NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE
1—ORGANIZATION AND NATURE OF BUSINESS OPERATIONS
Organization
and General
B.
Riley Principal Merger Corp. (the “Company”), a blank check corporation, was incorporated as a Delaware corporation
on October 30, 2018. The Company is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933,
as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”). On November 14, 2018, GA International Services Corp. (“GA International”), a California corporation,
owned by Great American Group, LLC (“Great American”), a wholly owned subsidiary of B. Riley Financial, Inc. (“B.
Riley Financial”), merged into the Company. GA International operated as GA International Services, LLC, a former California
limited liability company, from the date of its incorporation on October 9, 2012 through November 5, 2018, the date it was converted
from a limited liability company to a California corporation. All of the membership interests in GA International Services, LLC
were issued to Great American in 2012. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an “Initial Business
Combination”).
At
March 31, 2019, the Company had not commenced any operations. All activity of the Company includes the activity of GA International
as if GA International, which was owned by the Company from inception and activity related to the initial public offering on April
11, 2019 (the “Public Offering”) described below. The Company will not generate any operating revenues until after
completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of
interest income on cash and cash equivalents from the proceeds derived from the Public Offering described below. The Company has
selected December 31st as its fiscal year end.
Public
Offering
The
Company completed the sale of 12,500,000 Units at an offering price of $10.00 per unit through the Public Offering. B. Riley Principal
Sponsor Co., LLC (the “Sponsor”), a Delaware limited liability company, was incorporated on October 11, 2018 as a
wholly owned indirect subsidiary of B. Riley Financial. The Sponsor subscribed to purchase an aggregate of 425,000 Units at a
price of $10.00 per unit (the “Private Placement Unit”) in a private placement that closed on April 11, 2019 simultaneously
with the Public Offering. The sale of the 12,500,000 Units generated gross proceeds of $125,000,000, less underwriting commissions
of $2,500,000 (2% of gross proceeds) and other offering costs of $458,987. The Private Placement Units generated $4,250,000 of
proceeds.
Each
unit consists of one share of the Company’s Class A common stock, $0.0001 par value (each a “public share”),
and one-half of one redeemable warrant, with each whole warrant exercisable for one share of Class A common stock (each,
a “Warrant” and, collectively, the “Warrants” and, with respect to the warrants underlying the Private
Placement Units, the “Private Placement Warrants”). One Warrant entitles the holder thereof to purchase one whole
share of Class A common stock at a price of $11.50 per share.
The
Company granted the underwriters a 45-day option to purchase on a pro rata basis up to 1,875,000 additional units at the initial
public offering price less the underwriting discounts and commissions. On April 12, 2019, the Company consummated the closing
of the sale of 1,875,000 additional units (“Overallotment Units”) upon receiving notice of the underwriters’
election to exercise their overallotment option, generating additional gross proceeds of $18,750,000 and incurring additional
offering costs of $375,000 in underwriting fees. Simultaneously with the exercise of the overallotment, the Company consummated
the Private Placement of an additional 37,500 Private Placement Units to the Sponsor, generating gross proceeds of $375,000. In
addition, as a result of the underwriters’ election to exercise their overallotment option the Founder Shares, as defined
in Note 3, were no longer forfeitable.
Note
Payable - Related Party
On
November 16, 2018, the Sponsor agreed to loan the Company up to $300,000 (see Note 3) to support the Company’s initial formation
and operations. At March 31, 2019 and December 31, 2018, $67,950 and $50,000 was outstanding, respectively, on the loan and such
loan was repaid using proceeds from the Public Offering on April 12, 2019.
The
Trust Account
Upon
completion of the Public Offering and issuance of the Overallotment Units, $143,750,000 of proceeds were deposited in the Trust
Account to be invested only in U.S. government treasury bills with a maturity of 180 days or less or in money market funds registered
under the Investment Company Act and compliant with Rule 2a-7 thereof that maintain a stable net asset value of $1.00. Unless
and until the Company completes the Initial Business Combination, it may pay its expenses only from the net proceeds of the Public
Offering held outside the Trust Account, which was $1,685,930 on April 11, 2019, of which $450,864 was used to pay unpaid offering
costs payable and $67,950 was used to pay the promissory note payable to the Sponsor.
Except
with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the
proceeds from the Public Offering may not be released from the Trust Account until the earliest of: (i) the completion of
the Initial Business Combination; (ii) the redemption of any public shares properly tendered in connection with a stockholder
vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s
obligation to redeem 100% of its public shares if it does not complete the Initial Business Combination within 18 months from
the closing of the Public Offering; or (iii) the redemption of all of the Company’s public shares if the Company is
unable to complete the Initial Business Combination within 18 months from the closing of the Public Offering (at which such time
up to $100,000 of interest shall be available to the Company to pay dissolution expenses), subject to applicable law. The proceeds
deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority
over the claims of the Company’s public stockholders.
Initial
Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering,
although substantially all of the net proceeds of the Public Offering and the Private Placement are intended to be generally applied
toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more businesses or
assets with a fair market value equal to at least 80% of the assets held in the Trust Account less taxes payable on interest earned
on the Trust Account. There is no assurance that the Company will be able to successfully effect an Initial Business Combination.
The
Company, after signing a definitive agreement for an Initial Business Combination, will provide its public stockholders with the
opportunity to redeem all or a portion of their shares upon the completion of the Initial Business Combination, either (i) in
connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. However,
in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001.
In such case, the Company would not proceed with the redemption of its public shares and the related Initial Business Combination,
and instead may search for an alternate Initial Business Combination.
If
the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination,
a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate
amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination,
including interest but less taxes payable. As a result, such shares of Class A common stock have been recorded at redemption
amount and classified as temporary equity upon the completion of the Public Offering, in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities
from Equity.”
Pursuant
to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business
Combination within 18 months from the closing of the Public Offering, 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 the
public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest but less taxes payable (less up to $100,000 of interest to pay dissolution expenses), 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 liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for
claims of creditors and the requirements of other applicable law.
Letter Agreement
The Company’s Sponsor, officers and
directors have entered into a letter agreement with the Company, pursuant to which they have agreed, among other things (a) to
waive their redemption rights with respect to any Founder Shares, Private Placement Shares and any Public Shares held by them in
connection with the completion of the Initial Business Combination, (b) to waive their redemption rights with respect to their
Founder Shares, Private Placement Shares and public shares in connection with a stockholder vote to approve an amendment to the
Company’s amended and restated certificate of incorporation to modify the substance or timing of its obligation to redeem
100% of its public shares if it does not complete an Initial Business Combination within 18 months from the closing of the Public
Offering and (c) to vote their Founder Shares and any public shares purchased during or after the Public Offering (including in
open market and privately negotiated transactions) in favor of the Initial Business Combination.
Forward
Purchase Agreement
B.
Riley Principal Investments, LLC (“BRPI”), a Delaware limited liability company and an affiliate of the Sponsor, entered
into a forward purchase agreement with the Company to provide for the purchase by it (or its designees) of an aggregate of 2,500,000
units at $10.00 per unit for an aggregate purchase price of $25,000,000 in a private placement to close concurrently with the
closing of the Initial Business Combination.
The
proceeds from the sale of the forward purchase units may be used as part of the consideration to the sellers in the Initial Business
Combination, to pay expenses in connection with the Initial Business Combination or for working capital in the post-business combination
company. The forward purchase will be required to be made regardless of whether any Class A common stock is redeemed by the Company’s
public stockholders and is intended to provide the Company with a minimum funding level for the Initial Business Combination.
The forward purchaser will not have the ability to approve the Initial Business Combination prior to the signing of a material
definitive agreement. The forward purchase units will be issued only in connection with the closing of the Initial Business Combination.
The
Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which
they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares
and Private Placement Shares held by them if the Company fails to complete the Initial Business Combination within 18 months of
the closing of the Public Offering. However, if the Sponsor or any of the Company’s directors or officers acquires shares
of Class A common stock in or after the Public Offering, they are entitled to liquidating distributions from the Trust Account
with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
In
the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s
remaining stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s
stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock,
except that the Company will provide its stockholders with the opportunity to redeem their public shares for cash equal to their
pro rata share of the aggregate amount then on deposit in the Trust Account, under the circumstances, and, subject to the limitations,
described herein.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”).
The
Company’s unaudited condensed interim financial statements have been prepared in accordance with U.S. GAAP and the
rules and regulations of the SEC for interim financial information and the instructions to
Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by
U.S. GAAP. In the opinion of management, all adjustments considered for a fair presentation have
been included. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2019 or any other period. The accompanying unaudited condensed
interim financial statements should be read in conjunction with the Company’s audited financial statements and notes
thereto included in the Company’s prospectus filed with the SEC on April 9, 2019, as well as the Company’s
audited balance sheet statement and notes thereto included in the Company’s Form 8-K filed with the SEC on April
17, 2019.
Emerging
Growth Company
Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to
opt out of such extended transition period which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the
time private companies adopt the new or revised standard.
Net
Loss Per Common Share
The
Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per
common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period, excluding
shares of common stock subject to forfeiture. Net loss per common share is computed by dividing net gain/(loss) applicable to
common stockholders by the weighted average number of common shares outstanding during the period, plus, to the extent dilutive,
the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At March 31,
2019 and December 31, 2018, 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 under the treasury stock method. As a result, diluted
loss per common share is the same as basic loss per common share for the periods. In connection with the Company’s merger
with GA International on November 14, 2018, the Company completed a stock split 1 to 3,593,750 shares of Class B common stock
on November 19, 2018. The financial statements have been retroactively adjusted to reflect the stock split for all periods presented.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial
Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primary due to
their short term nature.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Deferred
Offering Costs
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses
of Offering.” Deferred offering costs of $372,422 and $162,500 as of March 31, 2019 and December 31, 2018, respectively,
consist principally of costs incurred in connection with preparation for the Public Offering. These costs, together with the underwriter
discount, will be charged to capital upon completion of the Public Offering in April 2019.
Income
Taxes
The
Company is included in the consolidated tax return of B. Riley Financial (the “Parent”). The Company calculates
the provision for income taxes by using a “separate return” method. Under this method the Company is assumed
to file a separate return with the tax authority, thereby reporting its taxable income or loss and paying the applicable tax to,
or receiving the appropriate refund from, the Parent. The Company’s current provision is the amount of tax payable
or refundable on the basis of a hypothetical, current year, separate return.
Any
difference between the tax provision (or benefit) allocated to the Company under the separate return method and payments to be
made to (or received from) the Parent for tax expense are treated as either dividends or capital contribution. Accordingly,
the amount by which the Company’s tax liability under the separate return method exceeds the amount of tax liability ultimately
settled as a result of using incremental expenses of the Parent is periodically settled as a capital contribution from the Parent
to the Company.
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.
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 March 31, 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 and city 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 and city 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.
On
December 22, 2017, the Tax Cut and Jobs Act (the “Tax Act”) was enacted into law resulting in a reduction in the federal
corporate income tax rate from 35% to 21% for years beginning in 2018. The enactment of the Tax Act also requires companies to
recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes
in tax laws in the period in which the new legislation is enacted. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The Company was at the time of the law change organized as a limited
liability company (“LLC”) that had elected to be treated as a single member LLC under the Internal Revenue Code. As
such, income, losses, and other tax attributes were primarily passed through to the sole owner. The Company upon conversation
to a C-Corporation became subject to the new rates and requirements for corporations under the Tax Act.
The
provision for income taxes was deemed to be immaterial.
Unrecognized
Tax Benefits
The
Company recognizes tax positions in the financial statements only when it is more likely than not that the position will be sustained
on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this
standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability
is established for differences between positions taken in a tax return and amounts recognized in the financial statements. There
were no unrecognized tax benefits as of March 31, 2019 and December 31, 2018. The Company recognizes accrued interest and
penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for interest expense and penalties
related to income tax matters as of March 31, 2019 and December 31, 2018. The Company is subject to income tax examinations
by major taxing authorities since inception.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have
a material effect on the Company’s financial statements.
NOTE
3 — RELATED PARTY TRANSACTIONS
Founder
Shares
In
November 2018, upon the completion of the merger of GA International Services Corp. and the Company, 3,593,750 shares of Class B
common stock (the “Founder Shares”) were issued to Great American in exchange for all of the common stock of GA International
Services Corp. The financial statement reflects the issuance of these shares retroactively for all periods presented. As used
herein, unless the context otherwise requires, Founder Shares shall be deemed to include the shares of Class A common stock
issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the units sold
in the Public Offering, the Founder Shares automatically convert into shares of Class A common stock at the time of the Initial
Business Combination and are subject to certain transfer restrictions, as described in more detail below, and the holders of the
Founder Shares, as described in more detail below, have agreed to certain restrictions and will have certain registration rights
with respect thereto. The number of Founder Shares issued was determined based on the expectation that the Founder Shares would
represent 20% of the outstanding shares of common stock upon completion of the Public Offering.
The
Company’s initial stockholders, officers and directors have agreed, not to transfer, assign or sell any Founder Shares held
by them until the earlier to occur of: (i) one year after the completion of the Initial Business Combination, (ii) the
last sale price of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least
150 days after the Initial Business Combination, or (iii) the date following the completion of the Initial Business
Combination on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction
that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Business
Combination Marketing Agreement
The
Company engaged B. Riley FBR, Inc. as advisors in connection with its Initial Business Combination to assist it in arranging meetings
with its stockholders to discuss a potential business combination and the target business’ attributes, introduce it to potential
investors that may be interested in purchasing its securities, assist it in obtaining stockholder approval for its Initial Business
Combination and assist it with the preparation of press releases and public filings in connection with the Initial Business Combination.
The Company will pay B. Riley FBR, Inc. for such services upon the consummation of the Initial Business Combination a cash fee
in an amount equal to 3.5% of the gross proceeds of the Public Offering (exclusive of any applicable finders’ fees which
might become payable). Pursuant to the terms of the business combination marketing agreement, no fee will be due if the Company
does not complete an Initial Business Combination.
Administrative
Fees
Commencing
on the date of the prospectus, the Company agreed to pay an affiliate of the Sponsor a total of $10,000 a month for office space,
utilities and secretarial and administrative support. Upon completion of the Company’s Initial Business Combination or liquidation,
the Company will cease paying these monthly fees.
Registration
Rights
The
holders of Founder Shares, Private Placement Units, Private Placement Shares, Private Placement Warrants and units that may be
issued upon conversion of working capital loans, if any, have registration rights to require the Company to register the resale
of any of its securities held by them (in the case of the Founder Shares, only after conversion of such shares to shares of Class A
common stock) pursuant to a registration rights agreement. These holders are also entitled to certain piggyback registration rights.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the
Securities Act to become effective until termination of the applicable lock-up period for the securities to be registered. The
Company will bear the expenses incurred in connection with the filing of any such registration statements. The Forward Purchase
Agreement has substantially similar registration rights.
Note
Payable - Related Party
On
November 16, 2018, the Sponsor agreed to loan the Company up to $300,000 to support the Company’s initial formation and
operations. At March 31, 2019 and December 31, 2018, $67,950 and $50,000 was outstanding, respectively, on the loan and such loan
was repaid using proceeds from the Public Offering on April 12, 2019.
Payable
to Related Party
The
Company also had an amount payable to Great American of $8,279 at March 31, 2019 and December 31, 2018. This amount
primarily reflects expenses relating to income taxes and formation expenses that were paid on behalf of the Company by Great
American.
NOTE
4 — STOCKHOLDER’S EQUITY
Common
Stock
The
authorized common stock of the Company includes up to 100,000,000 shares of Class A common stock and 25,000,000 shares of
Class B common stock. If the Company enters into an Initial Business Combination, it may (depending on the terms of such
an Initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is
authorized to issue at the same time as the Company’s stockholders vote on the Initial Business Combination to the extent
the Company seeks stockholder approval in connection with the Initial Business Combination. Holders of the Company’s common
stock are entitled to one vote for each share of common stock. In connection with the Company’s merger with GA International
on November 14, 2018, the Company completed a stock split 1 to 3,593,750 shares of Class B common stock on November 19, 2018.
At March 31, 2019 and December 31, 2018, there were 3,593,750 shares of Class B common stock issued and outstanding.
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 Company’s board of directors. At March 31, 2019 and December 31, 2018, there
were no shares of preferred stock issued or outstanding.
Warrants
Warrants
may only be exercised for a whole number of shares. No fractional Warrants will be issued upon separation of the units and only
whole Warrants will trade. The Warrants will become exercisable on the later of (a) 30 days after the completion of the Initial
Business Combination or (b) 12 months from the closing of the Public Offering; provided in each case that the Company has an effective
registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Warrants
and a current prospectus relating to them is available (or the Company permits holders to exercise their Warrants on a cashless
basis and such cashless exercise is exempt from registration under the Securities Act). The Company will as soon as practicable,
but in no event later than 15 business days, after the closing of the Initial Business Combination, use its best efforts to file
with the Securities and Exchange Commission (“SEC”) a registration statement for the registration, under the Securities
Act, of the shares of Class A common stock issuable upon exercise of the Warrants, to cause such registration statement to become
effective within 60 business days after the closing of the Initial Business Combination and to maintain a current prospectus relating
to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If the
shares issuable upon exercise of the warrants are not registered under the Securities Act by the 60
th
business
day after the closing of the Initial Business Combination, the Company will be required to permit holders to exercise their warrants
on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding
the above, if the Company’s Class A common stock is at the time of any exercise of a warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act,
the Company may, at its option, require holders of Warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects, the Company will not be required
to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not available.
The
Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The
Company may call the Warrants for redemption (except with respect to the Private Placement Warrants):
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in
whole and not in part;
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at
a price of $0.01 per warrant;
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upon
a minimum of 30 days’ prior written notice of redemption (the “30-day redemption
period”); and
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●
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if,
and only if, the last sale price of the Class A common stock equals or exceeds $18.00
per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within a 30-trading day period ending on the third
trading day prior to the date on which the Company sends the notice of redemption to
the warrant holders.
|
If
the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the
Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The
exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain
circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. In addition,
if (x) the Company issues additional shares of Class A common stock or securities convertible into or exercisable or exchangeable
for shares of Class A common stock for capital raising purposes in connection with the closing of the Initial Business Combination
(excluding any issuance of securities under the Forward Purchase Agreement), at an issue price or effective issue price of less
than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by
the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking
into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance (the “Newly
Issued Price”)), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,
and interest thereon, available for funding the Initial Business Combination, and (z) the volume weighted average trading price
of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company
consummates the Initial Business Combination (the “Market Value”) is below $9.20 per share, the exercise price of
the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued
Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to
180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the Company be required
to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser
of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock
underlying such unit. There will be no redemption rights or liquidating distributions with respect to the warrants, which will
expire worthless if the Company fails to complete an Initial Business Combination within the 18-month time period.
The
Private Placement Warrants are identical to the Warrants underlying the units sold in the Public Offering, except that the Private
Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be
transferable, assignable or salable until 30 days after the completion of the Initial Business Combination, subject to certain
limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial
purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the
initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable
by such holders on the same basis as the Warrants.
