The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONS
Social Capital Hedosophia
Holdings Corp. (the “Company”) is a recently incorporated blank check company incorporated as a Cayman Islands exempted
company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses (a “Business Combination”).
All activity from May
5, 2017 (inception) through June 30, 2018 related to the Company’s formation, the offering described below and identifying
a target company for a Business Combination.
The registration statements
for the Company’s initial public offering were declared effective on September 13, 2017. The Company consummated a public
offering of 69,000,000 units on September 18, 2017 (the “Public Offering”), including 9,000,000 units subject to the
underwriters’ over-allotment option, generating gross proceeds of $690,000,000 and net proceeds of $679,854,837 after deducting
$10,145,163 of transaction costs ($24,150,000 of deferred underwriting expenses may be paid upon the completion of a Business Combination),
which is discussed in Note 4. The units (“Units”) sold pursuant to the Offering were sold at an offering price of $10.00
per Unit. Each Unit consists of one of the Company’s Class A ordinary shares, par value $0.0001 per share, and one-third
of one warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per
share, subject to certain adjustments. In addition, the Company generated proceeds of $12,000,000 from the private placement (the
“Private Placement”) of 8,000,000 warrants (“Private Placement Warrants”) at a price of $1.50 per warrant
to SCH Sponsor Corp. (the “Sponsor”).
In connection with the
closing of the Offering and the Private Placement on September 18, 2017 (the “Closing Date”), an amount of $690,000,000
(or $10.00 per Class A ordinary share sold to the public in the Offering included in the Units (“Public Shares”)) from
the sale of the Units and Private Placement Warrants was placed in a trust account (the “Trust Account”). Funds held
in the Trust Account are invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180 days or less or
in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only
in direct U.S. government treasury obligations until the earlier of (i) the consummation of the Company’s initial Business
Combination; (ii) the redemption of any Public Shares properly tendered in connection with a shareholder vote to amend the Company’s
Amended and Restated Memorandum and Articles of Association to modify the substance or timing of the Company’s obligation
to redeem 100% of its Public Shares if it does not complete a Business Combination within 24 months from the Closing Date; and
(iii) the Company’s failure to consummate a Business Combination within the prescribed time. The remaining net proceeds (not
held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses. Additionally, the interest earned on the Trust Account balance may be released
to the Company to pay the Company’s tax obligations. Placing funds in the Trust Account may not protect those funds from
third party claims against the Company. Although the Company will seek to have all vendors, service providers (other than its independent
auditors), prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of
any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The
Sponsor has agreed that it will be liable to the Company under certain circumstances if and to the extent any claims by such persons
reduce the amount of funds in the Trust Account below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held
in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets,
in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver
of any and all rights to seek access to the Trust Account and except as to any claims under the indemnity of the underwriters of
the Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). The Company has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations
and believes that the Sponsor’s only assets are securities of the Company. Therefore, the Sponsor may not be able to satisfy
those obligations should they arise.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Public Offering and Private Placement,
although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination.
The Company’s Units, warrants and Class A ordinary shares are listed on the New York Stock Exchange (“NYSE”).
Pursuant to the NYSE listing rules, the Company’s initial Business Combination must be with a target business or businesses
whose collective fair market value is at least equal to 80% of the balance in the Trust Account (excluding deferred underwriting
commissions and taxes payable on the income earned on the Trust Account) at the time of the execution of a definitive agreement
for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. There is no assurance
that the Company will be able to effect a Business Combination successfully.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
In connection with any
proposed initial Business Combination, the Company will either (1) seek shareholder approval of such initial Business Combination
at a meeting called for such purpose or (2) provide shareholders with the opportunity to sell their Public Shares to the Company
by means of a tender offer, in each case where shareholders may seek to redeem their Public Shares into their pro rata share of
the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. If the Company seeks shareholder
approval of a Business Combination and it does not conduct redemptions in connection with a Business Combination pursuant to the
tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder,
together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from redeeming its Public Shares with respect to an aggregate of more than 15% of the Public Shares sold in the Public Offering.
The Company will proceed
with a Business Combination only if it has net tangible assets of at least $5,000,001 upon consummation of the Business Combination
and, in the case of a shareholder vote, a majority of the issued and outstanding shares of the Company voted are voted in favor
of the Business Combination. In connection with any shareholder vote required to approve any Business Combination, the Sponsor
has agreed (i) to vote any of its respective ordinary shares in favor of the initial Business Combination and (ii) not to redeem
any of its respective ordinary shares in connection therewith.
Holders of warrants sold
as part of the Units will not be entitled to vote on the proposed Business Combination and will have no conversion or liquidation
rights with respect to their ordinary shares underlying such warrants.
Pursuant to the Company’s
Amended and Restated Memorandum and Articles of Association, if the Company is unable to complete its initial Business Combination
within 24 months from the Closing Date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares and
(iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of ordinary
shares and the Company’s board of directors, dissolve and liquidate. If the Company is unable to consummate an initial Business
Combination within 24 months from the Closing Date and is forced to redeem 100% of the outstanding Public Shares for a pro rata
portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust
Account, plus any pro rata interest earned on the funds held in the Trust Account and not released to the Company to pay any of
its taxes payable and less up to $100,000 of interest that may be released to the Company to pay dissolution expenses. The Sponsor
has entered into a letter agreement with the Company, pursuant to which it has waived its right to liquidating distributions from
the Trust Account with respect to its Founder Shares (as defined in Note 8) if the Company fails to complete a Business Combination
within 24 months after the Closing Date. However, if the Sponsor acquires Public Shares after the Public Offering, it will be entitled
to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete the Business
Combination within 24 months after the Closing Date.
If the Company is unable
to complete its initial Business Combination within 24 months from the Closing Date and expends all of the net proceeds of the
Public Offering not deposited in the Trust Account, without taking into account any interest earned on the Trust Account, the Company
expects that the per-share redemption price for Class A ordinary shares will be $10.00, plus interest and less amounts released
to the Company to pay its tax obligations. The proceeds deposited in the Trust Account could, however, become subject to claims
of the Company’s creditors that are in preference to the claims of the Company’s shareholders. In addition, if the
Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds
held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject
to the claims of third parties with priority over the claims of the Company’s shareholders. Therefore, the actual per-share
redemption price may be less than $10.00.
NOTE 2. LIQUIDITY
The Company has principally
financed its operations from inception using proceeds from the sale of its equity securities to its shareholders prior to the Public
Offering and such amount of proceeds from the Public Offering that were placed in an account outside of the Trust Account for working
capital purposes. As of June 30, 2018, the Company had $817,157 in its operating bank accounts, $697,131,808 in securities held
in the Trust Account to be used for a Business Combination or to repurchase or redeem its ordinary shares in connection therewith
and working capital of $277,889. Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through
August 2019.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
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
10 of Regulation S-X of the Securities and Exchange Commission (“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 comprehensive 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, 2017 as filed with the SEC on February 14, 2018, which contains the audited financial statements and notes thereto.
The financial information as of December 31, 2017 is derived from the audited financial statements presented in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2017. The interim results for the three and six months ended June 30,
2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other future
periods.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”),
as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt
out of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using
the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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 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 June 30, 2018 and December 31, 2017.
Marketable Securities Held in Trust Account
At June 30, 2018 and December
31, 2017, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.
Ordinary Shares Subject to Possible Redemption
The Company accounts for
its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified
as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that
feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are
classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered
to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2018
and December 31, 2017, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside
of the shareholders’ equity section of the Company’s balance sheets.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(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.
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’s management determined that the Cayman Islands is the Company’s
only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income
tax expense. As of June 30, 2018 and December 31, 2017, 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 over the next twelve months.
The Company may be subject
to potential examination by U.S. federal, U.S. states or 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 U.S. federal, U.S. state 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.
The Company’s tax
provision is zero because the Company is organized in the Cayman Islands with no connection to any other taxable jurisdiction.
As such, the Company has no deferred tax assets. The Company is considered to be an exempted Cayman Islands company and is presently
not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
Net Loss per Ordinary Share
Net loss per ordinary
share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. Weighted average
shares at June 30, 2017 were reduced for the effect of an aggregate of 1,500,000 ordinary shares that were then subject to forfeiture
if the over-allotment option was not exercised by the underwriters. The Company applies the two-class method in calculating earnings
per share. Ordinary shares subject to possible redemption at June 30, 2018, which are not currently redeemable and are not redeemable
at fair value, have been excluded from the calculation of basic loss per 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 warrants sold in the Public
Offering and Private Placement to purchase 31,000,000 Class A ordinary shares in the calculation of diluted loss per share, since
the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per ordinary share is
the same as basic loss per ordinary share for the periods.
Reconciliation of Net Loss per Ordinary
Share
The Company’s net
income is adjusted for the portion of income that is attributable to ordinary shares subject to redemption, as these shares only
participate in the income of the Trust Account and not the losses of the Company. Accordingly, basic and diluted loss per ordinary
share is calculated as follows:
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
For the Period
from May 5,
2017 (Inception)
Through
June 30,
|
|
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
Net income (loss)
|
|
$
|
2,441,116
|
|
|
$
|
4,199,140
|
|
|
$
|
(5,406
|
)
|
|
Less: Income attributable to ordinary shares subject to redemption
|
|
|
(2,843,330
|
)
|
|
|
(4,975,572
|
)
|
|
|
—
|
|
|
Adjusted net loss
|
|
$
|
(402,214
|
)
|
|
$
|
(776,432
|
)
|
|
$
|
(5,406
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
20,067,699
|
|
|
|
20,049,082
|
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per ordinary share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.00
|
)
|
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which,
at times may exceed the Federal depository insurance coverage of $250,000. At June 30, 2018 and December 31, 2017, the Company
had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
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” (“ASC 820”), approximates the carrying amounts represented in the accompanying balance sheet,
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 financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
In its Public Offering,
the Company sold 69,000,000 Units at a price of $10.00 per Unit in the Public Offering. Each Unit consists of one Class A ordinary
share and one-third of one warrant (each whole warrant, a “Warrant”). Each whole Warrant entitles the holder to purchase
one Class A ordinary share at a price of $11.50 per share. Each Warrant will become exercisable commencing on the later of 30 days
after the Company’s completion of an initial Business Combination and 12 months from the Closing Date and expire five years
from the completion of a Business Combination. The Company may redeem the outstanding Warrants at a price of $0.01 per Warrant
upon a minimum of 30 days’ prior written notice of redemption, and only in the event that the last sale price of the Class
A ordinary shares is at least $18.00 per share for any 20 trading days within a 30-trading day period ending on the third day prior
to the date on which notice of redemption is given. If the Company redeems the Warrants as described above, it will have the option
to require all holders that wish to exercise their Warrants to do so on a “cashless basis.” In accordance with the
warrant agreement relating to the Warrants sold in the Public Offering, the Company is required to use its best efforts to file
a registration statement covering the issuance of the shares underlying the Warrants within 15 business days after the closing
of the Business Combination and to maintain the effectiveness of such registration statement. No Warrants will be exercisable for
cash unless the Company has an effective registration statement covering the Class A ordinary shares issuable upon exercise of
the Warrants and a current prospectus relating to such shares. If the issuance of the shares issuable upon exercise of the Warrants
is not registered under the Securities Act, holders will be permitted to exercise their Warrants on a cashless basis. If the Company
is unable to consummate a Business Combination within 24 months from the Closing Date, the Company will redeem 100% of the Public
Shares using the funds in the Trust Account as described in Note 1. In such event, the Warrants will expire worthless.
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the
Public Offering, the Company’s Sponsor purchased an aggregate of 8,000,000 Private Placement Warrants at $1.50 per warrant
(for an aggregate purchase price of $12,000,000) from the Company. All of the proceeds received from these purchases were placed
in the Trust Account.
The Private Placement
Warrants are identical to the Warrants included in the Units sold in the Public Offering except that the Private Placement Warrants:
(i) are not redeemable by the Company, (ii) may be exercised for cash or on a cashless basis, so long as they are held by the Sponsor
or any of its permitted transferees and (iii) are entitled to registration rights (including the ordinary shares issuable upon
exercise of the Private Placement Warrants). Additionally, the purchasers have agreed not to transfer, assign or sell any of the
Private Placement Warrants, including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants (except
to certain permitted transferees), until 30 days after the completion of the Company’s initial Business Combination.
In order to fund working
capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Company’s
Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to,
loan the Company funds as may be required. In the event that the initial Business Combination does not close, the Company may use
a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination
entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
NOTE 6. RELATED PARTY TRANSACTIONS
Advance from Related Party
During the six months
ended June 30, 2018 and the year ended December 31, 2017, a related party advanced an aggregate of $346,895 and $126,378, respectively,
for working capital purposes and for costs associated with the formation of the Company and offering costs. The advances are non-interest
bearing, unsecured and due on demand. The Company repaid $126,378 of advances during the six months ended June 30, 2018. As of
June 30, 2018 and December 31, 2017, outstanding advances amounted to $346,895 and $126,378, respectively.
Administrative Services Agreement
The Company entered into
an agreement whereby, commencing on September 18, 2017 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, administrative
and support services. For the three and six months ended June 30, 2018, the Company incurred $30,000 and $60,000 in fees for these
services. At June 30, 2018 and December 31, 2017, $95,000 and $35,000, respectively, is included in accounts payable and accrued
expenses in the accompanying condensed balance sheets.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company granted the
underwriters a 45-day option to purchase up to 9,000,000 additional Units to cover over-allotments. On September 14, 2017, the
underwriters elected to exercise their over-allotment option to purchase 9,000,000 Units at a purchase price of $10.00 per Unit.
The underwriters were paid a cash underwriting discount of $10,000,000 of the gross proceeds of the Public Offering. In addition,
the underwriters are entitled to a deferred fee of three and one-half percent (3.5%) of the gross proceeds of the Public Offering,
or $24,150,000, payable upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms
of the underwriting agreement. The underwriters have agreed to waive their right to the deferred underwriting commission held in
the Trust Account in the event the Company does not complete a Business Combination.
The underwriters agreed
to reimburse the Company for an amount equal to 10% of the discount paid to the underwriters for financial advisory services provided
by Connaught (UK) Limited in connection with the Public Offering, of which $1,000,000 was paid at the closing of the Public Offering
and up to $2,415,000 will be payable at the time of the closing of the initial Business Combination.
The underwriters also
agreed to reimburse the Company for certain offering expenses. As of December 31, 2017, the amount to be reimbursed from the underwriters
amounted to $657,138, which was recorded as a receivable, with a corresponding credit to additional paid in capital. The amount
was repaid during the six months ended June 30, 2018.
The Sponsor, the holders
of the Private Placement Warrants (or underlying Class A ordinary shares) and the holders of any warrants (or underlying Class
A ordinary shares) issued upon conversion of working capital loans made by the Company’s Sponsor, officers, directors or
their affiliates, if any such loans are issued, will be entitled to registration rights with respect to their securities pursuant
to an agreement dated as of September 13, 2017. The holders of 30% of the registrable securities are entitled to demand that the
Company register these securities. In addition, the holders have certain “piggy-back” registration rights on registration
statements filed after the Company’s consummation of a Business Combination. However, the registration rights agreement will
provide that the Company will not permit any registration statement to become effective until termination of applicable lock-up
periods with respect to such securities.
NOTE 8. SHAREHOLDERS’ EQUITY
Preferred Shares
The Company is authorized
to issue 5,000,000 preferred shares 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. As of June 30, 2018 and December 31, 2017, there are
no preferred shares issued or outstanding.
Ordinary Shares
The Company is authorized
to issue 500,000,000 Class A ordinary shares and 50,000,000 Class B ordinary shares, both with a par value of $0.0001 per share.
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
Holders of the Class A
ordinary shares are entitled to one vote for each Class A ordinary share; provided that only holders of the Class B ordinary shares
have the right to vote on the election of directors prior to the initial Business Combination. At June 30, 2018 and December 31,
2017, there were 2,857,675 and 2,780,258 Class A ordinary shares issued and outstanding, excluding 66,142,325 and 66,219,742 Class
A ordinary shares subject to possible redemption, respectively.
The Company had entered
into a Securities Subscription Agreement, dated as of May 10, 2017 (the “Founder’s Purchase Agreement”), with
the Sponsor pursuant to which the Sponsor subscribed for an aggregate of 14,375,000 Class B ordinary shares, par value $0.0001
per share of the Company, for an aggregate purchase price of $25,000. On May 18, 2017, the Sponsor surrendered 2,875,000 Class
B ordinary shares for no value, and on August 23, 2017 and September 13, 2017, the Company approved share capitalizations resulting
in an aggregate of 17,250,000 Class B ordinary shares issued and outstanding and held by the Sponsor (including the Class A ordinary
shares issuable upon conversion thereof, the “Founder Shares”), of which 2,250,000 were subject to forfeiture. As a
result of the underwriters’ election to fully exercise their over-allotment option on September 14, 2017, no Founder Shares
are subject to forfeiture.
The Class B ordinary shares
will automatically convert into Class A ordinary shares at the time of the initial Business Combination, on a one-for-one basis,
subject to adjustment for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and
the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares, or equity-linked
securities, are issued or deemed issued in excess of the amounts sold in the Public Offering and related to the closing of the
initial Business Combination, the ratio at which the Class B ordinary shares shall convert into Class A ordinary shares will be
adjusted (unless the holders of a majority of the outstanding Class B ordinary shares agree to waive such anti-dilution adjustment
with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of
all Class B ordinary shares will equal, in the aggregate, 20% of the sum of all ordinary shares outstanding upon completion of
the Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with the
initial Business Combination, excluding any Class A ordinary shares or equity-linked securities issued, or to be issued, to any
seller in the initial Business Combination. Holders of Founder Shares may also elect to convert their Class B ordinary shares into
an equal number of Class A ordinary shares. At June 30, 2018 and December 31, 2017, 17,250,000 Class B ordinary shares were issued
and outstanding.
The holders of the Class
B ordinary shares agreed not to transfer such shares until one year after the date of the consummation of an initial Business Combination
or earlier if, subsequent to an initial Business Combination, (i) the last reported sales price of the Company’s Class A
ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions
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 (ii) the Company consummates a subsequent liquidation, merger, share exchange or
other similar transaction which results in all of the Company’s shareholders having the right to exchange their Class A ordinary
shares for cash, securities or other property.
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.
|
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
The following table presents
information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2018 and December
31, 2017, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
Description
|
|
Level
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
697,131,808
|
|
|
$
|
691,941,351
|
|
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.
Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the financial statements.
