after the date of the consummation of our initial business
combination, or earlier with respect to fifty percent (50%) of such
shares if, subsequent to our business combination, the last sales
price of our 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 following the consummation of our initial business
combination. The limited exceptions include transfers, assignments
or sales (i) to our officers, directors, consultants or their
affiliates, (ii) to an entity’s members, (iii) to relatives
and trusts for estate planning purposes, (iv) by virtue of the laws
of descent and distribution upon death, (v) pursuant to a qualified
domestic relations order, (vi) to us for no value for cancellation
in connection with the consummation of our initial business
combination, or (vii) by private sales made at or after the
consummation of a business combination at prices no greater than
the price at which the shares were originally purchased, in each
case (except for clause (vi) or with our prior consent) where the
transferee agrees to the terms of the escrow agreement and to be
bound by these transfer restrictions.
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Private
placement units
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Simultaneously with
the consummation of this offering, our sponsor has committed to
purchase an aggregate of 225,000 private placement units at $10.00
per unit (for a total purchase price of $2,250,000) in a private
placement that will occur simultaneously with the closing of this
offering. Our sponsor has also agreed that if the over-allotment
option is exercised by the underwriters in full or in part, it will
purchase from us up to an additional 18,750 private placement units
at a price of $10.00 per unit in an amount necessary to maintain in
the trust account at $10.00 per unit sold to the public in this
offering. These additional private placement units will be
purchased in a private placement that will occur simultaneously
with the purchase of units resulting from the exercise of the
over-allotment option. The purchase price of the private placement
units will be added to the proceeds from this offering to be held
in the trust account. If we do not complete our initial business
combination within 12 months from the closing of this
offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), the proceeds of the sale of the
private placement units will be used to fund the redemption of our
public shares (subject to the requirements of applicable law) and
the private placement units will be worthless. The rights
and warrants contained in the private placement units will
be identical to the rights and warrants included in
the units being sold in this offering except the
warrants will not be redeemable by us and may be exercised
on a cashless basis so long as they are held by our sponsor or its
permitted transferees (as described below under “Principal
Stockholders”). If the warrants contained in the private
placement units are held by holders other than our sponsor or its
permitted transferees, the warrants contained in the private
placement units will be redeemable by us and exercisable by the
holders on the same basis as the warrants included in the units
being sold in this offering.
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8
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Transfer
restrictions on private placement units
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The
private placement units (including the shares of common
stock, rights, warrants and shares of common stock
issuable upon conversion or exercise of such
rights and warrants) will not be transferable,
assignable or salable until after the completion of our initial
business combination.
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Offering
proceeds to be held in trust account
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An
aggregate of $10.00 per unit (regardless of whether or not the
over-allotment option is exercised in full or part) will be placed
in a U.S.-based trust account at [●] maintained by
Continental Stock Transfer & Trust Company, acting as trustee
pursuant to an agreement to be signed on the date of this
prospectus. Except as set forth below, the proceeds held in the
trust account will not be released until the earlier of the
completion of an initial business combination and our redemption of
100% of the outstanding public shares if we have not completed a
business combination in the required time period. Therefore, unless
and until an initial business combination is consummated, the
proceeds held in the trust account will not be available for our
use for any expenses related to this offering or expenses which we
may incur related to the investigation and selection of a target
business and the negotiation of an agreement to acquire a target
business.
Notwithstanding the
foregoing, there can be released to us from the trust account any
interest earned on the funds in the trust account that we need to
pay our franchise and income taxes. With this exception, expenses
incurred by us may be paid prior to a business combination only
from the net proceeds of this offering and the sale of the private
placement units not held in the trust account (initially estimated
to be $500,000); provided, however, that in order to meet our
working capital needs following the consummation of this offering,
our sponsor, officers, directors or their affiliates may 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 the holder’s discretion, up to $1,500,000 of the notes
may be converted into private units at a price of $10.00 per unit.
These units would be identical to the private placement units. If
we do not complete a business combination, the loans will be
forgiven.
None of
the warrants may be exercised until after the consummation of a
business combination, thus, after the proceeds of the trust account
have been disbursed. Accordingly, the warrant exercise price will
be paid directly to us and not placed in the trust
account.
The
amount of proceeds to be held in and outside of our trust account
immediately following the closing of this offering is net of
underwriting discounts of $1.25 million (or approximately $1.44
million if the over-allotment option is exercised in full) and
estimated offering expenses of $500,000.
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Ability to extend time to complete business
combination
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We will have until 12 months from the closing of this offering to
consummate an initial business combination. However, if we
anticipate that we may not be able to consummate our initial
business combination within 12 months, we may extend the period of
time to consummate a business combination up to two times, each by
an additional three months (for a total of up to 18 months to
complete a business combination). Pursuant to the terms of our
amended and restated certificate of incorporation and the trust
agreement to be entered into between us and Continental Stock
Transfer & Trust Company on the date of this prospectus, in
order to extend the time available for us to consummate our initial
business combination, our sponsor or its affiliates or designees,
upon five days advance notice prior to the applicable deadline,
must deposit into the trust account $500,000, or up to $575,000 if
the underwriters’ over-allotment option is exercised in full
($0.10 per share in either case) on or prior to the date of the
applicable deadline, for each three month extension (or up to an
aggregate of $1,000,000 (or $1,150,000 if the underwriters’
over-allotment option is exercised in full), or $0.20 per share if
we extend for the full six months). Any such payments would be made
in the form of a loan. Any such loans will be non-interest bearing
and payable upon the consummation of our initial business
combination. If we complete our initial business combination, we
would repay such loaned amounts out of the proceeds of the trust
account released to us. If we do not complete a business
combination, we will not repay such loans. Furthermore, the letter
agreement with our initial stockholders contains a provision
pursuant to which our sponsor has agreed to waive its right to be
repaid for such loans out of the funds held in the trust account in
the event that we do not complete a business combination. Our
sponsor and its affiliates or designees are not obligated to fund
the trust account to extend the time for us to complete our initial
business combination.
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Limited
payments to insiders
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There
will be no fees, reimbursements or other cash payments paid to our
sponsor, officers, directors or their affiliates for any services
they render prior to, or in order to effectuate the consummation
of, an initial business combination (regardless of the type of
transaction that it is) other than the following payments, none of
which will be made from the proceeds of this offering and the sale
of the private placement units held in the trust account prior to
the completion of our initial business combination:
● repayment, without
interest, at the closing of this offering of an aggregate of up to
$150,000 loaned to us by our sponsor;
● repayment, without
interest, at the closing of this offering of $25,000 loaned to us
by Richard Ackerman, our Chairman, President and Chief Executive
Officer;
● payment of an
aggregate of up to $10,000 per month to our sponsor for office
space and related services; and
● reimbursement of
out-of-pocket expenses incurred by them in connection with certain
activities on our behalf, such as identifying and investigating
possible target businesses and business combinations.
There
is no limit on the amount of out-of-pocket expenses reimbursable by
us. Our audit committee will review and approve all reimbursements
and payments made to our sponsor, officers, directors or our or
their respective affiliates, with any interested director
abstaining from such review and approval.
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9
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Stockholder
approval of, or tender offer in connection with, initial business
combination
|
In
connection with any proposed initial business combination, we will
either (1) seek stockholder approval of such 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
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
herein. If we determine to engage in a tender offer, such tender
offer will be structured so that each stockholder may tender any or
all of his, her or its shares rather than some pro rata portion of
his, her or its shares. If enough stockholders tender their shares
so that we are unable to satisfy any applicable closing condition
set forth in the definitive agreement related to our initial
business combination, or we are unable to maintain net tangible
assets of at least $5,000,001 upon such consummation, we will not
consummate such initial business combination. 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. 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 Rule 13e-4 and Regulation 14E of the Securities
Exchange Act of 1934, as amended, or Exchange Act, which regulate
issuer tender offers. 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, if we seek stockholder approval, a majority of the outstanding
shares of common stock voted are voted in favor of the business
combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that
we would avoid being subject to Rule 419 promulgated under the
Securities Act. However, if we seek to consummate an initial
business combination with a target business that imposes any type
of working capital closing condition or requires us to have a
minimum amount of funds available from the trust account upon
consummation of such initial business combination, we may need to
have more than $5,000,001 in net tangible assets upon consummation
and this may force us to seek third party financing which may not
be available on terms acceptable to us or at all. As a result, we
may not be able to consummate such initial business combination and
we may not be able to locate another suitable target within the
applicable time period, if at all.
Our
sponsor, officers and directors have agreed (i) to vote any such
shares in favor of any proposed business combination, (ii) not to
convert any such shares in connection with a stockholder vote to
approve a proposed initial business combination and (iii) not to
sell any such shares to us in a tender offer in connection with any
proposed business combination. As a result, we would need only
1,712,501, or approximately 34.3%, of the 5,000,000 public shares
sold in this offering to be voted in favor of a transaction in
order to have our initial business combination approved (assuming
the over-allotment option is not exercised, that all shares were
present and entitled to vote at the meeting, and that the 100,000
shares to be issued to EarlyBirdCapital upon the consummation of
this offering are voted in favor of the transaction).
None of
our sponsor, officers, directors or their affiliates has indicated
any intention to purchase units in this offering or any units or
shares of common stock from persons in the open market or in
private transactions. However, if we hold a meeting to approve a
proposed business combination and a significant number of
stockholders vote, or indicate an intention to vote, against a
proposed business combination, our sponsor, officers, directors or
their affiliates could make such purchases in the open market or in
private transactions, either before or after we mail a proxy
statement related to the proposed business combination, in order to
influence any vote held to approve a proposed initial business
combination. Notwithstanding the foregoing, our officers,
directors, sponsor and their affiliates will not make purchases of
shares of common stock if the purchases would violate Section
9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed
to stop potential manipulation of a company’s
stock.
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10
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Conversion
rights
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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.
We may
require public stockholders seeking conversion, whether they are a
record holder or hold their shares in “street name,” to
either (i) physically tender their certificates to our transfer
agent or (ii) deliver their shares to the transfer agent
electronically using Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System, at the holder’s
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. The requirement for physical or electronic
delivery prior to the meeting ensures that a holder’s
election to convert his shares is irrevocable once the business
combination is approved. There is a nominal cost associated with
this tendering process and the act of certificating the shares or
delivering them through the DWAC system. The transfer agent will
typically charge the tendering broker $45.00 and it would be up to
the broker whether or not to pass this cost on to the converting
holder.
We will
consummate our initial business combination only if we have net
tangible assets of at least $5,000,001 upon such consummation. In
connection with any proposed business combination, a target
business could impose a working capital closing condition or
require us to have a higher minimum amount of funds available from
the trust account upon consummation of such initial business
combination. As a result, the foregoing may limit the number of
shares that we can have converted and still consummate such
business combination.
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Liquidation
if no business combination
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If we
are unable to complete an initial business combination by
12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), 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 not previously released to us, 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 have funds sufficient to pay or
provide for all creditors’ claims. Although we are required
to use our reasonable best efforts to have all third parties
(including any vendors or other entities we engage after this
offering) and any prospective target businesses enter into
agreements with us 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. There is also no
guarantee that the third parties would not challenge the
enforceability of these waivers and bring claims against the trust
account for monies owed them. A/Z Property Partners, LLC
("A/Z Property"), an entity majority owned by Richard
Ackerman, our Chairman, President and Chief Executive Officer, has
agreed 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. We believe A/Z
Property has sufficient net worth to satisfy its
indemnity obligation should it arise, however we cannot
assure you A/Z Property will have sufficient
liquid assets to satisfy such obligations if it
is required to do so. Additionally, the agreement entered into by
A/Z Property Partners specifically provides for two exceptions to
the indemnity it has given: it will have no liability (1) as to any
claimed amounts owed to a target business or vendor or other entity
who has executed an agreement with us waiving any right, title,
interest or claim of any kind they may have in or to any monies
held in the trust account, or (2) as to any claims for
indemnification by the underwriters of this offering against
certain liabilities, including liabilities under the Securities
Act.
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11
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The
holder of the founder’s shares will not participate in any
redemption distribution from our trust account with respect to such
shares.
If we
are unable to conclude an initial business combination within
12 months from the closing of this offering and do not extend the
time we have to complete an initial business combination as
described herein and we expend all of the net proceeds of
this offering and the sale of the private placement units not
deposited in the trust account, we expect that the initial
per-share redemption price will be approximately $10.00 (which is
equal to the anticipated aggregate amount then on deposit in the
trust account excluding any interest earned on the funds held in
the trust account). The proceeds deposited in the trust account
could, however, become subject to claims of our creditors that are
in preference to the claims of our stockholders. In addition, if we
are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us that 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. Therefore, we cannot assure you that the actual
per-share redemption price will not be less than approximately
$10.00.
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Potential
amendments to charter
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Our
sponsor, officers and directors have agreed that they will not
propose any amendment to our amended and restated certificate of
incorporation that would restrict our public stockholders from
converting or selling their shares to us in connection with a
business combination or affect the substance or timing of our
obligation to redeem 100% of our public shares if we do not
complete a business combination within 12 months from
the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) unless we provide our public
stockholders with the opportunity to convert their shares of common
stock upon the approval of any such amendment at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in
the trust account, including interest but net of franchise and
income taxes payable, divided by the number of then outstanding
public shares. This redemption right shall apply in the event of
the approval of any such amendment, whether proposed by our
sponsor, any executive officer, director or any other
person.
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RISKS
In
making your decision on whether to invest in our securities, you
should take into account the special risks we face as a blank check
company, as well as the fact that this offering is not being
conducted in compliance with Rule 419 promulgated under the
Securities Act, and, therefore, you will not be entitled to
protections normally afforded to investors in Rule 419 blank check
offerings. For additional information concerning how Rule 419 blank
check offerings differ from this offering, please see
“Proposed Business — Comparison of this offering to
offerings of blank check companies subject to Rule 419.” You
should carefully consider these and the other risks set forth in
the section entitled “Risk Factors” beginning on page
14 of this prospectus.
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12
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SUMMARY FINANCIAL DATA
The
following table summarizes the relevant financial data for our
business and should be read with our financial statements, which
are included in this prospectus. We have not had any significant
operations to date, and accordingly only balance sheet data is
presented.
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September
30, 2017
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Actual
|
As
Adjusted
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Balance
Sheet Data
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Working capital
(deficit) (1)
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$(67,530)
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$50,523,913
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Total
assets (2)
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173,813
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50,523,913
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Total
liabilities
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150,000
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-
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Value of common
stock subject to possible conversion/tender (3)
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-
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45,523,910
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Stockholders’
(deficit) equity(4)
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23,813
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5,000,003
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The
“as adjusted” information gives effect to the sale of
the units we are offering, including the application of the related
gross proceeds and the payment of the estimated remaining costs
from such sale and the repayment of the accrued and other
liabilities required to be repaid.
The
“as adjusted” working capital and total assets amounts
include the $50,000,000 to be held in the trust account, which,
except for limited situations described in this prospectus, will be
available to us only upon the consummation of a business
combination within the time period described in this prospectus. If
a business combination is not so consummated, the trust account,
less amounts we are permitted to withdraw as described in this
prospectus, will be distributed solely to our public stockholders
(subject to our obligations under Delaware law to provide for
claims of creditors).
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.
__________
(1) The “as adjusted” calculation includes
$50,000,000 cash held in trust from the proceeds of this offering
and the sale of the private placement units, plus $500,000 of cash
held outside the trust account, plus $100 from the issuance of the
unit purchase option, plus $23,813 of actual stockholders’
equity at September 30, 2017.
(2) The “as adjusted” calculation equals
$50,000,000 cash held in trust from the proceeds of this offering
and the sale of the private placement units, plus $500,000 in cash
held outside the trust account, plus $100 from the issuance of the
unit purchase option, plus $23,813 of actual stockholders’
equity at September 30, 2017.
(3) The “as adjusted” calculation equals the
“as adjusted” total assets, less the “as
adjusted” total liabilities, less the “as
adjusted” stockholders’ equity, which is set to
approximate the minimum net tangible assets threshold of at least
$5,000,001 upon consummation of our initial business
combination.
(4) Excludes 4,552,391 shares of common stock which are
subject to redemption in connection with our initial business
combination. The “as adjusted” calculation equals
“as adjusted” total assets, less the “as
adjusted” total liabilities, less the value of shares of
common stock that may be redeemed in connection with our initial
business combination ($10.00 per share).
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13
RISK FACTORS
An investment in our securities involves a high degree of risk. You
should consider carefully the risks described below, which we
believe represent the material risks related to the offering,
together with the other information contained in this prospectus,
before making a decision to invest in our units. This prospectus
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. Therefore, our ability to commence
operations is dependent upon obtaining financing through the public
offering of our securities. Since we do not have an operating
history, you will have no basis upon which to evaluate our ability
to achieve our business objective, which is to consummate an
initial business combination. We have not conducted any substantive
discussions and we have no plans, arrangements or understandings
with any prospective acquisition candidates. We will not generate
any revenues until, at the earliest, after the consummation of a
business combination.
Our independent registered public accounting firm’s report
contains an explanatory paragraph that expresses substantial doubt
about our ability to continue as a “going
concern.”
As of
September 30, 2017, we had $82,470 in cash and a working capital
deficiency of $67,530. Further, we have incurred and expect to
continue to incur significant costs in pursuit of our financing and
acquisition plans. Management’s plans to address this need
for capital through this offering are discussed in the section of
this prospectus titled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
We cannot assure you that our plans to raise capital or to
consummate an initial business combination will be successful.
These factors, among others, raise substantial doubt about our
ability to continue as a going concern. The financial statements
contained elsewhere in this prospectus do not include any
adjustments that might result from our inability to consummate this
offering or our inability to continue as a going
concern.
If we are unable to consummate a business combination, our public
stockholders may be forced to wait more than 12 months
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) before receiving distributions from
the trust account.
We have
12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) in which 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 full time period 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 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 prospectus. 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.
14
You will not be entitled to protections normally afforded to
investors of blank check companies.
Since
the net proceeds of this offering and the sale of the private
placement units 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 will have net
tangible assets in excess of $5,000,000 upon the successful
consummation of this offering and will file 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,
investors will not be 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 will be immediately tradable, 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 will have a longer period of time to complete such a business
combination than we would if we were subject to such
rule.
If we determine to change our acquisition criteria or guidelines,
many of the disclosures contained in this prospectus would be
rendered irrelevant and you would be investing in our company
without any basis on which to evaluate the potential target
business we may acquire.
We
could seek to deviate from the acquisition criteria or guidelines
disclosed in this prospectus although we have no current intention
to do so. For instance, we currently anticipate acquiring a target
business with a consistent historical financial performance.
However, we are not obligated to do so and may determine to merge
with or acquire a company with no operating history if the terms of
the transaction are determined by us to be favorable to our public
stockholders. In such event, many of the acquisition criteria and
guidelines set forth in this prospectus would be rendered
irrelevant. We could also seek to amend our amended and restated
certificate of incorporation to provide us with more time to
complete an initial business combination. Accordingly, investors
may be making an investment in our company without any basis on
which to evaluate the potential target business we may
acquire.
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.
As of
September 30, 2017, our certificate of incorporation authorized the
issuance of up to 10,000,000 shares of common stock, par value
$0.001 per share. As of the date of this prospectus, 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. Immediately after this offering, there will be (assuming
that the underwriters have not exercised their over-allotment
option) 88,057,500 authorized but unissued shares of
common stock available for issuance, which amount takes into
account shares reserved for issuance upon exercise of the
underwriter’s option, conversion of
outstanding rights (including private placement rights and the
rights underlying the underwriter's option) and warrants
(including the warrants contained in the private placement units
and the underwriter’s option). Immediately after this
offering, there will be no shares of preferred stock issued and
outstanding. Although we have no commitment as of the date of this
offering, 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:
●
may significantly
reduce the equity interest of investors in this
offering;
●
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;
●
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
●
may adversely
affect prevailing market prices for our shares of common
stock.
Similarly,
if we issue debt securities, it could result in:
●
default and
foreclosure on our assets if our operating revenues after a
business combination are insufficient to repay our debt
obligations;
15
●
acceleration of our
obligations to repay the indebtedness even if we make all principal
and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves
without a waiver or renegotiation of that covenant;
●
our immediate
payment of all principal and accrued interest, if any, if the debt
security is payable on demand; and
●
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.
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 net proceeds of this offering and the sale of the private
placement units not being held in trust are insufficient to allow
us to operate for at least the next 12 months
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), we may be unable to complete a
business combination.
We
believe that, upon consummation of this offering, the funds
available to us outside of the trust account will be sufficient to
allow us to operate for at least the next 12 months
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), 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. 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 private units at a price of $10.00 per unit
(which, for example, would result in the holders being issued
165,000 shares of common stock if $1,500,000 of notes were so
converted since the 150,000 rights included in such units would
result in the issuance of 15,000 shares upon the closing of our
business combination, as well as 75,000 warrants to purchase 75,000
shares).
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 will 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, A/Z Property has agreed (subject to certain
exceptions described elsewhere in this prospectus) 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. We believe A/Z
Property has sufficient net worth to satisfy its indemnity
obligation should it arise, however we
cannot assure you
that A/Z Property will have sufficient liquid assets to satisfy
obligations if it is required to do so. Additionally, the agreement
entered into by A/Z Property specifically provides for two
exceptions to the indemnity it has given: it will have no liability
(1) as to any claimed amounts owed to a target business or vendor
or other entity who has executed an agreement with us waiving any
right, title, interest or claim of any kind they may have in or to
any monies held in the trust account, or (2) as to any claims for
indemnification by the underwriters of this offering against
certain liabilities, including liabilities under the Securities
Act.
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. 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 12 months from
the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time). If we have not completed a business
combination by such date, 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.
16
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 A/Z Property'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 A/Z Property 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 A/Z
Property to enforce such indemnification obligations. While we
currently expect that our independent directors would take legal
action on our behalf against A/Z Property 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.
An investor 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 will be 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 warrants
contained in the private placement units) in order to make any
change that adversely affects the interests of the registered
holders. Accordingly, we would need only 1,193,751, or
47.8%, of the public warrants to vote in favor of a
proposed amendment for it to be approved (assuming the holders of
the warrants contained in the private placement units 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 will be 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. Accordingly, we would need only 2,387,501, or 47.8%, of
the public rights to vote in favor of a proposed amendment for it
to be approved (assuming the holders of the private rights all
voted in favor of the amendment).
17
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 senior housing and care
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 investors in this offering 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 senior housing and care
industry, which is where our management team has significant
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.
18
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, which is affiliated with certain of our officers and
directors, has agreed to waive its right to convert its
founder’s shares and any other shares purchased in this
offering or thereafter, or to receive distributions from the trust
account with respect to their founder’s shares upon our
liquidation if we are unable to consummate a business combination.
Accordingly, the shares acquired prior to this offering will be
worthless if we do not consummate a business combination.
Additionally, the warrants, including the warrants contained in the
private placement units held by our sponsor, 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, 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. For a more
detailed description of the pre-existing fiduciary and contractual
obligations of our management team, and the potential conflicts of
interest that such obligations may present, see the section titled
“Management — Conflicts of
Interest.”
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.
We
anticipate that our securities will be listed on Nasdaq, a national
securities exchange, upon consummation of this offering. Although,
after giving effect to this offering, we expect to meet on a pro
forma basis Nasdaq’s minimum initial listing standards, which
generally only requires that we meet certain requirements relating
to stockholders’ equity, market capitalization, aggregate
market value of publicly held shares and distribution requirements,
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:
●
a limited
availability of market quotations for our securities;
●
reduced liquidity
with respect to our securities;
19
●
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;
●
a limited amount of
news and analyst coverage for our company; and
●
a decreased ability
to issue additional securities or obtain additional financing in
the future.
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 we expect that our units
and eventually our common stock, rights and warrants
will be listed on Nasdaq, our units, common stock,
rights and warrants will be 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 or 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 this offering and the sale of the private placement
units, 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:
●
solely dependent
upon the performance of a single business, or
●
dependent upon the
development or market acceptance of a single or limited number of
products, processes or services.
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.
20
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 elsewhere
in this prospectus) 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.
21
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 this offering and the sale of the private placement
units, 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
warrants, rights and the unit purchase option, 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 net proceeds of this offering and the sale of
the private placement units will be sufficient to allow us to
consummate a business combination, because we have not yet
identified any prospective target business, we cannot ascertain the
capital requirements for any particular transaction. If the net
proceeds of this offering and the sale of the private placement
units 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 stockholder will control a substantial interest in us
and thus may influence certain actions requiring a stockholder
vote.
Upon
consummation of our offering, our initial stockholder prior to the
offering will own approximately 22.4%
of our issued and outstanding shares of common stock (assuming it
does not purchase any units in this offering). None of our sponsor,
officers, directors or their affiliates has indicated any intention
to purchase units in this offering or any units or shares of common
stock from persons in the open market or in private transactions.
However, 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 stockholder, as well as all of our officers and directors,
have agreed to vote the shares of common stock owned by them
immediately before this offering as well as any shares of common
stock acquired in this offering or in the aftermarket in favor of
such proposed business combination.
Our
board of directors will be 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 stockholder, because of its
ownership position, will have considerable influence regarding the
outcome. Accordingly, our initial stockholder will continue to
exert control at least until the consummation of a business
combination.
Our initial stockholder paid $25,000, or approximately $0.017 per
share, for the founder’s shares and, accordingly, you will
experience immediate and substantial dilution from the purchase of
our shares of common stock.
The
difference between the public offering price per share (allocating
all of the unit purchase price to the common stock, including
the common stock underlying the rights included in the
units, and none to the warrants included in the
units) and the pro forma net tangible book value per share of
common stock after this offering constitutes the dilution to the
investors in this offering. Our initial stockholder acquired the
founder’s shares at a nominal price, significantly
contributing to this dilution. Upon consummation of this offering,
you and the other new investors will incur an immediate and
substantial dilution of approximately 78.4% or
$7.13
per share (the difference between the pro forma net tangible book
value per share $1.96, and the initial
offering price of $9.09 per share at a
fully diluted base immediately upon closing of this offering). This
is because investors in this offering will be contributing
approximately 95.7% of the total
amount paid to us for our outstanding securities after this
offering but will only own 77.5%
of our outstanding securities. Accordingly, the per-share purchase
price you will be paying substantially exceeds our per share net
tangible book value.
22
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 will
be issuing rights to receive 500,000 shares of common stock
and warrants to purchase 2,500,000 shares of
common stock as part of the units offered by this prospectus (or
rights to receive 575,000 shares of common stock and
warrants to purchase 2,875,000 shares of common stock
if the over-allotment option is exercised in full) and rights
to receive 22,500 shares of common stock and warrants to
purchase 112,500 shares of common stock contained in
the private placement units (or rights to receive 24,375
shares of common stock and warrants to purchase
121,875 shares of common stock if the over-allotment
option is exercised in full). We will also issue unit purchase
options to purchase 500,000 units to EarlyBirdCapital (and/or its
designees) which, if exercised, will result in the issuance of
500,000 shares of common stock, rights to
receive 50,000 shares of common stock and warrants to
purchase an additional 250,000 shares of common stock.
We may also issue additional private units, which will be identical
to the private placement units, to our sponsor, officers or
directors in payment of working capital loans made to us as
described in this prospectus. 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
conversion or 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
warrants, rights, or unit purchase option could have
an adverse effect on the market price for our securities or on our
ability to obtain future financing. If and to the extent these
rights are converted or warrants and options are
exercised, you may experience dilution to your
holdings.
Because each unit contains one-half of one warrant and one right to
receive one-tenth of one share of common stock, the units may be
worth less than units of other blank check
companies.
Each unit contains
one-half of one warrant and one right to receive one-tenth (1/10)
of one share of common stock upon consummation of our initial
business combination. This is different from other offerings
similar to ours whose units include one share of common stock and
one warrant to purchase one whole share. We have established the
components of the units in this way in order to reduce the dilutive
effect of the warrants and rights upon completion of a business
combination since the warrants will be exercisable for, and the
rights will be convertible into, a fraction of the number of shares
in the aggregate, 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 your unexpired warrants prior to their exercise at a
time that is disadvantageous to you, thereby making your 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 $21.00 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 you (i) to exercise your warrants
and pay the exercise price therefor at a time when it may be
disadvantageous for you to do so, (ii) to sell your 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 your warrants. None of the warrants contained in the
private placement units will be redeemable by us so long as they
are held by the sponsor or its 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 described elsewhere in this prospectus 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.
23
We
have no obligation to net cash settle the rights or
warrants.
In no event will we
have any obligation to net cash settle the rights or warrants.
Furthermore, there are no contractual penalties for failure to
deliver securities to the holders of the rights or warrants upon
consummation of an initial business combination or exercise of the
warrants. Accordingly, you might not receive the shares of common
stock underlying the rights and warrants.
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
stockholders prior to this offering are entitled to demand that we
register the resale of the founder’s 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
placement units and any private units 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 placement units and any other private
units we issue to them (and the underlying securities) 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, as amended, or 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:
●
restrictions on the
nature of our investments; and
●
restrictions on the
issuance of securities.
In
addition, we may have imposed upon us certain burdensome
requirements, including:
●
registration as an
investment company;
●
adoption of a
specific form of corporate structure; and
●
reporting, record
keeping, voting, proxy, compliance policies and procedures and
disclosure requirements and other rules and
regulations.
Compliance
with these additional regulatory burdens would require additional
expense for which we have not allotted.
The determination of the offering price of our units is more
arbitrary compared with the pricing of securities for an operating
company in a particular industry.
Prior
to this offering there has been no public market for any of our
securities. The public offering price of the units and the terms of
the rights and warrants were negotiated between us and
EarlyBirdCapital. Factors considered in determining the prices and
terms of the units, including the shares of common stock,
rights and warrants underlying the units,
include:
●
the history and
prospects of companies whose principal business is the acquisition
of other companies;
●
prior offerings of
those companies;
24
●
our prospects for
acquiring an operating business at attractive values;
●
our capital
structure;
●
an assessment of
our management and their experience in identifying operating
companies; and
●
general conditions
of the securities markets at the time of the offering.
However,
although these factors were considered, the determination of our
offering price is more arbitrary than the pricing of securities for
an operating company in a particular industry since we have no
historical operations or financial results with which to
compare.
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.
Our sponsor may decide not to extend the term we have to consummate
our initial business combination, in which case we would cease all
operations except for the purpose of winding up and we would redeem
our public shares and liquidate, and the rights and warrants will
be worthless.
We will have until 12
months from the closing of this offering to consummate an initial
business combination. However, if we anticipate that we may not be
able to consummate our initial business combination within 12
months, we may extend the period of time to consummate a business
combination up to two times, each by an additional three months
(for a total of up to 18 months to complete a business
combination). Pursuant to the terms of our amended and restated
certificate of incorporation and the trust agreement to be entered
into between us and Continental Stock Transfer & Trust Company
on the date of this prospectus, in order to extend the time
available for us to consummate our initial business combination,
our sponsor or its affiliates or designees, upon five days advance
notice prior to the applicable deadline, must deposit into the
trust account $500,000, or up to $575,000 if the
underwriters’ over-allotment option is exercised in full
($0.10 per share in either case) on or prior to the date of the
applicable deadline, for each three month extension (or up to an
aggregate of $1,000,000 (or up to $1,150,000 if the
underwriters’ over-allotment option is exercised in full), or
$0.20 per share, if we extend for the full six months). Any such
payments would be made in the form of a loan. Any such loans will
be non-interest bearing and payable upon the consummation of our
initial business combination. If we complete our initial business
combination, we would repay such loaned amounts out of the proceeds
of the trust account released to us to pay our franchise and income
taxes payable. If we do not complete a business combination, we
will not repay such loans. Furthermore, the letter agreement with
our initial stockholders contains a provision pursuant to which our
sponsor has agreed to waive its right to be repaid for such loans
out of the funds held in the trust account in the event that we do
not complete a business combination. Our sponsor and its affiliates
or designees are not obligated to fund the trust account to extend
the time for us to complete our initial business combination. If we
are unable to consummate our initial business combination within
the applicable time period, we will, as promptly as reasonably
possible but not more than ten business days thereafter, redeem the
public shares for a pro rata portion of the funds held in the trust
account and 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 each
case to our obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law. In such
event, the rights and warrants
will be worthless.
The requirement that we complete an initial business combination
within 12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) may give potential target businesses
leverage over us in negotiating a business
combination.
We have
12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) 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.
25
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.
Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and
report on our system of internal controls and may require that we
have such system of internal controls audited beginning with our
Annual Report on Form 10-K for the year ending
December 31, 2018. If we fail to maintain the adequacy of
our internal controls, we could be subject to regulatory scrutiny,
civil or criminal penalties and/or stockholder litigation. Any
inability to provide reliable financial reports could harm our
business. Section 404 of the Sarbanes-Oxley Act also requires that
our independent registered public accounting firm report on
management’s evaluation of our system of internal controls,
which requirement we are exempt from so long as we qualify as an
“emerging growth company,” as defined in Section 2(a)
of the Securities 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. 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:
●
rules and
regulations or currency conversion or corporate withholding taxes
on individuals;
●
tariffs and trade
barriers;
●
regulations related
to customs and import/export matters;
●
longer payment
cycles;
●
tax issues, such as
tax law changes and variations in tax laws as compared to the
United States;
●
currency
fluctuations and exchange controls;
●
challenges in
collecting accounts receivable;
●
cultural and
language differences;
●
employment
regulations;
●
crime, strikes,
riots, civil disturbances, terrorist attacks and wars;
and
●
deterioration of
political relations with the United States.
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.
26
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 will generally serve 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. Also, our amended and
restated certificate of incorporation provides our board of
directors the ability to designate the terms of and issue new
series of preferred stock, which may inhibit a takeover of
us.
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, accounting principles generally accepted in the
United States of America, or GAAP, or international financial
reporting standards, 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 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 may 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.
There is currently no market for our securities and a market for
our securities may not develop, which would adversely affect the
liquidity and price of our securities.
There
is currently no market for our securities. Stockholders therefore
have no access to information about prior market history on which
to base their investment decision. Following this offering, the
price of our securities may vary significantly due to one or more
potential business combinations and general market or economic
conditions. Furthermore, an active trading market for our
securities may never develop or, if developed, it may not be
sustained. You may be unable to sell your securities unless a
market can be established and sustained.
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 will be 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.
27
An investment in this offering may involve adverse U.S. federal
income tax consequences.
An
investment in this offering may involve adverse U.S. federal income
tax consequences. For instance:
●
because there are
no authorities that directly address instruments similar to the
units we are issuing in this offering, the allocation an investor
makes with respect to the purchase price of the unit
among the share of common stock,
rights and one-half of one warrant
included in the units could be challenged by the Internal Revenue
Service of the United States (“IRS”) or the
courts.
●
if we make
distributions on our common stock, such distributions generally
will be treated as dividends for U.S. federal income tax purposes
to the extent of our current or accumulated earnings and profits.
The ability of a holder to seek conversion of their shares may be
viewed as a position with respect to substantially similar or
related property which diminishes your risk of loss and thereby
affects your ability to satisfy the holding period requirements for
the dividends received deduction or the preferential tax rate on
qualified dividend income with respect to the time period prior to
the approval of an initial business combination.
●
our warrants may be
exercised on a cashless basis in certain situations as described
herein. The U.S. federal income tax consequences of a cashless
exercise of a warrant included in the units is unclear under
current law.
●
any capital gain or
loss you realize on a sale or other disposition of our common stock
will generally be long-term capital gain or loss if your holding
period for the common stock is more than one year. However, the
conversion feature of the common stock could affect your ability to
satisfy the holding period requirements for the long-term capital
gain tax rate with respect to the time period prior to the approval
of an initial business combination.
See the
section titled “Certain Material U.S. Federal Income Tax
Considerations” for a summary of the material United States
Federal income tax consequences of an investment in our securities.
Accordingly, each prospective investor is urged to consult a tax
advisor with respect to the specific tax consequences of the
acquisition, ownership and disposition of our securities, including
the applicability and effect of state, local, or foreign tax laws,
as well as U.S. federal tax laws.
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.
If we consummate a business combination with a target business in
the senior housing and care industry, we would be subject to the
risks attendant to that industry.
If
we are successful in consummating a business combination with a
target business in the senior housing and care industry, we would
be subject to all of the risks attendant to that industry,
including, among others:
●
terminations of
short-term resident agreements and resident
attrition;
●
substantial
reliance on private pay residents;
●
risks and
circumstances that adversely affect the ability of the elderly to
pay for our services;
●
competition from a
significant number of competitors, some of which may have
substantially greater financial resources than we
have;
●
inherent risk of
liability in the provision of personal and health care services,
not all of which may be covered by insurance;
and
●
significant
government regulations and compliance, some of which is burdensome
and some of which may change to our detriment in the
future.
28
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this prospectus that are not purely
historical are forward-looking statements. Our forward-looking
statements include 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
“anticipates,” “believe,”
“continue,” “could,”
“estimate,” “expect,”
“intends,” “may,” “might,”
“plan,” “possible,”
“potential,” “predicts,”
“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 prospectus
may include, for example, statements about our:
●
ability to complete
our initial business combination;
●
success in
retaining or recruiting, or changes required in, our officers, key
employees or directors following our initial business
combination;
●
officers and
directors allocating their time to other businesses and potentially
having conflicts of interest with our business or in approving our
initial business combination, as a result of which they would then
receive expense reimbursements;
●
potential ability
to obtain additional financing to complete a business
combination;
●
pool of prospective
target businesses;
●
ability of our
officers and directors to generate a number of potential investment
opportunities;
●
potential change in
control if we acquire one or more target businesses for
stock;
●
public
securities’ potential liquidity and trading;
●
the lack of a
market for our securities;
●
expectations
regarding the time during which we will be an “emerging
growth company” under the JOBS Act;
●
use of proceeds not
held in the trust account or available to us from interest income
on the trust account balance; or
●
financial
performance following this offering.
The
forward-looking statements contained in this prospectus are based
on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no
assurance that future developments affecting us will 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.” 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.
29
USE OF PROCEEDS
We
estimate that the net proceeds of this offering and the sale of the
private placement units will be as set forth in the following
table:
|
Without
Over-Allotment Option
|
Over-Allotment Option
Exercised
|
Gross
proceeds
|
|
|
From
offering
|
$50,000,000
|
$57,500,000
|
From private
placement
|
2,250,000
|
2,437,500
|
Total gross
proceeds
|
52,250,000
|
59,937,500
|
Offering expenses(1)
|
|
|
Underwriting
discount (2.5% of gross proceeds from units offered to
public)
|
1,250,000(2)
|
1,437,500(2)
|
Legal fees and
expenses
|
250,000
|
250,000
|
Nasdaq Listing
Fees
|
50,000
|
50,000
|
Printing and
engraving expenses
|
35,000
|
35,000
|
Accounting fees and
expenses
|
37,500
|
37,500
|
FINRA filing
fee
|
10,048
|
10,048
|
SEC registration
fee
|
7,926
|
7,926
|
Miscellaneous
expenses
|
109,526
|
109,526
|
Total expenses
(other than underwriters’ discount)
|
500,000
|
500,000
|
Net proceeds(3)
|
|
|
Held in
trust
|
$50,000,000
|
$57,500,000
|
% of public
offering size
|
100.0%
|
100.0%
|
Not held in
trust
|
500,000
|
500,000
|
|
Amount
|
Percentage
|
Use of net proceeds not held in
trust(4)(5)
|
|
|
Legal, accounting
and other third party expenses attendant to the search for target
businesses and to the due diligence investigation, structuring and
negotiation of a business combination
|
$100,000
|
20.0%
|
Due diligence of
prospective target businesses by officers, directors and
sponsor
|
25,000
|
5.0%
|
Legal and
accounting fees relating to SEC reporting obligations
|
75,000
|
15.0%
|
Payment of
administrative fee to our sponsor (up to $10,000 per month for up
to 12 months)
|
120,000
|
24.0%
|
Working capital to
cover miscellaneous expenses, general corporate purposes,
liquidation obligations and reserves
|
180,000
|
36.0%
|
Total
|
$500,000
|
100.0%
|
__________
(1)
A portion of the
offering expenses, including the SEC registration fee, the FINRA
filing fee, the non-refundable portion of the Nasdaq listing fee
and a portion of the legal and audit fees, have been paid from the
funds we borrowed from our sponsor described below. These funds
will be repaid out of the proceeds of this offering and the sale of
the private placement units available to us.
(2)
No discounts or
commissions will be paid with respect to the purchase of the
private placement units.
(3)
Of the proceeds we
receive from this offering and the sale of the units described in
this prospectus, $50,000,000, or $57,500,000 if the
underwriters’ over-allotment option is exercised in full
($10.00 per unit), will initially be deposited into a trust account
with Continental Stock Transfer & Trust Company acting as
trustee. We will have until 12 months from the closing of this
offering to consummate an initial business combination. However, if
we anticipate that we may not be able to consummate our initial
business combination within 12 months, we may extend the period of
time to consummate a business combination up to two times, each by
an additional three months (for a total of up to 18 months to
complete a business combination). Pursuant to the terms of our
amended and restated certificate of incorporation and the trust
agreement to be entered into between us and Continental Stock
Transfer & Trust Company on the date of this prospectus, in
order to extend the time available for us to consummate our initial
business combination, our sponsor or its affiliates or designees,
upon five days advance notice prior to the applicable deadline,
must deposit into the trust account $500,000, or up to $575,000 if
the underwriters’ over-allotment option is exercised in full
($0.10 per share in either case) on or prior to the date of the
applicable deadline, for each three month extension (or up to an
aggregate of $1,000,000 (or up to $1,150,000 if the
underwriters’ over-allotment option is exercised in full), or
$0.20 per share, if we extend for the full six
months).
(4)
The amount of
proceeds not held in trust will remain constant at approximately
$500,000 even if the over-allotment is exercised.
(5)
These are estimates
only. Our actual expenditures for some or all of these items may
differ from the estimates set forth herein. For example, we may
incur greater legal and accounting expenses than our current
estimates in connection with negotiating and structuring our
initial business combination based upon the level of complexity of
that business combination. We do not anticipate any change in our
intended use of proceeds, other than fluctuations among the current
categories of allocated expenses, which fluctuations, to the extent
they exceed current estimates for any specific category of
expenses, would be deducted from our excess working
capital.
30
Our
sponsor has committed to purchase the 225,000 private placement
units from us for a purchase price of $2,250,000 on a private
placement basis simultaneously with the consummation of this
offering. Our sponsor has also agreed that if the over-allotment
option is exercised by the underwriters in full or in part, it will
purchase from us up to an additional 18,750 private placement units
at a price of $10.00 per unit in an amount necessary to maintain in
the trust account at $10.00 per unit sold to the public in this
offering. These additional private placement units will be
purchased in a private placement that will occur simultaneously
with the purchase of units resulting from the exercise of the
over-allotment option. The private placement units are identical to
the units being sold in this offering, subject to certain limited
exceptions as described elsewhere in this prospectus. All of the
proceeds we receive from these purchases will be placed in the
trust account described below.
$50,000,000,
or $57,500,000 if the over-allotment option is exercised in full,
of net proceeds of this offering and the sale of the private
placement units will be placed in a U.S.-based trust account at
[●], maintained by Continental Stock Transfer & Trust
Company, New York, New York, as trustee. The funds held in trust
will be invested 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 the conditions of paragraph (d) under
Rule 2a-7 promulgated under the Investment Company Act which invest
only in direct U.S. government treasury obligations, so that we are
not deemed to be an investment company under the Investment Company
Act. Except with respect to interest earned on the funds held in
the trust account that may be released to us to pay our franchise
and income tax obligations, the proceeds will not be released from
the trust account until the earlier of the completion of a business
combination or our redemption of 100% of the outstanding public
shares if we have not completed a business combination in the
required time period. The proceeds held in the trust account may be
used as consideration to pay the sellers of a target business with
which we complete a business combination. Any amounts not paid as
consideration to the sellers of the target business may be used to
finance operations of the target business.
The
payment to our sponsor of a monthly fee of an aggregate of up to
$10,000 is for general and administrative services including office
space, utilities and secretarial support. This arrangement is being
agreed to by our sponsor for our benefit and is not intended to
provide our sponsor or affiliated officers and directors with
compensation in lieu of a salary. This arrangement will terminate
upon completion of our initial business combination or the
distribution of the trust account to our public stockholders. Other
than the up to $10,000 per month fee and the repayment of loans
from our sponsor (none of which payments will be made from the
proceeds of this offering and the sale of the private placement
units held in the trust account prior to the completion of our
initial business combination), no compensation of any kind will be
paid to our sponsor, officers, directors or any of their respective
affiliates, for services rendered to us prior to or in connection
with the consummation of our initial business combination
(regardless of the type of transaction that it is). However, such
entity and individuals will receive 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. Our audit committee will
review and approve all reimbursements and payments made to our
sponsor, officers, directors or our or their respective affiliates,
with any interested director abstaining from such review and
approval. There is no limit on the amount of such expenses
reimbursable by us; provided, however, that to the extent such
expenses exceed the available proceeds not deposited in the trust
account, such expenses would not be reimbursed by us unless we
consummate an initial business combination. Since the role of
present management after a business combination is uncertain, we
have no ability to determine what remuneration, if any, will be
paid to those persons after a business combination.
Regardless
of whether the over-allotment option is exercised in full, the net
proceeds from this offering available to us out of trust for our
working capital requirements in searching for a business
combination will be approximately $500,000. We intend to use the
proceeds for miscellaneous expenses such as paying fees to
consultants to assist us with our search for a target business and
for director and officer liability insurance premiums, with the
balance being held in reserve in the event due diligence, legal,
accounting and other expenses of structuring and negotiating
business combinations exceed our estimates, as well as for
reimbursement of any out-of-pocket expenses incurred by our
sponsor, officers and directors in connection with activities on
our behalf as described below.
The
allocation of the net proceeds available to us outside of the trust
account represents our best estimate of the intended uses of these
funds. In the event that our assumptions prove to be inaccurate, we
may reallocate some of such proceeds within the above described
categories. If our estimate of the costs of undertaking in-depth
due diligence and negotiating a business combination is less than
the actual amount necessary to do so, we may be required to raise
additional capital, the amount, availability and cost of which is
currently unascertainable. In this event, we could seek such
additional capital through loans or additional investments from
members of our management team, but such members of our management
team are not under any obligation to advance funds to, or invest
in, us.
We may
use substantially all of the net proceeds of this offering and the
sale of the private placement units, including the funds held in
the trust account, to acquire a target business and to pay our
expenses relating thereto. To the extent that our capital stock is
used in whole or in part as consideration to effect a business
combination, the proceeds held in the trust account which are not
used to consummate a business combination (including to pay
converting stockholders as described herein) will be disbursed to
the combined company and will, along with any other net proceeds
not expended, be used as working capital to finance the operations
of the target business. Such working capital funds could be used in
a variety of ways including continuing or expanding the target
business’s operations, for strategic acquisitions and for
marketing, research and development of existing or new
products.
31
To the
extent we are unable to consummate a business combination, we will
pay the costs of liquidation from our remaining assets outside of
the trust account. If such funds are insufficient, A/Z Property has
agreed to pay the funds necessary to complete such liquidation
(currently anticipated to be no more than approximately $15,000)
and has agreed not to seek repayment for such
expenses.
As of
the date of this prospectus, our sponsor and Chief Executive
Officer have loaned us an aggregate of $100,000 which was used to
pay a portion of the expenses of this offering referenced in the
line items above for the SEC registration fee, FINRA filing fee,
the non-refundable portion of the Nasdaq listing fee and a portion
of the legal and audit fees and expenses. The loans will be payable
without interest on the consummation of this offering. The loans
will be repaid out of the proceeds of this offering and the sale of
the private placement units available to us for payment of offering
expenses.
We
believe that, upon consummation of this offering, we will have
sufficient available funds to operate for the next 12
months
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), assuming that a business combination
is not consummated during that time. However, if necessary, in
order to meet our working capital needs following the consummation
of this offering, 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 private units at a
price of $10.00 per unit
(which, for example, would result in the holders being issued
165,000 shares of common stock if $1,500,000 of notes were so
converted since the 150,000 rights included in such units would
result in the issuance of 15,000 shares upon the closing of our
business combination, as well as 75,000 warrants to purchase 75,000
shares). The units would be
identical to the private placement units. If we do not complete a
business combination, the loans will be forgiven.
A
public stockholder will be entitled to receive funds from the trust
account (including interest earned on his, her or its portion of
the trust account to the extent not previously released to us) only
in the event of (i) our redemption of 100% of the outstanding
public shares if we have not completed a business combination in
the required time period, (ii) if that public stockholder converts
such shares, or sells such shares to us in a tender offer, in
connection with a business combination which we consummate or (iii)
we seek to amend any provisions of our amended and restated
certificate of incorporation that would restrict our public
stockholders from converting or selling their shares to us in
connection with a business combination or affect the substance or
timing of our obligation to redeem 100% of our public shares if we
do not complete a business combination within 12
months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time). This redemption right shall apply in
the event of the approval of any such amendment to our amended and
restated certificate of incorporation, whether proposed by our
sponsor, any executive officer, director or director nominee, or
any other person. In no other circumstances will a public
stockholder have any right or interest of any kind to or in the
trust account.
32
DIVIDEND POLICY
We have
not paid any cash dividends on our common stock to date and do not
intend to pay cash dividends prior to the completion of an initial
business combination. The payment of cash dividends in the future
will be dependent upon our revenues and earnings, if any, capital
requirements and general financial condition subsequent to
completion of a business combination. The payment of any dividends
subsequent to a business combination will be within the discretion
of our board of directors at such time. It is the present intention
of our board of directors to retain all earnings, if any, for use
in our business operations and, accordingly, our board of directors
does not anticipate declaring any dividends in the foreseeable
future. In addition, our board of directors is not currently
contemplating and does not anticipate declaring any stock dividends
in the foreseeable future, except if we increase the size of the
offering pursuant to Rule 462(b) under the Securities Act, in which
case we will effect a stock dividend immediately prior to the
consummation of the offering in such amount as to maintain the
ownership of our stockholders prior to this offering at 20% of our
issued and outstanding shares of our common stock upon the
consummation of this offering (excluding the shares of common stock
underlying the private placement units and any units purchased in
this offering). Further, if we incur any indebtedness, our ability
to declare dividends may be limited by restrictive covenants we may
agree to in connection therewith.
33
DILUTION
The
difference between the public offering price per share of common
stock, assuming no value is attributed to the warrants included in
the units we are offering pursuant to this prospectus or the
warrants contained in the private placement units, and the pro
forma net tangible book value per share of our common stock after
this offering, constitutes the dilution to investors in this
offering. Such calculation does not reflect any dilution associated
with the sale and exercise of warrants, including the warrants
contained in the private placement units, which would cause the
actual dilution to the public stockholders to be higher,
particularly where a cashless exercise is utilized. Net tangible
book value per share is determined by dividing our net tangible
book value, which is our total tangible assets less total
liabilities (including the value of common stock which may be
redeemed for cash), by the number of outstanding shares of our
common stock.
At
September 30, 2017, our net tangible book value was $(67,530), or
approximately $(0.05) per share of common stock. In September 2017,
1,437,500 shares were sold prior to the units being offered by this
prospectus for $25,000. The 1,437,500 founder’s shares
include an aggregate of up to 187,500 shares subject to forfeiture
by the initial stockholder to the extent that the
underwriters’ over-allotment is not exercised in full or in
part, so that the initial stockholder, together with the officers
and directors of the company will own, 20% of the company’s
issued and outstanding shares after the proposed offering. The
effect of the issuance of the founder’s shares and the
receipt of the $25,000 results in a net tangible book value before
this offering of $(0.05) assuming the over-allotment option has not
been exercised and an aggregate of 187,500 founder’s shares
have been forfeited as a result thereof. For purposes of the
dilution calculation, in order to present the maximum estimated
dilution as a result of this offering, we have assumed (i) the
issuance of 0.1 of a share for each right outstanding, as such
issuance will occur upon a business combination without payment of
additional consideration and (ii) the number of shares included in
the units offered hereby will be deemed to be 5,500,000 (consisting
of 5,000,000 shares of common stock included in the units we
are offering by this prospectus and 500,000 shares for the
outstanding rights), and the price per share in this offering will
be deemed to be $9.09. After giving effect to the sale of
5,500,000 shares of common stock included in the units
we are offering by this prospectus, the sale of the private
placement units, the sale of the founder’s shares and the
deduction of underwriting commissions and estimated expenses of
this offering, our pro forma net tangible book value at September
30, 2017 would have been $5,000,003 or $1.96 per
share, representing an immediate increase in net tangible book
value (as decreased by the value of the 4,552,391 shares of common
stock that may be redeemed for cash and assuming no exercise of the
underwriters’ over-allotment option) of $2.01
per share to our initial stockholder as of the date of this
prospectus and an immediate dilution of $7.13 per
share or 78.4% to our public stockholders not
exercising their redemption rights. The dilution to new investors
if the underwriters exercise their over-allotment option in full
would be an immediate dilution of $7.33 per share or
80.6%.
The
following table illustrates the dilution to the new investors on a
per-share basis, assuming no value is attributed to the warrants
included in the units or the private placement units:
Public offering
price
|
|
$9.09
|
Net tangible book
value before this offering (1)
|
$(0.05)
|
|
Increase
attributable to public stockholders and private sales
|
2.01
|
|
Pro forma net
tangible book value after this offering and the sale of the private
placement units
|
|
1.96
|
|
|
|
Dilution to public
stockholders
|
|
$7.13
|
Percentage of
dilution to public stockholders
|
|
78.4%
|
The
following table sets forth information with respect to our existing
stockholders and the public stockholders:
|
|
Shares Purchased
|
Total
Consideration
|
Average Price
|
|
|
Number(1)
|
Percentage
|
Amount
|
Percentage
|
per
Share
|
Existing
stockholders
|
1,250,000
|
17.6%
|
$25,000
|
0.1%
|
$0.02
|
Shares underlying
private placement units
|
247,500(2)
|
3.5%
|
2,250,000
|
4.3%
|
9.09
|
Underwriters
shares
|
100,000
|
1.4%
|
-
|
0.0%
|
-
|
Public
stockholders
|
5,500,000(3)
|
77.5%
|
50,000,000
|
95.6%
|
9.09
|
|
7,097,500
|
100.0%
|
$52,275,000
|
100.0%
|
|
__________
(1)
Assumes the
over-allotment option has not been exercised and an aggregate of
187,500 founder’s shares have been forfeited as a result
thereof.
(2)
Assumes the
issuance of an additional 22,500 shares underlying the private
placement rights.
(3)
Assumes the
issuance of an additional 500,000 shares underlying the rights
issued to public stockholders.
34
The pro
forma net tangible book value after the offering is calculated as
follows:
Numerator:
|
|
Net tangible book
value before the offering
|
$(67,530)
|
Net proceeds from
this offering and sale of the private placement units
|
50,500,000
|
Plus: Offering
costs accrued for and paid in advance, excluded from tangible book
value before this offering
|
91,343
|
Plus: Proceeds from
sale of unit purchase option to underwriters
|
100
|
Less: Proceeds held
in trust subject to redemption
|
(45,523,910)
|
|
$5,000,003
|
Denominator:
|
|
Shares of common
stock outstanding prior to this offering
|
1,250,000
|
Shares of common
stock included in private placement units
|
225,000
|
Shares
of common stock underlying rights included in private placement
units
|
22,500
|
Underwriters shares
of common stock
|
100,000
|
Shares of common
stock included in the units offered
|
5,000,000
|
Shares of
common stock underlying rights included in the units
offered
|
500,000
|
Less: Shares
subject to conversion/tender
|
(4,552,391)
|
|
2,545,109
|
__________
(1)
Assumes the
over-allotment option has not been exercised and an aggregate of
187,500 founder’s shares have been forfeited as a result
thereof.
35
CAPITALIZATION
The
following table sets forth our capitalization at September 30, 2017
and as adjusted to give effect to the sale of our 5,000,000 units
in this offering for $50,000,000 (or $10.00 per unit) and the sale
of 225,000 private placement units for $2,250,000 (or $10.00 per
unit) and the application of the estimated net proceeds derived
from the sale of such securities:
|
September 30,
2017
|
|
|
Actual
|
As
Adjusted(1)
|
Note payable to
related parties(2)
|
$100,000
|
-
|
Common stock, $.001
par value, -0- and 4,552,391 shares which are subject to possible
conversion/tender(3)
|
|
$45,523,910
|
|
|
|
Stockholders’
equity:
|
|
|
Common stock, $.001
par value, 10,000,000 shares authorized(5); 1,437,500 shares
issued and outstanding, actual; 2,022,609 shares(4) issued and
outstanding (excluding 4,552,391 shares subject to possible
conversion/tender), as adjusted
|
1,438
|
2,023
|
Additional paid-in
capital
|
23,562
|
4,999,167
|
Accumulated
deficit
|
(1,187)
|
(1,187)
|
Total
stockholders’ equity:
|
23,813
|
5,000,003
|
Total
capitalization
|
$123,813
|
$50,523,913
|
__________
(1)
Includes the
$2,250,000 we will receive from the sale of the private placement
units.
(2)
Note payable to
related parties in the amount of $100,000 in the aggregate to our
sponsor and our Chief Executive Officer. The notes are not-interest
bearing and is payable at the closing of the offering.
(3)
Upon the
consummation of our initial business combination, we will provide
our stockholders with the opportunity to convert or sell their
public shares for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account as of two
business days prior to the consummation of the initial business
combination, including interest less franchise and income taxes
payable, subject to the limitations described herein whereby our
net tangible assets will be maintained at a minimum of $5,000,001
upon consummation of our initial business combination.
(4)
Assumes the
over-allotment option has not been exercised and an aggregate of
187,500 founder’s shares have been forfeited by our sponsor
as a result thereof.
(5)
As of September
30, 2017, we are authorized to issue 10,000,000 shares of common
stock, par value $.001. The "as adjusted" column reflects, as of
the date of this prospectus, that we are authorized to issue
100,000,000 shares of common stock, par value
$.001.
36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
We were
formed on September 18, 2017 for the purpose of entering into a
merger, share exchange, asset acquisition, stock purchase,
recapitalization, reorganization or other similar business
combination with one or more target businesses. Our efforts to
identify a prospective target business will not be limited to a
particular industry or geographic region, although we intend to
initially focus our search for target businesses in the senior
housing and care industry in the United States. We intend to
utilize cash derived from the proceeds of this offering and the
sale of the private placement units, our securities, debt or a
combination of cash, securities and debt, in effecting a business
combination. The issuance of additional shares of common stock or
preferred stock:
●
may significantly
reduce the equity interest of our stockholders;
●
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;
●
will likely cause a
change in control if a substantial number of our 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 most
likely will also result in the resignation or removal of our
present officers and directors; and
●
may adversely
affect prevailing market prices for our securities.
Similarly,
if we issue debt securities, it could result in:
●
default and
foreclosure on our assets if our operating revenues after a
business combination are insufficient to pay our debt
obligations;
●
acceleration of our
obligations to repay the indebtedness even if we have made all
principal and interest payments when due if the debt security
contains covenants that required the maintenance of certain
financial ratios or reserves and we breach any such covenant
without a waiver or renegotiation of that covenant;
●
our immediate
payment of all principal and accrued interest, if any, if the debt
security is payable on demand; and
●
our inability to
obtain additional financing, if necessary, if the debt security
contains covenants restricting our ability to obtain additional
financing while such security is outstanding.
We have
neither engaged in any operations nor generated any revenues to
date. Our entire activity since inception has been to prepare for
our proposed fundraising through an offering of our equity
securities.
We are
an emerging growth company as defined in the JOBS Act. 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.
Liquidity and Capital Resources
As
indicated in the accompanying financial statements, at September
30, 2017, we had $82,470 in cash and a working capital deficit of
$67,530. Further, we have incurred and expect to continue to incur
significant costs in pursuit of our financing and acquisition
plans. Management’s plans to address this uncertainty through
this offering are discussed above. We cannot assure you that our
plans to raise capital or to consummate an initial business
combination will be successful. These factors, among others, raise
substantial doubt about our ability to continue as a going
concern.
Our
liquidity needs have been satisfied to date through receipt of
$25,000 from the sale of the founder’s shares. In addition,
as of the date of this prospectus, our sponsor has loaned to us a
total of $75,000 (of a total of up to $150,000 that we may draw
down) to be used for a portion of the expenses of this offering.
Also, as of the date of this prospectus, our Chief Executive
Officer has loaned to us $25,000 to be used for a portion of the
expenses of this offering. These loans are non-interest bearing,
unsecured and are due at the earlier of December 31, 2018 or the
closing of this offering. The loans will be repaid upon the closing
of this offering out of the $500,000 of offering proceeds that has
been allocated to the payment of offering expenses. We estimate
that the net proceeds from (i) the sale of the units in this
offering, after deducting offering expenses of approximately
$500,000 and underwriting discounts and commissions of $1.25
million (or approximately $1.44 million if the over-allotment
option is exercised in full), and (ii) the sale of the private
placement units for an aggregate purchase price of $2.25 million,
or approximately $2.44 million if the over-allotment option is
exercised in full, will be $50.5 million (or $58.0 million if the
over-allotment option is exercised in full). Of this amount, $50.0
million (or $57.5 million if the over-allotment option is exercised
in full) will be held in the trust account. The remaining $0.5
million in either case will not be held in trust.
37
We may
use substantially all of the net proceeds of this offering and the
sale of the private placement units, including the funds held in
the trust account, to acquire a target business and to pay our
expenses relating thereto. To the extent that our capital stock is
used in whole or in part as consideration to effect a business
combination, the remaining proceeds held in the trust account as
well as any other net proceeds not expended will be used as working
capital to finance the operations of the target business. Such
working capital funds could be used in a variety of ways including
continuing or expanding the target business’s operations, for
strategic acquisitions and for marketing, research and development
of existing or new products. Such funds could also be used to repay
any operating expenses or finders’ fees which we had incurred
prior to the completion of our business combination if the funds
available to us outside of the trust account were insufficient to
cover such expenses.
We
believe that, upon consummation of this offering, the approximate
$0.5 million of net proceeds not held in the trust account will be
sufficient to allow us to operate for at least the next
12 months
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), assuming that a business
combination is not consummated during that time. Over this time
period, we will be using these funds for identifying and evaluating
prospective acquisition candidates, performing business due
diligence on prospective target businesses, traveling to and from
the offices, plants or similar locations of prospective target
businesses, reviewing corporate documents and material agreements
of prospective target businesses, selecting the target business to
acquire and structuring, negotiating and consummating the business
combination. We anticipate that we will incur
approximately:
●
$100,000 of
expenses for the search for target businesses and for the legal,
accounting and other third-party expenses attendant to the due
diligence investigations, structuring and negotiating of a business
combination;
●
$25,000 of expenses
for the due diligence and investigation of a target business by our
officers, directors and sponsor;
●
$75,000 of expenses
in legal and accounting fees relating to our SEC reporting
obligations;
●
$120,000
for the payment of the administrative fee to our sponsor (of an
aggregate of up to $10,000 per month for up to 12
months); and
●
$180,000
for general working capital that will be used for miscellaneous
expenses, general corporate purposes, liquidation obligations and
reserves, including director and officer liability insurance
premiums.
If our
estimates of the costs of undertaking in-depth due diligence and
negotiating an initial business combination are less than the
actual amount necessary to do so, we may have insufficient funds
available to operate our business prior to our initial business
combination. Moreover, we may need to obtain additional financing
either to consummate our initial business combination or because we
become obligated to redeem a significant number of our public
shares upon consummation of our initial business combination, in
which case we may issue additional securities or incur debt in
connection with such business combination. We do not have a maximum
debt leverage ratio or a policy with respect to how much debt we
may incur. The amount of debt we will be willing to incur will
depend on the facts and circumstances of the proposed business
combination and market conditions at the time of the potential
business combination. At this time, we are not party to any
arrangement or understanding with any third party with respect to
raising additional funds through the sale of our securities or the
incurrence of debt. Subject to compliance with applicable
securities laws, we would only consummate such financing
simultaneously with the consummation of our initial business
combination. In the current economic environment, it has become
especially difficult to obtain acquisition financing. Following our
initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our
obligations.
Related Party Transactions
As of
the date of this prospectus, our sponsor has loaned to us a total
of $75,000 (of a total of up to $150,000 that we may draw down) to
be used for a portion of the expenses of this offering. Also, as of
the date of this prospectus, our Chief Executive Officer has loaned
to us $25,000 to be used for a portion of the expenses of this
offering. These loans are non-interest bearing, unsecured and are
due at the earlier of December 31, 2018 or the closing of this
offering. The loans will be repaid upon the closing of this
offering out of the $500,000 of offering proceeds that has been
allocated to the payment of offering expenses.
38
We are
obligated, commencing on the date of this prospectus, to pay our
sponsor a monthly fee of an aggregate of up to $10,000 for general
and administrative services.
Our
sponsor has committed that it will purchase 225,000 private
placement units, respectively, at $10.00 per unit (for a total
purchase price of $2,250,000) from us. These purchases will take
place on a private placement basis simultaneously with the
consummation of this offering. Our sponsor has also agreed that if
the over-allotment option is exercised by the underwriters in full
or in part, it will purchase from us up to an additional 18,750
private placement units at a price of $10.00 per unit in an amount
necessary to maintain in the trust account at $10.00 per unit sold
to the public in this offering. These additional private placement
units will be purchased in a private placement that will occur
simultaneously with the purchase of units resulting from the
exercise of the over-allotment option. We believe the purchase
price of the private placement units is greater than the fair value
of such units and therefore will not result in any share-based
compensation expense.
We do
not believe we will need to raise additional funds following this
offering in order to meet the expenditures required for operating
our business. However, in order to finance transaction costs in
connection with an intended initial business combination, our
sponsor, officers, directors or their affiliates may, but are not
obligated to, loan us funds as may be required. If we consummate an
initial business combination, we would repay such loaned amounts.
In the event that the initial business combination does not close,
we may use a portion of the working capital held outside the trust
account to repay such loaned amounts, but no proceeds from our
trust account would be used for such repayment. Up to $1,500,000 of
such loans may be convertible into private units of the post
business combination entity at a price of $10.00 per unit at the
option of the lender
(which, for example,
would result in the holders being issued 165,000 shares of common
stock if $1,500,000 of notes were so converted since the 150,000
rights included in such units would result in the issuance of
15,000 shares upon the closing of our business combination, as well
as 75,000 warrants to purchase 75,000
shares). The units would
be identical to the private placement units.
Controls and Procedures
We will
be required to comply with the internal control requirements of the
Sarbanes-Oxley Act for the fiscal year ending December 31, 2018. We
expect to assess the internal controls of our target business or
businesses prior to the completion of our initial business
combination and, if necessary, to implement and test additional
controls as we may determine are necessary in order to state that
we maintain an effective system of internal controls. A target
business may not be in compliance with the provisions of the
Sarbanes-Oxley Act regarding the adequacy of internal controls.
Target businesses we may consider for a business combination may
have internal controls that need improvement in areas such
as:
●
staffing for
financial, accounting and external reporting areas, including
segregation of duties;
●
reconciliation of
accounts;
●
proper
recording of expenses and liabilities in the period to which they
relate;
●
evidence of
internal review and approval of accounting
transactions;
●
documentation of
processes, assumptions and conclusions underlying significant
estimates; and
●
documentation of
accounting policies and procedures.
Because
it will take time, management involvement and perhaps outside
resources to determine what internal control improvements are
necessary for us to meet regulatory requirements and market
expectations for our operation of a target business, we may incur
significant expense in meeting our public reporting
responsibilities, particularly in the areas of designing,
enhancing, or remediating internal and disclosure controls. Doing
so effectively may also take longer than we expect, thus increasing
our exposure to financial fraud or erroneous financing
reporting.
Once
our management’s report on internal controls is complete, we
will retain our independent auditors to audit and render an opinion
on such report when required by Section 404, which requirement we
are exempt from so long as we qualify as an “emerging growth
company,” as defined in Section 2(a) of the Securities Act.
The independent auditors may identify additional issues concerning
a target business’s internal controls while performing their
audit of internal control over financial reporting.
39
Quantitative and Qualitative Disclosures about Market
Risk
The net
proceeds of this offering and the sale of the private placement
units, including amounts in the trust account, will be invested 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. Due to the short-term nature of these investments, we
believe there will be no associated material exposure to interest
rate risk.
Off-Balance Sheet Arrangements; Commitments and Contractual
Obligations; Quarterly Results
As of
the date of this prospectus, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and
did not have any commitments or contractual obligations. No
unaudited quarterly operating data is included in this prospectus
as we have conducted no operations to date.
40
PROPOSED BUSINESS
We are
a blank check company formed pursuant to the laws of the State of
Delaware on September 18, 2017 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. While our
efforts in identifying a prospective target business for our
initial business combination will not be limited to a particular
industry or geographic region, we intend to initially focus our
search on identifying a prospective target business in the senior
housing and care industry in the United States, as described below.
We do not have any specific business combination under
consideration and we have not had any substantive discussions,
formal or otherwise, with respect to such a
transaction.
Business Strategy
The
senior housing and care industry provides both housing and an array
of services to seniors, generally to those over the age of 75. Care
segments are commonly divided into four categories:
●
Independent
Living;
●
Assisted
Living;
●
Memory Care;
and
●
Nursing
Care.
In the
U.S., there currently are approximately 23,400 investment grade
senior housing and care properties containing 3 million units. The
total value of the investment grade senior housing and care
property market is estimated at $372 billion. The average age of
residents in senior housing is approximately in the mid-80s, while
the average move-in age is in the low to mid-80s. The sizes of the
80+ and 85+ populations are expected to increase at a rate of
approximately 1.5%-2% annually during the remainder of the decade.
The latter part of the 2020s is expected to see the beginning of
significant acceleration in this population, with the 80+
population growth rate averaging roughly 4.5% from 2025 through
2029. As such, we believe there are significant opportunities to
acquire senior housing property management companies that are
positioned for growth. These operating companies may have leasehold
and/or fee ownership of senior housing communities.
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 engagements, provide unique insight when identifying
potential business combination opportunities and creating value. We
believe their experience and deep understanding of various markets
in the senior housing and care industry positions us
to obtain access to potential targets in such markets,
frequently in a non-competitive manner and prior to other
parties.
Acquisition Criteria
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:
●
have strong
competitive positions, proven business models, consistent
historical financial performance and attractive growth
prospects;
●
have limited access
to capital markets due to external factors;
●
could benefit from
the substantial expertise, experience and network of our sponsor
and management team, who could assist with, for example, growth
strategy, operations, and the evaluation and integration of
acquisitions;
●
are well positioned
to participate in sector consolidation and would benefit from a
public acquisition currency;
●
would avoid the
potentially onerous terms, such as liquidation preferences, that
are often characteristic of late state private growth financing
rounds; and
●
offer attractive
risk-adjusted returns.
41
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.
Competitive Strengths
We
believe we have the following competitive strengths:
Status as a public company
We
believe our structure will make us an attractive business
combination partner to target businesses. As an existing public
company, we offer a target business an alternative to the
traditional initial public offering through a merger or other
business combination. In this situation, the owners of the target
business would exchange their shares of stock in the target
business for shares of our stock or for a combination of shares of
our stock and cash, allowing us to tailor the consideration to the
specific needs of the sellers. We believe target businesses might
find this method a more certain and cost effective method to
becoming a public company than the typical initial public offering.
In a typical initial public offering, there are additional expenses
incurred in marketing, roadshow and public reporting efforts that
will likely not be present to the same extent in connection with a
business combination with us. Furthermore, once the business
combination is consummated, the target business will have
effectively become public, whereas an initial public offering is
always subject to the underwriters’ ability to complete the
offering, as well as general market conditions, that could prevent
the offering from occurring. Once public, we believe the target
business would then have greater access to capital and an
additional means of providing management incentives consistent with
stockholders’ interests than it would have as a
privately-held company. It can offer further benefits by augmenting
a company’s profile among potential new customers and vendors
and aid in attracting talented employees.
While
we believe that our status as a public company will make us an
attractive business partner, some potential target businesses may
view the inherent limitations in our status as a blank check
company as a deterrent and may prefer to effect a business
combination with a more established entity or with a private
company. These inherent limitations include limitations on our
available financial resources, which may be inferior to those of
other entities pursuing the acquisition of similar target
businesses; the requirement that we seek shareholder approval of a
business combination or conduct a tender offer in relation thereto,
which may delay the consummation of a transaction; and the
existence of our outstanding warrants, which may represent a source
of future dilution.
Financial position
With
funds in the trust account of approximately $50 million (or $57.5
million if the over-allotment option is exercised in full)
available to use for a business combination (assuming no
stockholder seeks conversion of their shares or seeks to sell their
shares to us in a tender offer in relation to such business
combination), we offer a target business a variety of options such
as providing the owners of a target business with shares in a
public company and a public means to sell such shares, providing
capital for the potential growth and expansion of its operations or
strengthening its balance sheet by reducing its debt ratio. Because
we are able to consummate our initial business combination using
our cash, debt or equity securities, or a combination of the
foregoing, we have the flexibility to use the most efficient
combination that will allow us to tailor the consideration to be
paid to the target business to fit its needs and desires. However,
since we have no specific business combination under consideration,
we have not taken any steps to secure third party financing if we
are forced to use a significant portion of such funds for
converting or tendering stockholders and there can be no assurance
that it will be available to us.
Offering Structure
Unlike other blank check companies that sell units comprised of
shares of common stock and warrants to purchase a full share of
common stock in their initial public offerings, we are selling
units comprised of one share of common stock, one-half of one
warrant and one right which entitles the holder thereof to receive
one-tenth (1/10) of one share of common stock upon consummation of
our initial business combination. Our management believes that
investors in similarly structured blank check offerings, and those
likely to invest in this offering, have come to expect the units of
such companies to include one share of common stock and another
security which would allow the holders to acquire additional shares
of common stock. Without the ability to acquire such additional
shares of common stock, our management believes the investors would
not be willing to purchase units in such companies’ initial
public offerings. Accordingly, because the number of shares
ordinarily issuable upon exercise of the warrants found in the
typical structure of other blank check initial public offerings is
lessened in our case (since such warrants most often entitle the
holder thereof to receive a full share of common stock as opposed
to the one-tenth (1/10) of one share the rights entitle a holder to
receive and the one-half of one share of common stock that each
warrant holder is entitled to purchase), although not completely
eliminated, our management believes we will be viewed more
favorably by potential target companies when determining which
company to engage in a business combination with. However, our
management may be incorrect in this belief.
Our Management Team
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 Chairman,
President and Chief Executive Officer, Richard Ackerman, has over
35 years of real estate experience with 18 years in senior housing.
Prior to starting BRP, an opportunistic real estate investment firm
founded in 2004 that has invested in and managed over $800 million
in assets since its formation, Mr. Ackerman was Head of the Los
Angeles office for Apollo, a global private equity firm. Our Chief
Financial Officer, Lori Wittman, also has over 35 years of real
estate experience and was most recently the Chief Financial Officer
of CCP, a public healthcare real estate investment trust with a
diversified portfolio of triple-net leased properties focused on
the post-acute sector, which merged with Sabra Healthcare REIT,
Inc. Prior to CCP, Ms. Wittman was Senior Vice President of Capital
Markets and Investor Relations at Ventas, a leading real estate
investment trust with a diverse portfolio of more than 1,600 assets
in the United States, Canada and the United Kingdom consisting of
seniors housing communities, medical office buildings, skilled
nursing facilities, hospitals and other properties. Our Chief
Investment Officer and Corporate Secretary, Bennett Kim, has over
20 years of real estate experience and worked with Mr. Ackerman at
Apollo. Through BRP, Messrs. Ackerman and Kim are currently
developing $200 million of senior housing in Florida, which
consists of independent living, assisted living and memory care.
Also, our independent director nominees, Richard
Birdoff, Michael Fong, Stuart
Koenig, Albert G. Rex and Troy T. Taylor, have significant
experience in private investments, ownership and management of
businesses of many types, large and small.
42
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 senior
housing and care industry in the United States; however, we may
decide to enter into an initial business combination with a target
business that is not connected to the senior housing and care
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 senior housing and care industry. We believe
this expertise and network of contacts will allow us to generate a
number of acquisition opportunities. We believe there are a number
of high quality senior housing businesses with adequate scale to be
attractive public companies.
For
more information regarding our management team’s experience,
please see “Management” beginning on page
56.
Effecting a Business Combination
General
We are
not presently engaged in, and we will not engage in, any
substantive commercial business for an indefinite period of time
following this offering. We intend to utilize cash derived from the
proceeds of this offering and the sale of the private placement
units, our capital stock, debt or a combination of these in
effecting a business combination which has not yet been identified.
Accordingly, investors in this offering are investing without first
having an opportunity to evaluate the specific merits or risks of
any one or more business combinations. A business combination may
involve the acquisition of, or merger with, a company which does
not need substantial additional capital but which desires to
establish a public trading market for its shares, while avoiding
what it may deem to be adverse consequences of undertaking a public
offering itself. These include time delays, significant expense,
loss of voting control and compliance with various federal and
state securities laws. In the alternative, we may seek to
consummate a business combination with a company that may be
financially unstable or in its early stages of development or
growth. While we may seek to effect simultaneous business
combinations with more than one target business, we will probably
have the ability, as a result of our limited resources, to effect
only a single business combination.
We will
have until 12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) to consummate our
initial business combination. If we are unable to consummate our
initial business combination within the applicable time period, we
will, as promptly as reasonably possible but not more than ten
business days thereafter, redeem the public shares for a pro rata
portion of the funds held in the trust account and 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 each case to our obligations
under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
We Have Not Identified a Target Business
To
date, we have not selected any target businesses on which to
concentrate our search for a business combination. We do not have
any specific business combination under consideration and we have
not (nor has anyone on our behalf), directly or indirectly,
contacted any prospective target business with respect to such a
transaction. Additionally, we have not engaged or retained any
agent or other representative to identify or locate such companies.
As a result, we cannot assure you that we will be able to locate a
target business or that we will be able to engage in a business
combination with a target business on favorable terms or at
all.
Subject
to our officers’ and directors’ pre-existing fiduciary
duties and the limitation that a target business have a fair market
value of at least 80% of the balance in the trust account
(excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our
initial business combination, as described below in more detail, we
will have virtually unrestricted flexibility in identifying and
selecting a prospective acquisition candidate. Except for the
general criteria and guidelines set forth above under the caption
“Business Strategy,” we have not established any other
specific attributes or criteria (financial or otherwise) for
prospective target businesses. Accordingly, there is no basis for
investors in this offering to evaluate the possible merits or risks
of the target business with which we may ultimately complete a
business combination. To the extent we effect a business
combination with a financially unstable company or an entity in its
early stage of development or growth, including entities without
established records of sales or earnings, we may be affected by
numerous risks inherent in the business and operations of
financially unstable and early stage or potential emerging growth
companies. Although our management will endeavor to evaluate the
risks inherent in a particular target business, we cannot assure
you that we will properly ascertain or assess all significant risk
factors.
43
Our Acquisition Process
In
evaluating a prospective target business, we expect to conduct a
thorough due diligence review that will encompass, among other
things, meetings with incumbent management and employees, document
reviews, inspection of facilities, as well as a review of financial
and other information that will be made available to us. We also
expect to utilize our management team’s operational and
capital planning experience.
We are
not prohibited from pursuing an initial business combination with a
company that is affiliated with our sponsor, officers or directors.
In the event we seek to complete our initial business combination
with a company that is affiliated with our sponsor, officers or
directors, we, or a committee of independent directors, 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, that our initial
business combination is fair to our company from a financial point
of view.
Sources of Target Businesses
While
we have not yet identified any acquisition candidates, we believe
based on our management’s business knowledge and past
experience that there are numerous acquisition candidates. We
expect that our principal means of identifying potential target
businesses will be through the extensive contacts and relationships
of our officers and directors. While our officers and directors are
not required to commit any specific amount of time in identifying
or performing due diligence on potential target businesses, our
officers and directors believe that the relationships they have
developed over their careers and their access to their contacts and
resources will generate a number of potential business combination
opportunities that will warrant further investigation. We also
anticipate that target business candidates will be brought to our
attention from various unaffiliated sources, including investment
bankers, venture capital funds, private equity funds, leveraged
buyout funds, management buyout funds and other members of the
financial community. Target businesses may be brought to our
attention by such unaffiliated sources as a result of being
solicited by us through calls or mailings. These sources may also
introduce us to target businesses they think we may be interested
in on an unsolicited basis, since many of these sources will have
read this prospectus and know what types of businesses we are
targeting. Our officers and directors, as well as their affiliates,
may also bring to our attention target business candidates that
they become aware of through their business contacts as a result of
formal or informal inquiries or discussions they may have, as well
as attending trade shows or conventions. They must present to us
all target business opportunities that have a fair market value of
at least 80% of the assets held in the trust account (excluding
taxes payable on the income accrued in the trust account) at the
time of the agreement to enter into the initial business
combination, subject to any pre-existing fiduciary or contractual
obligations. While we do not presently anticipate engaging the
services of professional firms or other individuals that specialize
in business acquisitions on any formal basis, we may engage these
firms or other individuals in the future, in which event we may pay
a finder’s fee, consulting fee or other compensation to be
determined in an arm’s length negotiation based on the terms
of the transaction. In no event, however, will our sponsor,
officers, directors or their respective affiliates be paid any
finder’s fee, consulting fee or other compensation prior to,
or for any services they render in order to effectuate, the
consummation of an initial business combination (regardless of the
type of transaction that it is) other than the monthly
administrative services fee of up to $10,000, the repayment of any
loans from our sponsor, officers and directors for working capital
purposes and reimbursement of any out-of-pocket expenses. Our audit
committee will review and approve all reimbursements and payments
made to our sponsor, officers, directors or our or their respective
affiliates, with any interested director abstaining from such
review and approval. We have no present intention to enter into a
business combination with a target business that is affiliated with
any of our officers, directors or sponsor. However, we are not
restricted from entering into any such transactions and may do so
if (i) such transaction is approved by a majority of our
disinterested independent directors and (ii) we 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, that the business
combination is fair to our unaffiliated stockholders from a
financial point of view.
Selection of a Target Business and Structuring of a Business
Combination
Subject
to our officers’ and directors’ pre-existing fiduciary
duties and the limitations that a target business have a fair
market value of at least 80% of the balance in the trust account
(excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our
initial business combination, as described below in more detail,
and that we must acquire a controlling interest in the target
business, our management will have virtually unrestricted
flexibility in identifying and selecting a prospective target
business. Except for the general criteria and guidelines set forth
above under the caption “Acquisition Criteria,” we have
not established any specific attributes or criteria (financial or
otherwise) for prospective target businesses. In evaluating a
prospective target business, our management may consider a variety
of factors, including one or more of the following:
●
financial condition
and results of operation;
44
●
growth
potential;
●
brand recognition
and potential;
●
experience and
skill of management and availability of additional
personnel;
●
capital
requirements;
●
competitive
position;
●
barriers to
entry;
●
stage of
development of the products, processes or services;
●
existing
distribution and potential for expansion;
●
degree of current
or potential market acceptance of the products, processes or
services;
●
proprietary aspects
of products and the extent of intellectual property or other
protection for products or formulas;
●
impact of
regulation on the business;
●
regulatory
environment of the industry;
●
costs associated
with effecting the business combination;
●
industry
leadership, sustainability of market share and attractiveness of
market industries in which a target business participates;
and
●
macro competitive
dynamics in the industry within which the company
competes.
These
criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular business combination will be based,
to the extent relevant, on the above factors as well as other
considerations deemed relevant by our management in effecting a
business combination consistent with our business objective. In
evaluating a prospective target business, we will conduct an
extensive due diligence review which will encompass, among other
things, meetings with incumbent management and inspection of
facilities, as well as review of financial and other information
which is made available to us. This due diligence review will be
conducted either by our management or by unaffiliated third parties
we may engage, although we have no current intention to engage any
such third parties.
The
time and costs required to select and evaluate a target business
and to structure and complete the business combination can only be
estimated at this time. Any costs incurred with respect to the
identification and evaluation of a prospective target business with
which a business combination is not ultimately completed will
result in a loss to us and reduce the amount of capital available
to otherwise complete a business combination.
Fair Market Value of Target Business
The
target business or businesses that we acquire must collectively
have a fair market value equal to at least 80% of the balance of
the funds in the trust account (excluding taxes payable on the
income earned on the trust account) at the time of the execution of
a definitive agreement for our initial business combination,
although we may acquire a target business whose fair market value
significantly exceeds 80% of the trust account
balance.
45
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 50% or more 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. In
order to consummate such an acquisition, we may issue a significant
amount of our debt or equity securities to the sellers of such
businesses and/or seek to raise additional funds through a private
offering of debt or equity securities. Since we have no specific
business combination under consideration, we have not entered into
any such fund raising arrangement and have no current intention of
doing so. The fair market value of the target 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). 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 to independently determine that the target
business has a sufficient fair market value, we will obtain an
opinion from an unaffiliated, 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 will
not be required to obtain an opinion from an investment banking
firm as to the fair market value if our board of directors
independently determines that the target business complies with the
80% threshold.
Lack of Business Diversification
We may
seek to effect a business combination with more than one target
business, and there is no required minimum valuation standard for
any target at the time of such acquisition. We expect to complete
only a single business combination, although this process may
entail the simultaneous acquisitions of several operating
businesses. Therefore, at least initially, the prospects for our
success may be entirely dependent upon the future performance of a
single business operation. Unlike other entities which may have the
resources to complete several business combinations of entities
operating in multiple industries or multiple areas of a single
industry, it is probable that we will not have the resources to
diversify our operations or benefit from the possible spreading of
risks or offsetting of losses. By consummating a business
combination with only a single entity, our 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, and
●
result in our
dependency upon the performance of a single operating business or
the development or market acceptance of a single or limited number
of products, processes or services.
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 acquisitions,
which may make it more difficult for us, and delay our ability, to
complete the business combination. With multiple acquisitions, 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 in a
single operating business.
Limited Ability to Evaluate the Target Business’s
Management
Although
we intend to scrutinize the management of a prospective target
business when evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of the target
business’s management will prove to be correct. In addition,
we cannot assure you that the future management will have the
necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of our officers and
directors, if any, in the target business following a business
combination cannot presently be stated with any certainty. While it
is possible that some of our key personnel will remain in senior
management or advisory positions with us following a business
combination, it is unlikely that they will devote their full time
efforts to our affairs subsequent to a business combination.
Moreover, they would only be able to remain with the company after
the consummation of a business combination if they are able to
negotiate employment or consulting agreements in connection with
the business combination. Such negotiations would take place
simultaneously with the negotiation of the business combination and
could provide for them 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.
While the personal and financial interests of our key personnel may
influence their motivation in identifying and selecting a target
business, their ability to remain with the company after the
consummation of a business combination will not be the determining
factor in our decision as to whether or not we will proceed with
any potential business combination. Additionally, we cannot assure
you that our officers and directors will have significant
experience or knowledge relating to the operations of the
particular target business.
46
Following
a business combination, we may seek to recruit additional managers
to supplement the incumbent management of the target business. We
cannot assure you that we will have the ability to recruit
additional managers, or that any such additional managers we do
recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve an Initial
Business Combination
In
connection with any proposed 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 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 herein. If we determine
to engage in a tender offer, such tender offer will be structured
so that each stockholder may tender any or all of his, her or its
shares rather than some pro rata portion of his, her or its shares.
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. 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
combination 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 Rule 13e-4 and
Regulation 14E of the Exchange Act which regulate issuer tender
offers. 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, if we seek stockholder
approval, a majority of the outstanding shares of common stock
voted are voted in favor of the business combination.
We
chose our net tangible asset threshold of $5,000,001 to ensure that
we would avoid being subject to Rule 419 promulgated under the
Securities Act of 1933, as amended. However, if we seek to
consummate an initial business combination with a target business
that imposes any type of working capital closing condition or
requires us to have a minimum amount of funds available from the
trust account upon consummation of such initial business
combination, we may need to have more than $5,000,001 in net
tangible assets upon consummation and this may force us to seek
third party financing which may not be available on terms
acceptable to us or at all. As a result, we may not be able to
consummate such initial business combination and we may not be able
to locate another suitable target within the applicable time
period, if at all. Public stockholders may therefore have to wait
12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) in order to be able to
receive a pro rata share of the trust account.
Our
sponsor, officers and directors have agreed (1) to vote any shares
of common stock owned by them in favor of any proposed business
combination, including the founder’s shares, (2) not to
convert any shares of common stock in connection with a stockholder
vote to approve a proposed initial business combination and (3) not
sell any shares of common stock in any tender in connection with a
proposed initial business combination. As a result, we would need
only 1,712,501, or approximately 34.3%, of the 5,000,000 public
shares sold in this offering to be voted in favor of a transaction
in order to have our initial business combination approved
(assuming the over-allotment option is not exercised and all shares
were present and entitled to vote at the meeting, and that the
100,000 shares to be issued to EarlyBirdCapital upon the
consummation of this offering are voted in favor of the
transaction).
None of
our officers, directors, sponsor or their affiliates has indicated
any intention to purchase units or shares of common stock in this
offering or from persons in the open market or in private
transactions. However, if we hold a meeting to approve a proposed
business combination and a significant number of stockholders vote,
or indicate an intention to vote, against such proposed business
combination, our officers, directors, sponsor or their affiliates
could make such purchases in the open market or in private
transactions in order to influence the vote. Notwithstanding the
foregoing, our officers, directors, sponsor and their affiliates
will not make purchases of shares of common stock if the purchases
would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act,
which are rules designed to stop potential manipulation of a
company’s stock.
47
Conversion Rights
At any
meeting called to approve an initial business combination, 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 as of two business days prior to the
consummation of the initial business combination, less any taxes
then due but not yet paid (which taxes may be paid only from the
interest earned on the funds in the trust account). Alternatively,
we may provide our public stockholders with the opportunity to sell
their shares of our common stock to us through 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, less any taxes then due but not yet
paid.
Our
stockholders prior to this offering will not have conversion rights
with respect to any shares of common stock owned by them, directly
or indirectly, whether acquired prior to this offering or purchased
by them in this offering or in the aftermarket.
We may
require public stockholders seeking conversion, whether they are a
record holder or hold their shares in “street name,” to
either (i) tender their certificates to our transfer agent or (ii)
deliver their shares to the transfer agent electronically using
Depository Trust Company’s DWAC (Deposit/Withdrawal At
Custodian) System, at the holder’s 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.
There
is a nominal cost associated with the above-referenced delivery
process and the act of certificating the shares or delivering them
through the DWAC System. The transfer agent will typically charge
the tendering broker $45.00 and it would be up to the broker
whether to pass this cost on to the holder. However, this fee would
be incurred regardless of whether we require holders seeking to
exercise conversion rights to tender their shares. The need to
deliver shares is a requirement of exercising conversion rights
regardless of the timing of when such delivery must be effectuated.
However, in the event we require stockholders seeking to exercise
conversion rights to deliver their shares prior to the consummation
of the proposed business combination and the proposed business
combination is not consummated, this may result in an increased
cost to stockholders.
Any
proxy solicitation materials we furnish to stockholders in
connection with a vote for any proposed business combination will
indicate whether we are requiring stockholders to satisfy such
certification and delivery requirements. Accordingly, a stockholder
would have from the time the stockholder received our proxy
statement up until the vote on the proposal to approve the business
combination to deliver his shares if he wishes to seek to exercise
his conversion rights. This time period varies depending on the
specific facts of each transaction. However, as the delivery
process can be accomplished by the stockholder, whether or not he
is a record holder or his shares are held in “street
name,” in a matter of hours by simply contacting the transfer
agent or his broker and requesting delivery of his shares through
the DWAC System, we believe this time period is sufficient for an
average investor. However, we cannot assure you of this fact.
Please see the risk factor titled “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” for further information on the risks of
failing to comply with these requirements.
The
foregoing is different from the procedures historically used by
some blank check companies. Traditionally, in order to perfect
conversion rights in connection with a blank check company’s
business combination, the company would distribute proxy materials
for the stockholders’ vote on an initial business
combination, and a holder could simply vote against a proposed
business combination and check a box on the proxy card indicating
such holder was seeking to exercise his conversion rights. After
the business combination was approved, the company would contact
such stockholder to arrange for him to deliver his certificate to
verify ownership. As a result, the stockholder then had an
“option window” after the consummation of the business
combination during which he could monitor the price of the
company’s stock in the market. If the price rose above the
conversion price, he could sell his shares in the open market
before actually delivering his shares to the company for
cancellation. As a result, the conversion rights, to which
stockholders were aware they needed to commit before the
stockholder meeting, would become a “continuing” right
surviving past the consummation of the business combination until
the holder delivered its certificate. The requirement for physical
or electronic delivery prior to the meeting ensures that a
holder’s election to convert his shares is irrevocable once
the business combination is approved.
Any
request to convert such shares once made, may be withdrawn at any
time up to the vote on the proposed business combination.
Furthermore, if a holder of a public share of common stock
delivered his certificate in connection with an election of their
conversion and subsequently decides prior to the vote on the
proposed business combination not to elect to exercise such rights,
he may simply request that the transfer agent return the
certificate (physically or electronically).
If the
initial business combination is not approved or completed for any
reason, then our public stockholders who elected to exercise their
conversion rights would not be entitled to convert their shares for
the applicable pro rata share of the trust account as of two
business days prior to the consummation of the initial business
combination. In such case, we will promptly return any shares
delivered by public holders.
48
Ability to Extend Time to Complete Business
Combination
We will have until 12 months from the closing of this offering to
consummate an initial business combination. However, if we
anticipate that we may not be able to consummate our initial
business combination within 12 months, we may extend the period of
time to consummate a business combination up to two times, each by
an additional three months (for a total of up to 18 months to
complete a business combination). Pursuant to the terms of our
amended and restated certificate of incorporation and the trust
agreement to be entered into between us and Continental Stock
Transfer & Trust Company on the date of this prospectus, in
order to extend the time available for us to consummate our initial
business combination, our sponsor or its affiliates or designees,
upon five days advance notice prior to the applicable deadline,
must deposit into the trust account $500,000, or up to $575,000 if
the underwriters’ over-allotment option is exercised in full
($0.10 per share in either case) on or prior to the date of the
applicable deadline, for each three month extension (or up to an
aggregate of $1,000,000 (or up to $1,150,000 if the
underwriters’ over-allotment option is exercised in full), or
$0.20 per share, if we extend for the full six months). In the
event that we receive notice from our sponsor five days prior to
the applicable deadline of its intent to effect an extension, we
intend to issue a press release announcing such intention at least
three days prior to the applicable deadline. In addition, we intend
to issue a press release the day after the applicable deadline
announcing whether or not the funds had been timely deposited. Our
sponsor and its affiliates or designees are not obligated to fund
the trust account to extend the time for us to complete our initial
business combination.
Liquidation if No Business Combination
Our
amended and restated certificate of incorporation provides that we
will have only 12 months from the closing of this
offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) to complete an initial
business combination. If we have not completed an initial business
combination by such date, 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.
Our
sponsor, officers and directors have agreed that they will not
propose any amendment to our amended and restated certificate of
incorporation that would restrict our public stockholders from
converting or selling their shares to us in connection with a
business combination or affect the substance or timing of our
obligation to redeem 100% of our public shares if we do not
complete a business combination within 12 months from
the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) unless we provide our
public stockholders with the opportunity to convert their shares of
common stock upon such approval at a per-share price, payable in
cash, equal to the aggregate amount then on deposit in the trust
account, including interest not previously released to us but net
of franchise and income taxes payable, divided by the number of
then outstanding public shares. This redemption right shall apply
in the event of the approval of any such amendment, whether
proposed by our sponsor, any executive officer, director or
director nominee, or any other person.
Under
the Delaware General Corporation Law, stockholders may be held
liable for claims by third parties against a corporation to the
extent of distributions received by them in a dissolution. The pro
rata portion of our trust account distributed to our public
stockholders upon the redemption of 100% of our outstanding public
shares in the event we do not complete our initial business
combination within the required time period may be considered a
liquidation distribution under Delaware law. If the corporation
complies with certain procedures set forth in Section 280 of the
Delaware General Corporation Law intended to ensure that it makes
reasonable provision for all claims against it, including a 60-day
notice period during which any third-party claims can be brought
against the corporation, a 90-day period during which the
corporation may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are
made to stockholders, any liability of stockholders with respect to
a liquidating distribution is limited to the lesser of such
stockholder’s pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution.
Furthermore,
if the pro rata portion of our trust account distributed to our
public stockholders upon the redemption of 100% of our public
shares in the event we do not complete our initial business
combination within the required time period is not considered a
liquidation distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174
of the Delaware General Corporation Law, the statute of limitations
for claims of creditors could then be six years after the unlawful
redemption distribution, instead of three years, as in the case of
a liquidation distribution. If we are unable to complete a business
combination within the prescribed time frame, 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.
Accordingly, it is our intention to redeem our public shares as
soon as reasonably possible following the 12-month
anniversary of the closing of this offering (or
up to 18-month if we extend the period of time to consummate a
business combination by the full amount of time),
and, therefore, we do not intend to comply with those procedures.
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 such date.
Because
we will not be complying with Section 280 of the Delaware General
Corporation Law, Section 281(b) of the Delaware General Corporation
Law requires us to adopt a plan, based on facts known to us at such
time that will provide for our payment of all existing and pending
claims or claims that may be potentially brought against us within
the subsequent ten years. However, because we are a blank check
company, rather than an operating company, and our operations will
be limited to searching for prospective target businesses to
acquire, the only likely claims to arise would be from our vendors
(such as lawyers, investment bankers, etc.) or prospective target
businesses.
49
We are
required to use our reasonable best efforts to have all third
parties (including any vendors or other entities we engage after
this offering) and any prospective target businesses enter into
agreements with us waiving any right, title, interest or claim of
any kind they may have in or to any monies held in the trust
account. As a result, the claims that could be made against us will
be limited, thereby lessening the likelihood that any claim would
result in any liability extending to the trust. We therefore
believe that any necessary provision for creditors will be reduced
and should not have a significant impact on our ability to
distribute the funds in the trust account to our public
stockholders. Nevertheless, we cannot assure you of this fact as
there is no guarantee that vendors, service providers and
prospective target businesses will execute such agreements. If any
third party refuses to execute an agreement waiving such claims to
the monies held in the trust account, our management will perform
an analysis of the alternatives available to it and will only enter
into an agreement with a third party that has not executed a waiver
if management believes that such third party’s engagement
would be significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third party
that refuses to execute a waiver include the engagement of a third
party consultant whose particular expertise or skills are believed
by management to be significantly superior to those of other
consultants that would agree to execute a waiver or in cases where
management is unable to find a service provider willing to execute
a waiver. Our underwriters and auditor are the only third parties
we are currently aware of that may not execute a waiver. Nor is
there any guarantee that, even if they execute such agreements with
us, they will not seek recourse against the trust account. A/Z
Property has agreed 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. We believe A/Z
Property has sufficient net worth to satisfy its indemnity
obligation should it arise, however we
cannot assure you
that A/Z Property will have sufficient liquid assets to satisfy
such obligations if it is required to do so. Additionally, the
agreement entered into by A/Z Property specifically provides for
two exceptions to the indemnity it has given: it will have no
liability (1) as to any claimed amounts owed to a target business
or vendor or other entity who has executed an agreement with us
waiving any right, title, interest or claim of any kind they may
have in or to any monies held in the trust account, or (2) as to
any claims for indemnification by the underwriters of this offering
against certain liabilities, including liabilities under the
Securities Act. As a result, if we liquidate, the
per-share distribution from the trust account could be less than
$10.00 due to claims or potential claims of creditors. We will
distribute to all of our public stockholders, in proportion to
their respective equity interests, an 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.
We
anticipate notifying the trustee of the trust account to begin
liquidating such assets promptly after such date and anticipate it
will take no more than 10 business days to effect such a
distribution. Our sponsor has waived its rights to participate in
any liquidation distribution with respect to the founder’s
shares and any shares, rights or warrants included in
the private placement units. Additionally, any loans made by our
officers, directors, sponsors or their affiliates for working
capital needs will be forgiven and not repaid if we are unable to
complete an initial business combination. There will be no
distribution from the trust account with respect to our
rights or warrants, including the rights
or warrants contained in the private placement units, which
will expire worthless. We will pay the costs of any subsequent
liquidation from our remaining assets outside of the trust account.
If such funds are insufficient, A/Z Property has agreed to pay the
funds necessary to complete such liquidation (currently anticipated
to be no more than approximately $15,000) and has agreed not to
seek repayment for such expenses.
If we
are unable to complete an initial business combination and expend
all of the net proceeds of this offering and the sale of the
private placement units, other than the proceeds deposited in the
trust account, and without taking into account interest, if any,
earned on the trust account, the initial per-share redemption price
would be $10.00. The proceeds deposited in the trust account could,
however, become subject to claims of our creditors that are in
preference to the claims of public stockholders.
Our
public stockholders shall be entitled to receive funds from the
trust account only in the event of our failure to complete a
business combination within the required time period or if the
stockholders seek to have us convert or purchase their respective
shares upon a business combination which is actually completed by
us or upon certain amendments to our amended and restated
certificate of incorporation as described elsewhere herein. In no
other circumstances shall a stockholder have any right or interest
of any kind to or in the trust account.
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 cannot assure you we will be able to return to our
public stockholders at least $10.00 per share.
50
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 eighteen months
from the date of this prospectus, 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.
Amended and Restated Certificate of Incorporation
Our
amended and restated certificate of incorporation contains certain
requirements and restrictions relating to this offering that will
apply to us until the consummation of our initial business
combination. These provisions cannot be amended without the
approval of a majority of our stockholders. If we seek to amend any
provisions of our amended and restated certificate of incorporation
that would restrict our public stockholders from converting or
selling their shares to us in connection with a business
combination or affect the substance or timing of our obligation to
redeem 100% of our public shares if we do not complete a business
combination within 12 months from the closing of this
offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), we will provide
dissenting public stockholders with the opportunity to convert
their public shares in connection with any such vote. This
redemption right shall apply in the event of the approval of any
such amendment, whether proposed by our sponsor, any executive
officer, director or director nominee, or any other person. Our
sponsor, officers and directors have agreed to waive any conversion
rights with respect to any founder’s shares and any public
shares they may hold in connection with any vote to amend our
amended and restated certificate of incorporation. Specifically,
our amended and restated certificate of incorporation provides,
among other things, that:
●
we shall 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;
●
we will consummate
our initial business combination only if we have net tangible
assets of at least $5,000,001 upon such consummation and, if we
seek stockholder approval, a majority of the outstanding shares of
common stock voted are voted in favor of the business
combination;
●
if our initial
business combination is not consummated within 12
months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), then we will
redeem all of the outstanding public shares and thereafter
liquidate and dissolve our company;
●
upon the
consummation of this offering, $50.0 million, or approximately
$57.5 million if the over-allotment option is exercised in full,
shall be placed into the trust account;
●
we may not
consummate any other business combination, merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or
similar transaction prior to our initial business combination;
and
●
prior to our
initial business combination, we may not issue additional stock
that participates in any manner in the proceeds of the trust
account, or that votes as a class with the common stock sold in
this offering on any matter.
Competition
In
identifying, evaluating and selecting a target business, we may
encounter intense competition from other entities having a business
objective similar to ours. Many of these entities are well
established and have extensive experience 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 there may be numerous potential target businesses that we
could acquire with the net proceeds of this offering and the sale
of the private placement units, our ability to compete in acquiring
certain sizable target businesses may be limited by our available
financial resources.
51
The
following also may not be viewed favorably by certain target
businesses:
●
our obligation to
seek stockholder approval of a business combination or engage in a
tender offer may delay the completion of a
transaction;
●
our obligation to
convert or repurchase shares of common stock held by our public
stockholders may reduce the resources available to us for a
business combination; and
●
our outstanding
rights or warrants and unit purchase options, and the
potential future dilution they represent.
Any of
these factors may place us at a competitive disadvantage in
successfully negotiating a business combination. Our management
believes, however, that our status as a public entity and potential
access to the United States public equity markets may give us a
competitive advantage over privately-held entities having a similar
business objective as ours in acquiring a target business with
significant growth potential on favorable terms.
If we
succeed in effecting a business combination, there will be, in all
likelihood, intense competition from competitors of the target
business. We cannot assure you that, subsequent to a business
combination, we will have the resources or ability to compete
effectively.
Facilities
We
currently maintain our principal executive offices at 2645 N.
Federal Hwy, Suite 230, Delray Beach, Florida 33483. The cost for
this space is included in the up to $10,000 per-month aggregate fee
our sponsor will charge us for general and administrative services
commencing on the date of this prospectus pursuant to a letter
agreement between us and our sponsor. We believe, based on rents
and fees for similar services in the Palm Beach, Florida area, 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.
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 of
the company. 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 do not intend to have any 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 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.
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 international
financial reporting standards. 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 December 31, 2018 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.
52
Legal Proceedings
There
is no material litigation, arbitration or governmental proceeding
currently pending against us or any members of our management
team.
Comparison of this offering to offerings of blank check companies
subject to Rule 419
The
following table compares and contrasts the terms of our offering
and the terms of an offering of blank check companies under Rule
419 promulgated by the SEC assuming that the gross proceeds,
underwriting discounts and underwriting expenses for the Rule 419
offering are the same as this offering and that the underwriters
will not exercise their over-allotment option. None of the terms of
a Rule 419 offering will apply to this offering because we will
have net tangible assets in excess of $5,000,000 upon the
successful consummation of this offering and will file a Current
Report on Form 8-K, including an audited balance sheet
demonstrating this fact.
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Terms of the Offering
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Terms Under a Rule 419 Offering
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Escrow
of offering proceeds
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$50,000,000
of the net offering proceeds including the $2,250,000 we will
receive from the sale of the private placement units will be
deposited into a U.S.-based trust account at [●] and
maintained by Continental Stock Transfer & Trust Company,
acting as trustee.
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$43,740,000
of the offering proceeds, which is the net offering proceeds less
underwriting commission and expenses and up to ten percent (10%) of
the remaining proceeds, would be required to be deposited into
either an escrow account with an insured depositary institution or
in a separate bank account established by a broker-dealer in which
the broker-dealer acts as trustee for persons having the beneficial
interests in the account.
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Investment
of net proceeds
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The
$50,000,000 of net offering proceeds including the $2,250,000 we
will receive from the sale of the private placement units held in
trust will only be invested in United States “government
securities” within the meaning of Section 2(a)(16) of the
Investment Company Act with 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.
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Proceeds
could be invested only in specified securities such as a money
market fund meeting conditions of the Investment Company Act or in
securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United
States.
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Limitation
on fair value or net assets of target business
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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.
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We
would be restricted from acquiring a target business unless the
fair value of such business or net assets to be acquired represent
at least 80% of the maximum offering proceeds.
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Trading
of securities issued
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The
units may commence trading on or promptly after the date of this
prospectus. The shares of common stock, rights and
warrants comprising the units will begin to trade separately on the
90th day after the date of this prospectus unless EarlyBirdCapital,
Inc. informs us of its decision to allow earlier separate trading,
provided we have filed with the SEC a Current Report on Form 8-K,
which includes an audited balance sheet reflecting our receipt of
the proceeds of this offering, including any proceeds we receive
from the exercise of the over-allotment option, if such option is
exercised prior to the initial filing of such Current Report on
Form 8-K. If the over-allotment option is exercised after the
initial filing of such Current Report on Form 8-K, we will file an
amendment to the Form 8-K to provide updated financial information
to reflect the exercise and consummation of the over-allotment
option. We will also include in this Form 8-K, an amendment
thereto, or in a subsequent Form 8-K, information indicating if
EarlyBirdCapital, Inc. has allowed separate trading of the shares
of common stock, rights and warrants prior to the 90th
day after the date of this prospectus.
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No
trading of the units or the underlying shares of common
stock, rights and warrants would be permitted until
the completion of a business combination. During this period, the
securities would be held in the escrow or trust
account.
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53
Exercise
of the warrants
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The
warrants cannot be exercised until the later of the completion of a
business combination and 12 months from the closing of this
offering and, accordingly, will be exercised only after the trust
account has been terminated and distributed.
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The
warrants could be exercised prior to the completion of a business
combination, but securities received and cash paid in connection
with the exercise would be deposited in the escrow or trust
account.
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Election
to remain an investor
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We will
either (1) give our stockholders the opportunity to vote on the
business combination or (2) provide our public stockholders with
the opportunity to sell their shares of our common stock to us in a
tender offer for cash equal to their pro rata share of the
aggregate amount then on deposit in the trust account, less taxes.
If we hold a meeting to approve a proposed business combination, we
will send each stockholder a proxy statement containing information
required by the SEC. Under Delaware law and our bylaws, we must
provide at least 10 days advance notice of any meeting of
stockholders. Accordingly, this is the minimum amount of time we
would need to provide holders to determine whether to exercise
their rights to convert their shares into cash or to remain an
investor in our company. Alternatively, if we do not hold a meeting
and instead conduct a tender offer, we will conduct such tender
offer in accordance with the tender offer rules of the SEC and file
tender offer documents with the SEC which will contain
substantially the same financial and other information about the
initial business combination as we would have included in a proxy
statement. Under the tender offer rules, a tender offer must remain
open for 20 business days. Accordingly, this is the minimum amount
of time we would need to provide holders to determine whether to
sell their shares to us in such a tender offer or to remain an
investor in our company.
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A
prospectus containing information required by the SEC would be sent
to each investor. Each investor would be given the opportunity to
notify the company, in writing, within a period of no less than 20
business days and no more than 45 business days from the effective
date of the post-effective amendment, to decide whether he or she
elects to remain a stockholder of the company or require the return
of his or her investment. If the company has not received the
notification by the end of the 45th business day, funds and
interest or dividends, if any, held in the trust or escrow account
would automatically be returned to the stockholder. Unless a
sufficient number of investors elect to remain investors, all of
the deposited funds in the escrow account must be returned to all
investors and none of the securities will be issued.
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54
Business
combination deadline
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Pursuant
to our amended and restated certificate of incorporation, if we are
unable to complete our initial business combination within
12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), 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.
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If an
acquisition has not been consummated within 18 months after the
effective date of the initial registration statement, funds held in
the trust or escrow account would be returned to
investors.
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Interest
earned on the funds in the trust account
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There
can be released to us, from time to time, any interest earned on
the funds in the trust account that we may need to pay our
franchise and income tax obligations. The remaining interest earned
on the funds in the trust account will not be released until the
earlier of the completion of a business combination and our
liquidation upon failure to effect a business combination within
the allotted time.
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All
interest earned on the funds in the trust account will be held in
trust for the benefit of public stockholders until the earlier of
the completion of a business combination and our liquidation upon
failure to effect a business combination within the allotted
time.
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Release
of funds
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Except
for any amounts that we may need to pay our franchise and income
tax obligations, the proceeds held in the trust account will not be
released until the earlier of the completion of a business
combination and our liquidation upon failure to effect a business
combination within the allotted time.
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The
proceeds held in the escrow account would not be released until the
earlier of the completion of a business combination or the failure
to effect a business combination within the allotted
time.
|
55
MANAGEMENT
Directors and Executive Officers
Our
directors and executive officers are as follows:
Name
|
|
Age
|
|
Position
|
Richard
Ackerman
|
|
59
|
|
Chairman,
President and Chief Executive Officer
|
Lori
B. Wittman
|
|
58
|
|
Chief
Financial Officer and Director
|
Bennett
Kim
|
|
44
|
|
Chief
Investment Officer
|
Richard
Birdoff
|
|
58
|
Director
Nominee
|
|
Michael
Fong
|
|
73
|
|
Director
Nominee
|
Stuart F.
Koenig
|
|
65
|
|
Director
Nominee
|
Albert
G. Rex
|
|
62
|
|
Director
Nominee
|
Troy
T. Taylor
|
|
59
|
|
Director
Nominee
|
Richard Ackerman, our Chairman, President and Chief
Executive Officer since September 18, 2017, formed BRP in 2004. BRP
is an opportunistic real estate investment firm that has invested
in and managed over $800 million in assets since its formation. In
2012, BRP began to focus on senior housing development as there was
a distinct supply – demand imbalance and fragmentation in
senior housing developers, and formed Big Rock Senior Housing, a
national leader in developing and managing new Class A senior
housing communities of $50 million and more. Class A housing
communities consist of prestigious buildings with high quality
standard finishes, state of the art systems, exceptional
accessibility and a defined market presence competing for premier
senior housing users with rents above average for the area.
Mr. Ackerman serves as the Senior Managing Principal of BRP and Big
Rock Senior Housing. Prior to BRP, from 2001 to 2004, Mr. Ackerman
served as the Head of the Los Angeles office of Apollo, overseeing
all investments on the U.S. West Coast and Japan for the global
private equity firm. In August 1999, Mr. Ackerman was
appointed by Apollo as the Chief Executive Officer of Atlantic Gulf
Communities Corporation (an Apollo portfolio company) in order to
restructure the company and served in that capacity until April
2001. This publicly traded development and asset management
company's primary operations included the development and sale of
home sites and land tracts and the construction and sale of
oceanfront condominiums. From September 1996 to August 1999, Mr.
Ackerman was President and co-founder of Crocker Realty Trust, a
private REIT (an Apollo portfolio company) specializing in the
ownership and development of office space in the southeastern
United States. Prior to 1996, he was president and co-founder of
Crocker Realty Investors, a publicly traded REIT and a portfolio
company of the first Apollo Real Estate Investment Fund. The
company specialized in the ownership and development of office
space until its sale to Highwoods Properties, Inc.
In addition to the
foregoing business experience, Mr. Ackerman served as Chief
Executive Officer and a director of ALDA Office Properties, Inc.
(“ALDA”) during 2011. ALDA was formed in 2011 to
acquire, own and operate office properties in select markets
primarily in Northern and Southern California. In 2011, ALDA
filed a registration statement for its initial public offering,
which offering was subsequently abandoned due to market
conditions. Mr. Ackerman is also a former Director of
Summerville Senior Living, Inc., which is one of the largest
assisted living companies in the nation. Mr. Ackerman graduated
with a B.A. from Tulane University and a J.D. from the Tulane
School of Law.
Lori B. Wittman, our Chief Financial Officer
and a
director, since September 18, 2017, most recently served as the
Executive Vice President and Chief Financial Officer of CCP, a
public healthcare real estate investment trust with a diversified
portfolio of triple-net leased properties focused on the post-acute
sector, from August 2015 (after a spin-off from Ventas, Inc.) to
August 2017 (due to the merger of CCP and Sabra Healthcare REIT,
Inc.). A triple-net leased property is a property leased
pursuant to an agreement where the tenant or lessee agrees to pay
all real estate taxes, building insurance, and maintenance (the
three "nets") on the property in addition to any normal fees that
are expected under the agreement (rent, utilities, etc.) Ms.
Wittman previously served as Senior Vice President, Capital Markets
and Investor Relations of Ventas, a leading real estate investment
trust with a diverse portfolio of more than 1,600 assets in the
United States, Canada and the United Kingdom consists of seniors
housing communities, medical office buildings, skilled nursing
facilities, hospitals and other properties, from 2013 to 2015 and
as Vice President, Capital Markets and Investor Relations of Ventas
from 2011 to 2013. From 2006 to 2011, she was the Chief Financial
Officer and Managing Principal of BRP. Before that, Ms. Wittman
held various capital markets and finance positions with General
Growth Properties, Inc., Heitman, Homart Development Company,
Citibank and Mellon Bank. She has been a member of the Board of
Directors of IMH Financial Corporation, a real estate
investment and finance company since July 2014. In
addition to the foregoing business experience, Ms. Wittman served
as Chief Financial Officer of ALDA during 2011. Ms. Wittman
received a B.A. in Geography and Sociology from Clark University, a
Masters in City Planning from the University of Pennsylvania and an
M.B.A. from the University of Chicago.
Bennett Kim, our Chief Investment Officer and Corporate
Secretary since September 18, 2017, has served as the Managing
Principal of Big Rock Senior Housing since January 2016. Mr. Kim
was the Chief Investment Officer at BRP from May 2006 to July 2014
and was responsible for acquisitions, development, asset
management, and dispositions. From July 2014 to December 2015, Mr.
Kim served as the Head of Acquisitions for Carefree Communities,
the fifth largest national owner and operator of manufactured
housing communities and RV parks with 103 communities and 28,000
sites. From January 2001 to May 2006, Mr. Kim served as a
Vice President at Apollo and was responsible for new
investments and investment management including the development of
a $400 million mixed-use project that consists of two hotels, two
condominium towers, retail, office and structured parking. Mr. Kim
also formulated work-out strategies for one of the largest assisted
living companies in the nation while at Apollo. Between 1999 to
2000, Mr. Kim was an Assistant Vice President at Oaktree Capital
Management, where he evaluated and executed investments in the U.S.
and Japan for funds then totaling $1.7 billion of equity.
Previously, Mr. Kim worked as an Associate at Merrill Lynch Real
Estate Investment Banking, where he evaluated financing
alternatives for public and private real estate companies.
Mr. Kim also worked as a Senior Analyst at Walt Disney
Imagineering and as an Analyst at Disney Development Company.
In addition to the foregoing business experience, Mr. Kim
served as Chief Investment Officer of ALDA during 2011. Mr.
Kim is currently on the Board of Directors of UHI Soho Global, a
Cayman Islands based hedge fund. Mr. Kim graduated with an M.B.A.
from Harvard Business School and a B.A. in Economics from
UCLA.
56
Richard J. Birdoff, who will serve as
one of our directors upon consummation of this offering, has served
as President of RD Management and Realty Investors Development
Corp. (“RD Management”), a privately held retail real
estate developer and manager, since January 2015.
Mr. Birdoff is responsible for all aspects of the day-to-day
operations of the company including development, construction,
acquisitions, sales and dispositions. Mr. Birdoff joined RD
Management in 1991 as a principal and Executive Vice President and
since 1994, he has developed in excess of 10,000,000 sq. ft. of
shopping centers. Mr. Birdoff previously served on the Board of
Directors of Crocker Realty Investors, a Florida based publicly
held real estate investment trust.Mr. Birdoff has
been engaged in the real estate business for more than 30 years. He
received an undergraduate degree from Emory College in 1980 and his
Juris Doctorate degree in 1983 from Emory University Law School.
Following his graduation, Mr. Birdoff worked for IRT Properties in
Atlanta, Georgia. Thereafter, in 1984, he joined Bertram Associates
of Union, New Jersey where Mr. Birdoff served as associate
counsel. Bertram Associates, at the time was one of New
Jersey’s largest residential developers. Mr. Birdoff then
transitioned to be a principal in the real estate development
industry with Bertram Associates focusing on site acquisition,
construction and sales of residential homes.
Michael Fong, who will serve as one of our directors upon
consummation of this offering, serves as the Chairman and Chief
Executive Officer of JF International Ltd., a private equity firm
he founded since 2003. JF International invests and manages a
diversified portfolio of worldwide investments in real estate and
operating companies. In 2015, JF International joined with BRP to
invest in the luxury senior housing sector. From 1994 to 2003, Mr.
Fong was the Managing Director of The ALJ Group which is based in
Jeddah, Kingdom of Saudi Arabia and is one of the largest privately
held business enterprises in the Middle East. Mr. Fong also
previously served from 1990 to 1994 as the President of Jaymont
Properties, Inc., a real estate development and management company
with a substantial portfolio of premier office and mixed used
properties located in the central business district of major cities
such as New York, Boston, San Francisco, Orlando, Chicago, and
Miami. From 1979 to 1990, Mr. Fong was President of Intercap
Investments, Inc, a commercial developer of real estate central
business district projects in Miami and Coral Gables. From 1998 to
1999, Mr. Fong was the President of the Coral Gables,
FL Chamber of Commerce and served on its Board of Directors
for several years. Prior to 1979, Mr. Fong was President of
Interfin Investments, Inc., an investment banking firm based in
Lincoln, Nebraska and New York. From 1975 to 1979, Mr. Fong was a
Vice President and also served as Assistant to the President of
DuPont Walston, Inc., a major retail brokerage and investment
banking firm with over 200 branches across the United States. Mr.
Fong began his business career in 1971 with EDS, a firm founded by
H. Ross Perot, and was sent to New York when Mr. Perot made an
investment in DuPont Glore Forgan when EDS was awarded a major data
processing contract for redesigning a new system for the brokerage
business.
Stuart Koenig, who will serve as one of
our directors upon consummation of this offering, has over forty
years of diversified experience in the real estate, investment
banking and financial services industries. His experience includes
every aspect of commercial and residential real estate including
acquisition, financing, leasing, property management and
disposition. Mr. Koenig most recently served as a Senior Partner in
the real estate division of Ares Management, LP, a global
alternative asset manager with over $100 billion of assets under
management, from 2013 to 2016. Mr. Koenig served as Chair of the
Investment Committees of the real estate funds of Ares, which
collectively had $8 billion under management. From 1995 to 2013,
Mr. Koenig served as the Global Chief Financial Officer, Chief
Administrative Officer and Senior Partner of AREA Property
Partners, a global real estate investment and asset management firm
that raised and invested approximately $14 billion of client equity
in more than 600 transactions across all sectors of real
estate. Mr. Koenig oversaw the financing and
administrative activities for AREA and was also responsible for its
reporting, human resources, compliance, legal and structuring
activities. Mr. Koenig helped negotiate and execute the sale of
AREA to Ares Management in 2013. Prior to AREA, Mr. Koenig worked
in various positions in investment bank including Goldman Sachs
& Co. (1986-1994) and EF Hutton Inc. (1981-1986). From
1997-2014, Mr. Koenig served as the lead independent director and
member of the compensation committee of Emeritus Corporation (ESC,
NYSE) one of the largest publicly traded owners and operators of
assisted living facilities in the country and helped oversee the
sale of the company to Brookdale Senior Living (BKD, NYSE) in 2014.
Mr. Koenig currently serves as Trustee for the Binghamton
University Endowment Fund and is Chair of its Investment Committee
and also provides consulting services for the U.S. investment
activity of Profimex, an Israel based real estate investment firm.
Mr. Koenig has a B.A. from Binghamton University and an MBA from
Baruch College of the City University of
N.Y.
Albert G. Rex, who will serve as one of our directors upon
consummation of this offering, has served as the Managing Director
of Walker & Dunlop, a commercial real estate finance company,
since May 2012. In this role, Mr. Rex has been involved in over
1500 loans totaling more than $15 billion in transactions. Mr. Rex
has over 40 years of experience in the financing and equity aspects
of commercial real estate development throughout the U.S. with a
focus on the Southeast region. Mr. Rex spent the majority of his
career as a Managing Partner with Carey Kramer, a company he helped
found in 1983 and ultimately owned solely from 2001 until it merged
with Collateral Real Estate Capital in 2005. Collateral later
merged with Laureate Capital, LLC in 2007, to form Grandbridge Real
Estate Capital, LLC, a wholly-owned subsidiary of BB&T. Mr. Rex
is a graduate of University of Florida with a degree in Finance and
Real Estate and serves on their Real Estate Advisory Board. He is
an active member of the Mortgage Bankers Association (MBA), Urban
Land Institute (ULI), International Council of Shopping Centers
(ICSC), and National Association of Industrial and Office
Properties (NAIOP), where he has served as President of the South
Florida Chapter.
Troy T. Taylor, who will serve as one of our directors upon
consummation of this offering, has served as President of Algon
Group, an advisory firm he founded, since 2002. Algon Group is a
specialized financial firm providing sophisticated financial
advisory services to stakeholders with complex, challenging, and
financially distressed situations. Mr. Taylor has 25 years of
experience including investment banking, restructuring (both in
Chapter 11 and out of court) and senior management. Mr. Taylor has
served as the Chief Restructuring Officer, Chief Executive Officer
or Lead Financial Advisor in a broad range of industries including
manufacturing, distribution, hospitality, real estate and retail.
He has also served as a member of the Board of Directors of several
public and private companies, including Keystone Consolidated
Industries, Inc., Barjan, Inc., and 1-800-AutoTow, Inc. He
currently serves as Vice Chairman of Hyperion Bank located in
Philadelphia. Before 2002, Mr. Taylor served in various capacities
with GMA Partners, Inc., KPMG Peat Marwick, LLP, Morgan Keegan
& Company, Inc., Oppenheimer & Co., Inc. and Thomson
McKinnon Securities, Inc. Mr. Taylor received his B.S. in Economics
and his MBA from The Wharton School, University of
Pennsylvania.
Executive Compensation
Commencing
on the date of this prospectus through the acquisition of a target
business, we will pay our sponsor an aggregate fee of up to $10,000
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 $10,000 per month and the
repayment of any loans made by our sponsor and our Chief Executive
Officer 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.
57
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.
Director Independence
Currently
Messrs. Fong, Rex and Taylor would each be considered an
“independent director” under the Nasdaq listing rules,
which 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
independent directors will have regularly scheduled meetings at
which only independent directors are present.
Any
affiliated transactions will be on terms no less favorable to us
than could be obtained from independent parties. Our board of
directors will review and approve all affiliated transactions with
any interested director abstaining from such review and
approval.
Audit Committee
Effective
upon the date of this prospectus, we will establish an audit
committee of the board of directors, which will consist of
Messrs. Fong, Rex and Taylor (Chair), each of
whom is an independent director under Nasdaq’s listing
standards. The audit committee’s duties, which are specified
in our Audit Committee Charter, include:
●
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;
●
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;
●
reviewing and
approving all related-party transactions;
●
inquiring and
discussing with management our compliance with applicable laws and
regulations;
●
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;
●
appointing or
replacing the independent auditor;
●
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;
●
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
●
approving
reimbursement of expenses incurred by our management team in
identifying potential target businesses.
58
Financial Experts on Audit Committee
The
audit committee will at all times be composed exclusively of
“independent directors” who are “financially
literate” as defined under Nasdaq’s listing standards.
Nasdaq’s standards define “financially literate”
as being able to read and understand fundamental financial
statements, including a company’s balance sheet, income
statement and cash flow statement.
In
addition, we must certify to Nasdaq that the committee has, and
will continue to have, at least one member who has past employment
experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or
background that results in the individual’s financial
sophistication. The board of directors has determined that Mr.
Taylor qualifies as an “audit committee financial
expert,” as defined under rules and regulations of the
SEC.
Nominating Committee
Effective
upon the date of this prospectus, we will establish a nominating
committee of the board of directors, which will consist of Messrs.
Fong, Koenig, Rex (Chair), 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, stockholders, investment bankers and
others.
Guidelines for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the
Nominating Committee Charter, generally provide that persons to be
nominated:
●
should have
demonstrated notable or significant achievements in business,
education or public service;
●
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
●
should have the
highest ethical standards, a strong sense of professionalism and
intense dedication to serving the interests of the
stockholders.
The
Nominating Committee will consider a number of qualifications
relating to management and leadership experience, background and
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 stockholders and other
persons.
Compensation Committee
Effective
upon the date of this prospectus, we will establish a compensation
committee of the board of directors, which will consist of Messrs.
Birdoff, Koenig (Chair) and Taylor, 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:
●
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 based on such
evaluation;
●
reviewing and
approving the compensation of all of our other executive
officers;
●
reviewing our
executive compensation policies and plans;
●
implementing and
administering our incentive compensation equity-based remuneration
plans;
●
assisting
management in complying with our proxy statement and annual report
disclosure requirements;
●
approving all
special perquisites, special cash payments and other special
compensation and benefit arrangements for our executive officers
and employees;
59
●
if required,
producing a report on executive compensation to be included in our
annual proxy statement; and
●
reviewing,
evaluating and recommending changes, if appropriate, to the
remuneration for directors.
Code of Ethics
Effective
upon consummation of this offering, we will adopt a code of ethics
that applies to all of our executive officers, directors and
employees. The code of ethics codifies the business and ethical
principles that govern all aspects of our business.
Conflicts of Interest
Investors
should be aware of the following potential conflicts of
interest:
●
None of our
officers and directors is required to commit their full time to our
affairs and, accordingly, they may have conflicts of interest in
allocating their time among various business
activities.
●
In the course of
their other business activities, our sponsor, officers and
directors may become aware of investment and business opportunities
which may be appropriate for presentation to our company as well as
the other entities with which they are affiliated. Our officers and
directors may have conflicts of interest in determining to which
entity a particular business opportunity should be presented but
barring such a conflict, must present target business opportunities
that have a fair market value of at least 80% of the assets held in
the trust account (excluding taxes payable on the income earned in
the trust account) at the time of the agreement to enter into the
initial business combination, subject to any pre-existing fiduciary
or contractual obligations.
●
Unless we
consummate our initial business combination, our officers,
directors and sponsor will not receive reimbursement for any
out-of-pocket expenses incurred by them to the extent that such
expenses exceed the amount of available proceeds not deposited in
the trust account.
●
The founder’s
shares beneficially owned by our officers and directors will be
released from escrow only if a business combination is successfully
completed, and the private placement units including the
underlying shares of common stock, rights and warrants,
purchased by our sponsor will be worthless if a business
combination is not consummated. Additionally, our officers and
directors will not receive liquidation distributions with respect
to any of their founder’s shares. For the foregoing reasons,
our board may have a conflict of interest in determining whether a
particular target business is appropriate to effect a business
combination with.
In
general, officers and directors of a corporation incorporated under
the laws of the State of Delaware are required to present business
opportunities to a corporation if:
●
the corporation
could financially undertake the opportunity;
●
the opportunity is
within the corporation’s line of business; and
●
it would not be
fair to the corporation and its stockholders for the opportunity
not to be brought to the attention of the corporation.
Accordingly,
as a result of multiple business affiliations, our officers and
directors may have similar legal obligations relating to presenting
business opportunities meeting the above-listed criteria to
multiple entities. In addition, conflicts of interest may arise
when our board evaluates a particular business opportunity with
respect to the above-listed criteria. We cannot assure you that any
of the above mentioned conflicts will be resolved in our
favor.
In
order to minimize potential conflicts of interest which may arise
from multiple corporate affiliations, each of our officers and
directors has contractually agreed, pursuant to a written agreement
with us, until the earliest of our execution of a definitive
agreement for a business combination, our liquidation,
or such time as he or she ceases to be an officer or
director, to present to our company for our consideration, prior to
presentation to any other entity, any suitable business opportunity
that may reasonably be required to be presented to us,
subject to any pre-existing fiduciary or contractual obligations he
or she might have. Accordingly, our amended and
restated certificate of incorporation will provide that the
doctrine of corporate opportunity will not apply with respect to
any of our executive officers or directors in circumstances where
the application of the doctrine would conflict with any fiduciary
duties or contractual obligations they may have.
Individual
|
Entity
|
Entity’s
Business
|
Affiliation
|
Richard
Ackerman
|
None
|
-
|
-
|
Lori B.
Wittman
|
IMH Financial
Corporation
|
Real Estate Investment &
Finance
|
Director
|
Bennet
Kim
|
UHI Soho
Global
|
Hedge
Fund
|
Director
|
Richard
Birdoff
|
RD Management and Realty Investors
Development Corp.
|
Retail Real Estate Developer and Manager | Principal and Executive Vice President |
Michael
Fong
|
JF International
Ltd.
|
Private
Equity
|
Chairman and Chief Executive
Officer
|
Stuart
Koenig
|
None
|
-
|
-
|
Albert G.
Rex
|
Walker &
Dunlop
|
Commercial Real Estate
Finance
|
Managing
Director
|
Troy T.
Taylor
|
Algon
Group
|
Financial Advisory
Services
|
President
|
|
Hyperion
Bank
|
Financial
Institution
|
Vice
Chairman
|
60
In
addition, our executive officers and directors have agreed not to
participate in the formation of, or become an officer or director
of, any other special purpose acquisition company with a class of
securities registered under the Exchange Act until we have entered
into a definitive agreement regarding our initial business
combination or we have failed to complete our initial business
combination within 12 months after the closing of this
offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time).
If we
submit our initial business combination to our public stockholders
for a vote, our sponsor, as well as all of our officers and
directors have agreed to vote any shares held by them in favor of
our initial business combination. If they purchase shares of common
stock as part of this offering or in the open market, however, they
would be entitled to participate in any liquidation distribution in
respect of such shares but have agreed not to convert or sell such
shares to us in connection with the consummation of an initial
business combination.
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.
61
PRINCIPAL STOCKHOLDERS
The
following table sets forth information regarding the beneficial
ownership of our shares of common stock as of the date of this
prospectus and as adjusted to reflect the sale of our shares of
common stock included in the units offered by this prospectus
(assuming none of the individuals listed purchase units in this
offering), by:
●
each person known
by us to be the beneficial owner of more than 5% of our outstanding
shares of common stock;
●
each of our
officers, directors and director nominees; and
●
all of our
officers, directors and director nominees as a group.
Unless
otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of
common stock beneficially owned by them. The following table does
not reflect record of beneficial ownership of the rights
or warrants included in the units offered by this prospectus
or the private placement units as these rights and
warrants are not convertible or
exercisable, respectively, within 60 days
of the date of this prospectus.
|
Prior to
Offering
|
After
Offering(2)
|
||
Name and Address
of Beneficial Owner(1)
|
Amount and Nature
of Beneficial Ownership
|
Approximate
Percentage of Outstanding Shares of Common
Stock
|
Amount and Nature
of Beneficial Ownership
|
Approximate
Percentage of Outstanding Shares of Common
Stock
|
Big Rock Partners
Sponsor, LLC
|
1,437,500(3)
|
100%
|
1,475,000
|
22.4%
|
Richard
Ackerman
|
1,437,500(3)(4)
|
100%
|
1,475,000
|
22.4%
|
Lori B.
Wittman
|
-
|
-
|
-
|
-
|
Bennett
Kim
|
-
|
-
|
-
|
-
|
Richard Birdoff |
-
|
-
|
-
|
-
|
Michael
Fong
|
-
|
-
|
-
|
-
|
Stuart Koenig |
-
|
-
|
-
|
-
|
Albert G.
Rex
|
-
|
-
|
-
|
-
|
Troy T.
Taylor
|
-
|
-
|
-
|
-
|
All directors and
executive officers as a group (8
individuals)
|
1,437,500(3)
|
100%
|
1,475,000
|
22.4%
|
__________
(1)
Unless otherwise
indicated, the business address of each of the individuals is 2645
N. Federal Highway, Suite 230, Delray Beach, Florida
33483.
(2)
Assumes no exercise
of the over-allotment option and, therefore, the forfeiture of an
aggregate of 187,500 share of common stock held by our initial
stockholder.
(3)
Includes 187,500
shares which are subject to forfeiture to the extent the
underwriters’ over-allotment option is not exercised in
full.
(4)
Represents shares
held by Big Rock Partners Sponsor, LLC, of which Mr. Ackerman is
the sole and managing member.
Immediately
after this offering, our initial stockholder will beneficially own
approximately 22.4% of the then issued and outstanding shares of
common stock (assuming it does not purchase any units offered by
this prospectus). None of our sponsor, officers or directors has
indicated to us that it or they intend to purchase our securities
in the offering. Because of the ownership block held by our sponsor
(and our officers and directors through their ownership of
membership interests of the sponsor), our sponsor and such
individuals may be able to effectively exercise influence over all
matters requiring approval by our stockholders, including the
election of directors and approval of significant corporate
transactions other than approval of our initial business
combination.
If the
underwriters do not exercise all or a portion of the over-allotment
option, an aggregate of up to 187,500 founder’s shares will
be forfeited. Only a number of shares necessary to maintain the
collective 20% ownership interest in our shares of common stock
after giving effect to the offering and the exercise, if any, of
the underwriters’ over-allotment option will be necessary
(excluding the shares underlying the private placement units and
any units purchased in this offering).
62
All of
the founder’s shares outstanding prior to the date of this
prospectus will be placed in escrow with Continental Stock Transfer
& Trust Company, as escrow agent. None of these shares will be
transferred, assigned, sold or released from escrow until one year
after the date of the consummation of our initial business
combination, or earlier with respect to fifty percent (50%) of such
shares if, subsequent to our business combination, the last sales
price of our 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. Up to 187,500 of the founder’s shares may also be
released from escrow earlier than this date for cancellation if the
over-allotment option is not exercised in full as described above.
All of the founder’s shares may be released from escrow
earlier than as described above if within that time period, we
consummate a subsequent liquidation, merger, stock exchange or
other similar transaction which results in all of our stockholders
having the right to exchange their shares of common stock for cash,
securities or other property.
During
the escrow period, the holder of these shares will not be able to
sell or transfer its securities except for transfers, assignments
or sales (i) to our officers, directors, employees, consultants or
their affiliates, (ii) to an entity’s officers, directors,
employees or members, (iii) to relatives and trusts for estate
planning purposes, (iv) by virtue of the laws of descent and
distribution upon death, (v) pursuant to a qualified domestic
relations order, (vi) to us for no value for cancellation in
connection with the consummation of our initial business
combination, or (vii) by private sales made at or prior to the
consummation of a business combination at prices no greater than
the price at which the shares were originally purchased, in each
case (except for clause (vi) or with our prior consent) where the
transferee agrees to the terms of the escrow agreement and to be
bound by these transfer restrictions and other agreements of our
initial stockholder as set forth herein, but will retain all other
rights as our stockholders, including, without limitation, the
right to vote their shares of common stock and the right to receive
cash dividends, if declared. If dividends are declared and payable
in shares of common stock, such dividends will also be placed in
escrow. If we are unable to effect a business combination and
liquidate, there will be no liquidation distribution with respect
to the founder’s shares.
Our
sponsor has committed to purchase the 225,000 private placement
units for a total purchase price of $2,250,000 from us. These
purchases will take place on a private placement basis
simultaneously with the consummation of this offering. Our sponsor
has also agreed that if the over-allotment option is exercised by
the underwriters in full or in part, it will purchase from us up to
an additional 18,750 private placement units at a price of $10.00
per unit in an amount necessary to maintain in the trust account at
$10.00 per unit sold to the public in this offering. These
additional private placement units will be purchased in a private
placement that will occur simultaneously with the purchase of units
resulting from the exercise of the over-allotment option. The
warrants contained in the private placement units are identical to
the warrants being sold as part of the units in this offering
except that the private placement units: (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. If the
private placement units are held by holders other than the initial
purchasers or any of their permitted transferees, the private
placement units will be redeemable by us and exercisable by the
holders on the same basis as the warrants included in the units
being sold in this offering. Our sponsor has agreed not to
transfer, assign or sell any of the private placement units or the
common stock issuable upon conversion or exercise of
the private placement rights or warrants (except in
connection with the same limited exceptions that the private
placement units may be transferred as described above),
until after the completion of our initial business
combination.
In
order to meet our working capital needs following the consummation
of this offering, 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 units at a price
of $10.00 per unit. The units would be identical to the private
placement units
(which, for example,
would result in the holders being issued 165,000 shares of common
stock if $1,500,000 of notes were so converted since the 150,000
rights included in such units would result in the issuance of
15,000 shares upon the closing of our business combination, as well
as 75,000 warrants to purchase 75,000 shares).
If we
do not complete a business combination, the loans will be
forgiven.
Richard
Ackerman and Big Rock Partners Sponsor Group, LLC are our
“promoters,” as that term is defined under the federal
securities laws.
63
CERTAIN TRANSACTIONS
In
September 2017, our sponsor purchased 1,437,500 shares of our
common stock for an aggregate purchase price of $25,000 or
approximately $0.017 per share.
If the
underwriters do not exercise all or a portion of their
over-allotment option, our initial stockholder prior to this
offering will forfeit up to an aggregate of 187,500 shares of
common stock in proportion to the portion of the over-allotment
option that was not exercised.
If the
underwriters determine the size of the offering should be increased
(including pursuant to Rule 462(b) under the Securities Act) or
decreased, a share dividend or a contribution back to capital, as
applicable, would be effectuated in order to maintain our initial
stockholder’s ownership at a percentage of the number of
shares to be sold in this offering.
Also,
our sponsor has committed to purchase an aggregate of 225,000
private placement units (for a total purchase price of $2,250,000)
from us. These purchases will take place on a private placement
basis simultaneously with the consummation of this offering. Our
sponsor has also agreed that if the over-allotment option is
exercised by the underwriters in full or in part, it will purchase
from us at a price of $10.00 per unit up to an additional 18,750
private placement units in an amount necessary to maintain in the
trust account at $10.00 per unit sold to the public in this
offering. These additional private placement units will be
purchased in a private placement that will occur simultaneously
with the purchase of units resulting from the exercise of the
over-allotment option. We believe the purchase price of the private
placement units is greater than the fair value of such units and
therefore will not result in any share-based compensation expense.
The private placement units are identical to the units being sold
in this offering except that the warrants contained in the private
placement units: (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
placement units have agreed not to transfer, assign or sell any of
their private placement units or the common stock issuable upon
conversion of the underlying rights or exercise of the
underlying warrants of the private placement units
(except to certain permitted transferees), until after the
completion of our initial business combination.
In
order to meet our working capital needs following the consummation
of this offering, 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 the holder’s
discretion, up to $1,500,000 of the notes may be converted into
private units at a price of $10.00 per unit. The units would be
identical to the private placement units (which,
for example, would result in the holders being issued 165,000
shares of common stock if $1,500,000 of notes were so converted
since the 150,000 rights included in such units would result in the
issuance of 15,000 shares upon the closing of our business
combination, as well as 75,000 warrants to purchase 75,000
shares). If
we do not complete a business combination, the loans will be
forgiven.
The
holder of our founder’s shares issued and outstanding on the
date of this prospectus, as well as the holders of the private
placement units 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), will be entitled
to registration rights pursuant to an agreement to be signed prior
to or on the effective date of this offering. 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’s 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 placement
units or private units 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.
As of
the date of this prospectus, our sponsor has loaned to us a total
of $75,000 (of a total of up to $150,000 that we may draw down) to
be used for a portion of the expenses of this offering. Also, as of
the date of this prospectus, our Chief Executive Officer has loaned
to us $25,000 to be used for a portion of the expenses of this
offering. These loans are non-interest bearing, unsecured and are
due at the earlier of December 31, 2018 or the closing of this
offering. The loans will be repaid upon the closing of this
offering out of the $500,000 of offering proceeds that has been
allocated to the payment of offering expenses.
Also, A/Z Property, an entity majority owned by Richard Ackerman,
our Chairman, President and Chief Executive Officer, has agreed
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. We believe A/Z
Property has sufficient net worth to satisfy its indemnity
obligation should it arise, however we cannot assure you
that A/Z Property will have sufficient liquid assets to satisfy
such obligations if it is required to do so. Additionally, the
agreement entered into by A/Z Property specifically provides for
two exceptions to the indemnity it has given: it will have no
liability (1) as to any claimed amounts owed to a target business
or vendor or other entity who has executed an agreement with us
waiving any right, title, interest or claim of any kind they may
have in or to any monies held in the trust account, or (2) as to
any claims for indemnification by the underwriters of this offering
against certain liabilities, including liabilities under the
Securities Act.
64
Our
sponsor, which is affiliated with our officers and directors, has
agreed that, commencing on the effective date of this prospectus
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 $10,000 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 Palm Beach, Florida
area, that the fee charged by our sponsor is at least as favorable
as we could have obtained from an unaffiliated person.
Other
than the administrative fee of up to $10,000 per month, 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.
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 expected 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.
65
DESCRIPTION OF SECURITIES
General
As of
September 30, 2017, we were authorized to issue 10,000,000 shares
of common stock, par value $0.001. As of the date of this
prospectus, we are authorized to issue 100,000,000 shares of common
stock, par value $0.001, and 1,000,000 shares of preferred stock,
par value $0.001. As of the date of this prospectus, 1,437,500
shares of common stock are outstanding. No shares of preferred
stock are currently outstanding. The following description
summarizes the material terms of our securities. Because it is only
a summary, it may not contain all the information that is important
to you. For a complete description you should refer to our amended
and restated certificate of incorporation, bylaws and the form of
warrant agreement, which are filed as exhibits to the registration
statement of which this prospectus is a part, and to the applicable
provisions of Delaware law.
Units
Each
unit consists of one share of common stock one right
and one-half of one warrant.
Each right entitles the holder thereof to receive one-tenth (1/10)
of one share of common stock on the consummation of an initial
business combination. Each whole warrant
entitles the holder to purchase one share of common stock.
Pursuant to the
warrant agreement, a warrant holder may exercise his, her or its
warrants only for a whole number of shares of common stock. This
means that only a whole warrant may be exercised at any given time
by a warrant holder. No fractional warrants will be issued upon
separation of the units and only whole warrants will trade.
Accordingly, unless you purchase at least two units, you will not
be able to receive or trade a whole
warrant.
The
shares of common stock, rights and
warrants will begin to trade separately on the 90th day after the
date of this prospectus unless EarlyBirdCapital, Inc. informs us of
its decision to allow earlier separate trading, provided that in no
event may the shares of common stock, rights and
warrants be traded separately until we have filed with the SEC a
Current Report on Form 8-K which includes an audited balance sheet
reflecting our receipt of the gross proceeds of this offering and
the sale of the private placement units. Once the shares of common
stock, rights and warrants commence separate trading,
holders will have the option to continue to hold units or separate
their units into the component pieces.
We will
file a Current Report on Form 8-K which includes an audited balance
sheet promptly upon the consummation of this offering. The audited
balance sheet will reflect proceeds we receive from the exercise of
the over-allotment option, if the over-allotment option is
exercised on the date of this prospectus. If the over-allotment
option is exercised after the date of this prospectus, we will file
an amendment to the Form 8-K to provide updated financial
information to reflect the exercise of the over-allotment option.
We will also include in this Form 8-K, an amendment thereto, or in
a subsequent Form 8-K information indicating if EarlyBirdCapital,
Inc. has allowed separate trading of the shares of common
stock, rights and warrants prior to the 90th day after
the date of this prospectus.
Common Stock
Our
stockholders of record are entitled to one vote for each share held
on all matters to be voted on by stockholders. In connection with
any vote held to approve our initial business combination, our
sponsor, as well as all of our officers and directors, have agreed
to vote their respective shares of common stock owned by them
immediately prior to this offering and any shares purchased in this
offering or following this offering in the open market in favor of
the proposed business combination.
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 a vote is held to approve a business combination, a
majority of the outstanding shares of common stock voted are voted
in favor of the 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 is no cumulative voting
with respect to the election of directors, with the result that the
holders of more than 50% of the shares eligible to vote for the
election of directors can elect all of the directors.
Our
amended and restated certificate of incorporation provides that we
will have only 12 months from the closing of this
offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time) to complete an initial business
combination. If we have not completed an initial business
combination by such date, 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.
Our
sponsor, officers and directors have agreed to waive their rights
to participate in any liquidation distribution occurring upon our
failure to consummate an initial business combination with respect
to the founder’s shares. Our sponsor, officers and directors
will therefore not participate in any liquidation distribution with
respect to such shares. They will, however, participate in any
liquidation distribution with respect to any shares of common stock
acquired in connection with or following this
offering.
Our
stockholders have no conversion, preemptive or other subscription
rights and there are no sinking fund or redemption provisions
applicable to the shares of common stock, except that public
stockholders have the right to sell their shares to us in a tender
offer or have their shares of common stock converted to cash equal
to their pro rata share of the trust account if they vote on the
proposed business combination in connection with such business
combination and the business combination is completed. Public
stockholders who sell or convert their stock into their share of
the trust account still have the right to convert their
rights or exercise the warrants that they received as part
of the units.
66
Founder’s Shares
Our
sponsor has agreed (i) that such shares are subject to certain
transfer restrictions, as described in more detail below and (ii)
(A) to waive its redemption rights with respect to the
founder’s shares and public shares in connection with the
completion of our business combination and (B) to waive its rights
to liquidating distributions from the trust account with respect to
the founder’s shares if we fail to complete our business
combination within 12 months from the closing of this
offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time), although our sponsor (or any of our
executive officers, directors or affiliates) will be entitled to
liquidating distributions from the trust account with respect to
any public shares acquired if we fail to complete our initial
business combination within the allotted 12-month
(or up to 18-month if we extend the period of time to consummate a
business combination by the full amount of time) time
period. If we submit our business combination to our public
stockholders for a vote, our initial stockholder has agreed to vote
its founder’s shares and any public shares purchased during
or after this offering in favor of our initial business combination
and our executive officers, directors and director nominees have
also agreed to vote any public shares purchased during or after the
offering in favor of our initial business combination. As a result,
we would need only 1,712,501 of the 5,000,000 public shares, or
approximately 34.3%, sold in this offering to be voted in favor of
our initial business combination in order to have such transaction
approved (assuming the over-allotment option is not exercised and
all shares were present and entitled to vote at the meeting).
Permitted transferees of our sponsor will be subject to the same
obligations of our sponsor.
Subject
to certain limited exceptions, these shares will not be
transferred, assigned, sold or released from escrow until one year
after the date of the consummation of our initial business
combination, or earlier with respect to fifty percent (50%) of such
shares if, subsequent to our business combination, the last sales
price of our 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 following the consummation of our initial business
combination.
Preferred Stock
There
are no shares of preferred stock outstanding. As of the date of
this prospectus, our amended and restated certificate of
incorporation authorizes the issuance of 1,000,000 shares of
preferred stock with such designation, rights and preferences as
may be determined from time to time by our board of directors. No
shares of preferred stock are being issued or registered in this
offering. Accordingly, our board of directors is empowered, without
stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of
common stock. However, the underwriting agreement prohibits us,
prior to a business combination, from issuing preferred stock which
participates in any manner in the proceeds of the trust account, or
which votes as a class with the common stock on a business
combination. We may issue some or all of the preferred stock to
effect a business combination. In addition, the preferred stock
could be utilized as a method of discouraging, delaying or
preventing a change in control of us. Although we do not currently
intend to issue any shares of preferred stock, we cannot assure you
that we will not do so in the future.
Rights
Public Stockholders’ Rights
Each holder of a right will receive one-tenth (1/10) of one share
of common stock upon consummation of our initial business
combination, even if the holder of such right redeemed all shares
of common stock held by it in connection with the initial business
combination. No additional consideration will be required to be
paid by a holder of rights in order to receive its additional
shares upon consummation of an initial business combination, as the
consideration related thereto has been included in the unit
purchase price paid for by investors in this offering. If we enter
into a definitive agreement for a business combination in which we
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 convert its
rights in order to receive the 1/10 share underlying each right
(without paying any additional consideration) upon consummation of
the business combination. More specifically, the right holder will
be required to indicate its election to convert the rights into
underlying shares as well as to return the original rights
certificates to us.
If we are unable to complete an initial business combination within
the required time period and we liquidate the funds held in the
trust account, holders of rights will not receive any such funds
with respect to their rights, nor will they receive any
distribution from our assets held outside of the trust account with
respect to such rights, and the rights will expire
worthless.
As soon as practicable upon the consummation of our initial
business combination, we will direct registered holders of the
rights to return their rights to our rights agent. Upon receipt of
the rights, the rights agent will issue to the registered holder of
such rights the number of full shares of common stock to which it
is entitled. We will notify registered holders of the rights to
deliver their rights to the rights agent promptly upon consummation
of such business combination and have been informed by the rights
agent that the process of exchanging their rights for shares of
common stock should take no more than a matter of days. The
foregoing exchange of rights is solely ministerial in nature and is
not intended to provide us with any means of avoiding our
obligation to issue the shares underlying the rights upon
consummation of our initial business combination. Other than
confirming that the right delivered by a registered holder are
valid, we will have no ability to avoid delivery of the shares
underlying the rights. Nevertheless, there are no contractual
penalties for failure to deliver securities to the holders of the
rights upon consummation of an initial business combination.
Additionally, in no event will we be required to net cash settle
the rights. Accordingly, you might not receive the shares of common
stock underlying the rights.
The shares issuable upon conversion of the rights will be freely
tradable (except to the extent held by affiliates of ours). We will
not issue fractional shares upon conversion of the rights. If, upon
conversion of the rights, a holder would be entitled to receive a
fractional interest in a share, we will, upon conversion, comply
with Section 155 of the Delaware General Corporation Law (which
provides that Delaware companies shall either (1) arrange for the
disposition of fractional interests by those entitled thereto, (2)
pay in cash the fair value of fractions of a share as of the time
when those entitled to receive such fractions are determined or (3)
issue scrip or warrants in registered form (either represented by a
certificate or uncertificated) or in bearer form (represented by a
certificate) which shall entitle the holder to receive a full share
upon the surrender of such scrip or warrants aggregating a full
share). We will make the determination of how we are treating
fractional shares at the time of our initial business combination
and will include such determination in the proxy materials we will
send to stockholders for their consideration of such initial
business combination.
Rights contained in the Private Placement Units
The
rights contained in the private placement units have the same terms
as the rights being sold as part of the units in this offering. See
"Description of Securities - Rights- Public Stockholders' Rights"
above.
67
Warrants
Public Stockholders’ Warrants
No
warrants are currently outstanding. Each whole warrant
entitles the registered holder to purchase one share of common
stock at a price of $11.50 per share, subject to adjustment as
discussed below, at any time after the later of the completion of
an initial business combination and 12 months from the closing of
this offering. No warrants will be exercisable for cash unless we
have an effective and current registration statement covering the
shares of common stock issuable upon exercise of the warrants and a
current prospectus relating to such shares of common stock.
Notwithstanding the foregoing, if a registration statement covering
the shares of common stock issuable upon exercise of the public
warrants is not effective within a specified period following the
consummation of our initial business combination, warrant holders
may, until such time as there is an effective registration
statement and during any period when we 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. In such event, each holder would pay the exercise
price by surrendering the warrants for that number of shares of
common stock equal to the quotient obtained by dividing (x) the
product of the number of shares of common stock 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” for this purpose will mean the average reported last
sale price of the shares of common stock for the 5 trading days
ending on the trading day prior to the date of exercise. The
warrants will expire on the fifth anniversary of our completion of
an initial business combination, at 5:00 p.m., New York City time,
or earlier upon redemption or liquidation.
We may
call the warrants for redemption (excluding the warrants contained
in the private placement units and any warrants included in
additional private units issued to our sponsor, officers or
directors in payment of working capital loans made to us, but
including any outstanding warrants issued upon exercise of the unit
purchase option issued to EarlyBirdCapital and/or its designees),
in whole and not in part, at a price of $0.01 per
warrant,
●
at any time during
the exercise period,
●
upon not less than
30 days’ prior written notice of redemption to each warrant
holder,
●
if, and only if,
the reported last sale price of the shares of common stock equals
or exceeds $21.00 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 the notice of redemption to 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.
The
right to exercise will be forfeited unless the warrants are
exercised prior to the date specified in the notice of redemption.
On and after the redemption date, a record holder of a warrant will
have no further rights except to receive the redemption price for
such holder’s warrant upon surrender of such
warrant.
The
redemption criteria for our warrants have been established at a
price which is intended to provide warrant holders a reasonable
premium to the initial exercise price and provide a sufficient
differential between the then-prevailing share price and the
warrant exercise price so that if the share price declines as a
result of our redemption call, the redemption will not cause the
share price to drop below the exercise price of the
warrants.
If we
call the warrants for redemption as described above, our management
will have the option to require all holders that wish to exercise
warrants to do so on a “cashless basis.” In such event,
each holder would pay the exercise price by surrendering the
warrants for that number of shares of common stock equal to the
quotient obtained by dividing (x) the product of the number of
shares of common stock 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 of common stock for
the 5 trading days ending on the third trading day prior to the
date on which the notice of redemption is sent to the holders of
warrants.
The
warrants will be 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,
but requires the approval, by written consent or vote, of the
holders of at least 50% of the then outstanding warrants in order
to make any change that adversely affects the interests of the
registered holders.
The
exercise price and number of shares of common stock issuable on
exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, extraordinary dividend
or our recapitalization, reorganization, merger or consolidation.
However, the warrants will not be adjusted for issuances of shares
of common stock at a price below their respective exercise
prices.
The
warrants may be exercised upon surrender of the warrant certificate
on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant
certificate completed and executed as indicated, accompanied by
full payment of the exercise price, by certified or official bank
check payable to us, for the number of warrants being exercised.
The warrant holders do not have the rights or privileges of holders
of shares of common stock and any voting rights until they exercise
their warrants and receive shares of common stock. After the
issuance of shares of common stock upon exercise of the warrants,
each holder will be entitled to one vote for each share held of
record on all matters to be voted on by stockholders.
Under
the terms of the warrant agreement, we have agreed to use our best
efforts to have declared effective a prospectus relating to the
shares of common stock issuable upon exercise of the warrants and
keep such prospectus current until the expiration of the warrants.
However, we cannot assure you that we will be able to do so and, if
we do not maintain a current prospectus relating to the shares of
common stock issuable upon exercise of the warrants, holders will
be unable to exercise their warrants for cash and we will not be
required to net cash settle or cash settle the warrant
exercise.
68
Warrant
holders may elect to be subject to a restriction on the exercise of
their warrants such that an electing warrant holder would not be
able to exercise their warrants to the extent that, after giving
effect to such exercise, such holder would beneficially own in
excess of 9.8% of the shares of common stock
outstanding.
No
fractional shares will be issued upon exercise of the warrants. If,
by reason of any adjustment made pursuant to the warrant agreement,
upon exercise of the warrants, a holder would be entitled to
receive a fractional interest in a share, we will, upon exercise,
round up to the nearest whole number the number of shares of common
stock to be issued to the warrant holder.
Warrants contained in the Private Placement Units
The
warrants contained in the private placement units will not be
transferable, assignable or salable until after the completion of
our initial business combination (except, among other limited
exceptions as described under “Principal Stockholders”)
and they will not be redeemable by us and may be exercised on a
cashless basis so long as they are held by our sponsor or its
permitted transferees. Otherwise, the warrants contained in the
private placement units have terms and provisions that are
identical to those of the warrants being sold as part of the units
in this offering. If the warrants contained in the private
placement units are held by holders other than our sponsor or its
permitted transferees, the warrants contained in the private
placement units will be redeemable by us and exercisable by the
holders on the same basis as the warrants included in the units
being sold in this offering.
If
holders of the warrants elect to exercise them on a cashless basis,
they would pay the exercise price by surrendering his, her or its
warrants for that number of shares of common stock equal to the
quotient obtained by dividing (x) the product of the number of
shares of common stock 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 common stock for the 10
trading days ending on the third trading day prior to the date on
which the notice of warrant exercise is sent to the warrant agent.
The reason that we have agreed that these warrants may be exercised
on a cashless basis so long as they are held by our sponsor and
permitted transferees is because it is not known at this time
whether they will be affiliated with us following a business
combination. If they remain affiliated with us, their ability to
sell our securities in the open market will be significantly
limited. We expect to have policies in place that prohibit insiders
from selling our securities except during specific periods of time.
Even during such periods of time when insiders will be permitted to
sell our securities, an insider cannot trade in our securities if
he or she is in possession of material non-public information.
Accordingly, unlike public stockholders who could exercise their
warrants and sell the shares of common stock received upon such
exercise freely in the open market in order to recoup the cost of
such exercise, the insiders could be significantly restricted from
selling such securities. As a result, we believe that allowing the
holders to exercise such warrants on a cashless basis is
appropriate.
Representative’s Shares of Common Stock
We have agreed to issue to EarlyBirdCapital (and/or its designees)
100,000 shares of common stock (or up to 115,000 shares if the
underwriters’ over-allotment option is exercised in full, pro
rata with the amount of the over-allotment option being exercised)
upon the consummation of this offering (and upon consummation of
any portion of the over-allotment option). EarlyBirdCapital (and/or
its designees) has agreed not to transfer, assign or sell any such
shares without our prior consent until the completion of our
initial business combination. In addition, EarlyBirdCapital (and/or
its designees) has agreed (i) to waive its redemption rights with
respect to such shares in connection with the completion of our
initial business combination and (ii) to waive its rights to
liquidating distributions from the trust account with respect to
such shares if we fail to complete our initial business combination
within 12 months from the closing of this offering (or up to 18
months from the closing of this offering if we extend the period of
time to consummate a business combination by the full amount of
time).
Purchase Option
We have
agreed to sell to EarlyBirdCapital (and/or its designees) at the
closing of the offering for $100.00, an option to purchase up to
500,000 units. The units issuable upon exercise of this option are
identical to those offered by this prospectus. See
“Underwriting.”
Dividends
We have
not paid any cash dividends on our shares of common stock to date
and do not intend to pay cash dividends prior to the completion of
a business combination. The payment of cash dividends in the future
will be dependent upon our revenues and earnings, if any, capital
requirements and general financial condition subsequent to
completion of a business combination. The payment of any dividends
subsequent to a business combination will be within the discretion
of our then board of directors. It is the present intention of our
board of directors to retain all earnings, if any, for use in our
business operations and, accordingly, our board does not anticipate
declaring any dividends in the foreseeable future.
Our Transfer Agent, Rights Agent and Warrant
Agent
The
transfer agent for our securities, rights agent for our
rights and warrant agent for our warrants is Continental
Stock Transfer & Trust Company, One State Street Plaza, New
York, New York 10004.
Listing of our Securities
We
expect our units, common stock, rights and warrants
quoted on Nasdaq under the symbols “BRPAU,”
“BRPA,” "BRPAR" and
“BRPAW,” respectively. We anticipate that our units
will be listed on Nasdaq on or promptly after the effective date of
the registration statement. Following the date the shares of our
common stock, rights and warrants are eligible to
trade separately, we anticipate that the shares of our common
stock, rights and warrants will be listed separately
and as a unit on Nasdaq.
69
Certain Anti-Takeover Provisions of Delaware Law and our Amended
and Restated Certificate of Incorporation and By-Laws
Staggered board of directors
Our
amended and restated certificate of incorporation provides that our
board of directors will be classified into two classes of directors
of approximately equal size. As a result, in most circumstances, a
person can gain control of our board only by successfully engaging
in a proxy contest at two or more annual meetings. Furthermore,
because our board is classified, directors may be removed only with
cause by a majority of our outstanding shares.
Special meeting of stockholders
Our
bylaws provide that special meetings of our stockholders may be
called only by a majority vote of our board of directors, by our
Chief Executive Officer or by our Chairman.
Advance notice requirements for stockholder proposals and director
nominations
Our
bylaws provide that stockholders seeking to bring business before
our annual meeting of stockholders, or to nominate candidates for
election as directors at our annual meeting of stockholders, must
provide timely notice of their intent in writing. To be timely, a
stockholder’s notice will need to be received by the company
secretary at our principal executive offices not later than the
close of business on the 90th day nor earlier than the open of
business on the 120th day prior to the anniversary date of the
immediately preceding annual meeting of stockholders. Pursuant to
Rule 14a-8 of the Exchange Act, proposals seeking inclusion in our
annual proxy statement must comply with the notice periods
contained therein. Our bylaws also specify certain requirements as
to the form and content of a stockholders’ meeting. These
provisions may preclude our stockholders from bringing matters
before our annual meeting of stockholders or from making
nominations for directors at our annual meeting of
stockholders.
Authorized but unissued shares
Our
authorized but unissued common stock and preferred stock are
available for future issuances without stockholder approval and
could be utilized for a variety of corporate purposes, including
future offerings to raise additional capital, acquisitions and
employee benefit plans. The existence of authorized but unissued
and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of us by means
of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum Selection
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. Although we believe this provision
benefits our company by providing increased consistency in the
application of Delaware law in the types of lawsuits to which it
applies, the provision may have the effect of discouraging lawsuits
against our directors and officers.
Section 203 of the Delaware General Corporation
Law
We will
be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This statute
prevents certain Delaware corporations, under certain
circumstances, from engaging in a “business
combination” with:
●
a stockholder who
owns 15% or more of our outstanding voting stock (otherwise known
as an “interested stockholder”);
●
an affiliate of an
interested stockholder; or
●
an associate of an
interested stockholder, for three years following the date that the
stockholder became an interested stockholder.
70
A
“business combination” includes a merger or sale of
more than 10% of our assets. However, the above provisions of
Section 203 do not apply if:
●
our board of
directors approves the transaction that made the stockholder an
“interested stockholder,” prior to the date of the
transaction;
●
after the
completion of the transaction that resulted in the stockholder
becoming an interested stockholder, that stockholder owned at least
85% of our voting stock outstanding at the time the transaction
commenced, other than statutorily excluded shares of common stock;
or
●
on or subsequent to
the date of the transaction, the business combination is approved
by our board of directors and authorized at a meeting of our
stockholders, and not by written consent, by an affirmative vote of
at least two-thirds of the outstanding voting stock not owned by
the interested stockholder.
Limitation on Liability and Indemnification of Directors and
Officers
Our
amended and restated certificate of incorporation provides that our
directors and officers will be indemnified by us to the fullest
extent authorized by Delaware law as it now exists or may in the
future be amended. In addition, our amended and restated
certificate of incorporation provides that our directors will not
be personally liable for monetary damages to us for breaches of
their fiduciary duty as directors, unless they violated their duty
of loyalty to us or our stockholders, acted in bad faith, knowingly
or intentionally violated the law, authorized unlawful payments of
dividends, unlawful stock purchases or unlawful redemptions, or
derived an improper personal benefit from their actions as
directors.
Our
bylaws also will permit us to secure insurance on behalf of any
officer, director or employee for any liability arising out of his
or her actions, regardless of whether Delaware law would permit
indemnification. We will purchase a policy of directors’ and
officers’ liability insurance that insures our directors and
officers against the cost of defense, settlement or payment of a
judgment in some circumstances and insures us against our
obligations to indemnify the directors and officers.
These
provisions may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty. These
provisions also may have the effect of reducing the likelihood of
derivative litigation against directors and officers, even though
such an action, if successful, might otherwise benefit us and our
stockholders. Furthermore, a stockholder’s investment may be
adversely affected to the extent we pay the costs of settlement and
damage awards against directors and officers pursuant to these
indemnification provisions. We believe that these provisions, the
insurance and the indemnity agreements are necessary to attract and
retain talented and experienced directors and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
71
SHARES ELIGIBLE FOR FUTURE SALE
Immediately
after this offering, we will have 6,575,000 shares of common stock
outstanding, or 7,546,250 shares if the over-allotment option is
exercised in full. Of these shares, the 5,000,000 shares of common
stock sold in this offering, or 5,750,000 shares of common stock if
the over-allotment option is exercised in full (in each case,
excluding shares underlying rights to be sold in this offering, and
excluding shares underlying private placement rights), will
be freely tradable without restriction or further registration
under the Securities Act, except for any shares purchased by one of
our affiliates within the meaning of Rule 144 under the Securities
Act. All of the remaining shares are restricted securities under
Rule 144, in that they were issued in private transactions not
involving a public offering. All of those shares have been placed
in escrow and will not be transferable until they are released
except in limited circumstances described elsewhere in this
prospectus.
Rule 144
A
person who has beneficially owned restricted shares of common
stock, rights or warrants for at least six months would be entitled
to sell their securities provided that (i) such person is not
deemed to have been one of our affiliates at the time of, or at any
time during the three months preceding, a sale and (ii) we are
subject to the Exchange Act periodic reporting requirements for at
least three months before the sale. Persons who have beneficially
owned restricted shares of common stock for at least six months but
who are our affiliates at the time of, or any time during the three
months preceding, a sale, would be subject to additional
restrictions, by which such person would be entitled to sell within
any three-month period a number of shares that does not exceed the
greater of either of the following:
●
1% of the number of
shares of common stock then outstanding, which will equal 65,750
shares immediately after this offering (or 75,462 if the
over-allotment option is exercised in full); and
●
the average weekly
trading volume of the shares of common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale.
Sales
under Rule 144 are also limited by manner of sale provisions and
notice requirements and to the availability of current public
information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former
Shell Companies
Historically,
the SEC staff had taken the position that Rule 144 is not available
for the resale of securities initially issued by companies that
are, or previously were, blank check companies, like us. The SEC
has codified and expanded this position in the amendments discussed
above by prohibiting the use of Rule 144 for resale of securities
issued by any shell companies (other than business combination
related shell companies) or any issuer that has been at any time
previously a shell company. The SEC has provided an important
exception to this prohibition, however, if the following conditions
are met:
●
the issuer of the
securities that was formerly a shell company has ceased to be a
shell company;
●
the issuer of the
securities is subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act;
●
the issuer of the
securities has filed all Exchange Act reports and material required
to be filed, as applicable, during the preceding 12 months (or such
shorter period that the issuer was required to file such reports
and materials), other than Form 8-K reports; and
●
at least one year
has elapsed from the time that the issuer filed current Form 10
type information with the SEC reflecting its status as an entity
that is not a shell company.
As a
result, it is likely that pursuant to Rule 144, our sponsor will be
able to sell its founder’s shares freely without registration
one year after we have completed our initial business combination
assuming it is not an affiliate of ours at that time.
72
Registration Rights
The
holder of our founder’s shares issued and outstanding on the
date of this prospectus, as well as the holders of the private
placement units and any private units issued to our sponsor,
officers, directors or their affiliates may be issued in payment of
working capital loans made to us (and the underlying securities)
will be entitled to registration rights pursuant to an agreement to
be signed prior to or on the effective date of this offering. 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’s 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
placement units or private units issued to our sponsor, officers,
directors or their affiliates in payment of working capital loans
made to us (in each case, including the underlying securities) can
elect to exercise these registration rights at any time after we
consummate a business combination. Notwithstanding anything to the
contrary, EarlyBirdCapital and its designees may only make a demand
on one occasion and only during the five-year period beginning on
the effective date of the registration statement of which this
prospectus forms a part. In addition, the holders have certain
“piggy-back” registration rights with respect to
registration statements filed subsequent to our consummation of a
business combination; provided, however, that EarlyBirdCapital and
its designees may participate in a “piggy-back”
registration only during the seven-year period beginning on the
effective date of the registration statement of which this
prospectus forms a part. We will bear the expenses incurred in
connection with the filing of any such registration
statements.
73
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS
The
following is a discussion of the material U.S. federal income tax
consequences of the acquisition, ownership and disposition of our
units, shares of common stock, rights and warrants,
which we refer to collectively as our securities. Because the
components of a unit are separable at the option of the holder, the
holder of a unit generally should be treated, for U.S. federal
income tax purposes, as the owner of the underlying common
stock, right and warrant components of the unit, as
the case may be. As a result, the discussion below with respect to
actual holders of common stock, rights and warrants
should also apply to holders of units (as the deemed owners of the
underlying common stock, rights and warrants that
comprise the units). This discussion applies only to securities
that are held as a capital asset for U.S. federal income tax
purposes and is applicable only to holders who purchased units in
this offering.
This
discussion is limited solely to U.S. federal income tax
considerations and does not address all of the U.S. federal income
considerations that may be relevant to you in light of your
particular circumstances. This discussion does not describe
different tax consequences that may be relevant to persons subject
to special rules, such as:
●
banks and other
financial institutions;
●
insurance
companies;
●
dealers and traders
in securities or currencies;
●
persons holding our
securities as part of a hedge, straddle, conversion transaction
integrated transaction or similar transaction;
●
certain former
citizens or residents of the United States;
●
U.S. holders (as
defined below) whose functional currency for U.S. federal income
tax purposes is not the U.S. dollar;
●
partnerships or
other entities classified as partnerships for U.S. federal income
tax purposes and investors therein;
●
persons liable for
the alternative minimum tax; and
●
tax-exempt
entities.
This
discussion is based on the Internal Revenue Code of 1986, as
amended (the “Code”), and administrative
pronouncements, judicial decisions and final, temporary and
proposed Treasury regulations as of the date hereof, changes to any
of which subsequent to the date of this prospectus may affect the
tax consequences described herein. This discussion does not address
any aspect of state, local or non-U.S. taxation, or any U.S.
federal taxes other than income taxes (such as gift and estate
taxes).
If an
entity that is treated as a partnership for U.S. federal income tax
purposes holds our securities, the tax treatment of a partner will
generally depend on the status of the partner and the activities of
the entity. If you are a partner in such an entity, you should
consult your tax advisor.
WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR TAX ADVISORS
REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME,
ESTATE AND OTHER TAX CONSIDERATIONS WITH RESPECT TO ACQUIRING,
HOLDING AND DISPOSING OF OUR SECURITIES.
Personal Holding Company Status
We
could be subject to United States federal income tax at rates in
excess of those generally applicable to corporations on a portion
of our income if we are determined to be a personal holding
company, or PHC, for United States federal income tax purposes. A
U.S. corporation will generally be classified as a PHC for United
States federal income tax purposes in a given taxable year if (i)
at any time during the last half of such taxable year, five or
fewer individuals (without regard to their citizenship or residency
and including as individuals for this purpose certain entities such
as certain tax-exempt organizations, pension funds, and charitable
trusts) own or are deemed to own (pursuant to certain constructive
ownership rules) more than 50% of the stock of the corporation by
value and (ii) at least 60% of the corporation’s adjusted
ordinary gross income, as determined for United States federal
income tax purposes, for such taxable year consists of PHC income
(which includes, among other things, dividends, interest, certain
royalties, annuities and, under certain circumstances,
rents).
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Depending
on the date and size of our initial business combination, it is
possible that at least 60% of our adjusted ordinary gross income
may consist of PHC income as discussed above. In addition,
depending on the concentration of our stock in the hands of
individuals, including the members of our sponsor and certain
tax-exempt organizations, pension funds, and charitable trusts, it
is possible that more than 50% of our stock will be owned or deemed
owned (pursuant to the constructive ownership rules) by such
persons during the last half of a taxable year. Thus, no assurance
can be given that we will not become a PHC following this offering
or in the future. If we are or were to become a PHC in a given
taxable year, we would be subject to an additional PHC tax,
currently 20%, on our undistributed PHC income, which generally
includes our taxable income subject to certain
adjustments.
Allocation of Purchase Price and Characterization of a
Unit
No
statutory, administrative or judicial authority directly addresses
the treatment of a unit or instruments similar to a unit for U.S.
federal income tax purposes and, therefore, that treatment is not
entirely clear. The acquisition of a unit should be treated for
U.S. federal income tax purposes as the acquisition of one share of
our common stock, one right and one-half of one
warrant to acquire one share of our common stock. We intend to
treat the acquisition of a unit in this manner and, by purchasing a
unit, you will agree to adopt such treatment for tax purposes. For
U.S. federal income tax purposes, you must allocate the purchase
price paid by you for such unit among the share of common
stock, the right and one-half of one the
warrant based on the relative fair market value of each at the time
of issuance. You must determine the fair market value of the share
of common stock, the right and the warrant as of the
date of issuance. Any such determination must take into account the
relevant facts and circumstances, including any market prices for
our common stock, rights or warrants attributable to
any public trading of the common stock, rights or
warrants that occurs after the units are issued. The price
allocated to each share of common stock, the right and
the one-half of
one warrant will be your tax basis in such
share, right or one-half of
one warrant, as the case may be. Any disposition of a
unit should be treated for U.S. federal income tax purposes as a
disposition of the share of common stock, one right and
one-half of one warrant comprising the unit, and the
amount realized on the disposition should be allocated
among the share of common stock, the
right and the one-half of
one warrant based on their respective relative fair
market values (determined at the time of such disposition taking
into account all the relevant facts and
circumstances).
The
foregoing treatment of the shares of common stock,
rights and warrants and your purchase price allocation are
not binding on the IRS or the courts. Because there are no
authorities that directly address instruments that are similar to
the units, no assurance can be given that the IRS or the courts
will agree with the characterization described above or the
discussion below. Accordingly, each prospective investor is urged
to consult its own tax advisors regarding the tax consequences of
an investment in a unit (including alternative characterizations of
a unit). The balance of this discussion assumes that the
characterization of the units described above is respected for U.S.
federal income tax purposes.
U.S. Holders
This
section is addressed to U.S. holders of our securities. For
purposes of this discussion, a “U.S. holder” is a
beneficial owner of our securities that is, for U.S. federal income
tax purposes:
●
an individual who
is citizen or resident of the United States;
●
a corporation, or
other entity taxable as a corporation, created or organized in, or
under the laws of, the United States or any state thereof or the
District of Columbia;
●
an estate or trust
the income of which is subject to U.S. federal income taxation
regardless of its source; or
●
a trust if (A) a
court within the United States is able to exercise primary
supervision over the administration of the trust and one or more
United States persons (within the meaning of the Code) have the
authority to control all substantial decisions of the trust, or (B)
it has in effect a valid election to be treated as a United States
person.
Dividends and Distributions
If we
make cash distributions on our common stock, such distributions
generally will be treated as dividends for U.S. federal income tax
purposes to the extent of our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles.
Distributions in excess of our current or accumulated earnings and
profits generally will first constitute a return of capital that
will reduce your basis in the common stock (but not below zero).
Any remaining excess will be treated as gain realized on the sale
or other disposition of the Common Stock (as described in the first
paragraph under “U.S. Holders — Sale or Other
Disposition or Conversion of common stock”
below).
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Dividends
we pay to a U.S. holder that is a taxable corporation generally
will qualify for the dividends received deduction if the requisite
holding period is satisfied. With certain exceptions (including,
but not limited to, dividends treated as investment income for
purposes of investment interest deduction limitations), and
provided certain holding period requirements are met, dividends we
pay to a non-corporate U.S. holder generally will constitute
“qualified dividends” that will be subject to tax at
the maximum tax rate accorded to long-term capital gains. It is
unclear whether the conversion rights with respect to the common
stock described under “Proposed Business — Effecting a
Business Combination — Conversion Rights” may prevent
you from satisfying the applicable holding period requirements with
respect to the dividends received deduction or the preferential tax
rate on qualified dividend income, as the case may be.
Sale or Other Disposition or Conversion of Common
Stock
Gain or
loss you realize on the sale or other disposition of our common
stock (other than conversion into cash but including a liquidation
in the event we do not consummate a business combination within the
required time) generally will be capital gain or loss. The amount
of your gain or loss will be equal to the difference between your
tax basis in the common stock disposed of and the amount realized
on the disposition. The deductibility of capital losses is subject
to limitations. Any capital gain or loss you realize on a sale or
other disposition of our common stock will generally be long-term
capital gain or loss if your holding period for the common stock is
more than one year. However, the conversion feature of the common
stock described under “Proposed Business — Effecting a
Business Combination — Conversion Rights” could affect
your ability to satisfy the holding period requirements for the
long-term capital gain tax rate with respect to the time period
prior to the approval of an initial business combination. The
deductibility of capital losses is subject to
limitations.
If you
convert your common stock into a right to receive cash as described
in “Proposed Business — Effecting a Business
Combination — Conversion Rights” or we repurchase your
common stock in an open market transaction, the treatment of the
transaction for U.S. federal income tax purposes will depend on
whether the conversion or repurchase (hereinafter referred to as a
“redemption”) qualifies as sale of the common stock
under Section 302 of the Code. If the redemption qualifies as a
sale of common stock, you will be treated as described in the
preceding paragraph (rather than as a dividend or distribution). If
the redemption does not qualify as a sale of common stock, the you
will be treated as receiving a corporate distribution with the tax
consequences described above under “U.S. Holders —
Dividends and Distributions”. Whether a redemption qualifies
for sale treatment will depend largely on the total number of
shares of our stock treated as held by you (including any stock
constructively owned by you as a result of owning warrants)
relative to all of our shares outstanding both before and after the
redemption. The redemption of common stock generally will be
treated as a sale of the common stock (rather than as a corporate
distribution) if the redemption (i) is “substantially
disproportionate” with respect to you, (ii) results in a
“complete termination” of your interest in us or (iii)
is “not essentially equivalent to a dividend” with
respect to you. These tests are explained more fully below. In
determining whether any of the foregoing tests are satisfied, a
U.S. holder takes into account not only stock actually owned by the
U.S. holder, but also shares of our stock that are constructively
owned by it. A U.S. holder may constructively own, in addition to
stock owned directly, stock owned by certain related individuals
and entities in which the U.S. holder has an interest or that have
an interest in such U.S. holder, as well as any stock the U.S.
holder has a right to acquire by exercise of an option, which would
generally include common stock which could be acquired pursuant to
the exercise of the warrants. In order to meet the substantially
disproportionate test, the percentage of our outstanding voting
stock actually and constructively owned by the U.S. holder
immediately following the redemption of common stock must, among
other requirements, be less than 80% of the percentage of our
outstanding voting stock actually and constructively owned by the
U.S. holder immediately before the redemption. There will be a
complete termination of a U.S. holder’s interest if either
(i) all of the shares of our stock actually and constructively
owned by the U.S. holder are redeemed or (ii) all of the shares of
our stock actually owned by the U.S. holder are redeemed and the
U.S. holder is eligible to waive, and effectively waives in
accordance with specific rules, the attribution of stock owned by
certain family members and the U.S. holder does not constructively
own any other stock. The redemption of the common stock will not be
essentially equivalent to a dividend if a U.S. holder’s
conversion results in a “meaningful reduction” of the
U.S. holder’s proportionate interest in us. Whether the
redemption will result in a meaningful reduction in a U.S.
holder’s proportionate interest in us will depend on the
particular facts and circumstances. You should consult with your
own tax advisor as to the tax consequences of a
redemption.
If none
of the foregoing tests is satisfied, then the redemption will be
treated as a corporate distribution and the tax effects to you will
be as described under “U.S. Holders — Dividends and
Distributions,” above. After the application of those rules,
any remaining tax basis you have in the redeemed common stock will
be added to your adjusted tax basis in your remaining stock, or, if
you have none, to your adjusted tax basis in your warrants or
possibly in other stock constructively owned by you.
Sale or Other Disposition, Exercise or Expiration of Warrants
or Rights
Upon
the sale or other disposition of a warrant (other than by exercise)
or our rights, you will generally recognize capital
gain or loss equal to the difference between the amount realized on
the sale or other disposition and your tax basis in the warrant
or rights (as the case may be). This capital gain or
loss will be long-term capital gain or loss if, at the time of the
sale or other disposition, the warrant or right has
been held by you for more than one year. The deductibility of
capital losses is subject to limitations.
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Except
as discussed below with respect to the cashless exercise of a
warrant, you generally will not recognize taxable gain or loss from
the acquisition of common stock upon exercise of a warrant for
cash. Your tax basis in the share of our common stock received upon
exercise of the warrant generally will be an amount equal to the
sum of the your initial investment in the warrant (i.e., the
portion of your purchase price for a unit that is allocated to the
warrant) and the exercise price. Your holding period for the common
stock received upon exercise of the warrants will begin on the date
following the date of exercise (or possibly the date of exercise)
of the warrants and will not include the period during which you
held the warrants. If a warrant is allowed to lapse unexercised,
you generally will recognize a capital loss equal to your tax basis
in the warrant.
The tax
consequences of a cashless exercise of a warrant are not clear
under current tax law. A cashless exercise may be tax-free, either
because the exercise is not a gain realization event or because the
exercise is treated as a recapitalization for U.S. federal income
tax purposes. In either tax-free situation, a your tax basis in the
common stock received would equal your tax basis in the warrant. If
the cashless exercise were treated as not being a gain realization
event, your holding period in the common stock would be treated as
commencing on the date following the date of exercise (or possibly
the date of exercise) of the warrant. If the cashless exercise were
treated as a recapitalization, the holding period of the common
stock would include the holding period of the warrant.
It is
also possible that a cashless exercise could be treated in part as
a taxable exchange in which gain or loss would be recognized. In
such event, you could be deemed to have surrendered warrants equal
to the number of common shares having a value equal to the exercise
price for the total number of warrants to be exercised. You would
recognize capital gain or loss in an amount equal to the difference
between the fair market value of the common stock represented by
the warrants deemed surrendered and your tax basis in the warrants
deemed surrendered. In this case, your tax basis in the common
stock received would equal the sum of the fair market value of the
common stock represented by the warrants deemed surrendered and
your tax basis in the warrants exercised. Your holding period for
the common stock would commence on the date following the date of
exercise (or possibly the date of exercise) of the
warrant.
Due to
the absence of authority on the U.S. federal income tax treatment
of a cashless exercise, there can be no assurance which, if any, of
the alternative tax consequences and holding periods described
above would be adopted by the IRS or a court of law. Accordingly,
you should consult your own tax advisor regarding the tax
consequences of a cashless exercise.
If a
warrant expires without being exercised, you will recognize a
capital loss in an amount equal to your tax basis in the warrant.
Such loss will be long-term capital loss if, at the time of the
expiration, the warrant has been held by you for more than one
year. The deductibility of capital losses is subject to
limitations.
In general, you should not recognize gain or loss upon the
acquisition of common stock pursuant to the rights. The tax basis
of common stock acquired pursuant to the rights should be equal to
your tax basis in such rights. The holding period of such common
stock should begin on the day after the receipt of such common
stock pursuant to such rights. The tax treatment of a right that
expires worthless is unclear. Holders of rights should consult
their own tax advisors regarding the tax treatment of any losses
that result if the rights expire worthless.
Constructive Distributions on Warrants
The
terms of each warrant provide for an adjustment to the number of
shares of common stock for which the warrant may be exercised or to
the exercise price of the warrant in certain events, as discussed
in the section of this prospectus captioned “Description of
Securities — Warrants — Public Stockholders’
Warrants.” An adjustment which has the effect of preventing
dilution generally is not taxable. You would, however, be treated
as receiving a constructive distribution from us if, for example,
the adjustment increases your proportionate interest in our assets
or earnings and profits (e.g., through an increase in the number of
shares of common stock that would be obtained upon exercise) as a
result of a distribution of cash to the holders of shares of our
common stock which is taxable to the U.S. holders of such shares as
described under “U.S. Holders — Dividends and
Distributions” above. For example, if the exercise price of
the warrants is decreased as a result of certain taxable dividends
paid to holders of the common stock, then the amount by which such
exercise was decreased could be considered an increase in the
warrant holder’s proportionate interest in our assets or
earnings and profits, which may result in a constructive
distribution to you with respect to your warrants. Such
constructive distribution would be subject to tax in the same
manner as if you received a cash distribution from us equal to the
fair market value of such increased interest. You should consult
your tax advisor regarding the proper treatment of adjustment to
the warrants.
Unearned Income Medicare Tax
A 3.8%
Medicare contribution tax will generally apply to all or some
portion of the net investment income of a U.S. holder that is an
individual with adjusted gross income that exceeds a threshold
amount ($250,000 if married filing jointly or if considered a
“surviving spouse” for federal income tax purposes,
$125,000 if married filing separately, and $200,000 in other
cases). This 3.8% tax will also apply to all or some portion of the
undistributed net investment income of certain U.S. holders that
are estates and trusts. For these purposes, dividends and gains
from the taxable dispositions of the common stock,
rights and warrants will generally be taken into account in
computing such a U.S. holder’s net investment
income.
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Information Reporting and Backup Withholding
Information
returns may be filed with the IRS with respect to dividends or
other distributions we may pay to you and proceeds from the sale of
your shares of common stock, rights or warrants. You
will be subject to backup withholding on these payments if you fail
to provide your taxpayer identification number to the paying agent
and comply with certain certification procedures or otherwise
establish an exemption from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld with respect to your
shares of common stock, rights or warrants under the
backup withholding rules will be refunded to you or credited
against your United States federal income tax liability, if any, by
the IRS provided that certain required information is furnished to
the IRS in a timely manner.
Non-U.S. Holders
This
section is addressed to non-U.S. holders of the securities. For
purposes of this discussion, a “non-U.S. holder” is a
beneficial owner of a security (other than an entity treated as a
partnership for U.S. federal income tax purposes) that is not a
U.S. holder.
Dividends and Distributions
If we
were to pay taxable dividends to you with respect to your shares of
common stock (including any deemed distributions treated as a
dividend on the warrants, as described in “Non-U.S. Holders
— Constructive Distributions on Warrants” below), those
dividends would generally be subject to United States withholding
tax at a rate of 30% of the gross amount, unless you are eligible
for a reduced rate of withholding tax under an applicable income
tax treaty and you provide proper certification of your eligibility
for such reduced rate (usually on an IRS Form W-8BEN or Form
W-8BEN-E). A distribution generally will constitute a dividend for
U.S. federal income tax purposes to the extent of our current or
accumulated earnings and profits as determined under the Code. Any
distribution not constituting a dividend generally will be treated
first as reducing your basis in your shares of common stock and, to
the extent it exceeds your basis, as gain from the disposition of
your shares of Common Stock treated as described under
“Non-U.S. Holders — Sale or Other Disposition of
Common Stock, Rights or
Warrants” below. The full amount of any distributions to you
may, however, be subject to United States withholding tax unless
the applicable withholding agent elects to withhold a lesser amount
based on a reasonable estimate of the amount of the distribution
that would be treated as a dividend. In addition, if we determine
that we are likely to be classified as a “United States real
property holding corporation”(see “Non-U.S. Holders
— Sale or Other Disposition of Common Stock,
Rights or Warrants” below), we will withhold at least
15% of any distribution that exceeds our current and accumulated
earnings and profits as provided by the Code.
Dividends
we pay to you that are effectively connected with your conduct of a
trade or business within the United States generally will not be
subject to United States withholding tax if you comply with
applicable certification and disclosure requirements (usually by
providing an IRS Form W-8ECI). Instead, such dividends generally
will be subject to United States federal income tax, net of certain
deductions, at the same graduated individual or corporate rates
applicable to United States persons. If you are a corporation,
effectively connected income may also be subject to a “branch
profits tax” at a rate of 30% (or such lower rate as may be
specified by an applicable income tax treaty).
Exercise of Warrants
The
U.S. federal income tax treatment of your exercise of a warrant, or
the expiration of a warrant held by a Non-U.S. holder, generally
will correspond to the U.S. federal income tax treatment of the
exercise or expiration of a warrant by a U.S. holder, as described
under “U.S. holders — Sale or other Disposition,
Exercise or Expiration of Warrants” above, although to the
extent a cashless exercise results in a taxable exchange, the
consequences would be similar to those described below in
“Non-U.S. Holders — Sale or Other Disposition of Common
Stock or Warrants.”
Sale or Other Disposition of Common Stock, Rights or
Warrants
You
generally will not be subject to United States federal income tax
on any gain realized upon the sale, taxable exchange or other
taxable disposition of our common stock (which would include a
dissolution and liquidation if we do not consummate an initial
business combination within the required timeframe),
rights or warrants (including an expiration or redemption of
our warrants), unless:
●
the gain is
effectively connected with your conduct of a trade or business
within the United States (and, under certain income tax treaties,
is attributable to a United States permanent establishment or fixed
base you maintain);
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●
you are an
individual, you hold your shares of common stock,
rights or warrants as capital assets, you are present in the
United States for 183 days or more in the taxable year of
disposition and you meet other conditions, and you are not eligible
for relief under an applicable income tax treaty; or
●
we are or have been
a “United States real property holding corporation” for
United States federal income tax purposes and, in the case where
the shares of our common stock are regularly traded on an
established securities market, you hold or have held, directly or
indirectly, at any time within the shorter of the five-year period
preceding disposition or your holding period for your shares of
common stock, rights or warrants, more than 5% of our
common stock. Special rules may apply to the determination of the
5% threshold in the case of a holder of a warrant or
rights. You are urged to consult your own tax advisors
regarding the effect of holding the warrants or rights
on the calculation of such 5% threshold. We will be classified as a
United States real property holding corporation if the fair market
value of our “United States real property interests”
equals or exceeds 50% of the sum of (1) the fair market value of
our United States real property interests, (2) the fair market
value of our non-United States real property interests and (3) the
fair market value of any other of our assets which are used or held
for use in our trade or business. Although we currently are not a
United States real property holding corporation, we cannot
determine whether we will be a United States real property holding
corporation in the future until we consummate an initial business
combination.
Gain
that is effectively connected with your conduct of a trade or
business within the United States generally will be subject to
United States federal income tax, net of certain deductions, at the
same rates applicable to United States persons. If you are a
corporation, the branch profits tax also may apply to such
effectively connected gain. If the gain from the sale or
disposition of your shares of common stock, rights or
warrants is effectively connected with your conduct of a trade or
business in the United States but under an applicable income tax
treaty is not attributable to a permanent establishment you
maintain in the United States, your gain may be exempt from United
States tax under the treaty. If you are described in the second
bullet point above, you generally will be subject to United States
federal income tax at a rate of 30% on the gain realized, although
the gain may be offset by some United States source capital losses
realized during the same taxable year. If you are described in the
third bullet point above, gain recognized by you on the sale,
exchange or other disposition of shares of common stock,
rights or warrants will be subject to U.S. federal income
tax at generally applicable U.S. federal income tax rates. In
addition, a buyer of your shares of common stock,
rights or warrants may be required to withhold United States
income tax at a rate of 15% of the amount realized upon such
disposition.
If you
convert your common stock into a right to receive cash as described
in “Proposed Business — Effecting a Business
Combination — Conversion Rights,” the conversion
generally will be treated as a sale of common stock rather than as
a dividend or distribution. The conversion will, however, be
treated as a dividend or distribution and taxed as described in
“Non-U.S. Holders — Dividends and Distributions”
if the conversion is not treated as a sale of your common stock.
See the discussion in “— U.S. Holders — Sale or
Other Disposition or Conversion of Common Stock.” You should
consult your own tax advisor as to whether conversion of your
common stock will be treated as a sale or as a dividend under the
Code.
Constructive Distribution on Warrants
The
terms of each warrant provide for an adjustment to the number of
shares of common stock for which the warrant may be exercised or to
the exercise price of the warrant in certain events, as discussed
in the section of this prospectus captioned “Description of
Securities — Warrants — Public Stockholders’
Warrants.” An adjustment which has the effect of preventing
dilution generally is not taxable. You would, however, be treated
as receiving a constructive distribution from us if, for example,
the adjustment increases your proportionate interest in our assets
or earnings and profits (e.g., through an increase in the number of
shares of common stock that would be obtained upon exercise) as a
result of a distribution of cash to the holders of shares of our
common stock which is taxable. For example, if the exercise price
of the warrants is decreased as a result of certain taxable
dividends paid to holders of the common stock, then the amount by
which such exercise was decreased could be considered an increase
in the warrant holder’s proportionate interest in our assets
or earnings and profits, which may result in a constructive
distribution to you with respect to your warrants. Such
constructive distribution would be subject to tax in the same
manner as if you received a cash distribution from us equal to the
fair market value of such increased interest. Any resulting
withholding tax would be collected from other amounts payable or
distributable to you. You should consult your tax advisor regarding
the proper treatment of any adjustment to the
warrants.
Information Reporting and Backup Withholding
We must
report annually to the IRS the amount of dividends or other
distributions we may pay to you on your shares of common stock and
the amount of tax we withhold on any such distributions regardless
of whether withholding is required. The IRS may make copies of the
information returns reporting those dividends and amounts withheld
available to the tax authorities in the country in which you reside
pursuant to the provisions of an applicable income tax treaty or
exchange of information treaty.
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The
United States imposes backup withholding on dividends and certain
other types of payments to United States persons. You will not be
subject to backup withholding on dividends you receive on your
shares of common stock if you provide proper certification (usually
on an IRS Form W-8BEN or Form W-8BEN-E) of your status as a
non-United States person or you are a corporation or one of several
types of entities and organizations that qualify for
exemption.
Backup
withholding is not an additional tax. Any amounts withheld with
respect to your shares of common stock, rights or
warrants under the backup withholding rules will be refunded to you
or credited against your United States federal income tax
liability, if any, by the IRS provided that certain required
information is furnished to the IRS in a timely
manner.
FATCA Withholding
The
Foreign Account Tax Compliance Act (“FATCA”) generally
imposes a U.S. federal withholding tax of 30% on dividends and on
the gross proceeds of a disposition of our common
stock,
rights or warrants paid to a “foreign financial
institution” (as specially defined under these rules), unless
such institution enters into an agreement with the U.S. government
to withhold on certain payments and to collect and provide to the
U.S. tax authorities substantial information regarding the U.S.
account holders of such institution (which includes certain equity
and debt holders of such institution, as well as certain account
holders that are foreign entities with U.S. owners) or otherwise
establishes an exemption. FATCA also generally imposes a U.S.
federal withholding tax of 30% on dividends and on the gross
proceeds of a disposition of our common stock,
rights or warrants paid to a “non-financial
foreign entity” (as specially defined under these rules)
unless such entity provides the withholding agent with a
certification identifying certain substantial direct and indirect
U.S. owners of the entity, certifies that there are none or
otherwise establishes an exemption. The withholding obligations
under FATCA generally apply to payments of dividends (including
constructive dividends) on our common stock,
rights or warrants, and under transition rules, are
expected to apply to payments of gross proceeds from a sale or
other disposition of our common stock,
rights or warrants on or after January 1, 2019. An
intergovernmental agreement between the United States and an
applicable foreign country may modify the requirements described in
this paragraph. We will not pay any additional amounts to holders
in respect of any amounts withheld, including pursuant to FATCA.
Under certain circumstances, you may be eligible for refunds or
credits of such taxes. Prospective investors are encouraged to
consult with their own tax advisors regarding the possible
implications of this legislation on their investment in our
securities.
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UNDERWRITING
We are
offering the units described in this prospectus through the
underwriters named below. EarlyBirdCapital, Inc. is acting as
representative of the underwriters. We have entered into an
underwriting agreement with the representative. Subject to the
terms and conditions of the underwriting agreement, the
underwriters have agreed to purchase, and we have agreed to sell to
the underwriters, the number of units listed next to each of its
name in the following table:
Underwriter
|
Number of
Units
|
EarlyBirdCapital,
Inc.
|
-
|
I-Bankers
Securities, Inc
|
-
|
Total
|
5,000,000
|
The
underwriting agreement provides that the underwriters must buy all
of the units if they buy any of them. However, the underwriters are
not required to purchase the units covered by the option to
purchase additional units as described below.
Our
units are offered subject to a number of conditions,
including:
●
receipt and
acceptance of our units by the underwriters; and
●
the
underwriters’ right to reject orders in whole or in
part.
In
connection with this offering, the underwriters or securities
dealers may distribute prospectuses electronically.
Option To Purchase Additional Units
We have
granted the underwriters an option to buy up to an aggregate of
750,000 additional units. The underwriters have 45 days from the
date of this prospectus to exercise this option. If the
underwriters exercise this option, they will purchase additional
units approximately in proportion to the amounts specified in the
table above.
Underwriting Discount
Units
sold by the underwriters to the public will initially be offered at
the initial offering price set forth on the cover of this
prospectus. Any units sold by the underwriters to securities
dealers may be sold at a discount of up to $____ per unit from the
initial public offering price and the dealers may reallow a
concession not in excess of $____ per unit to other dealers. Sales
of units made outside of the United States may be made by
affiliates of the underwriters. After completion of the
initial public offering, if all the units are
not sold at the initial public offering price, the representative
may change the offering price and the other selling terms. Upon
execution of the underwriting agreement, the underwriters will be
obligated to purchase the units at the prices and upon the terms
stated therein.
The
following table shows the per unit and total underwriting discount
we will pay to the underwriters assuming both no exercise and full
exercise of the underwriters’ option to purchase up to
750,000 additional units.
|
No
Exercise
|
Full
Exercise
|
Per
Unit
|
$0.25
|
$0.25
|
Total
|
$1,250,000
|
$1,437,500
|
We
estimate that the total expenses of the offering payable by us, not
including the underwriting discount, will be approximately
$500,000. In addition, we have agreed to pay for the FINRA-related
fees and expenses of the underwriters’ legal counsel, not to
exceed $15,000, the expenses of transaction “bibles”
and lucite cube “mementos,” not to exceed $3,000, and
the expenses of investigations and background checks, not to exceed
$21,000. We have paid EarlyBirdCapital $25,000 as an advance
against its actual out-of-pocket expenses. To the extent that the
out-of-pocket expenses are less than this advance, EarlyBirdCapital
will refund the excess to us.
Indemnification
We have
agreed to indemnify the underwriter against certain liabilities,
including certain liabilities under the Securities Act. If we are
unable to provide this indemnification, we have agreed to
contribute to payments the underwriter may be required to make in
respect of those liabilities.
81
NASDAQ Listing
We have
applied to have our units listed on the Nasdaq Capital Market under
the symbol “BRPAU” on or promptly after the date of
this prospectus. Once the securities comprising the units begin
separate trading, the common stock, rights and
warrants will be traded on Nasdaq under the symbols
“BRPA,” "BRPAR" and
“BRPAW.”
Business Combination Marketing Agreement
We have
engaged EarlyBirdCapital as an advisor in connection with our
business combination to assist us in holding meetings with our
stockholders to discuss the potential business combination and the
target business’ attributes, introduce us to potential
investors that are interested in purchasing our securities in
connection with the business combination, assist us in obtaining
stockholder approval for the business combination and assist us
with our press releases and public filings in connection with the
business combination. We will pay EarlyBirdCapital a cash fee for
such services upon the consummation of our initial business
combination in an amount equal to 4.0% of the gross proceeds of
this offering (exclusive of any applicable finders’ fees
which might become payable).
Representative’s Shares of Common Stock
We have
agreed to issue to EarlyBirdCapital (and/or its designees) 100,000
shares of common stock (or up to 115,000 shares if the
underwriters’ over-allotment option is exercised in full)
upon the consummation of this offering. EarlyBirdCapital (and/or
its designees) has agreed not to transfer, assign or sell any such
shares without our prior consent until the completion of our
initial business combination. In addition, EarlyBirdCapital (and/or
its designees) has agreed (i) to waive its redemption rights with
respect to such shares in connection with the completion of our
initial business combination and (ii) to waive its rights to
liquidating distributions from the trust account with respect to
such shares if we fail to complete our initial business combination
within 12 months from the closing of this offering
(or up to 18 months from the closing of this offering if we extend
the period of time to consummate a business combination by the full
amount of time).
The
shares have been deemed compensation by FINRA and are therefore
subject to a lock-up for a period of 180 days immediately following
the date of the effectiveness of the registration statement of
which this prospectus forms a part pursuant to Rule 5110(g)(1) of
FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule
5110(g)(1), these securities will not be the subject of any
hedging, short sale, derivative, put or call transaction that would
result in the economic disposition of the securities by any person
for a period of 180 days immediately following the effective date
of the registration statement of which this prospectus forms a
part, nor may they be sold, transferred, assigned, pledged or
hypothecated for a period of 180 days immediately following the
effective date of the registration statement of which this
prospectus forms a part except to any underwriter and selected
dealer participating in the offering and their bona fide officers
or partners.
Pursuant
to the underwriting agreement, we have granted the holders of these
shares the same registration rights as described below with respect
to the purchase option.
Purchase Option
We have
agreed to sell to EarlyBirdCapital (and/or its designees), for
$100, an option to purchase up to a total of 500,000 units
exercisable at $10.00 per unit (or an aggregate exercise price of
$5,000,000) upon the closing of this offering.
Since the option is not
exercisable until the closing of our initial business combination
and the rights will entitle the holders to receive one-tenth of a
share at that time, the option will effectively represent the right
to purchase up to 550,000 shares of common stock (which includes
the 50,000 shares which will be issued for the rights included in
the units) and 250,000 warrants to purchase 250,000 shares of
common stock at $11.50 per share for an aggregate maximum amount of
$2,875,000. The purchase option
may be exercised for cash or on a cashless basis, at the
holder’s option, at any time during the period commencing on
the later of the first anniversary of the effective date of the
registration statement of which this prospectus forms a part and
the closing of our initial business combination and terminating on
the fifth anniversary of such effectiveness date. Notwithstanding
anything to the contrary, EarlyBirdCapital has agreed that neither
it nor its designees will be permitted to exercise the option
nor the rights or the warrants underlying the option
after the five year anniversary of the effective date of the
registration statement of which this prospectus forms a part. The
option and such units purchased pursuant to the option, as well as
the shares of common stock underlying such units, the rights
and warrants included in such units and the shares of common
stock that are issuable for the rights and warrants
included in such units have been deemed compensation by FINRA and
are therefore subject to a lock-up for a period of 180 days
immediately following the date of the effectiveness of the
registration statement of which this prospectus forms a part
pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules.
Pursuant to FINRA Rule 5110(g)(1), these securities will not be the
subject of any hedging, short sale, derivative, put or call
transaction that would result in the economic disposition of the
securities by any person for a period of 180 days immediately
following the effective date of the registration statement of which
this prospectus forms a part, nor may they be sold, transferred,
assigned, pledged or hypothecated for a period of 180 days
immediately following the effective date of the registration
statement of which this prospectus forms a part 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 of which this prospectus forms a part with
respect to the registration under the Securities Act of the
securities directly and indirectly issuable upon exercise of the
option. We 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 our recapitalization, reorganization, merger or consolidation.
However, the option will not be adjusted for issuances of shares of
common stock at a price below its exercise price. We will have no
obligation to net cash settle the exercise of the purchase option
or the rights or warrants underlying the purchase option. The
holder of the purchase option will not be entitled to exercise the
purchase option or the rights or warrants underlying the purchase
option unless a registration statement covering the securities
underlying the purchase option is effective or an exemption from
registration is available. If the holder is unable to exercise the
purchase option or underlying rights or warrants, the purchase
option, rights or warrants, as applicable, will expire
worthless.
82
The
exercise price and number of units issuable upon exercise of the
option (and the underlying securities) may be adjusted in certain
circumstances including in the event of a stock dividend, or our
recapitalization, reorganization, merger or consolidation. However,
the option will not be adjusted for issuances of shares of common
stock at a price below its exercise price.
Price Stabilization, Short Positions
In
connection with this offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the price
of units during and after this offering, including:
●
stabilizing
transactions;
●
short
sales;
●
purchases to cover
positions created by short sales;
●
imposition of
penalty bids; and
●
syndicate covering
transactions.
Stabilizing
transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of our units
while this offering is in progress. Stabilization transactions
permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. These
transactions may also include making short sales of our units,
which involve the sale by the underwriters of a greater number of
units than they are required to purchase in this offering and
purchasing units on the open market to cover short positions
created by short sales. Short sales may be “covered short
sales,” which are short positions in an amount not greater
than the underwriters’ option to purchase additional units
referred to above, or may be “naked short sales,” which
are short positions in excess of that amount.
The
underwriters may close out any covered short position by either
exercising their option, in whole or in part, or by purchasing
units in the open market. In making this determination, the
underwriters will consider, among other things, the price of units
available for purchase in the open market as compared to the price
at which they may purchase units through the over-allotment
option.
Naked
short sales are short sales made in excess of the over-allotment
option. The underwriters must close out any naked short position by
purchasing units in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there
may be downward pressure on the price of the units in the open
market that could adversely affect investors who purchased in this
offering.
The
underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the representative of the
underwriters a portion of the underwriting discount received by it
because the representative has repurchased units sold by or for the
account of that underwriter in stabilizing or short covering
transactions.
These
stabilizing transactions, short sales, purchases to cover positions
created by short sales, the imposition of penalty bids and
syndicate covering transactions may have the effect of raising or
maintaining the market price of our units or preventing or
retarding a decline in the market price of our units. As a result
of these activities, the price of our units may be higher than the
price that otherwise might exist in the open market. The
underwriters may carry out these transactions on the Nasdaq, in the
over-the-counter market or otherwise. Neither we nor the
underwriters make any representation or prediction as to the effect
that the transactions described above may have on the price of the
units. Neither we, nor the underwriters, make any representation
that the underwriter will engage in these stabilization
transactions or that any transaction, once commenced, will not be
discontinued without notice.
83
Determination of Offering Price
Prior
to this offering, there was no public market for our units. The
initial public offering price will be determined by negotiation
between us and the representative of the underwriters. The
principal factors to be considered in determining the initial
public offering price include:
●
the information set
forth in this prospectus and otherwise available to the
representative;
●
our history and
prospects and the history and prospects for the industry in which
we compete;
●
our past and
present financial performance;
●
our prospects for
future earnings and the present state of our
development;
●
the general
condition of the securities market at the time of this
offering;
●
the recent market
prices of, and demand for, publicly traded units of generally
comparable companies; and
●
other factors
deemed relevant by the underwriters and us.
The
estimated public offering price range set forth on the cover page
of this preliminary prospectus is subject to change as a result of
market conditions and other factors. Neither we nor the
underwriters can assure investors that an active trading market
will develop for our units, warrants, rights or common
stock or that the units will trade in the public market at or above
the initial public offering price.
Affiliations
EarlyBirdCapital
and its affiliates are full service financial institutions engaged
in various activities, which may include securities trading,
commercial and investment banking, financial advisory, investment
management, investment research, principal investment, hedging,
financing and brokerage activities. EarlyBirdCapital and its
affiliates may from time to time in the future engage with us and
perform services for us or in the ordinary course of their business
for which they will receive customary fees and expenses. In the
ordinary course of their various business activities, the
underwriters and their respective affiliates may also make or hold
a broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for
the accounts of their customers, and such investment and securities
activities may involve securities and/or instruments of us. The
underwriters and its affiliates may also make investment
recommendations and/or publish or express independent research
views in respect of these securities or instruments and may at any
time hold, or recommend to clients that they acquire, long and/or
short positions in these securities and instruments.
Additional Future Arrangements
We are
not under any contractual obligation to engage any of the
underwriters to provide any services for us after this offering,
and have no present intent to do so. However, the underwriters may
introduce us to potential target businesses or assist us in raising
additional capital in the future. If any of the underwriters
provide services to us after this offering, we may pay such
underwriter fair and reasonable fees that would be determined at
that time in an arm’s length negotiation; provided that no
agreement will be entered into with any underwriter and no fees for
such services will be paid to any underwriter prior to the date
that is 90 days from the date of this prospectus, unless FINRA
determines that such payment would not be deemed
underwriter’s compensation in connection with this
offering.
Electronic Distribution
A
prospectus in electronic format may be made available on the
Internet sites or through other online services maintained by the
underwriters participating in this offering, or by their
affiliates. In those cases, prospective investors may view offering
terms online and, depending upon the particular underwriter,
prospective investors may be allowed to place orders online. The
underwriters may agree with us to allocate a specific number of
units for sale to online brokerage account holders. Any such
allocation for online distributions will be made by the
underwriters on the same basis as other allocations. Other than the
prospectus in electronic format, the information on any
underwriter’s website and any information contained in any
other website maintained by an underwriter is not part of the
prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or any
underwriter in its capacity as underwriter and should not be relied
upon by investors.
84
Selling Restrictions
Canada
Resale Restrictions
We
intend to distribute our securities in the Province of Ontario,
Canada (the “Canadian Offering Jurisdiction”) by way of
a private placement and exempt from the requirement that we prepare
and file a prospectus with the securities regulatory authorities in
such Canadian Offering Jurisdiction. Any resale of our securities
in Canada must be made under applicable securities laws that will
vary depending on the relevant jurisdiction, and which may require
resales to be made under available statutory exemptions or under a
discretionary exemption granted by the applicable Canadian
securities regulatory authority. Canadian resale restrictions in
some circumstances may apply to resales of interests made outside
of Canada. Canadian purchasers are advised to seek legal advice
prior to any resale of our securities. We may never be a
“reporting issuer”, as such term is defined under
applicable Canadian securities legislation, in any province or
territory of Canada in which our securities will be offered and
there currently is no public market for any of the securities in
Canada, and one may never develop. Canadian investors are advised
that we have no intention to file a prospectus or similar document
with any securities regulatory authority in Canada qualifying the
resale of the securities to the public in any province or territory
in Canada.
Representations of Purchasers
A
Canadian purchaser will be required to represent to us and the
dealer from whom the purchase confirmation is received
that:
●
the purchaser is
entitled under applicable provincial securities laws to purchase
our securities without the benefit of a prospectus qualified under
those securities laws;
●
where required by
law, that the purchaser is purchasing as principal and not as
agent;
●
the purchaser has
reviewed the text above under Resale Restrictions; and
●
the purchaser
acknowledges and consents to the provision of specified information
concerning its purchase of our securities to the regulatory
authority that by law is entitled to collect the
information.
Rights of Action — Ontario Purchasers Only
Under
Ontario securities legislation, certain purchasers who purchase a
security offered by this prospectus during the period of
distribution will have a statutory right of action for damages, or
while still the owner of our securities, for rescission against us
in the event that this prospectus contains a misrepresentation
without regard to whether the purchaser relied on the
misrepresentation. The right of action for damages is exercisable
not later than the earlier of 180 days from the date the purchaser
first had knowledge of the facts giving rise to the cause of action
and three years from the date on which payment is made for our
securities. The right of action for rescission is exercisable not
later than 180 days from the date on which payment is made for our
securities. If a purchaser elects to exercise the right of action
for rescission, the purchaser will have no right of action for
damages against us. In no case will the amount recoverable in any
action exceed the price at which our securities were offered to the
purchaser and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, we will have no
liability. In the case of an action for damages, we will not be
liable for all or any portion of the damages that are proven to not
represent the depreciation in value of our securities as a result
of the misrepresentation relied upon. These rights are in addition
to, and without derogation from, any other rights or remedies
available at law to an Ontario purchaser. The foregoing is a
summary of the rights available to an Ontario purchaser. Ontario
purchasers should refer to the complete text of the relevant
statutory provisions.
Enforcement of Legal Rights
All of
our directors and officers as well as the experts named herein are
located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada
upon us or those persons. All of our assets and the assets of those
persons are located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against us or those persons in
Canada or to enforce a judgment obtained in Canadian courts against
us or those persons outside of Canada.
85
Collection of Personal Information
If a
Canadian purchaser is resident in or otherwise subject to the
securities laws of the Province of Ontario, the Purchaser
authorizes the indirect collection of personal information
pertaining to the Canadian purchaser by the Ontario Securities
Commission (the “OSC”) and each Canadian purchaser will
be required to acknowledge and agree that the Canadian purchaser
has been notified by us (i) of the delivery to the OSC of personal
information pertaining to the Canadian purchaser, including,
without limitation, the full name, residential address and
telephone number of the Canadian purchaser, the number and type of
securities purchased and the total purchase price paid in respect
of the securities, (ii) that this information is being collected
indirectly by the OSC under the authority granted to it in
securities legislation, (iii) that this information is being
collected for the purposes of the administration and enforcement of
the securities legislation of Ontario, and (iv) that the title,
business address and business telephone number of the public
official in Ontario who can answer questions about the OSC’s
indirect collection of the information is the Administrative
Assistant to the Director of Corporate Finance, the Ontario
Securities Commission, Suite 1903, Box 5520, Queen Street West,
Toronto, Ontario, M5H 3S8, Telephone: (416) 593-8086, Facsimile:
(416) 593-8252.
Notice to Prospective Investors in Australia
No
placement document, prospectus, product disclosure statement or
other disclosure document has been lodged with the Australian
Securities and Investments Commission (“ASIC”), in
relation to the offering. This prospectus does not constitute a
prospectus, product disclosure statement or other disclosure
document under the Corporations Act 2001 (the “Corporations
Act”), and does not purport to include the information
required for a prospectus, product disclosure statement or other
disclosure document under the Corporations Act.
Any
offer in Australia of the shares may only be made to persons (the
“Exempt Investors”) who are “sophisticated
investors” (within the meaning of section 708(8) of the
Corporations Act), “professional investors” (within the
meaning of section 708(11) of the Corporations Act) or otherwise
pursuant to one or more exemptions contained in section 708 of the
Corporations Act so that it is lawful to offer the shares without
disclosure to investors under Chapter 6D of the Corporations
Act.
The
shares applied for by Exempt Investors in Australia must not be
offered for sale in Australia in the period of 12 months after the
date of allotment under the offering, except in circumstances where
disclosure to investors under Chapter 6D of the Corporations Act
would not be required pursuant to an exemption under section 708 of
the Corporations Act or otherwise or where the offer is pursuant to
a disclosure document which complies with Chapter 6D of the
Corporations Act. Any person acquiring shares must observe such
Australian on-sale restrictions.
This
prospectus contains general information only and does not take
account of the investment objectives, financial situation or
particular needs of any particular person. It does not contain any
securities recommendations or financial product advice. Before
making an investment decision, investors need to consider whether
the information in this prospectus is appropriate to their needs,
objectives and circumstances, and, if necessary, seek expert advice
on those matters.
Notice to Prospective Investors in the Dubai International
Financial Centre
This
prospectus relates to an Exempt Offer in accordance with the
Offered Securities Rules of the Dubai Financial Services Authority
(“DFSA”). This prospectus is intended for distribution
only to persons of a type specified in the Offered Securities Rules
of the DFSA. It must not be delivered to, or relied on by, any
other person. The DFSA has no responsibility for reviewing or
verifying any documents in connection with Exempt Offers. The DFSA
has not approved this prospectus nor taken steps to verify the
information set forth herein and has no responsibility for the
prospectus. The shares to which this prospectus relates may be
illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the shares offered should conduct their
own due diligence on the shares. If you do not understand the
contents of this prospectus you should consult an authorized
financial advisor.
Notice to Prospective Investors in the European Economic
Area
In
relation to each member state of the European Economic Area that
has implemented the Prospectus Directive (each, a “relevant
member state”), with effect from and including the date on
which the Prospectus Directive is implemented in that relevant
member state (the “relevant implementation date”), an
offer of units described in this prospectus may not be made to the
public in that relevant member state prior to the publication of a
prospectus in relation to the units that has been approved by the
competent authority in that relevant member state or, where
appropriate, approved in another relevant member state and notified
to the competent authority in that relevant member state, all in
accordance with the Prospectus Directive, except that, with effect
from and including the relevant implementation date, an offer of
our units may be made to the public in that relevant member state
at any time:
86
●
to any legal entity
which is a qualified investor as defined in the Prospectus
Directive;
●
to fewer than 100,
or, if the relevant member state has implemented the relevant
provisions of the 2010 PD Amending Directive, 150, natural or legal
persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive,
subject to obtaining the prior consent of the relevant Dealer or
Dealers nominated by the issuer for any such offer; or natural or
legal persons (other than qualified investors as defined below)
subject to obtaining the prior consent of the underwriter for any
such offer; or
●
in any other
circumstances that do not require the publication by us of a
prospectus pursuant to Article 3 of the Prospectus
Directive.
Each
purchaser of units described in this prospectus located within a
relevant member state will be deemed to have represented,
acknowledged and agreed that it is a “qualified
investor” within the meaning of Article 2(1)(e) of the
Prospectus Directive.
For the
purpose of this provision, the expression an “offer to the
public” in any relevant member state means the communication
in any form and by any means of sufficient information on the terms
of the offer and the units to be offered so as to enable an
investor to decide to purchase or subscribe for the units, as the
expression may be varied in that member state by any measure
implementing the Prospectus Directive in that member state, and the
expression “Prospectus Directive” means Directive
2003/71/EC (and amendments thereto, including the PD 2010 Amending
Directive to the extent implemented by the relevant member state)
and includes any relevant implementing measure in each relevant
member state, and the expression 2010 PD Amending Directive means
Directive 2010/73/EU.
We have
not authorized and do not authorize the making of any offer of
units through any financial intermediary on their behalf, other
than offers made by the underwriters with a view to the final
placement of the units as contemplated in this prospectus.
Accordingly, no purchaser of the units, other than the
underwriters, is authorized to make any further offer of the units
on behalf of us or the underwriters.
Notice to Prospective Investors in Switzerland
The
shares may not be publicly offered in Switzerland and will not be
listed on the SIX Swiss Exchange (“SIX”) or on any
other stock exchange or regulated trading facility in Switzerland.
This document has been prepared without regard to the disclosure
standards for issuance prospectuses under art. 652a or art. 1156 of
the Swiss Code of Obligations or the disclosure standards for
listing prospectuses under art. 27 ff. of the SIX Listing Rules or
the listing rules of any other stock exchange or regulated trading
facility in Switzerland. Neither this document nor any other
offering or marketing material relating to the shares or the
offering may be publicly distributed or otherwise made publicly
available in Switzerland.
Neither
this document nor any other offering or marketing material relating
to the offering, the Company, the shares have been or will be filed
with or approved by any Swiss regulatory authority. In particular,
this document will not be filed with, and the offer of shares will
not be supervised by, the Swiss Financial Market Supervisory
Authority FINMA (FINMA), and the offer of shares has not been and
will not be authorized under the Swiss Federal Act on Collective
Investment Schemes (“CISA”). The investor protection
afforded to acquirers of interests in collective investment schemes
under the CISA does not extend to acquirers of shares.
Notice to Prospective Investors in the United Kingdom
This
prospectus is only being distributed to, and is only directed at,
persons in the United Kingdom that are qualified investors within
the meaning of Article 2(1)(e) of the Prospectus Directive that are
also (i) investment professionals falling within Article 19(5) of
the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005 (the “Order”) or (ii) high net worth
entities, and other persons to whom it may lawfully be
communicated, falling within Article 49(2)(a) to (d) of the Order
(all such persons together being referred to as a “relevant
person”). The units are only available to, and any
invitation, offer or agreement to purchase or otherwise acquire
such units will be engaged in only with, relevant persons. This
prospectus and its contents are confidential and should not be
distributed, published or reproduced (in whole or in part) or
disclosed by recipients to any other persons in the United Kingdom.
Any person in the United Kingdom that is not a relevant person
should not act or rely on this document or any of its
contents.
Notice to Prospective Investors in France
Neither
this prospectus nor any other offering material relating to the
units described in this prospectus has been submitted to the
clearance procedures of the Autorité des Marchés
Financiers or by the competent authority of another member state of
the European Economic Area and notified to the Autorité des
Marchés Financiers. The units have not been offered or sold
and will not be offered or sold, directly or indirectly, to the
public in France. Neither this prospectus nor any other offering
material relating to the units has been or will be:
●
released, issued,
distributed or caused to be released, issued or distributed to the
public in France; or
●
used in connection
with any offer for subscription or sale of the units to the public
in France.
87
Such
offers, sales and distributions will be made in France
only:
●
to qualified
investors (investisseurs qualifiés) and/or to a restricted
circle of investors (cercle restreint d’investisseurs), in
each case investing for their own account, all as defined in, and
in accordance with, Article L.411-2, D.411-1, D.411-2, D.734-1,
D.744-1, D.754-1 and D.764-1 of the French Code monétaire et
financier;
●
to investment
services providers authorized to engage in portfolio management on
behalf of third parties; or
●
in a transaction
that, in accordance with article L.411-2-II-1°-or-2°-or
3° of the French Code monétaire et financier and article
211-2 of the General Regulations (Règlement Général)
of the Autorité des Marchés Financiers, does not
constitute a public offer (appel public à
l’épargne).
The
units may be resold directly or indirectly, only in compliance with
Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of
the French Code monétaire et financier.
Notice to Prospective Investors in Hong Kong
The
units may not be offered or sold in Hong Kong by means of any
document other than (i) in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance
(Cap. 32, Laws of Hong Kong), or (ii) to “professional
investors” within the meaning of the Securities and Futures
Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder, or (iii) in other circumstances which do not result in
the document being a “prospectus” within the meaning of
the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no
advertisement, invitation or document relating to the units may be
issued or may be in the possession of any person for the purpose of
issue (in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed or
read by, the public in Hong Kong (except if permitted to do so
under the laws of Hong Kong) other than with respect to units which
are or are intended to be disposed of only to persons outside Hong
Kong or only to “professional investors” within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws of
Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The
units have not been and will not be registered under the Financial
Instruments and Exchange Law of Japan (Law No. 25 of 1948, as
amended) and, accordingly, will not be offered or sold, directly or
indirectly, in Japan, or for the benefit of any Japanese Person or
to others for re-offering or resale, directly or indirectly, in
Japan or to any Japanese Person, except in compliance with all
applicable laws, regulations and ministerial guidelines promulgated
by relevant Japanese governmental or regulatory authorities in
effect at the relevant time. For the purposes of this paragraph,
“Japanese Person” shall mean any person resident in
Japan, including any corporation or other entity organized under
the laws of Japan.
Notice to Prospective Investors in Singapore
This
prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus and
any other document or material in connection with the offer or
sale, or invitation for subscription or purchase, of the units may
not be circulated or distributed, nor may the units be offered or
sold, or be made the subject of an invitation for subscription or
purchase, whether directly or indirectly, to persons in Singapore
other than (i) to an institutional investor under Section 274 of
the Securities and Futures Act, Chapter 289 of Singapore (the
“SFA”), (ii) to a relevant person pursuant to Section
275(1), or any person pursuant to Section 275(1A), and in
accordance with the conditions specified in Section 275 of the SFA
or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA, in each
case subject to compliance with conditions set forth in the
SFA.
88
Where
the units are subscribed or purchased under Section 275 of the SFA
by a relevant person which is:
●
shares, debentures
and units of shares and debentures of that corporation or the
beneficiaries’ rights and interest (howsoever described) in
that trust shall not be transferred within six months after that
corporation or that trust has acquired the shares pursuant to an
offer made under Section 275 of the SFA except:
●
to an institutional
investor (for corporations, under Section 274 of the SFA) or to a
relevant person defined in Section 275(2) of the SFA, or to any
person pursuant to an offer that is made on terms that such shares,
debentures and units of shares and debentures of that corporation
or such rights and interest in that trust are acquired at a
consideration of not less than $200,000 (or its equivalent in a
foreign currency) for each transaction, whether such amount is to
be paid for in cash or by exchange of securities or other assets,
and further for corporations, in accordance with the conditions
specified in Section 275 of the SFA;
●
where no
consideration is or will be given for the transfer; or
●
where the transfer
is by operation of law.
LEGAL MATTERS
Akerman
LLP, Miami, Florida is acting as our counsel in connection with the
registration of our securities under the Securities Act, and as
such, will pass upon the validity of the securities offered in this
offering. Graubard Miller, New York, New York, is acting as counsel
to the underwriters.
EXPERTS
The
financial statements of Big Rock Partners Acquisition Corp. at
September 30, 2017 and for the period from September 18, 2017
(inception) through September 30, 2017 included in this Prospectus
have been audited by Marcum LLP, independent registered public
accounting firm, as set forth in their report, thereon (which
contains an explanatory paragraph relating to substantial doubt
about the ability of Big Rock Partners Acquisition Corp. to
continue as a going concern as described in Note 1 to the financial
statements), appearing elsewhere in this prospectus, and are
included in reliance on such report given upon the authority of
such firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have
filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the securities we are offering by
this prospectus. This prospectus does not contain all of the
information included in the registration statement. For further
information about us and our securities, you should refer to the
registration statement and the exhibits and schedules filed with
the registration statement. Whenever we make reference in this
prospectus to any of our contracts, agreements or other documents,
the references are materially complete but may not include a
description of all aspects of such contracts, agreements or other
documents, and you should refer to the exhibits attached to the
registration statement for copies of the actual contract, agreement
or other document.
Upon
completion of this offering, we will be subject to the information
requirements of the Exchange Act and will file annual, quarterly
and current event reports, proxy statements and other information
with the SEC. You can read our SEC filings, including the
registration statement, over the Internet at the SEC’s
website at www.sec.gov. You may also read and copy any document we
file with the SEC at its public reference facility at 100 F Street,
N.E., Washington, D.C. 20549.
You may
also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference
facilities.
89
BIG ROCK PARTNERS ACQUISITION CORP.
INDEX TO FINANCIAL STATEMENTS
F.
|
|
Page
|
Report of Independent Registered Pubic Accounting Firm
|
|
F-2
|
Balance
Sheet
|
|
F-3
|
Statement
of Operations
|
|
F-4
|
Statement of Changes in Stockholder’s Equity
|
|
F-5
|
Statement of Cash Flows
|
|
F-6
|
Notes to Financial Statements
|
|
F-7
– F-14
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Shareholder
of Big
Rock Partners Acquisition Corp.
We have
audited the accompanying balance sheet of Big Rock Partners
Acquisition Corp. (the “Company”) as of September 30,
2017, and the related statements of operations, changes in
stockholder’s equity and cash flows for the period from
September 18, 2017 (inception) through September 30, 2017. These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements 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 financial statements are
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 financial statements,
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Big Rock
Partners Acquisition Corp. as of September 30, 2017 and the results
of its operations and its cash flows for the period from September
18, 2017 (inception) through September 30, 2017 in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has no present revenue, its
business plan is dependent on the completion of a financing and the
Company’s cash and working capital as of September 30, 2017
are not sufficient to complete its planned activities for the
upcoming year. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.
Management’s plans regarding these matters are also described
in Notes 1 and 3. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/
Marcum LLP
Marcum
LLP
New
York, NY
October
13, 2017
F-2
BIG ROCK PARTNERS ACQUISITION CORP.
BALANCE SHEET
September 30, 2017
ASSETS
|
|
Current asset
– cash
|
$82,470
|
Deferred offering
costs
|
91,343
|
Total
Assets
|
$173,813
|
|
|
LIABILITIES
AND STOCKHOLDER’S EQUITY
|
|
Current
liabilities
|
|
Accrued
expenses
|
$1,157
|
Accrued offering
costs
|
48,843
|
Promisory notes -
related parties
|
100,000
|
Total
Current Liabilities
|
150,000
|
|
|
Commitments
|
|
|
|
Stockholder’s
Equity
|
|
Common stock,
$0.001 par value; 10,000,000 shares authorized; 1,437,500 shares
issued and outstanding (1)
|
1,438
|
Additional paid-in
capital
|
23,562
|
Accumulated
deficit
|
(1,187)
|
Total
Stockholder’s Equity
|
23,813
|
TOTAL
LIABILITIES AND STOCKHOLDER’S EQUITY
|
$173,813
|
(1)
|
Includes
an aggregate of 187,500 shares held by the Sponsor that are subject
to forfeiture to the extent that the underwriters’
over-allotment is not exercised in full (Note 7).
|
The
accompanying notes are an integral part of the financial
statements.
F-3
BIG ROCK PARTNERS ACQUISITION CORP.
STATEMENT OF OPERATIONS
For the period from September 18, 2017 (inception) through
September 30, 2017
Formation
costs
|
$1,187
|
Net
Loss
|
$(1,187)
|
|
|
Weighted average
shares outstanding, basic and diluted(1)
|
1,250,000
|
|
|
Basic
and diluted net loss per common share
|
$(0.00)
|
(1)
|
Excludes
an aggregate of 187,500 shares held by the Sponsor that are subject
to forfeiture to the extent that the underwriters’
over-allotment is not exercised in full (Note 7).
|
The
accompanying notes are an integral part of the financial
statements.
F-4
BIG ROCK PARTNERS ACQUISITION CORP.
STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
|
Common
Stock(1)
|
Additional
Paid-
|
Accumulated
|
Total
Stockholder’s
|
|
|
Shares
|
Amount
|
in
Capital
|
Deficit
|
Equity
|
Balance –
September 18, 2017 (inception)
|
-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
Issuance of common
stock to Sponsor(1)
|
1,437,500
|
1,438
|
23,562
|
-
|
25,000
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
(1,187)
|
(1,187)
|
|
|
|
|
|
|
Balance
– September 30, 2017
|
1,437,500
|
$1,438
|
$23,562
|
$(1,187)
|
$23,813
|
(1)
|
Includes
an aggregate of 187,500 shares held by the Sponsor that are subject
to forfeiture to the extent that the underwriters’
over-allotment is not exercised in full (Note 7).
|
The
accompanying notes are an integral part of the financial
statements.
F-5
BIG ROCK PARTNERS ACQUISITION CORP.
STATEMENT OF CASH FLOWS
For the Period from September 18, 2017 (inception) through
September 30, 2017
Cash
Flows from Operating Activities:
|
|
Net
loss
|
$(1,187)
|
Changes in
operating assets and liabilities:
|
|
Accrued
expenses
|
1,157
|
Net
cash used in operating activities
|
(30)
|
|
|
Cash
Flows from Financing Activities:
|
|
Proceeds from
issuance of common stock to Sponsor
|
25,000
|
Proceeds from
promissory notes – related parties
|
100,000
|
Payment of offering
costs
|
(42,500)
|
Net
cash provided by financing activities
|
82,500
|
|
|
Net
Change in Cash
|
82,470
|
Cash –
Beginning
|
-
|
Cash
– Ending
|
$82,470
|
|
|
Non-Cash
investing and financing activities:
|
|
Deferred offering
costs included in accrued offering costs
|
$48,843
|
The
accompanying notes are an integral part of the financial
statements.
F-6
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Big
Rock Partners Acquisition Corp. (the “Company”) is a
newly organized blank check company incorporated in Delaware on
September 18, 2017. The Company was formed for the purpose of
acquiring, through a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization, recapitalization, or
other similar business transaction, one or more operating
businesses or entities 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 senior housing and care industry in the
United States.
At
September 30, 2017, the Company had not yet commenced operations.
All activity through September 30, 2017 relates to the
Company’s formation and the Proposed Offering (as defined
below), which is described below. The Company has selected December
31 as its fiscal year end.
The
Company’s ability to commence operations is contingent upon
obtaining adequate financial resources through a proposed initial
public offering of 5,000,000 units at $10.00 per unit (or 5,750,000
units if the underwriters’ over-allotment option is exercised
in full) (“Units”), which is discussed in Note 3 (the
“Proposed Offering”) and the sale of 225,000 units (or
243,750 units if the underwriters’ over-allotment option is
exercised in full) (the “Private Placement Units”) at a
price of $10.00 per unit in a private placement to Big Rock
Partners Sponsor, LLC (the “Sponsor”), that will close
simultaneously with the Proposed Offering. The Company’s
management has broad discretion with respect to the specific
application of the net proceeds of the Proposed Offering and
Private Placement Units, although substantially all of the net
proceeds are intended to be applied generally toward consummating a
Business Combination. The Company’s initial Business
Combination must be with one or more target businesses that
together have a fair market value equal to at least 80% of the
balance in the Trust Account (as defined below) (excluding taxes
payable on income earned on the Trust Account) at the time of the
signing an agreement to enter into a Business Combination. The
Company will only complete a Business Combination if the
post-Business Combination company owns or acquires 50% or more 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 1940, as amended, or the Investment Company
Act. There is no assurance that the Company will be able to
successfully effect a Business Combination. Upon the closing of the
Proposed Offering, management has agreed that $10.00 per Unit sold
in the Proposed Offering and the proceeds from the sale of the
Private Placement Units will be held in a trust account
(“Trust Account”) and invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of 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 meeting the conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of:
(i) the consummation of a Business Combination or (ii) the
distribution of the Trust Account as described below.
The
Company will provide its stockholders with the opportunity to
redeem all or a portion of their shares included in the Units sold
in the Proposed Offering (the “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
shares for a pro rata portion of the amount then on deposit in the
Trust Account (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 franchise and income
tax obligations). There will be no redemption rights upon the
completion of a Business Combination with respect to the
Company’s warrants. The common stock subject to redemption
will be recorded at a redemption value and classified as temporary
equity upon the completion of the Proposed 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, if the Company seeks stockholder
approval, 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
Company’s Sponsor, officers and directors (the “Initial
Stockholders”) have agreed (a) to vote their Founder’s
Shares (as defined in Note 5), Placement Shares (as defined in Note
4) and any Public Shares held by them in favor of approving a
Business Combination and (b) not to convert any Founder’s
Shares, Placement Shares (as defined in Note 4) and
any Public Shares held by them in connection with a stockholder
vote to approve a Business Combination or sell any such shares to
the Company in a tender offer in connection with a Business
Combination. Additionally, each public stockholder may elect to
redeem their Public Shares irrespective of whether they vote for or
against the proposed transaction.
F-7
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
The
Company will have until 12 months from the closing of the Proposed
Offering to consummate a Business Combination. However, if the
Company anticipates that it may not be able to consummate Business
Combination within 12 months, the Company may extend the period of
time to consummate a Business Combination up to two times, each by
an additional three months (for a total of up to 18 months to
complete a Business Combination) (the “Combination
Period”). Pursuant to the terms of the Amended and Restated
Certificate of Incorporation and the trust agreement to be entered
into between the Company and Continental Stock Transfer & Trust
Company on the effective date of the registration statement for the
Proposed Offering, in order to extend the time available for the
Company to consummate a Business Combination, the Sponsor or its
affiliates or designees must deposit into the Trust Account
$500,000, or $575,000 if the underwriters’ over-allotment
option is exercised in full ($0.10 per share in either case), up to
an aggregate of $1,000,000 (or $1,150,000 if the
underwriters’ over-allotment option is exercised in full), or
$0.20 per share, if the Company extends for the full six months, on
or prior to the date of the applicable deadline, for each three
month extension. The Sponsor and its affiliates or designees are
not obligated to fund the Trust Account to extend the time for the
Company to complete a Business
Combination.
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 and less interest to pay
dissolution expenses), 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. In the event of such distribution, it is possible that
the per share value of the assets remaining available for
distribution (including Trust Account assets) will be less than the
$10.00 per Unit in the Proposed Offering.
The
Initial Stockholders have agreed to (i) vote their Founder Shares,
Placement Shares and any Public Shares they may acquire during or
after the Proposed Offering in favor of approving a Business
Combination, (i) waive their redemption rights with respect to
Founder Shares, Placement Shares and any Public Shares they may
acquire during or after the Proposed Offering 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’s Shares, Placement
Shares, Placement Rights (as defined in Note 4) and
Placement Warrants 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, unless the Company provides the public stockholders
with the opportunity to redeem their 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
or liquidates within the Combination Period.
In
order to protect the amounts held in the Trust Account, A/Z
Property Partners, LLC, and entity majority owned and controlled by
Richard Ackerman, our Chairman, President and Chief Executive
Officer, 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
Proposed 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, A/Z Property Partners will not be responsible to the extent
of any liability for such third party claims. The Company will seek
to reduce the possibility that A/Z Property Partners will have to
indemnify the Trust Account due to claims of creditors by
endeavoring to have all vendors, service providers, 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.
Going
Concern Consideration
At
September 30, 2017, the Company had $82,470 in cash and a working
capital deficit of $67,530. The Company has incurred and expects to
continue to incur significant costs in pursuit of its financing and
acquisition plans. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern within
one year after the date that the financial statements are issued.
Management plans to address this uncertainty through a Proposed
Offering as discussed in Note 3. There is no assurance that the
Company’s plans to raise capital or to consummate a Business
Combination will be successful within the Combination Period. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The
accompanying 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.
F-8
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
Emerging growth company
The
Company is an “emerging growth company,” as defined in
Section 2(a) of 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 our 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
September 30, 2017.
Deferred offering costs
Deferred offering
costs consist of underwriting, legal, accounting and other expenses
incurred through the balance sheet date that are directly related
to the Proposed Offering and that will be charged to
stockholder’s equity upon the completion of the Proposed
Offering. Should the Proposed Offering prove to be unsuccessful,
these deferred costs, as well as additional expenses to be
incurred, will be charged to operations.
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 that will result in future taxable
or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to
be realized.
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
September 30, 2017, 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.
F-9
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
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’s management does not expect that the total
amount of unrecognized tax benefits will materially change over the
next twelve months.
The
provision for income taxes was deemed to be immaterial for the
period from September 18, 2017 (inception) through September 30,
2017.
Net loss per common share
The
Company complies with accounting and disclosure requirements of 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, excluding
shares of common stock subject to forfeiture by the Initial
Stockholders. Weighted average shares were reduced for the effect
of an aggregate of 187,500 shares of common stock that are subject
to forfeiture if the over-allotment option is not exercised by the
underwriters (see Note 7). At September 30, 2017, the Company did
not have any dilutive securities and other contracts that could,
potentially, be exercised or converted into common stock and then
share in the earnings of the Company. As a result, diluted loss per
common share is the same as basic loss per common share for the
periods.
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 September 30, 2017, 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 standards
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.
3. PROPOSED OFFERING
Pursuant to the
Proposed Offering, the Company will offer for sale 5,000,000 units
(or 5,750,000 Units if the underwriters’ over-allotment
option is exercised in full), at a purchase price of $10.00 per
Unit. Each Unit will
consist of one share of common stock, one right (“Public
Right”) and one-half of one 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 7). Each whole Public Warrant entitles the
holder to purchase one share of common stock at an exercise price
of $11.50 per whole share (see Note 7).
4. PRIVATE PLACEMENT
In
connection with the Proposed Offering, the Sponsor has committed to
purchase an aggregate of 225,000 Private Placement Units (or
243,750 Private Placement Units if the underwriters’
over-allotment option is exercised in full), at $10.00 per Private
Placement Unit ($2,250,000 in the aggregate, or $2,437,500 in the
aggregate if the over-allotment option is exercised in full) in a
private placement that will occur simultaneously with the
consummation of the Proposed Offering. Each Private Placement
Unit will consist of one share of common stock (“Placement
Share”), one right (“Placement Right”) and
one-half of one warrant (each, a “Placement Warrant”),
each whole Placement Warrant exercisable to purchase one share of
common stock at an exercise price of $11.50. The proceeds
from the Private Placement Units will be added to the proceeds from
the Proposed Offering to be held in the Trust Account. If the
Company does not complete a Business Combination within the
Combination Period, the proceeds from the sale of the Private
Placement Units will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law), the
Placement Rights and the Placement Warrants will expire
worthless.
The
Private Placement Units are identical to the Units to be sold in
the Proposed Offering except that the 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 Units and their component securities may not be
transferable, assignable or salable until after the consummation of
a Business Combination, subject to certain limited
exceptions.
F-10
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
5. RELATED PARTY TRANSACTIONS
Founder Shares
In
September 2017, the Company issued an aggregate of 1,437,500 shares
of common stock to the Sponsor (“Founder Shares”) for
an aggregate purchase price of $25,000. The Founder’s Shares include an aggregate of
up to 187,500 shares subject to forfeiture by the Sponsor to the
extent that the underwriters’ over-allotment is not exercised
in full or in part, so that the Sponsor will own 20% of the
Company’s issued and outstanding shares after the Proposed
Offering (assuming the Initial Stockholders do not purchase any
Public Shares in the Proposed Offering and excluding the Private
Placement Units and the Representative Shares (as defined in Note
6)).
The Initial Stockholders have agreed not to
transfer, assign or sell any of the Founder’s Shares until
the earlier of (i) one year after the date of the
consummation of a Business Combination, or (ii) the date on which
the closing 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 commencing after a
Business Combination, or earlier, in each case, if subsequent to a Business Combination, the Company
consummates a subsequent liquidation, merger, stock exchange,
reorganization or other similar transaction which results in all of
the Company’s stockholders having the right to exchange their
common stock for cash, securities or other
property.
Promissory Notes – Related Parties
On September 26, 2017, the Company issued to the
Sponsor and its Chief Executive Officer, unsecured promissory notes
pursuant to which the Company may borrow up to an aggregate amount
of $150,000 and $25,000, respectively, (the “Promissory
Notes”), of which $75,000 and $25,000, respectively, was
outstanding under the Promissory Notes as of September 30, 2017.
The Promissory Notes are non-interest bearing and payable on the
earlier to occur of (i) December 31, 2018, or (ii) the consummation
of the Proposed Offering.
Administrative Services Agreement
The
Company intends to enter into an agreement, commencing on the
effective date of the Proposed Offering through the earlier of the
consummation of a Business Combination or the Company’s
liquidation, to pay the Sponsor a monthly fee of $10,000 for office
space, utilities and administrative support.
Related Party Loans
In
order to finance transaction costs in connection with a Business
Combination, the Sponsor, an affiliate of the Sponsor, or 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 units at a price of $10.00 per unit. The units would
be identical to the Private Placement Units. In the event that a
Business Combination does not close, the loans will be
forgiven.
6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The
holders of the Founder Shares, Private Placement Units (and their
underlying securities), Representative Shares (as defined below)
and any Units 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 Proposed
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. The holders of the
majority of the Founder’s 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 Placement
Units or Units issued to the Sponsor, officers, directors or their
affiliates in payment of Working Capital Loans made to the Company
(in each case, including the underlying securities) can elect to
exercise these registration rights at any time after the Company
consummates a Business Combination. 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. Notwithstanding anything to the contrary,
EarlyBirdCapital, Inc. (“EarlyBirdCapital”) and/or its
designees may participate in a “piggy-back”
registration during the seven year period beginning on the
effective date of the registration statement. 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.
F-11
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
Underwriters Agreement
The
Company will grant the underwriters a 45-day option to purchase up
to 750,000 additional Units to cover over-allotments at the
Proposed Offering price, less the underwriting discounts and
commissions.
The
underwriters will be entitled to a cash underwriting discount of
two percent and one-half percent (2.5%) of the gross proceeds of
the Proposed Offering, or $1,250,000 (or up to $1,437,500 if the
underwriters’ over-allotment is exercised in
full).
In
addition, the Company has agreed to issue the EarlyBirdCapital
(and/or its designees) 100,000 shares of common stock (or up to
115,000 shares if the underwriters’ over-allotment option is
exercised in full) (the “Representative Shares”) upon
the consummation of the Proposed Offering. The Company intends to
account for the Representative Shares as an expense of the Proposed
Offering resulting in a charge directly to stockholder’s
equity. The Company estimates that the fair value of Representative
Shares is $1,000,000 (or $1,150,000 if the underwriters’
over-allotment option is exercised in full) based upon the offering
price of the Units of $10.00 per Unit. The underwriter has agreed
not to transfer, assign or sell any such shares until the
completion of a Business Combination. In addition, the underwriter
(and/or its designees) has agreed (i) to waive its redemption
rights with respect to such shares in connection with the
completion of a Business Combination and (ii) to waive its rights
to liquidating distributions from the Trust Account with respect to
such shares if the Company fails to complete a Business Combination
within the Combination Period.
The
shares have been deemed compensation by FINRA and are therefore
subject to a lock-up for a period of 180 days pursuant to Rule
5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA
Rule 5110(g)(1), these securities will not be the subject of any
hedging, short sale, derivative, put or call transaction that would
result in the economic disposition of the securities by any person
for a period of 180 days immediately following the date of the
Proposed Offering, nor may they be sold, transferred, assigned,
pledged or hypothecated for a period of 180 days immediately
following the Proposed Offering except to any underwriter and
selected dealer participating in the Proposed Offering and their
bona fide officers or partners.
Business Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital 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 a Business Combination in an amount equal
to 4.0% of the gross proceeds of the Proposed Offering (exclusive
of any applicable finders’ fees which might become
payable).
Unit Purchase Option
The
Company has agreed to sell EarlyBirdCapital (and/or its designees),
for $100, an option to purchase up to 500,000 Units exercisable at
$10.00 per Unit (or an aggregate exercise price of $5,000,000)
commencing on the later of the first anniversary of the effective
date of the registration statement related to the Proposed Offering
and 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 five years from the effective
date of the registration statement related to the Proposed
Offering. The Units issuable upon exercise of this option are
identical to those offered in the Proposed Offering. The Company
intends to account for the unit purchase option, inclusive of the
receipt of $100 cash payment, as an expense of the Proposed
Offering resulting in a charge directly to stockholders’
equity. The Company estimates that the fair value of this unit
purchase option is approximately $1,690,878 (or $3.38 per Unit)
using the Black-Scholes option-pricing model. The fair value of the
unit purchase option to be granted to the underwriters is estimated
as of the date of grant using the following assumptions: (1)
expected volatility of 35%, (2) risk-free interest rate of 1.92%
and (3) expected life of five years. The option and such units
purchased pursuant to the option, as well as the common stock
underlying such units, the warrants included in such units, and the
shares underlying such warrants, 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 Proposed Offering
except to any underwriter and selected dealer participating in the
Proposed 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.
F-12
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
7. STOCKHOLDERS’ EQUITY
Preferred Stock
— At September 30,
2017, the Company has no authorized, issued or outstanding shares
of preferred stock. The Company plans on filing an Amended and
Restated Certificate of Incorporation prior to the closing date of
the Proposed Offering such that the Company will be
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.
Common Stock
— The Company is
authorized to issue 10,000,000 shares of common stock with a par
value of $0.001 per share. The Company plans on filing an Amended
and Restated Certificate of Incorporation prior to the closing date
of the Proposed Offering such that the Company will be
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. At September 30, 2017, there were
1,437,500 shares of common stock issued and outstanding, of which
187,500 shares are subject to forfeiture to the extent that the
underwriter’s 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 Proposed Offering
(assuming the Initial Stockholders do not purchase any Public
Shares in the Proposed Offering and excluding the Private Placement
Units and the Representative Shares).
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 conversion 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
Proposed 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 convert its rights in order to
receive 1/10 share underlying each right (without paying additional
consideration). The shares issuable upon conversion 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. Accordingly, holders of the
rights might not receive the shares of common stock underlying 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
completion of a Business Combination; provided in 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, 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 a specified period following the consummation of 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
Placement Warrants will be identical to the Public Warrants
underlying the Units being sold in the Proposed Offering, except
that the Placement Warrants and the common stock issuable upon the
exercise of the Placement Warrants will not be transferable,
assignable or salable until after the completion of a Business
Combination, subject to certain limited exceptions. Additionally,
the Placement Warrants may be exercised on a cashless basis and be
non-redeemable so long as they are held by the initial purchasers
or their permitted transferees. If the Placement Warrants are held
by someone other than the initial purchasers or their permitted
transferees, the Placement Warrants will be redeemable by the
Company and exercisable by such holders on the same basis as the
Public Warrants.
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;
and
|
●
|
if, and
only if, the last sale price of the Company’s common stock
equals or exceeds $21.00 per share for any 20 trading days within a
30-trading day period ending on the third business day prior to the
date on which the Company sends the notice of redemption to the
warrant holders.
|
●
|
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.
F-13
BIG
ROCK PARTNERS ACQUISITION CORP.
NOTES
TO FINANCIALS
SEPTEMBER
30, 2017
8. SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur
after the balance sheet date up to the date that the financial
statements were issued. Based upon this review, the Company did not
identify any subsequent events that would have required adjustment
or disclosure in the financial statements.
F-14
5,000,000 Units
BIG ROCK PARTNERS ACQUISITION CORP.
PRELIMINARY PROSPECTUS
, 2017
Sole Book-Running Manager
EarlyBirdCapital, Inc.
I-Bankers Securities, Inc.
Until ,
2017 (25 days after the date of this prospectus), all dealers that
buy, sell or trade our common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This is
in addition to the dealers’ obligation to deliver a
prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and
Distribution.
The
estimated expenses payable by us in connection with the offering
described in this registration statement (other than the
underwriting discount and commissions) will be as
follows:
SEC Registration
Fee
|
7,926
|
FINRA filing
fee
|
10,048
|
Accounting fees and
expenses
|
37,500
|
Nasdaq listing
fees
|
50,000
|
Printing and
engraving expenses
|
35,000
|
Legal fees and
expenses
|
250,000
|
Miscellaneous
|
109,526(1)
|
Total
|
$500,000
|
(1)
This amount represents additional expenses that may be incurred by
the Company in connection with the offering over and above those
specifically listed above, including distribution and mailing
costs.
Item 14. Indemnification of Directors and
Officers.
Our
certificate of incorporation provides that all directors, officers,
employees and agents of the registrant shall be entitled to be
indemnified by us to the fullest extent permitted by
Section 145 of the Delaware General Corporation
Law.
Section 145
of the Delaware General Corporation Law concerning indemnification
of officers, directors, employees and agents is set forth
below.
“Section
145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A corporation shall
have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person’s
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, has reasonable cause to
believe that the person’s conduct was unlawful.
(b) A corporation shall
have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
expenses (including attorneys’ fees) actually and reasonably
incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
II-1
(c) To the extent that
a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections (a) and
(b) of this section, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses
(including attorneys’ fees) actually and reasonably incurred
by such person in connection therewith.
(d) Any indemnification
under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because the person
has met the applicable standard of conduct set forth in subsections
(a) and (b) of this section. Such determination shall be
made, with respect to a person who is a director or officer at the
time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including
attorneys’ fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including
attorneys’ fees) incurred by former directors and officers or
other employees and agents may be so paid upon such term s and
conditions, if any, as the corporation deems
appropriate.
(f) The indemnification
and advancement of expenses provided by, or granted pursuant to,
the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both
as to action in such person’s official capacity and as to
action in another capacity while holding such office.
(g) A corporation shall
have power to purchase and maintain insurance on behalf of any
person who is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person’s status
as such, whether or not the corporation would have the power to
indemnify such person against such liability under this
section.
(h) For purposes of
this section, references to “the corporation” shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under this
section with respect to the resulting or surviving corporation as
such person would have with respect to such constituent corporation
if its separate existence had continued.
(i) For purposes of
this section, references to “other enterprises” shall
include employee benefit plans; references to “fines”
shall include any excise taxes assessed on a person with respect to
any employee benefit plan; and references to “serving at the
request of the corporation” shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith
and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner “not
opposed to the best interests of the corporation” as referred
to in this section.
(j) The indemnification
and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of
Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw,
agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation’s obligation to advance expenses (including
attorney’s fees).”
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers, and controlling
persons pursuant to the foregoing provisions, or otherwise, we have
been advised that, in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of
expenses incurred or paid by a director, officer or controlling
person in a successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to the court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
II-2
Section
8.2(a) of our amended and restated certificate of incorporation
provides:
“To
the fullest extent permitted by applicable law, as the same exists
or may hereafter be amended, the Corporation shall indemnify and
hold harmless each person who is or was made a party or is
threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (a
“proceeding”)
by reason of the fact that he or she is or was a director or
officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation or of
a partnership, joint venture, trust, other enterprise or nonprofit
entity, including service with respect to an employee benefit plan
(an “indemnitee”), whether the basis
of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent, or in any other capacity
while serving as a director, officer, employee or agent, against
all liability and loss suffered and expenses (including, without
limitation, attorneys’ fees, judgments, fines, ERISA excise
taxes and penalties and amounts paid in settlement) reasonably
incurred by such indemnitee in connection with such proceeding. The
Corporation shall to the fullest extent not prohibited by
applicable law pay the expenses (including attorneys’ fees)
incurred by an indemnitee in defending or otherwise participating
in any proceeding in advance of its final disposition; provided,
however,
that, to the extent required by applicable law, such payment of
expenses in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking, by or on behalf
of the indemnitee, to repay all amounts so advanced if it shall
ultimately be determined that the indemnitee is not entitled to be
indemnified under this Section 8.2 or otherwise.
The rights to indemnification and advancement of expenses conferred
by this Section 8.2
shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors
and administrators. Notwithstanding the foregoing provisions of
this Section 8.2(a), except for
proceedings to enforce rights to indemnification and advancement of
expenses, the Corporation shall indemnify and advance expenses to
an indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board.”
Pursuant
to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, we have agreed to indemnify the
underwriters and the underwriters have agreed to indemnify us
against certain civil liabilities that may be incurred in
connection with this offering, including certain liabilities under
the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
(a)
During the past
three years, we sold the following shares of common stock without
registration under the Securities Act:
Stockholder
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|
Number of Shares
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Big
Rock Partners Sponsor, LLC
|
|
|
1,437,500
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|
These
shares were issued on September 26, 2017 pursuant to the exemption
from registration contained in Section 4(a)(2) of the
Securities Act as the shares were sold to accredited investors. The
shares issued were sold for an aggregate offering price of $25,000
at an average purchase price of approximately $0.017 per
share.
Our
sponsor has also committed to purchase from us 225,000 private
placement units at $10.00 per unit (for an aggregate purchase price
of $2,250,000). These purchases will take place on a private
placement basis simultaneously with the consummation of our initial
public offering. Our sponsor has also committed to purchase up to a
maximum of 18,750 additional private placement units in proportion
to the amount of the underwriters’ over-allotment option that
is exercised. These issuances will be made pursuant to the
exemption from registration contained in Section 4(a)(2) of
the Securities Act.
No
underwriting discounts or commissions were paid with respect to
such sales.
II-3
Item 16. Exhibits and Financial Statement
Schedules.
(a) The
following exhibits are filed as part of this Registration
Statement:
Exhibit
No.
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Description
|
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Form of
Underwriting Agreement.*
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|
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|
Letter
Agreement between the Registrant and
EarlyBirdCapital.*
|
|
3.1
|
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Certificate
of Incorporation.**
|
|
|
Form
of Amended and Restated Certificate of
Incorporation.*
|
|
3.3
|
|
|
By-laws.**
|
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|
Form
of Amended and Restated By-laws.*
|
|
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|
Specimen
Unit Certificate.*
|
|
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|
Specimen
Common Stock Certificate.*
|
|
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|
Specimen
Right Certificate *
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|
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|
Specimen
Warrant Certificate.*
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|
Form
of Right Agreement between Continental Stock Transfer & Trust
Company and Registrant*
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|
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|
Form of
Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant.*
|
|
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|
Form of
Unit Purchase Option. *
|
|
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|
Opinion
of Akerman LLP.*
|
|
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|
Form of
Letter Agreement for the Registrant’s sponsor.*
|
|
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|
Form of
Letter Agreement for each of the Registrant’s other officers
and directors.*
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|
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|
Form of
Letter Agreement for A/Z Property Partners,
LLC.*
|
|
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|
Form of
Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant.*
|
|
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|
Form of
Stock Escrow Agreement between the Registrant, Continental Stock
Transfer & Trust Company and the Initial
Stockholder.*
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|
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|
Form of
Registration Rights Agreement among the Registrant and the Initial
Stockholder.*
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|
Form of
Administrative Services Agreement.*
|
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Securities
Subscription Agreement, dated September 26, 2017, between the
Registrant and Big Rock Partners Sponsor, LLC.*
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|
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Promissory
Note, dated as of September 26, 2017, in favor of Richard
Ackerman.*
|
|
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Promissory
Note, dated as of September 26, 2017, in favor of Big Rock Partners
Sponsor, LLC*
|
|
10.9
|
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|
Form of
Indemnification Agreement for officers, directors and special
advisors.*
|
|
|
Form
of Code of Ethics.*
|
|
|
|
Consent
of Marcum LLP.*
|
|
23.2
|
|
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Consent
of Akerman, LLP (included in Exhibit 5.1).*
|
24
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|
Power
of Attorney (included on signature page of this Registration
Statement).**
|
|
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Consent of
Richard Birdoff *
|
|
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|
Consent
of Michael Fong.*
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|
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Consent
of Stuart Koenig *
|
|
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|
Consent
of Albert G. Rex.*
|
|
|
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Consent
of Troy T. Taylor.*
|
|
|
|
Form
of Audit Committee Charter.*
|
|
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|
Form
of Compensation Committee Charter.*
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|
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Form
of Nominating Committee Charter.*
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*
Filed
herewith.
**
Previously
Filed.
Item 17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration
statement:
i.
To include any
prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
II-4
ii.
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in
the effective registration statement;
iii.
To include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration
statement.
That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
That for the purpose of determining any liability under the
Securities Act of 1933 in a primary offering of securities of the
undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such
purchaser:
i.
Any preliminary
prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule
424;
ii.
Any free writing
prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
iii.
The portion of any
other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
iv.
Any other
communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(b)
The undersigned
hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the
underwriter to permit prompt delivery to each
purchaser.
(c)
Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d)
The undersigned
registrant hereby undertakes that:
For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
Delray Beach, Florida, on the 14th
day of November,
2017.
|
BIG
ROCK PARTNERS ACQUISITION CORP.
|
|
|
|
|
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By:
|
/s/ Richard
Ackerman
|
|
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Richard
Ackerman
|
|
|
|
Chairman, President
and Chief Executive Officer
|
|
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
/s/ Richard Ackerman |
|
Chairman,
President and Chief Executive Officer (Principal Executive
Officer)
|
|
November
14, 2017
|
Richard
Ackerman
|
|
|
|
|
|
|
|
|
|
/s/ Lori B. Wittman |
|
Chief
Financial Officer and Director (Principal Financial and Accounting
Officer)
|
|
November
14, 2017
|
Lori
B. Wittman
|
|
|
|
|
II-6