NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
Note
1 — Organization and Business Operations
Organization
and General
Twelve
Seas Investment Company (the “Company”) is a blank check company incorporated on November 30, 2017, under the laws
of the Cayman Islands 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 businesses or entities (a “Business Combination”).
The Company’s efforts to identify a prospective target business are not limited to a particular industry or geographic location.
As
of June 30, 2019, the Company had not yet commenced any operations generating revenue. All activity through June 30, 2019 relates
to the Company’s formation, the Initial Public Offering (as defined below), the search for prospective targets to effect
a Business Combination, and consummating the aforementioned Business Combination (as described in Initial Business Combination
section of Note 1). The Company has selected December 31 as its fiscal year end.
Financing
The
registration statements for the Company’s initial public offering (“Initial Public Offering”) were declared
effective on June 19, 2018. On June 22, 2018, the Company consummated the Initial Public Offering of 18,000,000 units (“Units”
or “Public Units” and, with respect to the ordinary shares included in the Public Units being offered, the “Public
Shares”), generating gross proceeds of $180,000,000, which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 475,000 units (the “Private Units”)
at a price of $10.00 per Unit in a private placement to the Company’s sponsor (the “Sponsor”), generating gross
proceeds of $4,750,000, which is described in Note 4.
Contained
in the underwriting agreement for the Public Offering is an overallotment option allowing the underwriters to purchase from the
Company up to an additional 2,700,000 Public Units and the sale to the Sponsor of an additional 54,000 Private Units at $10.00
per Unit (as described in Note 3 – Initial Public Offering and Note 4 - Private Placement).
On
June 28, 2018, the underwriters exercised the option in full and purchased 2,700,000 Public Units, which were sold at $10.00 per
Unit, generating gross proceeds of $27,000,000. Simultaneously with the sale of the over-allotment Public Units, the Company consummated
the private placement of an additional 54,000 Private Units, purchased by the Sponsor, at a price of $10.00 per Unit, generating
total additional gross proceeds of $540,000.
Trust
Account
Following
the closing of the Initial Public Offering on June 22, 2018, an amount of $180,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Public Units in the Initial Public Offering and the Private Units was placed in a trust account (“Trust
Account”). Following the closing of underwriters’ exercise of over-allotment option on June 28, 2018, an additional
$27,000,000 of net proceeds ($10.00 per Unit) was placed in the Trust Account, bringing the aggregate proceeds held in the Trust
Account to $207,000,000.
The
funds in the Trust Account are invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or
in any open-ended investment company that holds itself out as a money market fund 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, except that interest earned on the Trust Account can be released to pay the Company’s
income or other tax obligations.
TWELVE
SEAS INVESTMENT COMPANY
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
Initial
Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the Private Units, although substantially all of the net proceeds are intended to be generally applied toward consummating
a Business Combination. The Company’s 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) (net of taxes payable) at the
time of the signing an agreement to enter into a Business Combination. However, 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. There is no assurance that the Company will be able to successfully effect a Business Combination.
The
Company will provide its shareholders with the opportunity to redeem all or a portion of their shares included in the Public Units
sold in the Initial Public Offering (the “Public Shares”) upon the completion of a Business Combination either (i)
in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision
as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the
Company, solely in its discretion. The shareholders will be entitled to redeem their shares for a pro rata portion of the amount
then on deposit in the Trust Account (initially approximately $10.00 per share, plus any pro rata interest earned on the funds
held in the Trust Account and not previously released to the Company to pay its tax obligations).
The
ordinary shares subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion
of the Initial Public 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 consummation of such a Business Combination and a majority of the issued and outstanding shares voted
are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to
hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum
and Articles of Association, 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 shareholder
approval of the transaction is required by law, or the Company decides to obtain shareholder 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 shareholder approval in connection with a Business Combination, the Initial
Shareholders (defined in Note 5- Related Party Transactions) have agreed to vote their initial shares and private shares, as well
as any public shares acquired in or after this offering, in favor of any proposed business combination. Additionally, each public
shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
The
Company will have until December 22, 2019 to consummate a Business Combination (the “Combination Period”). If the
Company is unable to complete a Business Combination within the Combination Period, it will trigger the automatic winding up,
dissolution and liquidation pursuant to the terms of the Amended and Restated Memorandum and Articles of Association. The amount
in the Trust Account (less the aggregate nominal par value of the shares of the Company’s public shareholders) under the
Companies Law will be treated as share premium which is distributable under the Companies Law provided that immediately following
the date on which the proposed distribution is proposed to be made, the Company is able to pay the debts as they fall due in the
ordinary course of business. If the Company is forced to liquidate the Trust Account, the public shareholders would be distributed
the amount in the Trust Account calculated as of the date that is two days prior to the distribution date (including any accrued
interest).
TWELVE
SEAS INVESTMENT COMPANY
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
The
Initial Shareholders have agreed to (i) waive their conversion rights with respect to their Initial Shares, private shares and
Public Shares in connection with the consummation of a Business Combination, (ii) to waive their rights to liquidating distributions
from the Trust Account with respect to their initial shares and private placement shares if the Company fails to consummate a
Business Combination within the Combination Period and (iii) not to propose an amendment to the Company’s Amended and Restated
Memorandum and Articles of Association 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 shareholders
with the opportunity to redeem their shares in conjunction with any such amendment.
On
April 15, 2019, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with
Brooge Holdings Limited, a Cayman Islands exempted company (“Pubco”), Brooge Merger Sub Limited, a Cayman Islands
exempted company and a wholly-owned subsidiary of Pubco (“Merger Sub”), Brooge Petroleum And Gas Investment Company
FZE, a company formed under the laws of the Fujairah Free Zone, UAE (“BPGIC”), and each of the holders of BPGIC’s
outstanding capital shares that become parties to the Business Combination Agreement by executing a joinder agreement to the Business
Combination Agreement (a “Joinder”). On May 10, 2019, BPGIC’s sole shareholder, Brooge Petroleum and Gas Investment
Company (BPGIC) PLC (“Seller”), executed and delivered to the Company, BPGIC and Pubco, a Joinder.
On
April 15, 2019, the Company changed the ticker symbols for the Company’s units, ordinary shares, warrants and rights trading
on the NASDAQ Capital Market from “TWLVU,” “TWLV,” “TWLVW” and “TWLVR,” respectively,
to “BROGU,” “BROG,” “BROGW,” and “BROGR,” respectively.
Pursuant
to the Business Combination Agreement, at the closing of the transactions contemplated by the Business Combination Agreement (the
“Closing”), (a) the Company will merge with Merger Sub, with the Company continuing as the surviving entity, and with
all holders of the Company’s securities receiving substantially identical securities of Pubco, and (b) Pubco will acquire
all of the issued and outstanding ordinary shares of BPGIC in exchange for ordinary shares of Pubco, with BPGIC becoming a wholly-owned
subsidiary of Pubco.
The
total consideration to be paid by Pubco to Seller will be 100,000,000 Pubco ordinary shares, subject to reduction to the extent
that BPGIC elects for the Sellers to receive a portion of the consideration for the purchased shares as cash in lieu of receiving
Pubco ordinary shares in an amount not to exceed 40% of the Closing Net Cash (as defined in the Business Combination Agreement);
provided that 20,000,000 of the Pubco shares otherwise issuable to Seller at the Closing will be set aside in escrow and delivered
to the escrow agent at the Closing, with such escrow shares subject to vesting and potential forfeiture based on terms set forth
in an escrow agreement mutually agreed by the Company and BPGIC (the “Escrow Agreement). In addition, the Initial Shareholders
of the Company have agreed to forfeit 20% of their Founder shares at the Closing and escrow 30% of their Founder shares at the
Closing, subject to the same vesting and forfeiture conditions as the Seller.
On
April 30, 2019, the Company and BPGIC entered into a letter agreement pursuant to which (a) the due date was extended from April
30, 2019 to May 10, 2019 (or such later date prior to the Closing as mutually agreed by the Company and BPGIC) for (i) Pubco,
Seller and the escrow agent to enter into the Escrow Agreement, (ii) BPGIC to deliver the Company Schedules (as defined in the
Business Combination Agreement), and (iii) BPGIC to deliver the Joinder Documents (as defined in the Business Combination Agreement)
for each shareholder of BPGIC, and (b) the date on and after which the Company has a right to terminate the Business Combination
Agreement if the deliverables specified in clause (a) above are not timely provided was also extended from April 30, 2019 to May
10, 2019 (or such later date prior to the Closing as mutually agreed by the Company and BPGIC.)
On
May 10, 2019 as required by the Business Combination Agreement, (i) Pubco, Seller and Continental Stock Transfer and Trust Company,
as escrow agent, entered into the Escrow Agreement, (ii) BPGIC timely delivered to the Company the Company Schedules, and (iii)
as noted above, Seller delivered the Joinder and the other Joinder Documents.
On
June 13, 2019 the Company and BPGIC filed an investor presentation with the SEC to be used in connection with the transactions
contemplated by the Business Combination Agreement.
TWELVE
SEAS INVESTMENT COMPANY
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
Liquidation
The
holders of the initial shares will not participate in any liquidation distribution with respect to such securities. 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 $10.00 per Unit in the Initial Public Offering. In order to protect the amounts held
in the Trust Account, Dimitri Elkin, the Company’s Chief Executive Officer, has contractually agreed, pursuant
to a written agreement to the Company, that if the Company liquidates the Trust Account prior to the consummation of a Business
Combination, he will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses
or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products
sold to the Company. 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. Moreover, in the event that an executed waiver
is deemed to be unenforceable against a third party, then Dimitri Elkin will not be responsible to the extent of any
liability for such third party claims. The Company will seek to reduce the possibility that Dimitri Elkin will have
to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the
Company’s independent auditors), prospective target businesses or other entities with which the Company does business, execute
agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
The
Company will pay the costs of liquidating the trust account from the remaining assets outside of the trust account. If such funds
are insufficient, Bryant Edwards, the Company’s COO, has contractually agreed to advance the Company the funds necessary
to complete such liquidation (currently anticipated to be no more than approximately $20,000) and has contractually agreed not
to seek repayment for such expenses.
Liquidity
As
of June 30, 2019, the Company had cash outside the Trust Account of $66,596 available for working capital needs. All remaining
cash and securities were held in the Trust Account and is generally unavailable for the Company’s use, prior to an initial
Business Combination, and is restricted for use either in a Business Combination or to redeem Public Shares. As of June 30, 2019,
none of the amount on deposit in the Trust Account was available to be withdrawn as described above.
Through
June 30, 2019, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the insider shares,
advances from the Sponsor in an aggregate amount of $300,000 which were repaid upon the IPO (as described in Note 5) and the
remaining net proceeds from the IPO and Private Placement (as described in Note 3 and 4). On April 4, 2019, the Company issued
a Note (as described in Note 5) in the principal amount of up to $500,000 to the Sponsor, the balance of which will be repaid
promptly after the date on which the Company consummates a Business Combination. In the event that the Company is unable to consummate
a business combination, as described in the prospectus relating to the IPO, the loans must be repaid to the extent that the Company
is financially able to do so with cash at its disposable outside of the Trust. As of June 30, 2019, the Sponsor had funded an
aggregate amount of $400,000 to the Company in pursuant to the Note.
The
Company anticipates that the $66,596 outside of our trust account as of June 30, 2019, combined with up to $100,000 of the remaining
Sponsor loans available in pursuant to the Note issued on April 4, 2019, will not be sufficient to allow the Company to operate
before a business combination is consummated or automatic winding up, dissolution and liquidation.
Until
consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional
Working Capital Loans from the Initial Shareholders, the Sponsor, the Company’s officers and directors, or their respective
affiliates, 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.
The Company currently estimates that it has
insufficient funds available to both operate its business and consummate its initial business combination. The Company may need
to obtain additional financing either to consummate its initial business combination or because it becomes obligated to redeem
a significant number of its public shares upon consummation of its initial business combination, in which case the Company may
issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable
securities laws, the Company would only consummate such financing simultaneously with the consummation of its initial business
combination. Following the Company’s initial business combination, if cash on hand is insufficient, the Company may need
to obtain additional financing in order to meet its obligations but there is no assurance that new financing will be available
to the Company on commercially acceptable terms. Furthermore, if the Company is not able to consummate a business combination
by December 22, 2019, it will trigger the Company’s automatic winding up, liquidation and dissolution. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements have been
prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might
result from the outcome of this uncertainty.
TWELVE
SEAS INVESTMENT COMPANY
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
Note
2 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting
principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure
rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all
adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position,
and the results of its operations and its cash flows. Operating results as presented are not necessarily indicative of the results
to be expected for a full year.
Emerging
Growth Company Status
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the
“Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and
it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its
periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder 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.
Offering
Costs
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A
– “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred
through the balance sheet date that are related to the Public Offering and that were charged to shareholders’ equity upon
the completion of the Initial Public Offering. Accordingly, offering costs totaling $8,593,124 have been charged to shareholders’
equity (consisting of $4,140,000 in underwriters’ fees, plus $703,124 of other cash expenses, and a non-cash charge of $3,750,000
to record the fair value of the representative shares (as described in Note 7 - Commitments & Contingencies)).
Use
of Estimates
The
preparation of financial statements in conformity with US 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 expenses during the reporting period. Actual results could differ from those estimates.
TWELVE
SEAS INVESTMENT COMPANY
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
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 has $66,596 of cash held outside of the Trust Account as of June 30, 2019 and $252,927 as of December 31, 2018. The
Company did not have any cash equivalents as of June 30, 2019 and December 31, 2018.
Investment
Held in Trust Account
Investment
consists of United States Money Market, United States Treasury securities and United States Money Market Fund. The Company classifies
its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 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 treasury securities are recorded at amortized cost and adjusted for the amortization or accretion
of premiums or discounts.
A
decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an
impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new
cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers
whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating
the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes
the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted
performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums
and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using
the effective-interest method. Such amortization and accretion is included in the “interest income” line item in the
condensed statements of operations. Interest income is recognized when earned.
Fair
Value Measurements
FASB
ASC Topic 820 “Fair Value Measurements and Disclosures” defines fair value, the methods used to measure fair value
and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining
fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure
fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer
and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable
inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources
independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller
would use in pricing the asset or liability developed based on the best information available in the circumstances.
The
fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 —
|
Valuations based
on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily
and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
|
|
|
Level 2 —
|
Valuations based
on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active
for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that
are derived principally from or corroborated by market through correlation or other means.
|
|
|
Level 3 —
|
Valuations based
on inputs that are unobservable and significant to the overall fair value measurement.
|
TWELVE
SEAS INVESTMENT COMPANY
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2019
(Unaudited)
The
fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheet. The fair
values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses, due to related parties and Sponsor
loans are estimated to approximate the carrying values as of June 30, 2019 due to the short maturities of such instruments.
The
following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring
basis as of June 30, 2019 and December 31, 2018 and indicates the fair value hierarchy of the valuation techniques the Company
utilized to determine such fair value as of June 30, 2019.
|
|
June 30,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
Description
|
|
2019
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Money Market Fund held in Trust Account
|
|
$
|
211,727,689
|
|
|
|
211,727,689
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
211,727,689
|
|
|
$
|
211,727,689
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
December 31,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
Description
|
|
2018
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held in Trust Account
|
|
$
|
764
|
|
|
$
|
764
|
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. Treasury Securities held in Trust Account
|
|
|
209,227,528
|
|
|
|
-
|
|
|
|
209,227,528
|
|
|
|
-
|
|
|
|
$
|
209,228,292
|
|
|
$
|
764
|
|
|
$
|
209,227,528
|
|
|
$
|
-
|
|
Ordinary
Shares Subject to Possible Redemption
The
Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory
redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary
shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary
equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares
feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of
uncertain future events. Accordingly, at June 30, 2019 and December 31, 2018, ordinary shares subject to possible redemption are
presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheets.
Warrants
and Rights
Since
the Company is not required to net cash settle the Warrants and Rights (as defined in Note 3 – Initial Public Offering)
and the Warrants and Rights are exercisable or convertible upon the consummation of an initial Business Combination, the management
determined that the Warrants and Rights will be classified within shareholders’ equity as “Additional paid-in capital”
upon their issuance in accordance with ASC 815-40. The proceeds from the sale will be allocated to Public Shares, Warrants, and
Rights based on the relative fair value of the securities in accordance with 470-20-30. The value of the Public Shares, Warrants,
and Rights will be based on the closing price paid by investors.
Net
Income per Ordinary Share
The
Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income per ordinary
share is computed by dividing net income by the weighted average number of ordinary shares issued and outstanding for the periods.
In accordance with SAB Topic 4.D and ASC 260-10-55-12, weighted average shares were retrospectively stated for the 1,437,500 ordinary
shares cancelled on June 1, 2018, effectuation of a 1.5-for-1 stock dividend on June 8, 2018, and effectuation of a 1.2-for-1
stock dividend on June 19, 2018 (see Note 5). In accordance with ASC 260-10-45-13, weighted average shares were reduced for the
effect of up to an aggregate of 50,000 ordinary shares that are subject to forfeiture by the underwriter on a pro rata basis with
the initial shareholders in the event that the initial shareholders are required to forfeit or transfer any Insider Shares to
third parties for no consideration or otherwise restructure the terms of such shares in connection with the initial Business Combination. At June 30, 2019, the Company did not have any dilutive securities and other contracts that could, potentially,
be exercised or converted into ordinary shares and then share in the income of the Company. As a result, diluted income per ordinary
share is the same as basic income per ordinary shares for the periods presented.
TWELVE SEAS INVESTMENT COMPANY
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
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.
Income Taxes
The Company accounts for income taxes under
ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance
to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period,
disclosure and transition. The Company has identified the Cayman Islands as its only “major” tax jurisdiction, as defined.
Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring
recognition in the Company’s financial statements. Since the Company was incorporated on November 30, 2017, the evaluation
was performed for the 2018 tax year which will be the only period subject to examination. The Company believes that its income
tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material
changes to its financial position. The Company’s policy for recording interest and penalties associated with audits is to
record such items as a component of income tax expense.
Recent Accounting Pronouncements
Management does not believe that any recently
issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial
statements.
Note 3 — Initial Public Offering
Pursuant to the Initial Public Offering
on June 22, 2018, the Company sold 18,000,000 Units at a purchase price of $10.00 per Unit. On June 28, 2018, in connection with
the underwriters’ exercise of their over-allotment option in full, the Company consummated the sale of an additional 2,700,000
Public Units at $10.00 per Unit. Each Unit consists of one ordinary share, one redeemable warrant (“Public Warrant”),
and one right (“Public Right”). Each redeemable warrant entitles the holder to purchase one ordinary share at an exercise
price of $11.50 (see Note 8). Each holder of a right will automatically receive one-tenth (1/10) of an ordinary share upon consummation
of a Business Combination (see Note 8).
TWELVE SEAS INVESTMENT COMPANY
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 4 — Private Placements
Simultaneously with the Initial Public
Offering, the Sponsor purchased an aggregate of 475,000 Private Units at $10.00 per Unit (for a total purchase price of $4,750,000).
On June 28, 2018, in connection with the underwriters’ exercise of their over-allotment option in full, the Company consummated
the sale of an additional 54,000 Private Units at $10.00 per Unit (for a total purchase price of $540,000).
The Private Units are identical to the
units sold in the Initial Public Offering except the Private Warrants (as defined in Note 8) will be non-redeemable and may be
exercised on a cashless basis. The purchasers of the Private Units have agreed not to transfer, assign or sell any of the Private
Units or underlying securities (except to the same permitted transferees as the insider shares) until the completion of the Business
Combination.
If the Company does not complete a Business
Combination within the Combination Period, the proceeds of the sale of the Private Units will be used to fund the redemption of
the Public Shares (subject to the requirements of applicable law).
Note 5 — Related Party Transactions
Insider Shares
On December 11, 2017, the Company issued
4,312,500 shares (“Insider Shares”) to the Sponsor and certain officers and directors (“Initial Shareholders”)
for an aggregate amount of $25,000. On June 1, 2018, the Initial Shareholders returned 1,437,500 ordinary shares to the Company
for cancellation. On June 8, 2018, the Company effectuated a 1.5-for-1 dividend of its ordinary shares in connection with the upsized
Initial Public Offering, resulting in 4,312,500 Insider Shares outstanding and held by the Initial Shareholders. On June 19, 2018,
the Company effectuated a 1.2-for-1 dividend of its ordinary shares resulting in an aggregate of 5,175,000 Insider Shares outstanding
and held by the Initial Shareholders. None of the transactions mentioned above materially impacts the market value of the shares
presented in the Company’s historical financial statements, nor do they impact the market value of $10.00 per Unit regardless
of the number of shares outstanding. Therefore, according to accounting literature ASC 505-20-25, this transaction is not a stock
split in substance, and no retroactive adjustments to the shares outstanding presented in prior periods is required. As a result
of the underwriters’ over-allotment option exercised in full on June 28, 2018, 675,000 Insider Shares are no longer subject
to forfeiture and the initial shareholders maintained 20% of the Company’s issued and outstanding shares after the Initial
Public Offering and the exercise of the over-allotment.
The Initial Shareholders have agreed not
to transfer, assign or sell any of the Insider Shares (except to certain permitted transferees) until (1) with respect to 50% of
the Insider Shares, the earlier of one year after the date of the consummation of the Business Combination and the date on which
the closing price of the ordinary shares equals or exceeds $12.50 per share (as adjusted for share splits, share capitalizations,
reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Business Combination
and (2) with respect to the remaining 50% of the Insider Shares, one year after the date of the consummation of the Business Combination,
or earlier, in either case, if, subsequent to the Business Combination, the Company consummates a liquidation, merger, stock exchange
or other similar transaction which results in all of the shareholders having the right to exchange their ordinary shares for cash,
securities or other property.
Related Party Advances
As of June 30, 2019, the amount due to
related parties was $57,692. The amount includes unpaid reimbursements for travel and business expenses incurred by the officers
on behalf of the Company.
For the period from November 30, 2017 through
December 31, 2017, a related party, on behalf of the Sponsor, had advanced to the Company an aggregate of $46,500 in regards to
the formation costs and costs associated with the Initial Public Offering. On May 22, 2018, the Sponsor advanced to the Company
an additional $150,000. On June 1, 2018, two related parties, on behalf of the sponsor, advanced to the Company an aggregate of
$60,000. On June 18, 2018, the Sponsor advanced to the Company an additional $43,500. The loans were non-interest bearing, unsecured
and due on demand. The Company repaid the Sponsor in full with $300,000 from the proceeds of the Initial Public Offering not being
placed in the Trust Account on June 22, 2018.
TWELVE SEAS INVESTMENT COMPANY
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor, or the Company’s officers and directors, or their respective affiliates may, but
are not obligated to, loan the Company funds from time to time or at any time (“Working Capital Loans”). Each Working
Capital Loan, other than as described below, 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 $500,000 of the
Working Capital Loans may be converted upon consummation of a Business Combination into Private Units at a price of $10.00 per
unit (which, for example, would result in the holders being issued units to acquire 55,000 ordinary shares (which includes 5,000
ordinary shares issuable upon exercise of rights) and warrants to purchase 50,000 ordinary shares for $11.50 per share if $500,000
of notes were so converted).
On April 4, 2019, the Company issued an
unsecured promissory note (the “Note”) in the principal amount of up to $500,000 to the Sponsor. The Note bears no
interest and is repayable in full upon consummation of the Company’s initial Business Combination. In the event that the
Company is unable to consummate a Business Combination, as described in the prospectus relating to the IPO, the loans must be repaid
to the extent that the Company is financially able to do so with cash at its disposable outside of the Trust. The Sponsor has the
option to convert any unpaid balance of the Note into units, each unit consisting of one ordinary share of the Company, one warrant
exercisable for one ordinary share of the Company and one right to receive one-tenth (1/10) of one ordinary share of the Company
upon the consummation of an initial Business Combination, based on a conversion price of $10.00 per unit. The terms of any such
units shall be identical to the terms of the units issued pursuant to the private placement that was consummated by the Company
in connection with the Company’s Initial Public Offering.
As of June 30, 2019, the Sponsor had funded
an aggregate amount of $400,000 to the Company pursuant to the Note.
Administrative Service Fee
The Company has agreed to pay an affiliate
of the Sponsor, a monthly fee of an aggregate of $10,000 for general and administrative services (commencing June 20, 2018) including
office space, utilities and secretarial support. As of January 1, 2019, the Company has terminated this arrangement. As of March
31, 2019, the Company has paid off all outstanding payables to the affiliate of the Sponsor.
Note 6 — Investment Held in Trust
Account
The
Company received $210,844,000 from investment in U.S. Treasury Securities which were matured on April 25, 2019. The proceeds received
were reinvested in the Money Market Funds. As of June 30, 2019, investment in the Company’s Trust Account consisted of $211,727,689
in Money Market Fund. As of December 31, 2018, investment in the Company’s Trust Account consisted of $764 in U.S. Money
Market and $209,227,528 in U.S. Treasury Securities
.
The carrying
value, excluding gross unrealized holding gain and fair value of held to maturity securities on June 30, 2019 and December 31,
2018 are as follows:
|
|
Carrying
Value as of
June 30,
2019
|
|
|
Gross
Unrealized
Holding
Gain
|
|
|
Fair Value
as of
June 30,
2019
|
|
Money Market Fund
|
|
$
|
211,727,689
|
|
|
$
|
-
|
|
|
$
|
211,727,689
|
|
|
|
$
|
211,727,689
|
|
|
$
|
-
|
|
|
$
|
211,727,689
|
|
|
|
Carrying
Value as of
December 31,
2018
|
|
|
Gross Unrealized
Holding
Gain
|
|
|
Fair Value
as of
December 31,
2018
|
|
Cash held in Trust Account
|
|
$
|
764
|
|
|
$
|
-
|
|
|
$
|
764
|
|
U.S. Treasury Securities
|
|
|
209,227,528
|
|
|
|
25,362
|
|
|
|
209,252,890
|
|
|
|
$
|
209,228,292
|
|
|
$
|
25,362
|
|
|
$
|
209,253,654
|
|
Note 7 — Commitments & Contingencies
Deferred Fees
The Company has committed to pay its attorney
deferred legal fees upon the consummation of the Initial Business Combination relating to legal services performed in connection
with the proposed business combination. An amount of $359,952 has been accrued in the accompanying balance sheet as of June 30,
2019 and is due and payable upon consummation of business combination. In the event that the Company is unable to consummate
a business combination, as described in the prospectus relating to the IPO, the deferred fees will not be paid.
TWELVE SEAS INVESTMENT COMPANY
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Registration Rights
Pursuant to a registration rights agreement
entered into on June 19, 2018, the holders of the Insider Shares, Private Units (and their underlying securities), Representative
Shares (as a 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. The holders of a majority of these securities are entitled to make up to two
demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear
the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The Company granted the underwriters a
45-day option to purchase up to 2,700,000 additional Units to cover over-allotments at the Initial Public Offering price, less
the underwriting discounts and commissions. On June 28, 2018, the underwriters exercised its full over-allotment option of 2,700,000
units.
The underwriters were paid a cash underwriting
discount of two percent (2.0%) of the gross proceeds of the Initial Public Offering, or $3,600,000. In relation to the additional
2,700,000 units the underwriters purchased via the over-allotment option, an additional amount of $540,000 was paid to the underwriters.
In addition, the Company issued EarlyBirdCapital
“EBC”, the underwriter, and/or its designees 375,000 ordinary shares (the “Representative Shares”) upon
the consummation of the Initial Public Offering. The Company accounted for the Representative Shares as an expense of the Initial
Public Offering resulting in a charge directly to shareholders’ equity. The Company determined the fair value of Representative
Shares is $3,750,000 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. In the event that the Initial Shareholders are required to forfeit
or transfer any Insider Shares to third parties for no consideration or otherwise restructure the terms of such shares in connection
with the initial Business Combination, the underwriter (and/or its designees) has agreed to forfeit up to an aggregate of 50,000
ordinary shares on a pro rata basis with the Initial Shareholders.
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 Initial Public Offering, nor may they be sold, transferred, assigned, pledged or hypothecated for a period
of 180 days immediately following the Initial Public Offering except to any underwriter and selected dealer participating in the
Initial Public Offering and their bona fide officers or partners.
Business Combination Marketing Agreement
The Company has engaged EBC as an advisor
in connection with a Business Combination to assist the Company in holding meetings with its shareholders 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 shareholder approval for the Business Combination and assist the Company
with its press releases and public filings in connection with an Business Combination. The Company will pay EBC a cash fee equal
to 3.5% of the gross proceeds raised in the offering for such services upon the consummation of the Business Combination (exclusive
of any applicable finders’ fees which might become payable). The Company may allocate up to 1% of the 3.5% fee to other firms
who assist in connection with the Business Combination.
Note 8 — Shareholder’s Equity
Ordinary Shares
- The
Company is authorized to issue a total of 200,000,000 ordinary shares of a par value of $0.0001 each. As of June 30, 2019 and December
31, 2018, the Company has issued an aggregate of 6,185,302 and 6,351,330 ordinary shares, respectively, excluding 20,593,698 and
20,427,670 shares of ordinary shares subject to possible redemption.
Preferred Shares
- The
Company is authorized to issue a total of 2,000,000 preferred shares of a par value of $0.0001 each. At June 30, 2019 and December
31, 2018, there were no shares of preferred shares issued or outstanding.
TWELVE SEAS INVESTMENT COMPANY
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
JUNE 30, 2019
(Unaudited)
Warrants -
Each Public
Warrant is at $11.50 per share and exercisable for one ordinary share. The warrants will become exercisable on the later of the
completion of a Business Combination and 12 months from the date of the prospectus. If a registration statement covering the ordinary
shares issuable upon exercise of the public warrants is not effective within 90 days following the consummation of the Business
Combination, public 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 an
available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering
the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary
shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market
value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported
last sale price of the ordinary shares for the 10 trading days ending on the day prior to the date of exercise.
The warrants underlying the Private Units
(“Private Warrants”) are identical to the Public Warrants sold in this offering except the Private Warrants will be
non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers
or their permitted transferees.
The Company may redeem the outstanding
warrants (excluding the Private Warrants), in whole and not in part, at a price of $0.01 per warrant:
|
●
|
at any time while the warrants are exercisable,
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption,
|
|
●
|
if, and only if, the last sales price of the ordinary shares equals or exceeds $18.00 per share 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 ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
|
If the Company calls the warrants for redemption
as described above, the management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.”
Rights -
Except in cases
where the Company is not the surviving company in a Business Combination, each holder of a right will automatically receive one-tenth
(1/10) of an ordinary share upon consummation of the initial Business Combination, even if the holder of a Public Right converted
all ordinary shares held by him, her or it in connection with the initial Business Combination or an amendment to the Company’s
memorandum and articles of association with respect to its pre-business combination activities. In the event that the Company will
not be the surviving company upon completion of the initial Business Combination, each holder of a right will be required to affirmatively
convert his, her or its rights in order to receive the one-tenth (1/10) of a share underlying each right upon consummation of the
Business Combination. No additional consideration will be required to be paid by a holder of rights in order to receive his, her
or its additional ordinary shares upon consummation of an initial Business Combination. The shares issuable upon exchange of the
rights will be freely tradable (except to the extent held by affiliates of the Company). If the Company 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 ordinary shares will receive in the transaction
on an as-converted into ordinary shares basis.
The Company will not issue fractional
shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise
addressed in accordance with the applicable provisions of the Cayman Islands law. As a result, the holders of the rights must
hold rights in multiples of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination.
If the Company is unable to complete an initial Business Combination within the required time 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 an initial Business Combination. Additionally, in no event will the Company be required to
net cash settle the rights. Accordingly, the rights may expire worthless.