ITEM
1. FINANCIAL STATEMENTS
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED
BALANCE SHEETS
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March 31,
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December 31,
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2018
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2017
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(unaudited)
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ASSETS
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Current assets:
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Cash
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$
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1,031,000
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$
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1,353,000
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Prepaid expenses
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59,000
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42,000
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Total current assets
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1,090,000
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1,395,000
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Cash and investments held in Trust Account
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261,534,000
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260,612,000
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Total assets
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$
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262,624,000
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$
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262,007,000
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$
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9,000
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$
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19,000
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Accrued liabilities
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149,000
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108,000
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Accrued income and franchise taxes
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686,000
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544,000
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Total current liabilities
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844,000
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671,000
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Other liabilities:
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Deferred underwriting compensation
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9,616,000
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9,616,000
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Total liabilities
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10,460,000
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10,287,000
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Common stock subject to possible redemption; 24,471,723 and 24,427,763 shares at March 31, 2018 and December 31, 2017, respectively, (at value of approximately $10.10 per share)
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247,164,000
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246,720,000
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $0.0001 par value; 1,000,000 authorized shares; none issued or outstanding
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-
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-
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Common stock, $0.0001 par value; 200,000,000 authorized shares; 7,609,527 and 7,653,487 shares, respectively, issued and outstanding (excluding 24,471,723 and 24,427,763 shares, respectively, subject to possible redemption)
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1,000
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1,000
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Additional paid-in-capital
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4,274,000
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4,718,000
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Retained earnings
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725,000
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281,000
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Total stockholders’ equity
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5,000,000
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5,000,000
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Total liabilities and stockholders’ equity
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$
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262,624,000
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$
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262,007,000
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See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
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Three Months ended
March 31, 2018
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The period from January 3, 2017 (date of inception) to
March 31, 2017
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Revenues
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$
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-
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$
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-
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General and administrative expenses
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287,000
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10,000
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Loss from operations
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(287,000
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)
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(10,000
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)
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Other income – Interest income on Trust Account
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923,000
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-
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Income (loss) before provision for income tax
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636,000
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(10,000
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)
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Provision for income tax
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192,000
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-
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Net income (loss)
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$
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444,000
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$
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(10,000
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)
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Weighted average common shares outstanding:
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Basic
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7,639,000
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6,416,000
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Diluted
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32,081,000
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6,416,000
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Net income (loss) per common share:
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Basic
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$
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0.06
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$
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(0.00
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)
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Diluted
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$
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0.01
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$
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(0.00
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)
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See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY
For
the three months ended March 31, 2018
(unaudited)
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Common Stock
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Paid-in
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Additional
Retained
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Total
Stockholders’
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Shares
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Amount
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Capital
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Earnings
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Equity
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Balance, December 31, 2017
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7,653,487
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$
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1,000
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$
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4,718,000
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$
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281,000
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$
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5,000,000
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Adjustment of proceeds subject to possible redemption at value of $10.10 per share
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(43,960
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)
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-
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(444,000
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)
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-
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(444,000
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Net income
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-
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-
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-
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444,000
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444,000
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Balance, March 31, 2018
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7,609,527
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$
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1,000
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$
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4,274,000
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$
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725,000
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$
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5,000,000
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See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
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For the three Months Ended March 31, 2018
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The period from January 3, 2017 (date of inception) to March 31, 2017
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Cash flows from operating activities:
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Net income (loss)
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$
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444,000
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$
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(10,000
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)
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Adjustments to reconcile net income (loss) to net cash used in operating activities:
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Interest income retained in Trust Account
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(923,000
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)
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-
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Changes in operating assets and liabilities:
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Increase in prepaid expenses
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(17,000
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)
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-
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Increase in accounts payable and accrued liabilities
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31,000
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10,000
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Increase in accrued income and franchise taxes
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143,000
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-
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Net cash used in operating activities
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(322,000
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)
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-
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Cash flows from investing activities: Cash deposited in Trust Account
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-
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-
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Cash flows from financing activities:
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-
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-
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Net decrease in cash
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(322,000
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)
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-
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Cash at beginning of period
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1,353,000
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-
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Cash at end of period
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$
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1,031,000
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$
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-
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See
accompanying notes to condensed financial statements
HENNESSY
CAPITAL ACQUISITION CORP. III
Notes to Condensed Financial Statements
(unaudited)
NOTE
1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization
and General:
Hennessy
Capital Acquisition Corp. III (the “Company”) was incorporated in Delaware on January 3, 2017. The Company was formed
for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At
March 31, 2018, the Company had not commenced any operations. All activity for the period from January 3, 2017 (date of inception)
to March 31, 2018 relates to the Company’s formation and the initial public offering (“Public Offering”)
described below and, subsequent to the Public Offering, efforts have been directed toward locating and completing a suitable Business
Combination. The Company will not generate any operating revenues until after completion of the Business Combination, at the earliest.
The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived
from the Public Offering. All dollar amounts are rounded to the nearest thousand dollars.
Sponsor
and Financing:
The
Company’s sponsor is Hennessy Capital Partners III LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Public Offering (as described in Note 3) was declared effective by the United States Securities
and Exchange Commission (the “SEC”) on June 22, 2017. The Company intends to finance a Business Combination with proceeds
from the $256,650,000 Public Offering (including $31,650,000 from the underwriters’ partial exercise of their overallotment
option - Note 3) and $9,600,000 private placement (Note 4). Upon the closing of the Public Offering and the private placement,
approximately $259,217,000 was deposited in a trust account with Continental Stock Transfer and Trust Company acting as trustee
(the “Trust Account”) as discussed below. As a result of the underwriters’ exercising less than the full overallotment
option, the Sponsor forfeited 52,500 shares of its common stock as described in Notes 3 and 4.
The
Trust Account:
The
funds in the Trust Account may be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180)
days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which
invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation
of the Business Combination or (ii) the distribution of the Trust Account as described below. The funds held outside the Trust
Account may be used to pay for business, legal and accounting due diligence on prospective targets and for general and administrative
expenses.
The
Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay
taxes, if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Business
Combination; (ii) the redemption of 100% of the shares of common stock included in the Units (as defined in Note 3) sold in the
Public Offering if the Company is unable to complete a Business Combination within 18 months from the closing of the Public Offering
(subject to the requirements of law); or (iii) the redemption of the public shares in connection with a stockholder vote to amend
the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s
obligation to redeem 100% of its public shares if it does not complete its Business Combination by December 28, 2018, which is
18 months from the closing of the Public Offering.
Business
Combination:
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering,
although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating
a Business Combination with a Target Business. As used herein, “Target Business” must be one or more target businesses
that together have a fair market value equal to at least 80% of the balance in the Trust Account (less any deferred underwriting
commissions and taxes payable on interest earned) at the time of the Company’s signing a definitive agreement in connection
with the Business Combination. There is no assurance that the Company will be able to successfully effect a Business Combination.
The
Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business
Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless
of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then
on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest
but less taxes payable, or (ii) provide stockholders with the opportunity to have their shares redeemed by the Company by means
of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the
aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including
interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination
or will allow stockholders to redeem their shares in a tender offer will be made by the Company, solely in its discretion, and
will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise
require the Company to seek stockholder approval unless a vote is required by NYSE American (formerly known as NYSE MKT) rules.
If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares
of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public
shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of a Business Combination.
In such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and
instead may search for an alternate Business Combination.
If
the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public
stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount
then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including
interest but less taxes payable. As a result, such shares of common stock are recorded at redemption amount and classified as
temporary equity upon the completion of the Public Offering, in accordance with FASB ASC 480, “Distinguishing Liabilities
from Equity.”
The
Company only has 18 months from the closing date of the Public Offering to complete the Business Combination. If the Company does
not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding
up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common
stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $100,000 of
such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate
the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution
and liquidation. The initial stockholders have entered into letter agreements with the Company, pursuant to which they have waived
their rights to participate in any redemption with respect to their initial shares; however, if the initial stockholders or any
of the Company’s officers, directors or affiliates acquire shares of common stock in or after the Public Offering, they
will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the
Company does not complete a Business Combination within the required time period.
In
the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution
(including Trust Account assets) will be less than the initial public offering price per Unit in the Public Offering.
Liquidation
and Going Concern
The
Company only has 18 months from the closing date of the Public Offering (until December 28, 2018) to complete its Business Combination.
If the Company does not complete a Business Combination by December 28, 2018, the Company will (i) cease all operations except
for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem
the public shares for a per share pro rata portion of the Trust Account, including interest, but less taxes payable and funds
released to the Company for working capital (and less up to $100,000 of interest to pay dissolution expenses) and (iii) as promptly
as possible following such redemption, subject to the approval of the Company’s remaining stockholders and its Board of
Directors, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders, as
part of its plan of dissolution and liquidation. The Sponsor and each of the Company’s officers and directors, each of whom
holds Founder Shares (defined in Note 4), have entered into letter agreements with the Company, pursuant to which they have waived
their rights to participate in any redemption with respect to their Founder Shares; however, if such initial stockholders or any
of their affiliates acquire shares of common stock in or after the Public Offering, they will be entitled to a pro rata share
of the Trust Account for such shares upon the Company’s redemption or liquidation in the event the Company does not complete
a Business Combination within the required time period.
This
mandatory liquidation and subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after
December 28, 2018.
In
the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution
(including Trust Account assets) will be less than the offering price per Unit in the Public Offering.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation:
The
accompanying unaudited condensed interim financial statements of the Company are presented in U.S. dollars in conformity with
accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations
of the SEC and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of the financial position as of March 31, 2018, and the results of operations and cash flows
for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance
with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results
for a full year.
The
accompanying unaudited condensed interim financial statements should be read in conjunction with the Company's audited financial
statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
Emerging
Growth Company:
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised accounting standard at the time private companies adopt the new or revised standard.
Net
Income Per Common Share:
Net
income per common share is computed by dividing net income applicable to common stockholders by the weighted average number of
common shares outstanding during the period (after deducting shares that were subject to forfeiture in connection with the Public
Offering), plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using
the treasury stock method. Shares of common stock subject to possible redemption have been excluded from the calculation of basic
income per share for the three months ended March 31, 2018 and for the period from January 3, 2017 (date of inception) to March
31, 2017 since such shares, if redeemed, only participate in their pro rata share of the Trust Account. The Company has not considered
the effect of warrants to purchase 28,848,750 shares of common stock sold in the Public Offering and the concurrent private placement
in the calculation of diluted income (loss) per share, since the exercise of the warrants into shares of common stock is contingent
upon the occurrence of future events. For the three months ended March 31, 2018 and for the period from January 3, 2017 (date
of inception) to March 31, 2017, the fully diluted calculation includes the shares subject to redemption.
Concentration
of Credit Risk:
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial
Instruments:
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards
Board ASC 820 (“FASB ASC 820”), “Fair Value Measurements and Disclosures,” approximates the carrying amounts
represented in the financial statements.
Use
of Estimates:
The
preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
Offering
Costs:
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A – “Expenses
of Offering”. Offering costs of approximately $14,836,000, consisting principally of underwriting discounts of $14,115,750
(including $9,615,750 of which payment is deferred) and approximately $720,000 of professional, printing, filing, regulatory and
other costs have been charged to additional paid in capital upon completion of the Public Offering.
Income
Taxes:
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC, 740, “Income Taxes.”
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
The
Company’s currently taxable income consists of interest income on the Trust Account, net of taxes. The Company’s costs
are generally considered start-up costs and are not currently deductible. During the three months ended March 31, 2018 and for
the period from January 3, 2017 (date of inception) to March 31, 2017, the Company recorded income tax expense of approximately
$192,000 and $ -0- primarily related to interest income earned on the Trust Account net of franchise taxes accrued. The Company’s
effective tax rate for the three months ended March 31, 2018 was approximately 31% which differs significantly from the expected
21% tax rate due to the start-up costs (discussed above) which are not currently deductible. There was no tax provision for the
period from January 3, 2017 (date of inception) to March 31, 2017 because there was no interest income during that period. On
December 22, 2017, the Tax Cut and Jobs Act was enacted into law resulting in a reduction in the federal corporate income tax
rate from 35% to 21% for years beginning in 2018. At March 31, 2018 and December 31, 2017, the Company has a deferred tax asset
of approximately $200,000 and $120,000, respectively, (which reflects the lower 21% rate under which those deferred taxes would
be expected to be recovered or settled) primarily related to start-up costs. Management has determined that a full valuation allowance
of the deferred tax asset is appropriate at March 31, 2018 and December 31, 2017.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2018 or December
31, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and penalties at March 31, 2018 or December 31, 2017. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions.
The Company is subject to income tax examinations by major taxing authorities since inception.
Redeemable
Common Stock:
As
discussed in Note 3, all of the 25,665,000 shares of common stock sold as part of Units in the Public Offering contain a redemption
feature which allows for the redemption of common shares under the Company’s Liquidation or Tender Offer/Stockholder Approval
provisions. In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security
to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all
of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company’s charter
does not specify a maximum redemption threshold, it provides that in no event will the Company redeem its public shares in an
amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001.
The
Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value at the end of each
reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional
paid-in capital. Accordingly, at March 31, 2018 and December 31, 2017, 24,471,723 and 24,427,763 of the 25,665,000 public shares
were classified outside of permanent equity at redemption value.
Recent
Accounting Pronouncements:
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s financial statements.
Subsequent
Events:
Management
has evaluated subsequent events to determine if events or transactions occurring after the date of the financial statements but
before the financial statements were issued, require potential adjustment to or disclosure in the financial statements and has
concluded that all such events that would require adjustment or disclosure have been recognized or disclosed.
NOTE
3 – PUBLIC OFFERING
In
June and July 2017, the Company closed on the sale of 25,665,000 units at a price of $10.00 per unit (the “Units”)
yielding gross proceeds from the Public Offering of $256,650,000. The closings occurred on June 28, 2017 with respect to 22,500,000
Units and on July 19, 2017 with respect to 3,165,000 Units related to the partial exercise of the underwriters’ over-allotment
option. Each Unit consists of one share of the Company’s common stock, $0.0001 par value and three-quarters of one redeemable
common stock purchase warrant (the “Warrants”). Each whole warrant offered in the Public Offering is exercisable to
purchase one share of our common stock. Only whole warrants may be exercised. Under the terms of the warrant agreement, the Company
has agreed to use its best efforts to file a new registration statement under the Securities Act, following the completion of
the Business Combination. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants,
a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest
whole number the number of shares of common stock to be issued to the warrant holder. Each Warrant will become exercisable on
the later of 30 days after the completion of the Business Combination or 12 months from the closing of the Public Offering and
will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation. However, if
the Company does not complete the Business Combination on or prior to the 18-month period allotted to complete the Business Combination,
the Warrants will expire at the end of such period. If the Company is unable to deliver registered shares of common stock to the
holder upon exercise of the Warrants during the exercise period, there will be no net cash settlement of these Warrants and the
Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant
agreement. Once the warrants become exercisable, the Company may redeem the outstanding warrants in whole and not in part at a
price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last
sale price of the Company’s shares of common stock equals or exceeds $18.00 per share for any 20 trading days within the
30-trading day period ending on the third trading day before the Company sends the notice of redemption to the warrant holders.
The
Company paid an underwriting discount of approximately 2.0% of the per Unit offering price to the underwriters at the June 28,
2017 closing of the Public Offering ($4,500,000), with an additional fee (the “Deferred Fee”) of approximately 3.5%
of the gross offering proceeds payable upon the Company’s completion of a Business Combination ($7,875,000). Upon closing
of the partial exercise of the over-allotment option, a 5.5% deferred discount on the gross proceeds of the over-allotment option
was accrued for approximately $1,741,000 resulting in the aggregate Deferred Fee of approximately $9,616,000 (approximately 3.7%
of the gross offering proceeds). The Deferred Fee will become payable to the underwriters from the amounts held in the Trust Account
solely in the event the Company completes the Business Combination.
In
connection with the exercise of the underwriters’ over-allotment option, 52,500 founder shares were forfeited.
In
addition, in June 2017, the Sponsor paid the Company approximately $9,600,000 in a private placement for the purchase of 9,616,000
warrants at a price of $1.00 per warrant (the “Private Placement Warrants”) - see also Note 4.
Upon
the closing of the Public Offering and the sale of the Private Placement Warrants, an aggregate of approximately $259,217,000
was deposited in the Trust Account.
NOTE
4 – RELATED PARTY TRANSACTIONS
Founder
Shares
During
April 2017, the Sponsor purchased 7,906,250 shares of common stock (the “Founder Shares”) for $25,000, or approximately
$0.003 per share. Thereafter, the Company cancelled a portion of the Founder Shares, resulting in an aggregate of 6,468,750 Founder
Shares outstanding (up to 843,750 of which were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’
over-allotment option was exercised). As a result of the partial cancellations, the per-share purchase price increased to approximately
$0.004 per share. In May 2017, the Sponsor transferred 1,125,000 founder shares to the Company’s officers and director nominees.
The Founder Shares are identical to the common stock included in the Units sold in the Public Offering except that the Founder
Shares are subject to certain transfer restrictions, as described in more detail below. In July 2017, pursuant to an agreement
with the underwriters to limit the ownership by the initial stockholders to 20% of the Company’s issued and outstanding
shares, the Sponsor forfeited 52,500 Founder Shares as a result of the over-allotment option not being exercised in full by the
underwriters.
The
Company’s initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier
of (A) one year after the completion of the Business Combination, or earlier if, subsequent to the Company’s initial Business
Combination, the last sale price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the Business Combination or (B) the date on which the Company completes a liquidation, merger,
stock exchange or other similar transaction after the Business Combination that results in all of the Company’s stockholders
having the right to exchange their shares of common stock for cash, securities or other property.
Private
Placement Warrants
Upon
the June 28, 2017 closing of the Public Offering, the Sponsor paid the Company approximately $9,600,000 for the purchase of the
9,600,000 Private Placement Warrants at a price of $1.00 per warrant in a private placement. Each Private Placement Warrant entitles
the holder to purchase one share of common stock at $11.50 per share. A portion of the purchase price of the Private Placement
Warrants was added to the proceeds from the Public Offering in funding the amount required to be deposited in the Trust Account
pending completion of the Business Combination. The Private Placement Warrants (including the common stock issuable upon exercise
of the Private Placement Warrants) are not transferable, assignable or salable until 30 days after the completion of the Business
Combination and are non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement
Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable
by the Company and exercisable by such holders on the same basis as the warrants included in the Units sold in the Public Offering.
Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Warrants sold as part of
the Units in the Public Offering and have no net cash settlement provisions.
If
the Company does not complete a Business Combination, then the proceeds deposited in the Trust Account will be part of the liquidating
distribution to the public stockholders and the Private Placement Warrants issued to the Sponsor will expire worthless.
Registration
Rights
The
Company’s initial stockholders and holders of the Private Placement Warrants are entitled to registration rights pursuant
to a registration rights agreement. The Company’s initial stockholders and holders of the Private Placement Warrants will
be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities
for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include
their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection
with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities
under the registration rights agreement.
Related
Party Loans
On
March 31, 2017, the Sponsor agreed to loan the Company an aggregate of $300,000 by drawdowns of not less than $10,000 each against
the issuance of an unsecured promissory note (the “Note”) to cover expenses related to the Public Offering. During
2017, the Company borrowed the entire $300,000 available under the Note and the non-interest bearing loans were paid in full on
June 28, 2017.
Administrative
Services Agreement and Other Agreements
The
Company pays $15,000 a month ($45,000 for the three months ended March 31, 2018) for office space, administrative services and
secretarial support to an affiliate of the Sponsor, Hennessy Capital LLC. Services commenced on June 23, 2017 and will terminate
upon the earlier of the consummation by the Company of the Business Combination or the liquidation of the Company.
Also,
commencing on June 23, 2017 (the date the securities were first listed on the NYSE MKT), the Company has agreed to compensate
its Chief Financial Officer $25,000 per month prior to the consummation of the Business Combination, of which 50% is payable in
cash currently and 50% in cash upon the successful completion of the Business Combination. Approximately $115,000 and $78,000,
respectively, has been included in accrued liabilities for the deferred compensation of the Chief Financial Officer at March 31,
2018 and December 31, 2017.
NOTE
5 - TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The
Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and
reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at
fair value at least annually.
Upon
the closing of the Public Offering and the private placement, a total of approximately $259,217,000 was deposited into the Trust
Account. The proceeds in the Trust Account may be invested in either U.S. government treasury bills with a maturity of 180 days
or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended,
and that invest solely in U.S. government treasury obligations.
At
March 31, 2018 and December 31, 2017, the proceeds of the Trust Account were invested primarily in U.S. government treasury bills
maturing in 2018 yielding interest of between approximately 1.1% and 1.4% per year. The Company classifies its U.S. government
treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments – Debt
and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to
hold until maturity. Held-to-maturity U.S. government treasury bills are recorded at amortized cost on the accompanying March
31, 2018 and December 31, 2017 condensed balance sheets and adjusted for the amortization of discounts.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis as
of March 31, 2018 and December 31, 2017 and indicates the fair value hierarchy of the valuation techniques the Company utilized
to determine such fair value. Since all of the Company’s permitted investments at March 31, 2018 and December 31, 2017 consisted
of U.S. government treasury bills and money market funds that invest only in U.S. government treasury bills, fair values of its
investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities
as follows:
|
|
Carrying value at March 31, 2018
|
|
|
Gross Unrealized Holding (Losses)
|
|
|
Quoted Price Prices in Active Markets (Level 1)
|
|
Description
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and money market funds
|
|
$
|
118,000
|
|
|
$
|
-
|
|
|
$
|
118,000
|
|
U.S. government treasury bills
|
|
|
261,416,000
|
|
|
|
(37,000
|
)
|
|
|
261,379,000
|
|
Total
|
|
$
|
261,534,000
|
|
|
$
|
(37,000
|
)
|
|
$
|
261,497,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at December 31, 2017
|
|
|
Gross Unrealized Holding Gains
|
|
|
Quoted Price Prices in Active Markets (Level 1)
|
|
Description
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
$
|
15,000
|
|
U.S. government treasury bills
|
|
|
260,597,000
|
|
|
|
21,000
|
|
|
|
260,618,000
|
|
Total
|
|
$
|
260,612,000
|
|
|
$
|
21,000
|
|
|
$
|
260,633,000
|
|
Subsequent
to March 31, 2018, in April 2018, the Company withdrew approximately $916,000 from the Trust Account in connection with the payment
of its 2017, and partial estimated 2018, income and franchise taxes.
NOTE
6 – STOCKHOLDERS’ EQUITY
Common
Stock
On
June 22, 2017, the Company amended and restated its amended and restated certificate of incorporation to increase the number of
its authorized shares of common stock from 29,000,000 shares to 200,000,000 shares. The Company may (depending on the terms of
the Business Combination) be required to increase the number of shares of common stock which it is authorized to issue at the
same time as its stockholders vote on the Business Combination to the extent the Company seeks stockholder approval in connection
with its Business Combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock
they own. In June and July 2017, a total of 25,665,000 shares of common stock were issued as part of the Units in the Public Offering
(including Units issued in connection with the partial exercise of the underwriters’ over-allotment option) and in July
2017, 52,500 founder shares were forfeited resulting in 32,081,250 shares of common stock issued and outstanding including 24,471,723
and 24,475,832 shares, respectively, subject to redemption at March 31, 2018 and December 31, 2017.
Preferred
Stock
The
Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences
as may be determined from time to time by the Board of Directors. At March 31, 2018 and December 31, 2017, there were no shares
of preferred stock issued and outstanding.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with the condensed financial statements and the notes thereto contained elsewhere in this report.
Special
Note Regarding Forward-Looking Statements
All
statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s
financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.
When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking
statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information
currently available to, the Company’s management. Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors detailed in our filings with the SEC.
Overview
We
are a blank check company incorporated on January 3, 2017 as a Delaware corporation and formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or
more businesses (the “Initial Business Combination”). We intend to effectuate our Initial Business Combination using
cash from the proceeds of our initial public offering in June and July 2017 (the “Public Offering”) and the sale of
warrants in a private placement (the “Private Placement”) that occurred simultaneously with the completion of the
Public Offering (the “Private Placement Warrants”), our capital stock, debt or a combination of cash, stock and debt.
The
issuance of additional shares of our stock in an Initial Business Combination:
|
●
|
may
significantly dilute the equity interest of our stockholders;
|
|
●
|
may
subordinate the rights of holders of our common stock if preferred stock is issued with
rights senior to those afforded our common stock;
|
|
●
|
could
cause a change of control if a substantial number of shares of our common stock are issued,
which may affect, among other things, our ability to use our net operating loss carry
forwards, if any, and could result in the resignation or removal of our present officers
and directors;
|
|
●
|
may
have the effect of delaying or preventing a change of control of us by diluting the stock
ownership or voting rights of a person seeking to obtain control of us; and
|
|
●
|
may
adversely affect prevailing market prices for our common stock and/or warrants.
|
Similarly,
if we issue debt securities or incur other indebtedness to finance our Initial Business Combination, it could result in:
|
●
|
a
decrease in the prevailing market prices for our common stock and/or warrants;
|
|
●
|
default
and foreclosure on our assets if our operating revenues after an Initial Business Combination
are insufficient to repay our debt obligations;
|
|
●
|
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
or other indebtedness is payable on demand;
|
|
●
|
our
inability to obtain necessary additional financing if the debt security or other indebtedness
contains covenants restricting our ability to obtain such financing while the debt security
or other indebtedness is outstanding;
|
|
●
|
our
inability to pay dividends on our common stock;
|
|
●
|
using
a substantial portion of our cash flow to pay principal and interest on our debt, which
will reduce the funds available for dividends on our common stock if declared, expenses,
capital expenditures, acquisitions and other general corporate purposes;
|
|
●
|
limitations
on our flexibility in planning for and reacting to changes in our business and in the
industry in which we operate;
|
|
●
|
increased
vulnerability to adverse changes in general economic, industry and competitive conditions
and adverse changes in government regulation; and
|
|
●
|
limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions,
debt service requirements, execution of our strategy and other purposes and other disadvantages
compared to our competitors who have less debt.
|
At
March 31, 2018, we had approximately $1,031,000 in cash outside of the Trust Account. We expect to incur significant costs in
the pursuit of our Initial Business Combination and we cannot assure you that our plans to complete our Initial Business Combination
will be successful.
Results
of Operations
For
the period from January 3, 2017 (date of inception) to March 31, 2018 our activities consisted of formation and preparation
for the Public Offering and subsequent to the Public Offering, efforts have been directed toward locating and completing a suitable
Business Combination. As such, we had no operations or significant operating expenses until July 2017.
Our
normal operating costs include costs associated with our search for an Initial Business Combination, costs associated with our
governance and public reporting, state franchise taxes of approximately $17,000 per month (see below), a charge of $15,000 per
month from our Sponsor for administrative services and approximately $25,000 per month ($12,500 of which is deferred as to payment
until closing of our Initial Business Combination) for compensation to our Chief Financial Officer. In addition, since our operating
costs are not expected to be deductible for federal income taxes, we expect to be subject to federal income taxes on the income
from the Trust Account less franchise taxes. Such federal income taxes would approximate $750,000 per year based on the level
of interest income inherent in our current U.S. treasury bill investments. However, we are permitted to withdraw interest earned
from the Trust Account for the payment of federal income taxes and franchise taxes. We expect our costs to increase due to professional
and consulting fees and travel associated with evaluating various Initial Business Combination candidates. Such costs were approximately
$30,000 in the three months ended March 31, 2018. Further, once we identify an Initial Business Combination candidate, our costs
are expected to increase significantly in connection with negotiating and executing a merger agreement and related agreements
as well as additional professional, due diligence and consulting fees and travel costs that will be required in connection with
an Initial Business Combination.
Our
Public Offering and Private Placement closed on June 28, 2017 and, with respect to the partial exercise of the underwriters’
over-allotment option, on July 19, 2017 as more fully described in “Liquidity and Capital Resources” below. The proceeds
in the Trust Account were invested in a money market fund that invests solely in direct U.S. government obligations meeting the
applicable conditions of Rule 2a-7 of the Investment Company Act of 1940. In July 2017, the money market fund was largely liquidated
and the trust assets were invested in U.S. government treasury bills which mature on December 21, 2017 (and were re-invested in
U.S. government treasury bills maturing in May 2018) and January 11, 2018 (and were re-invested in U.S. government treasury bills
maturing in May 2018) and currently yield approximately 1.4% on a yearly basis. Interest on the Trust Account was approximately
$923,000 for the three months ended March 31, 2018.
Liquidity
and Capital Resources
On
June 28, 2017, we consummated the Public Offering of an aggregate of 22,500,000 Units at a price of $10.00 per unit generating
gross proceeds of approximately $225,000,000 before underwriting discounts and expenses. Simultaneously with the consummation
of the Public Offering, we consummated the Private Placement of 9,600,000 Private Placement Warrants, each exercisable to purchase
one share of our common stock at $11.50 per share, to the Sponsor, at a price of $1.00 per Private Placement Warrant, generating
gross proceeds, before expenses, of approximately $9,600,000. On July 19, 2017, the Company closed on the underwriters’
over-allotment option of 3,165,000 units (a partial exercise), increasing the aggregate initial public offering amount by approximately
$31,650,000 to approximately $256,650,000. The partial exercise of the underwriters’ over-allotment option resulted in the
forfeiture of 52,500 shares by the Sponsor. In addition, the Company incurred an additional deferred underwriting fee of approximately
$1,741,000, and approximately $42,000 of other offering costs, and transferred approximately $316,500 of its funds outside the
Trust Account to the Trust Account.
The
net proceeds from the Public Offering and Private Placement was approximately $261,030,000, net of the non-deferred portion of
the underwriting commissions of $4,500,000 and offering costs and other expenses of approximately $720,000. $259,216,500 of the
proceeds of the Public Offering and the private placement have been deposited in the Trust Account and are not available to us
for operations (except amounts to pay taxes). At March 31, 2018, we had approximately $1,031,000 of cash available outside of
the Trust Account to fund our activities until we consummate an Initial Business Combination.
Until
the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of shares of our
common stock for $25,000 by the Sponsor, and a total of $300,000 loaned by the Sponsor against the issuance of an unsecured promissory
note (the “Note”). These loans were non-interest bearing and were paid in full on June 28, 2017 in connection with
the closing of the Public Offering.
The
Company believes that it has sufficient working capital at March 31, 2018 to fund its operations through December 2018.
The
Company has only until December 28, 2018 to complete the Initial Business Combination. If the Company does not complete an Initial
Business Combination by December 28, 2018, the Company will (i) cease all operations except for the purposes of winding up; (ii)
as promptly as reasonably possible, but not more than ten business days thereafter, redeem the Public Shares for a per share pro
rata portion of the Trust Account, including interest, but less taxes payable (and less up to $100,000 of interest to pay dissolution
expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s
net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and each
of the Company’s officers and directors, each of whom holds founder shares (collectively the “initial stockholders”),
have entered into letter agreements with the Company, pursuant to which they have waived their rights to participate in any redemption
with respect to their founder shares; however, if the initial stockholders or any of their affiliates acquire shares of common
stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s
redemption or liquidation in the event the Company does not complete an Initial Business Combination within the required time
period.
This
mandatory liquidation and subsequent dissolution raises substantial doubt about the Company's ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after
December 28, 2018.
In
the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution
(including Trust Account assets) will be less than the initial public offering price per unit in the Public Offering.
Off-balance
sheet financing arrangements
We
have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in
transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest
entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We
have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt
or commitments of other entities, or entered into any agreements for non-financial assets.
Contractual
obligations
At
March 31, 2018, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
In connection with the Public Offering, we entered into an Administrative Services Agreement with Hennessy Capital LLC, an affiliate
of our Sponsor, pursuant to which the Company pays Hennessy Capital LLC $15,000 per month for office space, utilities and secretarial
support.
In
addition, commencing on June 23, 2017 (the date the Company’s securities were first listed on the NYSE American), the Company
has agreed to to compensate its Chief Financial Officer $25,000 per month prior to the consummation of the Initial Business Combination,
of which 50% is payable in cash currently and 50% in cash upon the successful completion of the Initial Business Combination.
Approximately $115,000 and $78,000, respectively, has been included in accrued liabilities for the deferred compensation of the
Chief Financial Officer at March 31, 2018 and December 31, 2017.
Upon
completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying or accruing these
monthly fees.
In
connection with identifying an Initial Business Combination candidate, the Company expects to enter into engagement letters or
agreements with various consultants, advisors, professionals and others in connection with an Initial Business Combination. The
services under these engagement letters and agreements are likely to be material in amount and in some instances, include contingent
or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the
quarter that an Initial Business Combination is consummated. In most instances, these engagement letters and agreements are expected
to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ
from those estimates. The Company has identified the following as its critical accounting policies:
Emerging
Growth Company
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has
elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard
at the time private companies adopt the new or revised standard.
Net
Income Per Common Share:
Net
income per common share is computed by dividing net income applicable to common stockholders by the weighted average number of
common shares outstanding during the period (after deducting shares that were subject to forfeiture in connection with the Public
Offering), plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using
the treasury stock method. Shares of common stock subject to possible redemption have been excluded from the calculation of basic
income per share for the three months ended March 31, 2018 and the period from January 3, 2017 (date of inception) to March 31,
2017 since such shares, if redeemed, only participate in their pro rata share of the Trust Account. The Company has not considered
the effect of warrants to purchase 28,848,750 shares of common stock sold in the Public Offering and the concurrent private placement
in the calculation of diluted income (loss) per share, since the exercise of the warrants into shares of common stock is contingent
upon the occurrence of future events. For the three months ended March 31, 2018 and for the period from January 3, 2017 (date
of inception) to March 31, 2017, the fully diluted calculation includes the shares subject to redemption.
Financial
Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed financial
statements.
Public
Offering Costs
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A- “Expenses
of Offering”. Public Offering costs of approximately $14,836,000 consist of underwriters’ discounts of approximately
$14,115,000 (including approximately $9,616,000 of which payment is deferred) and approximately $720,000 of professional, printing,
filing, regulatory and other costs associated with the Public Offering were charged to additional paid in capital upon completion
of the Public Offering in June and in July 2017.
Income
Taxes:
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC, 740, “Income Taxes.”
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
The
Company’s currently taxable income consists of interest income on the Trust Account net of taxes. The Company’s costs
are generally considered start-up costs and are not currently deductible. During the three months ended March 31, 2018 and for
the period from January 3, 2017 (date of inception) to March 31, 2018, the Company recorded income tax expense of approximately
$192,000 and $ -0- primarily related to interest income earned on the Trust Account net of franchise taxes accrued. The Company’s
effective tax rate for the three months ended March 31, 2018 was approximately 31% which differs significantly from the expected
21% tax rate due to the start-up costs (discussed above) which are not currently deductible. There was no tax provision for the
period from January 3, 2017 (date of inception) to March 31, 2017 because there was no interest income. On December 22, 2017,
the Tax Cut and Jobs Act was enacted into law resulting in a reduction in the federal corporate income tax rate from 35% to 21%
for years beginning in 2018. At March 31, 2018 and December 31, 2017, the Company has a deferred tax asset of approximately $200,000
and $120,000 (which, at December 31, 2017, reflects the lower 21% rate under which those deferred taxes would be expected to be
recovered or settled) primarily related to start-up costs. Management has determined that a full valuation allowance of the deferred
tax asset is appropriate at this time.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2018 or December
31, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and penalties at March 31, 2018 or December 31, 2017. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is subject to income tax examinations by major taxing authorities since inception.
Redeemable
Common Stock
All
of the 25,665,000 shares of common stock sold as part of the Units in the Public Offering contain a redemption feature which allows
for the redemption of such common stock under the Company’s liquidation or tender offer/stockholder approval provisions.
In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be
classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the
entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company does not specify a maximum
redemption threshold, its amended and restated certificate of incorporation provides that in no event will the Company redeem
its Public Shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal
the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock
are affected by charges against additional paid-in capital.
At
March 31, 2018, 24,471,723 of the 25,665,000 Public Shares were classified outside of permanent equity at redemption value.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s financial statements.