The accompanying notes are an integral part
of these financial statements.
The accompanying notes are an integral part
of these financial statements.
Notes
to Financial Statements
Business
Landcadia Holdings, Inc., a Delaware
corporation (the “Company”), was incorporated in Delaware on November 19, 2008 as Leucadia Development Corporation,
and changed its name to Landcadia Holdings, Inc. on September 15, 2015. 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, or the JOBS Act and, as such, is subject to all the risks associated with emerging growth companies.
The Company has not had any significant
operations to date. The Company is a blank-check company formed to effect a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination (the “Business Combination”) with one or more operating
businesses. All activity through September 30, 2017 relates to the Company’s initial public offering (the “public offering”)
and search for a Business Combination. There is no assurance that its plans to consummate a Business Combination will be successful
within the target business acquisition period, as described herein.
Sponsors
The Company’s sponsors are
Fertitta Entertainment, Inc., a Texas corporation, (the “FEI Sponsor”) and Leucadia National Corporation, a New York
corporation, (the “Leucadia Sponsor”, and together with FEI Sponsor, the “Sponsors”). The FEI Sponsor is
wholly owned by Tilman J. Fertitta, the Company’s Co-Chairman and Chief Executive Officer.
Financing
The registration statement for the
Company’s public offering was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on May
25, 2016. The Company intends to finance its Business Combination in part with proceeds from the $250,000,000 public offering and
the $7,000,000 private placement of sponsor warrants (“private placement”), see Notes 4 and 5. Upon the closing of
the public offering and the private placement, on June 1, 2016, $250,000,000 was placed in a trust account (the “Trust Account”),
with Continental Stock Transfer & Trust Company acting as trustee.
Trust Account
Funds held in the Trust Account
can only be invested in permitted United States ‘‘government securities’’ within the meaning of Section
2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180
days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which
invest only in direct U.S. government treasury obligations.
The Company’s second amended
and restated certificate of incorporation (the “Certificate of Incorporation”) provides that, other than the withdrawal
of interest to pay income taxes and franchise taxes if any, none of the funds held in trust will be released until the earlier
of: (i) the completion of the Business Combination; or (ii) the redemption of any shares of Class A common stock (“public
shares”) included in the units sold in the public offering properly tendered in connection with a stockholder vote to amend
the Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the public
shares if the Company does not complete the Business Combination within 24 months from the closing of the public offering; or (iii)
the redemption of 100% of the public shares if the Company is unable to complete the Business Combination within 24 months from
the closing of the public offering.
Initial Business Combination
The initial Business Combination
must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held
in the Trust Account, excluding the deferred underwriting commissions and taxes payable on the income earned by the Trust Account,
at the time of the agreement to enter into the initial Business Combination.
The Company, after signing a definitive
agreement for the 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
calculated 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 sell their shares to 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 calculated 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 sell their shares in a tender offer will be made by the Company, solely at 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. If the Company seeks stockholder approval, it will complete the 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. 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.
Notwithstanding the foregoing redemption
rights, if the Company seeks stockholder approval of the Business Combination and does not conduct redemptions in connection with
the Business Combination pursuant to the tender offer rules, the Certificate of Incorporation provides that a public stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate
of 15% of the shares sold in the public offering.
If the Company holds a stockholder
vote in connection with the Business Combination, a public stockholder will have the right to redeem its shares for an amount in
cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days
prior to the consummation of the Business Combination, including interest but less taxes payable. As a result, such public shares
are recorded at redemption value and classified as temporary equity following completion of the public offering (“Redeemable
Shares”), in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB, ASC”)
480, ‘‘Distinguishing Liabilities from Equity.’’ The amount in the Trust Account was initially $10.00 per
public share ($250,000,000 held in the Trust Account divided by 25,000,000 public shares). For further information regarding the
Redeemable Shares, see Note 3.
The Company will have 24 months
from the closing of the public offering to complete the Business Combination. If the Company does not complete the 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 for a per share pro rata portion of the Trust
Account, including interest (less taxes payable and up to $50,000 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
remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsors and certain persons who received unregistered
shares of Class F common stock of the Company (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 shares
of Class F common stock; however, if the Initial Stockholders or any of the Company’s officers, directors or affiliates acquire
shares of Class A common stock in or after the public offering, they will be entitled to a pro rata share of the Trust Account
in respect of such shares of Class A common stock upon the Company’s redemption or liquidation in the event the Company does
not complete the 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.
Pursuant to the letter agreements
referenced above, the Initial Stockholders also agreed that, if the Company submits the Business Combination to the Company’s
public stockholders for a vote, the Initial Stockholders will vote their founders shares (as defined below) and any public shares
purchased during or after the public offering in favor of the Business Combination.
Fiscal Year End
The Company’s fiscal year
ends on December 31.
|
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The accompanying financial statements
include the accounts of the Company and have been prepared in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. The interim financial information
provided is unaudited, but includes all adjustments which management considers necessary for the fair presentation of the results
for these periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for
the full year period and 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, 2016.
Use of Estimates
The preparation of these financial
statements 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 revenue and
expenses during the reporting period. Actual results could differ from those estimates.
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 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.
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.
Cash consists of proceeds from the
public offering and private placement held outside of the Trust Account and may be used to pay for business, legal and accounting
due diligence for the Business Combination and continuing general and administrative expenses.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist of cash accounts with 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 the
Company believes that it is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurement and Disclosures,”
approximates the carrying amounts represented in the balance sheet.
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 $654,840, consisted of costs incurred in connection with the preparation of the public offering.
These costs, together with $13,750,000 in underwriting commissions, have been charged to additional paid-in capital upon the closing
of the public offering. For further discussion on underwriting commissions see Notes 4 and 5.
Loss Per Common Share
Basic loss 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. All shares of Class F common stock are assumed to convert to shares of Class A common stock on a one-for-one basis. Consistent
with FASB ASC 480, shares of Class A common stock subject to possible redemption, as well as their pro rata share of undistributed
trust earnings consistent with the two-class method, have been excluded from the calculation of loss per common share for the three
and nine months ended September 30, 2017 and 2016. Such shares, if redeemed, only participate in their pro rata share of trust
earnings, see Note 3. Diluted loss per share includes the incremental number of shares of common stock to be issued in connection
with the conversion of Class F common stock or to settle warrants, as calculated using the treasury stock method. For the three
and nine month periods ending September 30, 2017 and 2016, the Company did not have any dilutive warrants, securities or other
contracts that could, potentially, be exercised or converted into common stock. As a result, diluted loss per common share is the
same as basic loss per common share for all periods presented.
A reconciliation of net loss per
common share as adjusted for the portion of income that is attributable to common stock subject to redemption is as follows:
|
|
Three months ended,
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(revised)
|
|
|
|
|
|
(revised)
|
|
Net income (loss)
|
|
$
|
269,118
|
|
|
$
|
32,093
|
|
|
$
|
498,784
|
|
|
$
|
(4,055
|
)
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
(373,906
|
)
|
|
|
(101,912
|
)
|
|
|
(866,088
|
)
|
|
|
(102,000
|
)
|
Net loss available to common shares
|
|
$
|
(104,788
|
)
|
|
$
|
(69,819
|
)
|
|
$
|
(367,304
|
)
|
|
$
|
(106,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average number of shares
|
|
|
7,561,293
|
|
|
|
7,496,470
|
|
|
|
7,543,218
|
|
|
|
7,498,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss available to common shares
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.01
|
)
|
Income Taxes
The Company complies with the accounting
and reporting requirements of FASB ASC, 740, “Income Taxes,” which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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. The Company recognizes accrued interest and penalties as income tax expense. No amounts were
accrued for the payment of interest and penalties at September 30, 2017 and December 31, 2016. 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
considers its major tax jurisdictions to be the United States and Texas and is subject to income tax examinations by these taxing
authorities.
The effective tax rate for the nine
months ended September 30, 2017 was 35.1%. The Company did not record a provision for income taxes in the nine months ended September
30, 2016 due to net operating losses incurred.
Subsequent Events
We have evaluated subsequent events
to determine if events or transactions occurring through November 13, 2017, the date the financial statements were issued, require
potential adjustment to or disclosure in the financial statements. The Company has concluded that all such events have been recognized
or disclosed in the financial statements.
The Company is authorized to issue
221,000,000 shares of all classes of capital stock, of which 200,000,000 shares are Class A common stock, par value $0.0001 per
share; 20,000,000 shares are Class F common stock, par value $0.0001 per share; and 1,000,000 shares are preferred stock, par value
$0.0001 per share. As of September 30, 2017 and December 31, 2016, there were no shares of preferred stock issued or outstanding.
As of September 30, 2017 and December
31, 2016, each of the Sponsors owned 50% of the 6,250,000 issued and outstanding shares of Class F common stock (“founders
shares”).
Redeemable Shares
The Company has issued 25,000,000
shares of Class A common stock. All of the shares of Class A common stock sold as part of the public offering contain a redemption
feature as defined in the public offering. 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. The Certificate of Incorporation provides a minimum
net tangible asset threshold of $5,000,001. The Company recognizes changes in redemption value immediately as they occur and will
adjust 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 shares will be affected by charges against additional paid-in capital.
As of September 30, 2017 and December
31, 2016, 23,672,431 and 23,734,599 public shares, respectively, were recorded as redeemable shares, classified outside of permanent
equity, and, 1,327,569 and 1,265,401, respectively, were classified as Class A common stock.
For further information on the founders
shares and sponsor warrants, see Note 5.
Public Units
In the public offering, the Company
sold 25,000,000 units at a price of $10.00 per unit (“units”). Each unit consists of one share of the Company’s
Class A common stock, $0.0001 par value and one redeemable warrant (each a “public warrant”). 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
of 1933, as amended (“Securities Act”), following the completion of the Business Combination covering the Class A common
stock underlying the public warrants. Each public warrant entitles the holder to purchase one-half of one share of Class A common
stock at a price of $5.75 ($11.50 per whole share). No fractional shares will be issued upon exercise of the public warrants. If,
upon exercise of the public 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 Class A common stock to be issued to the public warrant
holder. Each public 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. However, if the Company does not complete the Business Combination on or prior
to the 24-month period allotted to complete the Business Combination, the public warrants will expire at the end of such period.
If the Company is unable to deliver registered shares of Class A common stock to the holder upon exercise of public warrants issued
in connection with the units during the exercise period, there will be no net cash settlement of these public warrants and the
public warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant
agreement. Once the public warrants become exercisable, the Company may call the warrants for redemption: (i) in whole and not
in part; (ii) at a price of $0.01 per public warrant; (iii) upon not less than 30 days prior written notice of redemption (the
“30-day redemption period”) to each warrant holder; and (iv) if, and only if, the reported closing price of the public
shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three business days before
the Company sends the notice of redemption to the public warrant holders.
Underwriting Commissions
The Company paid an underwriting
discount of $5,000,000 ($0.20 per unit sold) to the underwriters at the closing of the public offering, with an additional fee
(“deferred discount”) of $8,750,000 ($0.35 per unit sold) payable upon the Company’s completion of the Business
Combination. The deferred discount will be forfeited by the underwriters in the event that the Company is unable to complete a
business combination and the subsequent liquidation of the Trust account as described elsewhere herein. See Note 5 for further
information on underwriting commissions.
|
5.
|
Related Party Transactions
|
Founders Shares
The founders shares are identical
to the public shares included in the units sold in the public offering except that the founders shares are subject to certain transfer
restrictions and the holders of the founders shares will have the right to elect all of the Company’s directors prior to
the Business Combination. The initial stockholders collectively own 22% of the Company’s issued and outstanding shares after
the public offering.
The initial stockholders have agreed
not to transfer, assign or sell any of their founders shares until one year after the completion of the Business Combination, or
earlier if, subsequent to the Business Combination, (i) the closing 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 (ii) 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 (“Lock Up Period”).
The founders shares will automatically
convert into public shares at the time of the Business Combination on a one-for-one basis, subject to adjustment as described in
the prospectus relating to the public offering. In the case that additional public shares, or equity-linked securities, are issued
or deemed issued in excess of the amounts offered in the public offering and related to the closing of the Business Combination,
the ratio at which the founders shares shall convert into public shares will be adjusted so that the number of public shares issuable
upon conversion of all founders shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of all shares
of common stock outstanding upon the completion of the public offering plus all public shares and equity-linked securities issued
or deemed issued in connection with the Business Combination, excluding any shares or equity-linked securities issued, or to be
issued, to any seller in the Business Combination or pursuant to the sponsor warrants (as defined below). In no event will the
founders shares convert into shares of Class A common stock at a ratio that is less than one-for-one.
Public Units
As a result of the public offering,
Jefferies LLC, an affiliate of the Leucadia Sponsor, owns 638,561 units which consist of one share of Class A common stock and
one public warrant.
Sponsor Warrants
The Sponsors have purchased an aggregate
of 14,000,000 warrants (“sponsor warrants”) at a price of $0.50 per warrant ($7,000,000 in the aggregate) in the private
placement that closed simultaneously with the closing of the public offering. A portion of the purchase price of the sponsor warrants
has been added to the net proceeds from the public offering to be held in the Trust Account such that at closing of the public
offering, $250,000,000 was placed in the Trust Account.
Each sponsor warrant entitles the
holder to purchase one-half of one share of Class A common stock at $5.75 per one-half share. The sponsor warrants (including the
Class A common stock issuable upon exercise of the sponsor warrants) will not be transferable, assignable or salable until 30 days
after the completion of the Business Combination and they will be non-redeemable so long as they are held by the initial purchasers
of the sponsor warrants or their permitted transferees. If the sponsor warrants are held by someone other than the initial purchasers
of the sponsor warrants or their permitted transferees, the sponsor 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 sponsor warrants
have terms and provisions that are identical to those of the public warrants except that the sponsor warrants may be exercised
on a cashless basis. If the Company does not complete the Business Combination, then the proceeds will be part of the liquidating
distribution to the public stockholders and the sponsor warrants issued to the Sponsors will expire worthless.
Registration Rights
The initial stockholders and holders
of the sponsor warrants will be entitled to registration rights pursuant to a registration rights agreement to be signed on or
before the date of the public offering. The initial stockholders and holders of the sponsor 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. However, the registration rights agreement provides that the Company will
not permit any registration statement filed under the Securities Act to become effective until termination of the applicable Lock
Up Period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Commissions
The Leucadia Sponsor is an affiliate
of Jefferies LLC, an underwriter of the public offering, and beneficially owns 50% of the Company’s Class F common stock.
Jefferies LLC received an underwriting discount of $2,125,000 at the closing of the public offering, with an additional deferred
discount of $3,718,750 payable from the Trust Account upon completion of the Business Combination. See Note 4 for further information
regarding underwriting commissions.
Administrative Services Agreement
The Company entered into an administrative
services agreement in which the Company will pay the FEI Sponsor for office space, secretarial and administrative services provided
to members of the Company’s management team, in an amount not to exceed $10,000 per month.
Sponsors Indemnification
The Sponsors have agreed that they
will be jointly and severally liable to the Company if and to the extent any claims by a vendor for services rendered or products
sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share or (ii) the actual amount per
public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of
the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party
who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s
indemnity of the underwriters of the public offering against certain liabilities, including liabilities under the Securities Act.
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Company’s sponsors
will not be responsible to the extent of any liability for such third party claims.
In addition, the Sponsors will not
be prohibited from loaning the Company funds in order to finance transaction costs in connection with the Business Combination.
Up to $1,500,000 of these loans may be convertible into warrants of the post Business Combination entity at a price of $0.50 per
warrant at the option of the lender. The warrants would be identical to the sponsor warrants. The terms of such loans have not
been determined.
Landcadia
Holdings, Inc.