The accompanying notes are an integral part of the unaudited
financial statements.
The accompanying notes are an integral part of the unaudited
financial statements.
The accompanying notes are an integral part of the unaudited
financial statements.
The accompanying notes are an integral part of the unaudited
financial statements.
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(
Unaudited
)
NOTE A—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
SCG Financial Acquisition Corp. (a corporation in the development
stage) (the “Company”) was incorporated in Delaware on January 5, 2011. The Company was formed for the purpose of acquiring,
through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, exchangeable share transaction or
other similar business transaction, one or more operating businesses or assets that the Company has not yet identified (“Initial
Business Combination”). The Company has neither engaged in any operations nor generated any income, other than interest on
the trust account assets (the “Trust Account”). The Company is focused on identifying a prospective target business
or asset with which to consummate an Initial Business Combination. The Company is considered to be in the development stage as
defined in FASB Accounting Standards Codification 915, or FASB ASC 915, “Development Stage Entities,” and is subject
to the risks associated with activities of development stage companies. The Company has selected December 31 as its fiscal year
end.
The Company is currently evaluating Initial Business Combination
candidates. All activity through September 30, 2012 relates to the Company’s formation, initial public offering (“Offering”)
and identification and investigation of prospective target businesses with which to consummate an Initial Business Combination.
The registration statement for the Offering was declared effective
April 8, 2011. The Company consummated the Offering on April 18, 2011 and received net proceeds of approximately $82,566,000, before
deducting underwriting compensation of $4,000,000 (which includes $2,000,000 of deferred contingent underwriting compensation payable
upon consummation of an Initial Business Combination) and includes $3,000,000 received for the purchase of 4,000,000 warrants by
SCG Financial Holdings LLC (the “Sponsor”). Total offering costs (excluding $2,000,000 in underwriting fees) was $433,808.
On April 12, 2011, the Sponsor purchased 4,000,000 warrants
(“Sponsor Warrants”) from the Company for an aggregate purchase price of $3,000,000. The Sponsor Warrants are identical
to the warrants sold in the Offering, except that if held by the original holder or its permitted assigns, they (i) may be exercised
for cash or on a cashless basis and (ii) are not subject to being called for redemption.
Total gross proceeds to the Company from the 8,000,000 units
sold in the offering was $80,000,000. The Company’s management has broad discretion with respect to the specific application
of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally
applied toward consummating an Initial Business Combination. Furthermore, there is no assurance that the Company will be able to
successfully consummate an Initial Business Combination.
On April 27, 2011, $80,000,000 from the Offering and Sponsor
Warrants that was placed in a trust account (“Trust Account”) was invested, as provided in the Company’s registration
statement. The Company is permitted to invest the proceeds of the Trust Account in U.S. “government securities,” within
the meaning of Section 2(a)(16) of the Investment Company Act of 1940 (the “1940 Act”) with a maturity of 180 days
or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the 1940 Act. The Trust Account assets
will be maintained until the earlier of (i) the consummation of an Initial Business Combination or (ii) the distribution of the
Trust Account as described below.
On May 2, 2012, the Company’s common stock commenced trading
on The Nasdaq Capital Market (“Nasdaq”), under the symbol “SCGQ”. Prior to May 2, 2012, the common stock
was quoted on the Over-the-Counter Bulletin Board quotation system under the same symbol.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
The Company, after signing a definitive agreement for the acquisition
of one or more target businesses or assets, will not submit the transaction for stockholder approval, unless otherwise required
by law or the rules of the Nasdaq Stock Market. The Company will proceed with an Initial Business Combination if it is approved
by the board of directors. Only in the event that the Company is required to seek stockholder approval in connection with its Initial
Business Combination, the Company will proceed with an Initial Business Combination only if a majority of the outstanding shares
of common stock voted are voted in favor of the Initial Business Combination. In connection with such a vote, if an Initial Business
Combination is approved and consummated, stockholders that elect to redeem their shares of common stock will be entitled to receive
their pro-rata portion of the Trust Account as follows: (i) public stockholders voting against the Initial Business Combination
and electing to redeem shares of common stock shall be entitled to receive a per share pro rata portion of the Trust Account (excluding
interest and net of taxes) and (ii) public stockholders voting in favor of the Initial Business Combination and electing to redeem
shares of common stock shall be entitled to receive a per share pro rata portion of the Trust Account (together with interest thereon
which was not previously used for working capital but net of taxes). These shares of common stock are recorded at a fair value
and classified as temporary equity, in accordance with ASC 480. The Sponsor, Gregory H. Sachs and each member of the Sponsor have
agreed, in the event the Company is required to seek stockholder approval of its Initial Business Combination, to vote the initial
shares acquired by them in favor of approving an Initial Business Combination. The Sponsor, Gregory H. Sachs and each member of
the Sponsor have also agreed to vote shares of common stock acquired by them in the Offering or in the aftermarket in favor of
an Initial Business Combination submitted to the Company’s stockholders for approval.
Going Concern Consideration
The Company’s Sponsor, officers and directors have agreed
that the Company will have until January 12, 2013 to consummate an Initial Business Combination and one three month extension subject
to (i) a signed letter of intent to consummate its Initial Business Combination by January 12, 2013 (and an Initial Business Combination
relating thereto has not been consummated) and (ii) the approval of at least 65% of the holders of the Company’s common stock.
If the Company does not consummate an Initial Business Combination within this period of time, it shall (i) cease all operations
except for the purposes of winding up, (ii) redeem the public shares of common stock for a per share pro rata portion of the Trust
Account, including a portion of the interest earned thereon which was not previously used for working capital (less up to $100,000
of such net interest to pay dissolution expenses), but net of any taxes (which redemption would completely extinguish such holders’
rights as stockholders, including the right to receive further liquidation distributions, if any) 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. This mandatory liquidation and subsequent dissolution raises substantial doubt
about the Company’s ability to continue as a going concern.
The Sponsor, Gregory H. Sachs and each member of the Sponsor
have waived their rights to participate in any redemption with respect to their initial shares. However, if the Sponsor, Gregory
H. Sachs or any member of the Sponsor acquire shares of common stock after the Offering, they will be entitled to a pro rata share
of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not consummate an Initial
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 Offering.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited interim financial statements should
be read in conjunction with the audited statements and notes thereto included in the Company’s 2011 Annual Report on Form
10-K filed with the SEC on March 22, 2012. The accompanying unaudited interim financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP) and pursuant to the accounting and disclosure
rules and regulations of the Securities and Exchange of Commission (SEC), and reflect all adjustments, consisting only of normal
recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as
of September 30, 2012 and the results of operations for the three months ended September 30, 2012 and 2011, nine months ended September
30, 2012, period from January 5, 2011 (date of inception) to September 30, 2011 and period from January 5, 2011 (date of inception)
to September 30, 2012. The balance sheet as of December 31, 2011, as presented herein, was derived from the Company’s audited
financial statements as reported in previous filings with the SEC. Certain information and disclosures normally included in interim
financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.
Development stage company
The Company complies with the reporting requirements of FASB
ASC 915, “Development Stage Entities.” At September 30, 2012, the Company had not commenced any operations nor generated
revenue to date, other than interest on the Trust Account balance. All activity through September 30, 2012 relates to the Company’s
formation, the Offering and the investigation of prospective target businesses with which to consummate an Initial Business Combination.
Net loss per common share
The Company complies with accounting and disclosure requirements
of FASB ASC 260, “Earnings Per Share.” Net loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted average number of common shares outstanding for the period. At September 30, 2012, the Company did
not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and
then share in the earnings of the Company. At September 30, 2012, the Company had outstanding warrants to purchase 12,000,000
shares of common stock. For the period presented, the weighted average of these shares was excluded from the calculation of diluted
income (loss) per common share because their inclusion would have been anti-dilutive. As a result, diluted loss per common share
is the same as basic loss per common share for the period.
Concentration of credit risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal depository
insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is
not exposed to significant risks on such accounts.
Restricted cash equivalents held in the Trust Account
The amounts held in the Trust Account represent substantially
all of the proceeds of the Offering and are classified as restricted assets since such amounts can only be used by the Company
in connection with the consummation of an Initial Business Combination. The funds held in the Trust Account are invested primarily
in United States Treasury Securities.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
Warrant Liability
The Company accounts for the 12,000,000 warrants issued
in connection with its Offering (consisting of 8,00,000 warrants issued in the Offering and the 4,000,000 Sponsor Warrants)
in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity" whereby under that provision they do not meet the criteria for
equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a
liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to
re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's
statement of operations. The fair value of warrants issued by the Company in connection with the Offering has been estimated using the warrants quoted market price.
Fair value of financial instruments
The fair value of the Company’s assets and liabilities,
which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheets.
Use of estimates
The preparation of financial statements 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 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. Actual results could differ from those
estimates.
Redeemable common stock
The 8,000,000 common shares sold as part of the Offering
contain a redemption feature which allows for the redemption of common shares under the Company’s liquidation or tender
offer/stockholder approval provisions. In accordance with FASB ASC 480 "Distinguishing Liabilities from Equity", redemption provisions
not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions
of FASB ASC 480. Although the Company does not specify a maximum redemption threshold, its Charter provides that in no event will
it redeem any of its public shares in an amount that would cause its net tangible assets (stockholders’ equity) 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 Initial
Business Combination, and instead may search for an alternate Initial Business Combination.
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 common stock shall be affected by charges
against the par value of common stock and retained earnings, or in the absence of retained earnings, by charges against
paid-in capital in accordance with ASC 480-10-S99. During the nine months ended September 30, 2012 and period from January 5,
2011 (date of inception) to December 31, 2011, changes from the initial redemption value were $858,392 and $237,495,
respectively, while changes from the initial number of shares subject to redemption were 85,839 and 23,750, respectively.
Changes in redemption value and amounts are primarily due to the net income of the Company. Accordingly, at September 30,
2012 and December 31, 2011, 7,048,708 and 6,962,869 public shares, respectively, are classified outside of permanent equity
at their redemption value. The redemption value is equal to the pro rata share of the aggregate amount then on deposit in the
Trust Account, including interest but less franchise and income taxes payable (approximately $10.00 per share at September
30, 2012).
Reclassifications
Certain reclassifications have been made to amounts previously
reported for 2011 to conform with the 2012 presentation. Such reclassifications have no effect on previously reported net loss.
Securities held in Trust Account
Investment securities consist of United States Treasury securities.
The Company classifies its securities as held-to-maturity in accordance with FASB ASC 320 “Investments - Debt and Equity
Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until
maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of
premiums or discounts.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
A decline in the market value of held-to-maturity securities
below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities'
fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an
impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a
market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to
the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of
the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition
in the geographic area or industry the investee operates in. Premiums and discounts are amortized or accreted over the life of
the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion
is included in the “interest income” line item in the statements of operations. Interest income is recognized when
earned.
Income tax
The Company complies with the accounting and reporting requirements
of Financial Accounting Standards Board Accounting Standards Codification 740, or 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 interim 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.
There were no unrecognized tax benefits as of September 30,
2012. FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the interim 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. No amounts were accrued for the payment of interest and penalties
at September 30, 2012. The Company is not currently aware of any issues under review that could result in significant payments,
accruals or material deviation from its position. The adoption of the provisions of FASB ASC 740 did not have a material impact
on the Company’s financial position and results of operation and cash flows as of and for the period ended September 30,
2012.
The Company is subject to income tax examinations by major taxing
authorities and has been since its inception.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
Recently issued accounting standards
The Company does not believe that the adoption of any recently
issued, but not yet effective, accounting standards will have a material impact on its financial position and results of operations.
NOTE C - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company has restated its financial statements as
of September 30, 2012 and December 31, 2011 to correct its accounting for an adjustment related to the warrants issued in
connection with the Offering. The Company’s original accounting treatment did not recognize a
derivative liability and did not recognize any changes in the fair value of that derivative liability in its statements of
operations.
In March 2013, the Company concluded it should
correct its accounting related to the Company’s outstanding warrants. The Company had initially accounted for the
warrants as a component of equity but upon further evaluation of the terms of the warrant, concluded that the warrants should
be accounted for as a derivative liability. The warrants contain a price adjustment provision, such that, in the event the
Company completes a business combination subsequent to the initial business combination which results in the Company’s
shares no longer being listed on a national exchange or the OTC Bulletin Board, the exercise price of the warrants will
decrease by formula that causes the warrants to not be indexed to the Company’s own stock. As a result of this
provision, the Company has restated its financial statements to reflect the Company’s warrants as a derivative
liability with changes in the fair value recorded in the current period earnings.
The following tables summarize the adjustments made to the
previously reported balance sheets, statements of operations and statements of cash flow:
September 30, 2012
Selected balance sheet information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
-
|
|
|
$
|
1,920,000
|
|
|
$
|
1,920,000
|
|
Total Liabilities
|
|
|
2,642,540
|
|
|
|
1,920,000
|
|
|
|
4,562,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, subject to possible redemption
|
|
|
72,407,078
|
|
|
|
(1,920,000
|
)
|
|
|
70,487,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
228
|
|
|
|
19
|
|
|
|
247
|
|
Additional Paid-in Capital
|
|
|
6,183,886
|
|
|
|
(1,184,132
|
)
|
|
|
4,999,754
|
|
Deficit Accumulated during the Development Stage
|
|
|
(1,184,113
|
)
|
|
|
1,184,113
|
|
|
|
-
|
|
Total Stockholders' Equity
|
|
|
5,000,001
|
|
|
|
-
|
|
|
|
5,000,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
80,049,619
|
|
|
$
|
-
|
|
|
$
|
80,049,619
|
|
December 31, 2011
Selected audited balance sheet information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
-
|
|
|
$
|
3,600,000
|
|
|
$
|
3,600,000
|
|
Total Liabilities
|
|
|
2,176,285
|
|
|
|
3,600,000
|
|
|
|
5,776,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, subject to possible redemption
|
|
|
73,228,686
|
|
|
|
(3,600,000
|
)
|
|
|
69,628,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
952
|
|
|
|
(696
|
)
|
|
|
256
|
|
Additional Paid-in Capital
|
|
|
5,361,554
|
|
|
|
(361,809
|
)
|
|
|
4,999,745
|
|
Deficit Accumulated during the Development Stage
|
|
|
(362,505
|
)
|
|
|
362,505
|
|
|
|
-
|
|
Total Stockholders' Equity
|
|
|
5,000,001
|
|
|
|
-
|
|
|
|
5,000,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
80,404,972
|
|
|
$
|
-
|
|
|
$
|
80,404,972
|
|
For the nine months ended September 30, 2012
Selected statement of operations information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of warrant liability
|
|
$
|
-
|
|
|
$
|
1,680,000
|
|
|
$
|
1,680,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
Attributable to Common Stockholders
|
|
$
|
(821,608
|
)
|
|
$
|
1,680,000
|
|
|
$
|
858,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
Net Loss per common share, excludes shares subject to possible redemption - basic and diluted
|
|
$
|
(0.36
|
)
|
|
$
|
0.70
|
|
|
$
|
0.34
|
|
Selected statement of cash flows information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(821,608
|
)
|
|
$
|
1,680,000
|
|
|
$
|
858,392
|
|
Gain on change in fair value of warrant liability
|
|
$
|
-
|
|
|
$
|
(1,680,000
|
)
|
|
$
|
(1,680,000
|
)
|
For the three months ended September 30, 2012
Selected statement of operations information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of warrant liability
|
|
$
|
-
|
|
|
$
|
600,000
|
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
Attributable to Common Stockholders
|
|
$
|
(95,108
|
)
|
|
$
|
600,000
|
|
|
$
|
504,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
Net Loss per common share, excludes shares subject to possible redemption - basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
0.24
|
|
|
$
|
0.20
|
|
Selected statement of cash flows information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(95,108
|
)
|
|
$
|
600,000
|
|
|
$
|
504,892
|
|
Gain on change in fair value of warrant liability
|
|
$
|
-
|
|
|
$
|
(600,000
|
)
|
|
$
|
(600,000
|
)
|
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011
(date of inception) to September 30, 2012
(Unaudited)
From the period from January 5, 2011 (date of inception)
to September 30, 2011
Selected statement of operations information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
Net Loss per common share, excludes shares subject to possible redemption - basic and diluted
|
|
$
|
(0.11
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.10
|
)
|
For the three months ended September 30, 2011
Selected statement of operations information
|
|
(as previously
reported)
|
|
|
Effect of Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
Net Loss per common share, excludes shares subject to possible redemption - basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.04
|
)
|
From the period from January 5, 2011 (date of inception)
to September 30, 2012
Selected statement of operations information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of
warrant liability
|
|
$
|
-
|
|
|
$
|
2,280,000
|
|
|
$
|
2,280,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
Attributable to Common Stockholders
|
|
$
|
(1,184,113
|
)
|
|
$
|
2,280,000
|
|
|
$
|
1,095,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
Net Loss per common share, excludes shares subject to possible redemption - basic and diluted
|
|
$
|
(0.56
|
)
|
|
$
|
1.02
|
|
|
$
|
0.46
|
|
Selected statement of cash flows information
|
|
(as previously
reported)
|
|
|
Effect of
Restatement
|
|
|
(as restated)
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,184,113
|
)
|
|
$
|
2,280,000
|
|
|
$
|
1,095,887
|
|
Gain on change in fair value of warrant liability
|
|
$
|
-
|
|
|
$
|
(2,280,000
|
)
|
|
$
|
(2,280,000
|
)
|
NOTE D – WARRANT LIABILITY
Pursuant to the Company’s Offering, the Company sold
8,000,000 units, which subsequently separated into one warrant at an initial exercise price of $11.50 and one share of common
stock. The Sponsor also purchased 4,000,000 warrants in a private placement in connection with the Offering. The warrants expire
five years after the date of the Company’s initial business combination. The warrants issued contain a restructuring price
adjustment provision in the event of any merger or consolidation of the Company with or into another corporation, subsequent to
the initial business combination, where the surviving entity is not the Company and whose stock is not listed for trading on a
national securities exchange or on the OTC Bulletin Board, or is not to be so listed for trading immediately following such event
(the “Applicable Event”). The exercise price of the warrant is decreased immediately following an Applicable Event
by a formula that causes the warrants to not be indexed to the Company’s own stock. Management used the quoted market price
for the valuation of the warrants to determine the warrant liability to be $1,920,000 and $3,600,000 as of September 30, 2012
and December 31, 2011, respectively. This valuation is revised on a quarterly basis until the warrants are exercised or they expire
with the changes in fair value recorded in the statement of operations.
NOTE E—INITIAL PUBLIC OFFERING
The Company consummated its Offering on April 18, 2011. Pursuant
to the Offering, the Company sold 8,000,000 units at $10.00 per unit (“Units”). Each Unit consists of one share of
the Company’s common stock, $0.0001 par value, and one redeemable common stock purchase warrant (“Warrant”).
Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $11.50 commencing
on the later of (a) one year from the date of the prospectus for the Offering (April 12, 2012) or (b) 30 days after the completion
of an Initial Business Combination, and will expire five years from the date of the consummation of the Initial Business Combination.
The Warrants will be redeemable by the Company at a price of $0.01 per Warrant upon 30 days prior notice after the Warrants become
exercisable, only in the event that the last sale price of the common stock is at least $17.50 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 notice of redemption is given.
NOTE F—RELATED PARTY TRANSACTIONS
The Company issued $75,000 and $100,000
unsecured promissory notes to the Sponsor on January 28, 2011 and February 9, 2011, respectively. The notes were non-interest bearing
and were payable on the earlier of December 30, 2011 or the consummation of the Offering. The notes were repaid from the proceeds
of the Company’s Offering. The Company issued a $100,000 unsecured promissory note to the Sponsor on August 15, 2012. This
note is non-interest bearing and is payable upon the consummation of the Initial Business Combination.
On January 28, 2011, the Company issued
to the Sponsor 1,752,381 shares of restricted common stock for an aggregate purchase price of $25,000 in cash. The purchase price
for each share of common stock was approximately $0.0001 per share. These shares included 228,571 shares of common stock that were
forfeited on June 2, 2011 (as a result of the underwriters not exercising their overallotment option) upon the expiration of the
underwriter’s overallotment option. The Sponsor and its permitted transferees own 16% of the Company’s issued and outstanding
shares after the Offering. A portion of the Sponsor’s shares, in an amount equal to 3% of the Company’s issued and
outstanding shares, will be subject to forfeiture by the Sponsor in the event the last sales price of the Company’s stock
does not equal or exceed $12.00 per share for any 20 trading days within any 30 trading day period within 24 months following the
closing of an Initial Business Combination. The Sponsor, Gregory H. Sachs and each member of the Sponsor have agreed that they
will not sell or transfer their initial shares until one year following the consummation of an Initial Business Combination, subject
to earlier release in certain circumstances.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
The Sponsor purchased, in a private placement,
4,000,000 warrants prior to the Offering at a price of $0.75 per warrant (an aggregate purchase price of $3,000,000) from the Company.
Based on the observable market prices, the Company believes that the purchase price of $0.75 per warrant for such warrants exceeded
the fair value of such warrants on the date of the purchase. The valuation was based on comparable initial public offerings by
previous blank check companies. The Sponsor has agreed that the warrants purchased will not be sold or transferred until 30 days
following consummation of an Initial Business Combination, subject to certain limited exceptions. If the Company does not complete
an Initial Business Combination, then the proceeds will be part of the liquidating distribution to the public stockholders and
the warrants issued to the Sponsor will expire worthless. The private placement warrants are classified within permanent equity
as additional paid-in capital in accordance with ASC 815-40-25-13.
The Company has entered into an Administrative
Services Agreement, effective as of April 12, 2011, with Sachs Capital Group, LP, an affiliate of the Sponsor, for an estimated
aggregate monthly fee of $7,500 for office space and secretarial and administrative services, with up to an additional $7,500 for
other operating expenses incurred by the Sponsor on behalf of the Company. This agreement will expire upon the earlier of: (a)
the successful completion of our Company’s Initial Business Combination, (b) January 12, 2013 (plus one 3 month extension
subject to (i) a signed letter of intent and (ii) approval of at least 65% of the holders of the Company’s common stock),
or (c) the date on which the Company is dissolved and liquidated.
The Sponsor is entitled to registration rights pursuant to a
registration rights agreement. The Sponsor will be entitled to demand registration rights and certain “piggy-back”
registration rights with respect to its shares of common stock, the Sponsor Warrants and the common stock underlying the Sponsor
Warrants, commencing on the date such common stock or Sponsor Warrants are released from escrow. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
NOTE G—COMMITMENTS AND CONTINGENCIES
In conjunction with the Offering on April
18, 2011, the Company granted the underwriters a 45-day option to purchase up to 1,200,000 additional Units to cover the over-allotment
at the initial offering price less the underwriting discounts and commissions. This option expired unexercised on June
2, 2011.
A contingent fee payable to the underwriters of the Offering
equal to 2.50% of the gross proceeds from the sale of the Units sold in the Offering will become payable from the amounts held
in the Trust Account solely in the event the Company consummates its Initial Business Combination. Such contingent fee is reflected
as deferred underwriter’s fee of $2,000,000 on the accompanying September 30, 2012 interim and December 31, 2011 balance
sheets.
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
NOTE H—INVESTMENT IN TRUST ACCOUNT
On April 27, 2011, $80,000,000 from the Offering and the sale
of the Sponsor Warrants that was placed in a Trust Account was invested, as provided in the Company’s registration statement. The
Company is permitted to invest the proceeds of the Trust Account in U.S. “government securities,” within the meaning
of Section 2(a)(16) of the 1940 Act with a maturity of 180 days or less or in money market funds meeting certain conditions under
Rule 2a-7 promulgated under the 1940 Act. The Trust Account assets will be maintained until the earlier of (i) the consummation
of an Initial Business Combination or (ii) the distribution of the Trust Account.
Investment securities in the Company’s Trust Account consist
of $79,991,200 and $80,041,697 in United States Treasury Bills and $20,270 and $740 of cash equivalents as of September 30, 2012
and December 31, 2011, respectively. The Company classifies its United States Treasury and equivalent securities as held-to-maturity
in accordance with FASB ASC 320, "Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities
which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized
cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts. The carrying amount,
gross unrealized holding gains and fair value of held-to-maturity securities at September 30, 2012 and December 31, 2011 are as
follows:
|
|
Carrying
Amount
|
|
|
Gross
Unrealized
Holding
Gains (Loss)
|
|
|
Fair Value
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities – September 30, 2012
|
|
$
|
79,992,883
|
|
|
$
|
(1,683
|
)
|
|
$
|
79,991,200
|
|
U.S. Treasury Securities – December 31, 2011
|
|
$
|
80,037,237
|
|
|
$
|
4,460
|
|
|
$
|
80,041,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE I—FAIR VALUE MEASUREMENTS
The Company adopted FASB ASC 820, “Fair Value Measurements”
for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually. The adoption of FASB ASC 820 did not
have an impact on the Company’s financial position or results of operations.
The Company defines fair value as the amount at which an
asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that
is, other than in a forced or liquidation sale. The fair value estimates presented in the table below are based on information
available to the Company as of September 30, 2012 and December 31, 2011.
The accounting standard regarding fair value measurements
discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of
future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The
standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The following is a brief description of those three levels:
• Level 1: Observable inputs such
as quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted
prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
• Level 3: Unobservable inputs
that reflect the reporting entity's own assumptions.
Warrant Liability
The fair value of the derivative warrant liability was determined by the Company using the quoted
market prices for the publicly traded warrants. On reporting dates where there are no active trades the Company uses the last
reported closing trade price of the warrants to determine the fair value (Level 2). There were no transfers between Level 1, 2
or 3 during any periods presented. There are no assets written down to fair value on non-recurring basis.
The following table presents information about the Company’s
assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2012
and
December 31, 2011,
and indicates the fair value hierarchy of the valuation techniques
the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points
that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable
data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or
liability:
SCG Financial Acquisition Corp.
(a development stage company)
NOTES TO INTERIM FINANCIAL STATEMENTS
For the period from January 5, 2011 (date
of inception) to September 30, 2012
(Unaudited)
Description
|
|
Fair Value
|
|
|
Quoted Prices
In
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities held in Trust Account:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
$
|
79,991,200
|
|
|
$
|
79,991,200
|
|
|
|
—
|
|
|
|
—
|
|
December 31, 2011
|
|
$
|
80,041,697
|
|
|
$
|
80,041,697
|
|
|
|
—
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
$
|
1,920,000
|
|
|
|
—
|
|
|
$
|
1,920,000
|
|
|
|
—
|
|
December 31, 2011
|
|
$
|
3,600,000
|
|
|
|
—
|
|
|
$
|
3,600,000
|
|
|
|
—
|
|
NOTE J—PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred
stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.
As of September 30, 2012, the Company has not issued any shares of preferred stock.
NOTE K – SUBSEQUENT EVENTS
On October 11, 2012, the Company issued an additional $100,000
unsecured promissory note to the Sponsor. This note is non-interest bearing and is payable upon the consummation of the Initial
Business Combination.