OPES
ACQUISITION CORP.
CONDENSED
BALANCE SHEETS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
14,178
|
|
|
$
|
205,638
|
|
Prepaid income taxes
|
|
|
71,224
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
26,250
|
|
|
|
89,095
|
|
Total Current Assets
|
|
|
111,652
|
|
|
|
294,733
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
21,361
|
|
|
|
—
|
|
Marketable securities held in Trust Account
|
|
|
95,659,596
|
|
|
|
117,740,109
|
|
Total Assets
|
|
$
|
95,792,609
|
|
|
$
|
118,034,842
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Account payable and accrued expenses
|
|
$
|
314,922
|
|
|
$
|
256,301
|
|
Income taxes payable
|
|
|
—
|
|
|
|
14,852
|
|
Total Current Liabilities
|
|
|
314,922
|
|
|
|
271,153
|
|
|
|
|
|
|
|
|
|
|
Promissory note – related party
|
|
|
306,935
|
|
|
|
—
|
|
Total Liabilities
|
|
|
621,857
|
|
|
|
271,153
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption, 8,693,122 and 11,030,442 shares at redemption value as of September 30, 2019 and December 31, 2018, respectively
|
|
|
90,170,747
|
|
|
|
112,763,686
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.0001 par value; 100,000,000 shares authorized; 3,844,125 and 3,789,558 issued and outstanding (excluding 8,693,122 and 11,030,442 shares subject to possible redemption) as of September 30, 2019 and December 31, 2018, respectively
|
|
|
384
|
|
|
|
379
|
|
Additional paid-in capital
|
|
|
2,977,836
|
|
|
|
3,979,089
|
|
Retained earnings
|
|
|
2,021,785
|
|
|
|
1,020,535
|
|
Total Stockholders’ Equity
|
|
|
5,000,005
|
|
|
|
5,000,003
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
95,792,609
|
|
|
$
|
118,034,842
|
|
The
accompanying notes are an integral part of these condensed financial statements.
OPES
ACQUISITION CORP.
CONDENSED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
157,429
|
|
|
$
|
204,577
|
|
|
$
|
571,946
|
|
|
$
|
410,348
|
|
Loss from operations
|
|
|
(157,429
|
)
|
|
|
(204,577
|
)
|
|
|
(571,946
|
)
|
|
|
(410,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
621,666
|
|
|
|
579,320
|
|
|
|
2,010,319
|
|
|
|
1,194,133
|
|
Unrealized (loss) gain on marketable securities held in Trust Account
|
|
|
(13,259
|
)
|
|
|
(24,688
|
)
|
|
|
5,704
|
|
|
|
(17,082
|
)
|
Other income
|
|
|
608,407
|
|
|
|
554,632
|
|
|
|
2,016,023
|
|
|
|
1,177,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
450,978
|
|
|
|
350,055
|
|
|
|
1,444,077
|
|
|
|
766,703
|
|
Provision for income taxes
|
|
|
(114,278
|
)
|
|
|
(73,512
|
)
|
|
|
(442,827
|
)
|
|
|
(161,008
|
)
|
Net income
|
|
$
|
336,700
|
|
|
$
|
276,543
|
|
|
$
|
1,001,250
|
|
|
$
|
605,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted (1)
|
|
|
3,800,351
|
|
|
|
3,765,243
|
|
|
|
3,796,787
|
|
|
|
3,408,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share (2)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
(1)
|
Excludes
an aggregate of 8,693,122 and 11,051,301 shares subject to redemption at September 30, 2019 and 2018, respectively.
|
(2)
|
Net
loss per share – basic and diluted excludes income attributable to common stock subject to redemption of $418,858 and
$414,306 for the three months ended September 30, 2019 and 2018, respectively, and $1,342,216 and $832,267 for the nine months
ended September 30, 2019 and 2018, respectively (see Note 3).
|
The
accompanying notes are an integral part of these condensed financial statements.
OPES
ACQUISITION CORP.
CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2018
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Retained
Earnings
(Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Equity
|
|
Balance – January 1, 2018
|
|
|
2,875,000
|
|
|
$
|
288
|
|
|
$
|
24,712
|
|
|
$
|
(1,176
|
)
|
|
$
|
23,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 11,500,000 Units, net of underwriting discounts and offering expenses
|
|
|
11,500,000
|
|
|
|
1,150
|
|
|
|
112,266,904
|
|
|
|
—
|
|
|
|
112,268,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 445,000 Private Placement Units
|
|
|
445,000
|
|
|
|
45
|
|
|
|
4,449,955
|
|
|
|
—
|
|
|
|
4,450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of unit purchase option
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
|
(11,061,794
|
)
|
|
|
(1,107
|
)
|
|
|
(111,763,319
|
)
|
|
|
—
|
|
|
|
(111,764,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,449
|
|
|
|
22,449
|
|
Balance – March 31, 2018 (unaudited)
|
|
|
3,758,206
|
|
|
|
376
|
|
|
|
4,978,352
|
|
|
|
21,273
|
|
|
|
5,000,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
7,307
|
|
|
|
1
|
|
|
|
(306,704
|
)
|
|
|
—
|
|
|
|
(306,703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
306,703
|
|
|
|
306,703
|
|
Balance – June 30, 2018 (unaudited)
|
|
|
3,765,243
|
|
|
|
377
|
|
|
|
4,671,648
|
|
|
|
327,976
|
|
|
|
5,000,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
3,456
|
|
|
|
—
|
|
|
|
(276,537
|
)
|
|
|
—
|
|
|
|
(276,537
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
276,543
|
|
|
|
276,543
|
|
Balance – September 30, 2018 (unaudited)
|
|
|
3,768,699
|
|
|
$
|
377
|
|
|
$
|
4,395,111
|
|
|
$
|
604,519
|
|
|
$
|
5,000,007
|
|
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2019
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Retained
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – January 1, 2019
|
|
|
3,789,558
|
|
|
$
|
379
|
|
|
$
|
3,979,089
|
|
|
$
|
1,020,535
|
|
|
$
|
5,000,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
10,775
|
|
|
|
1
|
|
|
|
(380,236
|
)
|
|
|
—
|
|
|
|
(380,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
380,241
|
|
|
|
380,241
|
|
Balance – March 31, 2019 (unaudited)
|
|
|
3,800,333
|
|
|
|
380
|
|
|
|
3,598,853
|
|
|
|
1,400,776
|
|
|
|
5,000,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
18
|
|
|
|
—
|
|
|
|
(284,317
|
)
|
|
|
—
|
|
|
|
(284,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
284,309
|
|
|
|
284,309
|
|
Balance – June 30, 2019 (unaudited)
|
|
|
3,800,351
|
|
|
|
380
|
|
|
|
3,314,536
|
|
|
|
1,685,085
|
|
|
|
5,000,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
43,774
|
|
|
|
4
|
|
|
|
(336,700
|
)
|
|
|
—
|
|
|
|
(336,696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
336,700
|
|
|
|
336,700
|
|
Balance – September 30, 2019 (unaudited)
|
|
|
3,844,124
|
|
|
$
|
384
|
|
|
$
|
2,977,836
|
|
|
$
|
2,021,785
|
|
|
$
|
5,000,005
|
|
The
accompanying notes are an integral part of these condensed financial statements.
OPES
ACQUISITION CORP.
CONDENSED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
1,001,250
|
|
|
$
|
605,695
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(2,010,319
|
)
|
|
|
(1,194,133
|
)
|
Unrealized (gain) loss on marketable securities held in Trust Account
|
|
|
(5,704
|
)
|
|
|
17,082
|
|
Deferred tax benefit
|
|
|
(21,361
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
62,845
|
|
|
|
(159,105
|
)
|
Prepaid income taxes
|
|
|
(71,224
|
)
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
58,621
|
|
|
|
223,232
|
|
Income taxes payable
|
|
|
(14,852
|
)
|
|
|
161,008
|
|
Net cash used in operating activities
|
|
|
(1,000,744
|
)
|
|
|
(346,221
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Cash withdrawn from Trust Account to pay franchise and income taxes
|
|
|
809,284
|
|
|
|
106,897
|
|
Cash withdrawn from Trust Account to redeeming stockholders
|
|
|
23,594,187
|
|
|
|
—
|
|
Investment of cash in Trust Account
|
|
|
(306,935
|
)
|
|
|
(116,150,000
|
)
|
Net cash provided by (used in) investing activities
|
|
|
24,096,536
|
|
|
|
(116,043,103
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
—
|
|
|
|
112,700,000
|
|
Proceeds from sale of Private Placement Units
|
|
|
—
|
|
|
|
4,450,000
|
|
Proceeds from Unit Purchase Option
|
|
|
—
|
|
|
|
100
|
|
Advances from related party
|
|
|
—
|
|
|
|
67,013
|
|
Repayment of advances from related party
|
|
|
—
|
|
|
|
(67,013
|
)
|
Proceeds from promissory note – related party
|
|
|
306,935
|
|
|
|
—
|
|
Repayment of promissory note – related party
|
|
|
—
|
|
|
|
(122,839
|
)
|
Payment of offering costs
|
|
|
—
|
|
|
|
(306,247
|
)
|
Redemption of common stock
|
|
|
(23,594,187
|
)
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
(23,287,252
|
)
|
|
|
116,721,014
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(191,460
|
)
|
|
|
331,690
|
|
Cash – Beginning
|
|
|
205,638
|
|
|
|
22,002
|
|
Cash – Ending
|
|
$
|
14,178
|
|
|
$
|
353,692
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
550,264
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Initial classification of common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
111,741,988
|
|
Change in value of common stock subject to possible redemption
|
|
$
|
1,001,248
|
|
|
$
|
605,678
|
|
The
accompanying notes are an integral part of these condensed financial statements.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Opes
Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on July 24, 2017. The Company
was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization
or other similar business transaction with one or more operating businesses or entities that the Company has not yet identified
(a “Business Combination”). Although the Company is not limited to a particular industry or geographic region for
purposes of consummating a Business Combination, the Company is currently focusing on businesses in Mexico.
All
activity through September 30, 2019 relates to the Company’s formation, its initial public offering (“Initial Public
Offering”), which is described below, and identifying a target business for a Business Combination.
The
registration statement for the Company’s Initial Public Offering was declared effective on March 13, 2018. On March 16,
2018, the Company consummated the Initial Public Offering of 10,000,000 units (“Units” and, with respect to the common
stock included in the Units sold, the “Public Shares”), generating gross proceeds of $100,000,000, which is described
in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 400,000 units (the “Private Placement
Units”) at a price of $10.00 per unit in a private placement to Axis Public Ventures S. de R.L. de C.V. (“Axis Public
Ventures”), an affiliate of Axis Capital Management (the “Sponsor”), Lion Point Capital (“Lion Point”)
and the other stockholders of the Company prior to the Initial Public Offering (“Initial Stockholders”), generating
gross proceeds of $4,000,000, which is described in Note 5.
Following
the closing of the Initial Public Offering on March 16, 2018, an amount of $101,000,000 ($10.10 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the Private Placement Units was placed in a trust account (“Trust
Account”) which may be invested only 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 selected by the Company 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 upon failure to consummate a Business Combination, as described below.
On
March 20, 2018, in connection with the underwriters’ exercise of their over-allotment option in full, the Company consummated
the sale of an additional 1,500,000 Units, and the sale of an additional 45,000 Private Placement Units each at $10.00 per unit,
generating total gross proceeds of $15,450,000. Following the closing, an additional $15,150,000 of the net proceeds ($10.10 per
Unit) was placed in the Trust Account, resulting in $116,150,000 ($10.10 per Unit) held in the Trust Account.
Transaction
costs amounted to $2,731,946, consisting of $2,300,000 of underwriting fees and $431,946 of other costs. As of September 30, 2019,
$14,178 of cash was held outside of the Trust Account and is available for working capital purposes.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and private placement of Private Placement Units, although substantially all of the net proceeds are intended to be applied
generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more
target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (net of taxes
payable) at the time of the signing an agreement to enter into a Business Combination. The Company will only complete a Business
Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the
target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business
Combination.
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii)
by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their
shares for a pro rata portion of the amount then on deposit in the Trust Account ($10.10 per share, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations).
There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
The
Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon consummation
of such Business Combination and, solely if the Company seeks stockholder approval, a majority of the outstanding shares voted
are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to
hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate
of Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”),
and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of
the transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s
Initial Stockholders have agreed to (a) vote their Founder Shares (as defined in Note 6), Placement Shares (as defined in Note
5) and any Public Shares held by them in favor of approving a Business Combination and (b) not to convert any shares in connection
with a stockholder vote to approve a Business Combination (or to sell any shares in any tender offer in connection with a Business
Combination). Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote
for or against the proposed Business Combination.
The Company has until
January 15, 2020 (or such later date as may be approved by stockholders) to consummate a Business Combination (the “Combination
Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business
days thereafter, redeem 100% of the outstanding Public Shares, at a per share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, including interest earned (net of taxes payable), divided by the number of then outstanding
Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right
to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed
to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to
provide for claims of creditors and the requirements of applicable law. The proceeds deposited in the Trust Account could, however,
become subject to claims of creditors. Therefore, the actual per-share redemption amount could be less than $10.10.
The
Initial Stockholders have (i) waived their redemption rights with respect to Founder Shares, Placement Shares and any Public Shares
they may acquire, (ii) waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares
and Placement Shares if the Company fails to consummate a Business Combination within the Combination Period and (iii) agreed
that they will not propose any amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect
Public Stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or
affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete
a Business Combination within the Combination Period unless the Company provides the Public Stockholders with the opportunity
to redeem their shares in conjunction with any such amendment. However, the Initial Stockholders will be entitled to liquidating
distributions with respect to any Public Shares acquired if the Company fails to consummate a Business Combination or liquidates
within the Combination Period.
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent
any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the
Company has discussed entering into a Business Combination agreement, reduce the amount of funds in the Trust Account below $10.10
per share. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title,
interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity
of the underwriters of the Proposed Offering against certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against
a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will
seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring
to have all vendors, service providers, prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust
Account.
On
September 16, 2019, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation
(the “charter”) to extend the period of time for which the Company is required to consummate a Business Combination
from September 16, 2019 to November 15, 2019 (the “Extension”). In connection with the approval of the extension,
stockholders elected to redeem an aggregate of 2,282,753 shares of common stock, of which the Company paid cash in the aggregate
amount of $23,594,187, or approximately $10.34 per share, to redeeming stockholders. Upon the filing of the amendment of the charter,
the Company deposited into the Trust Account $0.0333 for each public share that was not redeemed in connection with the Extension,
or an aggregate of approximately $306,935, for such extension period. The amount deposited into the Trust Account was loaned to
the Company by Lion Point. The loans are non-interest bearing, and due to be paid upon the consummation of a Business Combination.
The loans will be forgiven if the Company is unable to consummate a Business Combination except to the extent of any funds held
outside of the Trust Account.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
On November 15, 2019,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the period
of time for which the Company is required to consummate a Business Combination from November 15, 2019 to January 15, 2020 (the
“Second Extension”). In connection with the approval of the Second Extension, stockholders elected to redeem an aggregate
of 228,001 shares of common stock, of which the Company paid cash in the aggregate amount of $2.4 million, or approximately $10.43
per share, to redeeming stockholders. Upon the filing of the amendment of the charter, the Company deposited into the Trust Account
$0.0325 for each public share that was not redeemed in connection with the Second Extension, or an aggregate of approximately $292,150,
for such extension period. The amount deposited into the Trust Account was loaned to the Company by an unrelated third party. The
loan is non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loan will be forgiven if
the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
NOTE
2. LIQUIDITY AND GOING CONCERN
As
of September 30, 2019, the Company had $14,178 in its operating bank accounts, $95,659,596 in securities held in the Trust Account
to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital
deficit of $222,212, which excludes prepaid income taxes and franchise and income taxes payable as the net amounts can be paid
from the interest earned in the Trust Account. As of September 30, 2019, approximately $2,272,000 of the amount on deposit in
the Trust Account represented interest income, which is available to pay the Company’s tax obligations.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying
and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company will need
to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third
parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to
time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital
needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital,
it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern through January 15, 2020, the date that the Company will be required
to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated. These financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might
be necessary should the Company be unable to continue as a going concern.
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions
to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation
of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on
Form 10-K for the year ended December 31, 2018 as filed with the SEC on April 1, 2019, which contains the audited financial statements
and notes thereto. The financial information as of December 31, 2018 is derived from the audited financial statements presented
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The interim results for the three and
nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December
31, 2019 or for any future interim periods.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Emerging
growth company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to,
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not
previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
balance sheet with another public company which is neither an emerging growth company nor an emerging growth company which has
opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards
used.
Use
of estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2019 and December 31, 2018.
Marketable
securities held in Trust Account
At
September 30, 2019 and December 31, 2018, the assets held in the Trust Account were substantially held in U.S. Treasury Bills.
During the nine months ended September 30, 2019, the Company withdrew an aggregate of $809,284 of interest earned on the Trust
Account to pay its franchise and income tax obligations.
Common
stock subject to possible redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption
is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features 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) is classified as temporary equity. At all other times, common
stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common
stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s condensed balance sheets.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Income
taxes
The
Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September
30, 2018 due to the impact of state income taxes and for the three and nine months ended September 30, 2019 due to true-up adjustments
from the prior year tax returns.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of September 30, 2019 and December 31, 2018, there were no unrecognized tax benefits and
no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by federal, state, city and foreign taxing authorities in the areas of income
taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various
tax jurisdictions and compliance with federal, state, city and foreign tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net
loss per common share
Net
loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.
The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption
at September 30, 2019 and December 31, 2018, which are not currently redeemable and are not redeemable at fair value, have been
excluded from the calculation of basic loss per common share since such shares, if redeemed, only participate in their pro rata
share of the Trust Account earnings. The Company has not considered the effect of (1) warrants sold in the Initial Public Offering
and private placement to purchase 11,945,000 shares of common stock and (2) 750,000 shares of common stock and warrants to purchase
750,000 shares of common stock in the unit purchase option sold to the underwriters and their designees, in the calculation of
diluted loss per share, since the exercise of the warrants and the exercise of the unit purchase option is contingent upon the
occurrence of future events. As a result, diluted loss per common share is the same as basic loss per common share for the periods.
Reconciliation
of net loss per common share
The
Company’s net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption,
as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly,
basic and diluted loss per common share is calculated as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net income
|
|
$
|
336,700
|
|
|
$
|
276,543
|
|
|
$
|
1,001,250
|
|
|
$
|
605,695
|
|
Less: Income attributable to shares subject to possible redemption
|
|
|
(418,858
|
)
|
|
|
(414,306
|
)
|
|
|
(1,342,216
|
)
|
|
|
(832,267
|
)
|
Adjusted net loss
|
|
$
|
(82,158
|
)
|
|
$
|
(137,763
|
)
|
|
$
|
(340,966
|
)
|
|
$
|
(226,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
3,800,351
|
|
|
|
3,765,243
|
|
|
|
3,796,787
|
|
|
|
3,408,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal depository insurance coverage of $250,000. At September 30, 2019 and December 31, 2018,
the Company had not experienced losses on these accounts and management believes the Company 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 ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed balance
sheets, primarily due to their short-term nature.
Recently
issued accounting standards
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s condensed financial statements.
NOTE
4. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 11,500,000 units at a purchase price of $10.00 per Unit, inclusive of 1,500,000
units sold to the underwriters on March 20, 2018 upon the underwriters’ election to exercise their over-allotment option
in full. Each Unit consists of one share of common stock and one warrant (“Public Warrant”). Each Public Warrant entitles
the holder to purchase one share of common stock at an exercise price of $11.50 per share (see Note 8).
NOTE
5. PRIVATE PLACEMENT
Simultaneously
with the Initial Public Offering, the Initial Stockholders purchased an aggregate of 400,000 Private Placement Units, at a purchase
price of $10.00 per Private Placement Unit for an aggregate purchase price of $4,000,000. On March 20, 2018, the Company consummated
the sale of an additional 45,000 Private Placement Units at a price of $10.00 per Private Placement Unit, which were purchased
by the Sponsor, generating gross proceeds of $450,000. Each Private Placement Unit consists of one share of common stock (“Placement
Share”) and one warrant (“Placement Warrant”) to purchase one share of common stock at an exercise price of
$11.50. The proceeds from the sale of the Private Placement Units were added to the proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds
from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law) and the Placement Warrants will expire worthless.
NOTE
6. RELATED PARTY TRANSACTIONS
Founder
Shares
In
November 2017, the Company issued an aggregate of 2,875,000 shares of common stock (“Founder Shares”) to Axis Public
Ventures for an aggregate purchase price of $25,000. On March 9, 2018, Axis Public Ventures transferred 2,012,500 Founder Shares
to the other Initial Stockholders for the same price originally paid for such shares. The Founder Shares included an aggregate
of up to 375,000 shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’ over-allotment
was not exercised in full or in part, so that the Initial Stockholders would own 20% of the Company’s issued and outstanding
shares after the Initial Public Offering (assuming the Initial Stockholders did not purchase any Public Shares in the Proposed
Offering and excluding the Placement Shares). On March 20, 2018, as a result of the underwriters’ election to exercise their
over-allotment option in full, 375,000 Founder’s Shares are no longer subject to forfeiture.
The
Initial Stockholders have agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned
or sold until the earlier of six months after the date of the consummation of a Business Combination and the date on which the
closing price of the Company’s common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends,
reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Business
Combination, or earlier if, subsequent to a Business Combination, the Company consummates a liquidation, merger, stock exchange
or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares
of common stock for cash, securities or other property.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Administrative
Services Agreement
The
Company entered into an agreement whereby, commencing on March 13, 2018 through the earlier of the consummation of a Business
Combination or the Company’s liquidation, the Company will pay an affiliate of the Sponsor a monthly fee of $10,000 for
office space, utilities and administrative support. During each of three months ended September 30, 2019 and 2018, the Company
incurred $30,000 in fees for these services. During the nine months ended September 30, 2019 and 2018, the Company incurred $90,000
and $65,000 in fees for these services, respectively. At September 30, 2019 and December 31, 2018, $185,000 and $95,000, respectively,
are included in accounts payable and accrued expenses in the accompanying condensed balance sheets.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or the
Company’s officers, directors and other Initial Stockholders may, but are not obligated to, loan the Company funds from
time to time or at any time, as may be required (“Working Capital Loans”). Each Working Capital Loan would be evidenced
by a promissory note. The Working Capital Loans would either be paid upon consummation of a Business Combination, without interest,
or, at the holder’s discretion, up to $1,500,000 of the Working Capital Loans may be converted into units at a price of
$10.00 per unit. The units would be identical to the Private Placement Units. In the event that a Business Combination does not
close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no
proceeds held in the Trust Account would be used to repay the Working Capital Loans.
On
September 16, 2019, the Company’s stockholders agreed to extend the period of time the Company has to consummate a Business
Combination to November 15, 2019 and Lion Point agreed to loan the Company the funds necessary to obtain the Extension. On September
18, 2019, the Company issued an unsecured promissory note (the “Note”) in the aggregate principal amount of $306,935
to provide the Company the funds necessary to obtain the Extension. The Note is non-interest bearing and due to be paid upon the
consummation of a Business Combination. The loans will be forgiven if the Company is unable to consummate a Business Combination
except to the extent of any funds held outside of the Trust Account. As of September 30, 2019, the outstanding balance under the
Note amounted to an aggregate of $306,935.
NOTE
7. COMMITMENTS
Registration
Rights
Pursuant
to a registration rights agreement entered into on March 13, 2018, the holders of the Founder Shares, Private Placement Units
(and their underlying securities) and any Units that may be issued upon conversion of the Working Capital Loans (and their underlying
securities) are 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. The holders of the majority of the Founder Shares can elect to exercise these
registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released
from escrow. The holders of a majority of the Private Placement Units or Units issued to the Sponsor, officers, directors or their
affiliates in payment of Working Capital Loans made to the Company (in each case, including the underlying securities) can elect
to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders
will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the
completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Business
Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital, Inc., the representative of the underwriters in the Initial Public Offering (“EarlyBirdCapital”),
as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss
a potential Business Combination and the target business’ attributes, introduce the Company to potential investors that
are interested in purchasing securities in connection with the Business Combination, assist the Company in obtaining stockholder
approval for the Business Combination and assist the Company with its press releases and public filings in connection with a Business
Combination. The Company will pay EarlyBirdCapital a cash fee of $4,025,000 for such services upon the consummation of a Business
Combination (exclusive of any applicable finders’ fees which might become payable).
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Forward
Purchase Agreement
Lion
Point has entered into a contingent forward purchase agreement with the Company to purchase, in a private placement for aggregate
gross proceeds of $30,000,000, to occur concurrently with the consummation of the Company’s initial Business Combination,
3,000,000 units at $10.00 per unit, on substantially the same terms as the sale of Units in the Initial Public Offering. The funds
from the sale of these units may be used as part of the consideration to the sellers in the initial Business Combination; any
excess funds may be used for the working capital needs of the post-transaction company. This agreement is independent of the percentage
of stockholders electing to redeem their Public Shares and may provide the Company with an increased minimum funding level for
the initial Business Combination. The contingent forward purchase agreement is subject to conditions, including Lion Point giving
the Company its irrevocable written consent to purchase the units no later than five days after the Company notifies Lion Point
of the Company’s intention to meet to consider entering into a definitive agreement for a proposed Business Combination.
Lion Point granting its consent to the purchase is entirely within its sole discretion. Accordingly, if it does not consent to
the purchase, it will not be obligated to purchase the units.
NOTE
8. STOCKHOLDERS’ EQUITY
Preferred
Stock
On
March 13, 2018, the Company filed an Amended and Restated Certificate of Incorporation such that the Company is authorized to
issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences
as may be determined from time to time by the Company’s Board of Directors. At September 30, 2019 and December 31, 2018,
there were no shares of preferred stock issued or outstanding.
Common
Stock
On
March 13, 2018, the Company filed an Amended and Restated Certificate of Incorporation such that the Company is authorized to
issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common stock are
entitled to one vote for each share. At September 30, 2019 and December 31, 2018, there were 3,844,125 and 3,789,558 shares of
common stock issued and outstanding, excluding 8,693,122 and 11,030,442 shares of common stock subject to possible redemption,
respectively.
Warrants
The
Public Warrants will become exercisable 30 days after the completion of a Business Combination; provided that the Company has
an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the
Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, the
Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act,
of the shares of common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the
same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto,
until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing,
if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective
within a specified period following the consummation of Business Combination, warrant holders may, until such time as there is
an effective registration statement and during any period when the Company shall have failed to maintain an effective registration
statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act,
provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able
to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation.
The
Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
at
any time during the exercise period;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption; and
|
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
|
●
|
if,
and only if, the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading
days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice
of redemption to the warrant holders.
|
|
●
|
if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such
warrants.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and
number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in
the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be
adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect
to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with
the respect to such warrants. Accordingly, the warrants may expire worthless.
The
Placement Warrants will be identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that
the Placement Warrants and the common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable
or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement
Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their
permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees,
the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Unit
Purchase Option
On
March 13, 2018, the Company sold EarlyBirdCapital (and its designees), for $100, an option to purchase up to 750,000 Units exercisable
at $10.00 per Unit (or an aggregate exercise price of $7,500,000) commencing on the later of March 13, 2019 and the consummation
of a Business Combination. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option,
and expires on March 17, 2023. The Units issuable upon exercise of this option are identical to those offered in the Initial Public
Offering. The Company accounted for the unit purchase option, inclusive of the receipt of $100 cash payment, as an expense of
the Initial Public Offering resulting in a charge directly to stockholders’ equity. The fair value of the unit purchase
option was estimated to be approximately $2,633,621 (or $3.51 per Unit) using the Black-Scholes option-pricing model. The fair
value of the unit purchase option granted to the underwriters was estimated as of the date of grant using the following assumptions:
(1) expected volatility of 35%, (2) risk-free interest rate of 2.65% and (3) expected life of five years. The option grants to
holders demand and “piggyback” rights for periods of five and seven years, respectively, from March 13, 2018 with
respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option.
The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which
will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be
adjusted in certain circumstances including in the event of a stock dividend, or the Company’s recapitalization, reorganization,
merger or consolidation. However, the option will not be adjusted for issuances of common stock at a price below its exercise
price.
OPES ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
NOTE
9. FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 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.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
September 30, 2019 and December 31, 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value:
Description
|
|
Level
|
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
|
$
|
95,659,596
|
|
|
$
|
117,740,109
|
|
NOTE
10. SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial
statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required
adjustment or disclosure in the financial statements.
On November 15, 2019,
the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to extend the period
of time for which the Company is required to consummate a Business Combination from November 15, 2019 to January 15, 2020 (the
“Second Extension”). In connection with the approval of the Second Extension, stockholders elected to redeem an aggregate
of 228,001 shares of common stock, of which the Company paid cash in the aggregate amount of $2.4 million, or approximately $10.43
per share, to redeeming stockholders. Upon the filing of the amendment of the charter, the Company deposited into the Trust Account
$0.0325 for each public share that was not redeemed in connection with the Second Extension, or an aggregate of approximately $292,150,
for such extension period. The amount deposited into the Trust Account was loaned to the Company by an unrelated third party. The
loan is non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loan will be forgiven if
the Company is unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account.
Item
2. Management’s Discussion and Analysis
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based
these forward-looking statements on our current expectations and projections about future events. These forward-looking statements
are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology
such as “may,” “should,” “could,” “would,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms
or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those
described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us”,
“our” or the “Company” are to Opes Acquisition Corp., except where the context requires otherwise. The
following discussion should be read in conjunction with our condensed financial statements and related notes thereto included
elsewhere in this report.
Overview
We
are a blank check company formed under the laws of the State of Delaware on July 24, 2017 for the purpose of effecting a merger,
share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with
one or more businesses or entities (“business combination”). Our efforts to identify a prospective target business
is not limited to a particular industry or geographic region although we are currently focusing our search for target businesses
in Mexico.
We
consummated our initial public offering of (“Initial Public Offering”) of 10,000,000 units, each consisting of one
share of common stock and one warrant to purchase one share of common stock for $11.50 per share, on March 16, 2018. On March
20, 2018, we consummated the sale of an additional 1,500,000 units subject to the underwriters’ over-allotment option. All
activity through March 16, 2018 relates to our formation and the Initial Public Offering. Since March 16, 2018, we have been searching
for a target business with which to complete an initial business combination.
Recent
Developments
On November 15, 2019, our stockholders approved
an amendment to our Amended and Restated Certificate of Incorporation to extend the period of time for which we are required to
consummate a Business Combination from November 15, 2019 to January 15, 2020 (the “Second Extension”). In connection
with the approval of the Second Extension, stockholders elected to redeem an aggregate of 228,001 shares of common stock, of which
we paid cash in the aggregate amount of $2.4 million, or approximately $10.43 per share, to redeeming stockholders. Upon the filing
of the amendment of the charter, we deposited into the Trust Account $0.0325 for each public share that was not redeemed in connection
with the Second Extension, or an aggregate of approximately $292,150, for such extension period. The amount deposited into the
Trust Account was loaned to us by an unrelated third party. The loan is non-interest bearing, and due to be paid upon the consummation
of a Business Combination. The loan will be forgiven if we are unable to consummate a Business Combination except to the extent
of any funds held outside of the Trust Account.
Results
of Operations
We
have neither engaged in any business operations nor generated any revenues to date. Our entire activity from inception up to the
closing of our Initial Public Offering on March 16, 2018 was in preparation for that event. Subsequent to the Initial Public Offering,
our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating
revenues until the closing and completion of our initial business combination. We have, and expect to continue to generate, non-operating
income in the form of interest income on marketable securities. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For
the three months ended September 30, 2019, we had net income of $336,700, which consisted of interest income on marketable securities
held in the Trust Account of $621,666, offset by unrealized loss on marketable securities held in our Trust Account of $13,259,
operating costs of $157,429 and a provision for income taxes of $114,278.
For
the nine months ended September 30, 2019, we had net income of $1,001,250, which consisted of interest income on marketable securities
held in the Trust Account of $2,010,319 and an unrealized gain on marketable securities held in our Trust Account of $5,704, offset
by operating costs of $571,946 and a provision for income taxes of $442,827.
For
the three months ended September 30, 2018, we had net income of $276,543, which consists of interest income on marketable securities
held in the Trust Account of $579,320, offset by an unrealized loss on marketable securities held in our Trust Account of $24,688,
operating costs of $204,577 and a provision for income taxes of $73,512.
For
the nine months ended September 30, 2018, we had net income of $605,695, which consists of interest income on marketable securities
held in the Trust Account of $1,194,133, offset by an unrealized loss on marketable securities held in our Trust Account of $17,082,
operating costs of $410,348 and a provision for income taxes of $161,008.
Our
operating expenses principally consisted of expenses related to our public filings and listing and identification and due diligence
related to a potential target business, and to general operating expenses including printing, insurance and office expenses. Until
we consummate a business combination, we will have no operating revenues.
Liquidity
and Capital Resources
As
of September 30, 2019, we had marketable securities held in the Trust Account of $95,659,596 (including approximately $2,272,000
of interest income and unrealized gains) consisting of U.S. treasury bills with a maturity of 180 days or less. Interest income
on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2019, we have withdrawn $1,071,182 of
interest earned on the Trust Account to pay for our franchise and income tax obligations, of which $809,284 was withdrawn during
the nine months ended September 30, 2019.
For
the nine months ended September 30, 2019, cash used in operating activities was $1,000,744. Net income of $1,001,250 was offset
by interest earned on marketable securities held in the Trust Account of $2,010,319, an unrealized gain on marketable securities
held in our Trust Account of $5,704 and a deferred tax benefit of $21,361. Changes in operating assets and liabilities provided
$35,390 of cash from operating activities.
For
the nine months ended September 30, 2018, cash used in operating activities was $346,221. Net income $605,695 was impacted by
interest earned on marketable securities held in the Trust Account of $1,194,133 and an unrealized loss on marketable securities
held in our Trust Account of $17,082. Changes in operating assets and liabilities provided $225,135 of cash from operating activities.
We
intend to use substantially all of the funds held in the Trust Account to acquire a target business or businesses and to pay our
expenses relating thereto, including a fee payable to EarlyBirdCapital in the amount of $4,025,000. To the extent that our capital
stock or debt is used, in whole or in part, as consideration to effect a business combination, the remaining proceeds held in
the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of
the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target
business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products.
Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion
of our business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.
Lion
Point has entered into a contingent forward purchase agreement with us to purchase, in a private placement for aggregate gross
proceeds of $30,000,000, to occur concurrently with the consummation of our initial business combination, 3,000,000 units at $10.00
per unit, on substantially the same terms as the sale of units in the Initial Public Offering. The funds from the sale of these
units may be used as part of the consideration to the sellers in the initial business combination; any excess funds may be used
for the working capital needs of the post-transaction company. This agreement is independent of the percentage of stockholders
electing to redeem their public shares and may provide us with an increased minimum funding level for the initial business combination.
The contingent forward purchase agreement is subject to conditions, including Lion Point giving us its irrevocable written consent
to purchase the units no later than five days after we notify Lion Point of our intention to meet to consider entering into a
definitive agreement for a proposed business combination. Lion Point granting its consent to the purchase is entirely within its
sole discretion. Accordingly, if it does not consent to the purchase, it will not be obligated to purchase the units.
In
order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our sponsor,
our officers, directors and other initial stockholders or their affiliates may, but are not obligated to, loan us funds from time
to time or at any time as may be required. If we complete a business combination, we would repay such loaned amounts out of the
proceeds of the Trust Account released to us. In the event that a business combination does not close, we may use a portion of
the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be
used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit
at the option of the lender. The units would be identical to the private placement units. The loans would be non-interest bearing
and would be payable upon consummation of a business combination.
As
of September 30, 2019, we had $14,178 in cash and working capital deficit of $222,212, which excludes prepaid income taxes and
franchise and income taxes payable as the net amount can be paid from the interest earned on the Trust Account. We have not generated
operating revenues, nor do we expect to generate operating revenues until the consummation of a business combination. Until the
consummation of a business combination, we will be using the funds not held in the Trust Account for identifying and evaluating
prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to acquire, and structuring, negotiating and consummating the business combination.
On
September 16, 2019, our stockholders agreed to extend the period of time we had to consummate a Business Combination from September
16, 2019 to November 15, 2019 and Lion Point agreed to loan us the funds necessary to obtain the Extension. On September 18, 2019,
we issued a Note, in the aggregate principal amount of $306,935, to provide us the funds necessary to obtain the Extension. The
Note is non-interest bearing, and due to be paid upon the consummation of a Business Combination. The loans will be forgiven if
we are unable to consummate a Business Combination except to the extent of any funds held outside of the Trust Account. As of
September 30, 2019, the outstanding balance under the Note amounted to an aggregate of $306,935.
On November 15, 2019, our stockholders agreed to further extend the period of time for which we are required
to consummate a Business Combination from November 15, 2019 to January 15, 2020 (the “Second Extension”). In connection
with the approval of the Second Extension, stockholders elected to redeem an aggregate of 228,001 shares of common stock, of which
we paid cash in the aggregate amount of $2.4 million, or approximately $10.43 per share, to redeeming stockholders. Upon the filing
of the amendment of the charter, we deposited into the Trust Account $0.0325 for each public share that was not redeemed in connection
with the Second Extension, or an aggregate of approximately $292,150, for such extension period. The amount deposited into the
Trust Account was loaned to us by an unrelated third party. The loan is non-interest bearing, and due to be paid upon the consummation
of a Business Combination. The loan will be forgiven if we are unable to consummate a Business Combination except to the extent
of any funds held outside of the Trust Account.
We
will need to raise additional capital through loans or additional investments from our sponsor, stockholders, officers, directors,
or third parties. Our officers, directors and sponsor may, but are not obligated to, loan us funds, from time to time or at any
time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may
not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the
pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be
available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue
as a going concern.
Off-Balance
Sheet Arrangements
We
did not have any off-balance sheet arrangements as of September 30, 2019.
Contractual
obligations
We
do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an
agreement to pay an affiliate of our executive officers an aggregate monthly fee of $10,000 for office space and office and administrative
support provided to the Company. We began incurring these fees upon the consummation of our Initial Public Offering and will continue
to incur these fees monthly until the earlier of the completion of a business combination and the Company’s liquidation.
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, 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. We have identified the following critical
accounting policies:
Common
stock subject to possible redemption
We
account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption
is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control
and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Net
loss per common share
We
apply the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption which are
not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per share
since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted
for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate
in the earnings of the Trust Account and not our income or losses.
Recent
accounting standards
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on our financial statements.