NRX Pharmaceuticals, Inc. - Quarter Report: 2018 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
quarterly period ended June 30, 2018
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
transition period
from __________ to __________
Commission
File Number: 001-38302
BIG ROCK PARTNERS ACQUISITION CORP.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
82-2844431
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
|
2645 N. Federal Highway, Suite 230
Delray Beach, FL
|
33483
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (310) 734-2300
N/A
(Former
name or former address, if changed since last report)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No
☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Website, if any, every Interactive Date
File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
☒
No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
Large
accelerated filer ☐
|
|
Accelerated
filer ☐
|
|
Non-accelerated
filer ☐
|
|
Smaller
reporting company ☒
|
|
(Do not
check if a smaller reporting company)
|
|
Emerging
growth company ☒
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes
☒
No ☐
As of
August 3, 2018, there were 9,035,500 shares of the Company’s
common stock, par value $0.001, issued and
outstanding.
TABLE OF CONTENTS
|
1
|
||
|
|
|
|
|
1
|
||
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
8
|
||
|
|
|
|
|
10
|
||
|
|
|
|
|
10
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
12
|
||
PART I - FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
BIG ROCK PARTNERS
ACQUISITION CORP.
Condensed Balance Sheets
|
|
June
30,
2018
|
December
31,
2017
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash
|
$139,613
|
$449,374
|
|
Prepaid expenses
and other current assets
|
76,433
|
87,002
|
|
Total Current
Assets
|
216,046
|
536,376
|
|
|
|
|
|
Marketable
securities held in Trust Account
|
69,482,930
|
69,029,443
|
|
TOTAL
ASSETS
|
$69,698,976
|
$69,565,819
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts payable
and accrued expenses
|
$204,386
|
$85,671
|
|
Income tax
payable
|
13,063
|
—
|
|
Accrued offering
costs
|
—
|
7,500
|
|
Total
Current Liabilities
|
217,449
|
93,171
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
Common stock
subject to possible redemption, 6,412,916 and 6,444,515 shares at
redemption value as of June 30, 2018 and December 31, 2017,
respectively
|
64,481,518
|
64,472,647
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
Preferred stock,
$0.001 par value; 1,000,000 authorized, none issued and
outstanding
|
—
|
—
|
|
Common stock,
$0.001 par value; 100,000,000 shares authorized; 2,622,584 and
2,590,985 shares issued and outstanding (excluding 6,412,916 and
6,444,515 shares subject to possible redemption) as of June 30,
2018 and December 31, 2017, respectively
|
2,623
|
2,591
|
|
Additional paid-in
capital
|
5,093,540
|
5,102,443
|
|
Accumulated
deficit
|
(96,154)
|
(105,033)
|
|
Total
Stockholders’ Equity
|
5,000,009
|
5,000,001
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$69,698,976
|
$69,565,819
|
The
accompanying notes are an integral part of the condensed financial
statements.
1
BIG ROCK PARTNERS ACQUISITION
CORP.
Condensed Statement of Operations
(Unaudited)
|
|
Three Months
Ended
June
30,
2018
|
Six Months
Ended
June
30,
2018
|
|
|
|
|
|
Operating
costs
|
$271,810
|
$464,184
|
|
Loss
from operations
|
(271,810)
|
(464,184)
|
|
|
|
|
|
Other
income:
|
|
|
|
Interest
income
|
272,482
|
486,051
|
|
Unrealized gain on
marketable securities held in Trust Account
|
1,674
|
75
|
|
Other
income
|
274,156
|
486,126
|
|
|
|
|
|
Income before
provision for income taxes
|
2,346
|
21,942
|
|
Provision for
income taxes
|
(8,948)
|
(13,063)
|
|
Net
Income (Loss) Income
|
$(6,602)
|
$8,879
|
|
|
|
|
|
Weighted average
shares outstanding, basic and diluted (1)
|
2,605,782
|
2,598,424
|
|
|
|
|
|
Basic
and diluted net loss per common share (2)
|
$(0.06)
|
$(0.13)
|
(1)
Excludes
an aggregate of up to 6,412,916 shares subject to possible
redemption at June 30, 2018.
(2)
Net
loss per common share - basic and diluted excludes interest income
attributable to common stock subject to possible redemption of
$158,321 and $355,325, respectively, for the three and six months
ended June 30, 2018 (see Note 3).
The
accompanying notes are an integral part of the condensed financial
statements.
2
BIG ROCK PARTNERS ACQUISITION CORP.
Condensed Statement of Cash Flows
(Unaudited)
|
|
Six Months
Ended
June
30,
2018
|
|
Cash
Flows from Operating Activities:
|
|
|
Net
income
|
$8,879
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
Interest earned on
marketable securities held in Trust Account
|
(486,051)
|
|
Unrealized gain on
marketable securities held in Trust Account
|
(75)
|
|
Changes in
operating assets and liabilities:
|
|
|
Prepaid
expenses
|
10,569
|
|
Accounts payable
and accrued expenses
|
118,715
|
|
Income tax
payable
|
13,063
|
|
Net
cash used in operating activities
|
(334,900)
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
Cash withdrawn from
Trust Account
|
32,639
|
|
Net
cash provided by investing activities
|
32,639
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
Payment of offering
costs
|
(7,500)
|
|
Net
cash used in financing activities
|
(7,500)
|
|
|
|
|
Net
Change in Cash
|
(309,761)
|
|
Cash
- Beginning
|
449,374
|
|
Cash
- Ending
|
$139,613
|
|
|
|
|
Supplemental
disclosure of noncash investing and financing
activities:
|
|
|
Change in value of
common stock subject to possible redemption
|
$8,871
|
The
accompanying notes are an integral part of the condensed financial
statements.
3
BIG ROCK PARTNERS
ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
Big
Rock Partners Acquisition Corp. (the “Company”) is a
blank check company incorporated in Delaware on September 18, 2017.
The Company was formed for the purpose of acquiring, through a
merger, share exchange, asset acquisition, stock purchase,
reorganization, recapitalization, or other similar business
transaction, one or more operating businesses or entities that the
Company has not yet identified (a “Business
Combination”). Although the Company is not limited to a
particular industry or geographic region for purposes of
consummating a Business Combination, the Company is focusing on
businesses in the senior housing and care industry in the United
States.
All
activity through June 30, 2018 relates to the Company’s
formation, the initial public offering (the “Initial Public
Offering”) of 6,900,000 units (the “Units”), the
simultaneous sale of 272,500 units (the “Private Placement
Units”) in a private placement to Big Rock Partners Sponsor, LLC (the
“Sponsor”), and the Company’s search for a
target business with which to complete a Business
Combination.
The
Company will have until November 22, 2018 to complete a Business
Combination. If the Company anticipates that it may not be able to
consummate a Business Combination by November 22, 2018, the Company
may extend the period of time to consummate a Business Combination
up to two times, each by an additional three months (for a total of
up to 18 months to complete a Business Combination) (the
“Combination Period”). Pursuant to the terms of the
Company's Amended and Restated Certificate of Incorporation and the
trust agreement entered into between the Company and Continental
Stock Transfer & Trust Company on November 20, 2017, in order
to extend the time available for the Company to consummate a
Business Combination, the Sponsor or its affiliates or designees
must deposit into the Trust Account $690,000 ($0.10 per share) for
each three month extension, up to an aggregate of $1,380,000, or
$0.20 per share, if the Company extends for the full six months, on
or prior to the date of the applicable deadline. The Sponsor and
its affiliates or designees are not obligated to fund the Trust
Account to extend the time for the Company to complete a Business
Combination.
NOTE 2. LIQUIDITY
As of
June 30, 2018, the Company had $139,613 in its operating bank
accounts, $69,482,930 in marketable securities held in the Trust
Account to be used for a Business Combination or to repurchase or
convert stock in connection therewith and a working capital deficit
of $77,836. As of June 30, 2018, approximately $483,000 of the
amount on deposit in the Trust Account represented interest income,
which is available to pay the Company’s tax obligations. To
date the Company has withdrawn approximately $33,000 of interest
from the Trust Account in order to pay the Company’s
taxes.
Until
the consummation of a Business Combination, the Company will be
using the funds not held in the Trust Account for identifying and
evaluating prospective acquisition candidates, performing due
diligence on prospective target businesses, paying for travel
expenditures, selecting target businesses to acquire, and
structuring, negotiating and consummating the Business
Combination.
On July
30, 2018, an affiliate of the
Sponsor, committed to provide an aggregate of $200,000 in
loans to the Company in order to finance transaction costs in
connection with a Business Combination (see Note 8). To the extent
advanced, the loans will be evidenced by a promissory note, will be
non-interest bearing, unsecured and will only be repaid upon the
completion of a Business Combination. The loans may also be
convertible into units at a price of $10.00 per unit. The units
would be identical to the Private Placement Units. There are
no amounts currently outstanding.
The
Company may raise additional capital through loans or additional
investments from the Sponsor or its stockholders, officers,
directors, or third parties. Other than as described above, the
Company’s officers and directors and the Sponsor may, but are
not obligated to, loan the Company funds, from time to time, in
whatever amount they deem reasonable in their sole discretion, to
meet the Company’s working capital needs.
The
Company may need to obtain additional financing either to complete
a Business Combination or because it becomes obligated to redeem a
significant number of public shares upon completion of a Business
Combination, in which case the Company may issue additional
securities or incur debt in connection with such Business
Combination. None of the
Sponsor, stockholders, officers or directors, or third parties is
under any obligation to advance funds to, or invest in, the
Company. Accordingly, the Company may not be able to obtain
additional financing. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to
curtailing operations, suspending the pursuit of a potential
transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. Even if the Company can
obtain sufficient financing or raise additional capital, it only
has until November 22, 2018 (or May 22, 2019, if extended) to
consummate an acquisition. There is no assurance that the Company
will be able to do so prior to November 22, 2018 (or May 22, 2019,
if extended).
4
BIG ROCK PARTNERS ACQUISITION 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 8 of Regulation S-X of the
Securities and Exchange Commission (the “SEC”). Certain
information or footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they
do not include all the information and footnotes necessary for a
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
March 23, 2018, which contains the audited financial statements and
notes thereto. The interim results for the 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 future
interim periods.
Use of estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period.
Making
estimates requires management to exercise significant judgment. It
is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the
date of the financial statements, which management considered in
formulating its estimate, could change in the near term due to one
or more future confirming events. Accordingly, the actual results
could differ significantly from the Company’s
estimates.
Marketable securities held in Trust Account
At June
30, 2018 and December 31, 2017, the assets held in the Trust
Account were substantially held in U.S. Treasury Bills. During the
six months ended June 30, 2018, the Company withdrew $32,639 of
interest income to pay its franchise tax obligations.
Net loss per common share
Net
loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding for the
period. The Company applies the two-class method in calculating
earnings per share. Shares of common stock subject to possible
redemption at 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 (1) warrants
sold in the Initial Public Offering and private placement to
purchase 3,586,250 shares of common stock, (2) rights sold in the
Initial Public Offering and private placement that convert into
717,250 shares of common stock and (3) 600,000 shares of common
stock, warrants to purchase 300,000 shares of common stock and
rights that convert into 60,000 shares of common stock in the unit
purchase option sold to the underwriter, in the calculation of
diluted loss per share, since the exercise of the warrants, the
conversion of the rights into shares of common stock and the
exercise of the unit purchase option is contingent upon the
occurrence of future events. As a result, diluted loss per share is
the same as basic loss per share for the periods
presented.
5
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
Reconciliation of net loss per common share
The
Company’s net (loss) income is adjusted for the portion of
income that is attributable to common stock 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 share is calculated as follows:
|
|
Three
Months
Ended June
30,
2018
|
Six
Months
Ended June
30,
2018
|
|
Net (loss)
income
|
$(6,602)
|
$8,879
|
|
Less: Interest
income attributable to common stock subject to
redemption
|
(158,321)
|
(355,325)
|
|
Adjusted net
loss
|
$(164,923)
|
$(346,446)
|
|
|
|
|
|
Weighted average
shares outstanding, basic and diluted
|
2,605,782
|
2,598,424
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$(0.06)
|
$(0.13)
|
NOTE 4. RELATED PARTY TRANSACTIONS
Administrative Services Agreement
The
Company entered into an agreement whereby commencing on November
20, 2017 through the earlier of the consummation of a Business
Combination or the Company’s liquidation, the Company will
pay the Sponsor a monthly fee of $10,000 for office space,
utilities and administrative support. For the three and six months
ended June 30, 2018, the Company incurred $30,000 and $60,000 in
fees for these services, of which $5,000 is included in accounts
payable and accrued expenses in the accompanying condensed balance
sheet.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a
registration rights agreement entered into on November 20, 2017,
the holders of the Company’s common stock prior to the
Initial Public Offering (the “Founder Shares”), Private
Placement Units (and their underlying securities), the shares
issued to EarlyBirdCapital, Inc. (“EarlyBirdCapital”)
at the closing of the Initial Public Offering (the
“Representative Shares”) and any Units that may be
issued upon conversion of the working capital loans (and their
underlying securities) are entitled to registration rights. The
holders of a majority of these securities are entitled to make up
to three demands, excluding short form demands, that the Company
register such securities. The holders of the majority of the
Founder’s Shares can elect to exercise these registration
rights at any time commencing three months prior to the date on
which these shares of common stock are to be released from escrow.
The holders of a majority of the Private Placement Units or Units
issued to the Sponsor, officers, directors or their affiliates in
payment of working capital loans made to the Company (in each case,
including the underlying securities) can elect to exercise these
registration rights at any time after the Company consummates a
Business Combination. In addition, the holders will have certain
“piggy-back” registration rights with respect to
registration statements filed subsequent to the completion of a
Business Combination and rights to require the Company to register
for resale such securities pursuant to Rule 415 under the
Securities Act of 1933, as amended (the “Securities
Act”). Notwithstanding anything to the contrary,
EarlyBirdCapital and its designees may participate in a
“piggy-back” registration during the seven year period
beginning on the effective date of the registration statement.
However, the registration rights agreement will provide that the
Company will not permit any registration statement filed under the
Securities Act to become effective until termination of the
applicable lock-up period. The Company will bear the expenses
incurred in connection with the filing of any such registration
statements.
Business Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital as an advisor in connection
with a Business Combination to assist the Company in holding
meetings with its stockholders to discuss a potential Business
Combination and the target business’ attributes, introduce
the Company to potential investors that are interested in
purchasing securities, assist the Company in obtaining stockholder
approval for the Business Combination and assist the Company with
its press releases and public filings in connection with a Business
Combination. The Company will pay EarlyBirdCapital a cash fee for
such services upon the consummation of a Business Combination in an
amount equal to 4.0% of the gross proceeds of the Initial Public
Offering (exclusive of any applicable finders’ fees which
might become payable). If a Business Combination is not consummated
for any reason, no fee will be due or payable.
Business Combination Advisory
Agreement
The Company has engaged an advisor to assist the
Company in obtaining commitments for a proposed financing in
connection with a Business Combination. The Company will pay the
advisor a cash fee for such services upon the consummation of a
Business Combination consisting of either a structuring fee of
$750,000 or an advisory fee equal to the greater of (i) 2.0% of the
acquisition value (as defined in the agreement) or (ii) $1,500,000.
In addition, the Company will pay a contingent cash placement fee
with respect to commitments obtained for any financings, as defined
in the agreement. If a Business
Combination is not consummated for any reason, no fee will be due
or payable.
Finder's Agreement
The
Company has engaged EarlyBirdCapital to assist the Company in
identifying a potential target for a Business Combination and to
assist the Company in the course of its negotiation of a
transaction with a potential target. The Company will pay
EarlyBirdCapital a cash fee equal to 1.0% of the total
consideration (as defined in the finder's agreement) for such
services upon the consummation of a Business Combination. If a
Business Combination is not consummated for any reason, no fee will
be due or payable.
6
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2018
(Unaudited)
NOTE 6. STOCKHOLDERS’ EQUITY
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of
preferred stock with a par value of $0.001 per share with such
designation, rights and preferences as may be determined from time
to time by the Company’s Board of Directors. At June 30, 2018
and December 31, 2017, there were no shares of preferred stock
issued or outstanding.
Common Stock —
The Company is authorized to issue 100,000,000 shares of common
stock with a par value of $0.001 per share. Holders of the
Company’s common stock are entitled to one vote for each
share. At June 30, 2018 and December 31, 2017, there were 2,622,584
and 2,590,985 shares of common stock issued and outstanding,
excluding 6,412,916 and 6,444,515 shares of common stock subject to
possible redemption, respectively.
NOTE 7. FAIR VALUE MEASUREMENTS
The
Company follows the guidance in Accounting Standards Codification
(“ASC”) 820 for its financial assets and liabilities
that are re-measured and reported at fair value at each reporting
period, and non-financial assets and liabilities that are
re-measured and reported at fair value at least
annually.
The
fair value of the Company’s financial assets and liabilities
reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or
paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement
date. In connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable
inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about
how market participants would price assets and liabilities). The
following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs
used in order to value the assets and liabilities:
Level
1:
Quoted
prices in active markets for identical assets or liabilities. An
active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
Level
2:
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities
in markets that are not active.
Level
3:
Unobservable
inputs based on our assessment of the assumptions that market
participants would use in pricing the asset or
liability.
The
following table presents information about the Company’s
assets that are measured at fair value on a recurring basis at 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
|
$69,482,930
|
$69,029,443
|
NOTE 8. SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur
after the balance sheet date up to the date that the financial
statements were issued. Other than as described below, the Company
did not identify any subsequent events that would have required
adjustment or disclosure in the financial statements.
On July
30, 2018, an affiliate of the
Sponsor, committed to provide an aggregate of $200,000 in
loans to the Company in order to finance transaction costs in
connection with a Business Combination. To the extent advanced, the
loans will be evidenced by a promissory note, will be non-interest
bearing, unsecured and will only be repaid upon the completion of a
Business Combination. The loans may also be convertible into units
at a price of $10.00 per unit. The units would be identical to the
Private Placement Units. There are no amounts currently
outstanding.
7
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
References
in this report to “we,” “us” or the
“Company” refer to Big Rock Partners Acquisition Corp.
References to our “management” or our “management
team” refer to our officers and directors, and references to
the “Sponsor” refer to Big Rock Partners Sponsor, LLC,
a company affiliated with our Chairman, President and Chief
Executive Officer. The following discussion and analysis of the
Company’s financial condition and results of operations
should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this report. Certain
information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and
uncertainties.
Special Note Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q includes “forward-looking
statements” within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act that are not
historical facts, and involve risks and uncertainties that could
cause actual results to differ materially from those expected and
projected. All statements other than statements of historical fact
included in this Form 10-Q including statements in this
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” regarding the
Company’s financial position, business strategy and the plans
and objectives of management for future operations, are
forward-looking statements. Words such as “expect,”
“believe,” “anticipate,”
“intend,” “estimate,” “seek”
and variations and similar words and expressions are intended to
identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but
reflect management’s current beliefs, based on information
currently available. A number of factors could cause actual events,
performance or results to differ materially from the events,
performance and results discussed in the forward-looking
statements. For information identifying important factors that
could cause actual results to differ materially from those
anticipated in the forward-looking statements, please refer to the
Risk Factors section of the Company’s Annual Report on Form
10-K for the year ending December 31, 2017 filed with the SEC on
March 23, 2018. The Company’s securities filings can be
accessed on the EDGAR section of the SEC’s website at
www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are
a blank check company incorporated in Delaware on September 18,
2017 and formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or
more target businesses or entities (a “Business
Combination”). While our efforts in identifying a prospective
target business for our initial Business Combination will not be
limited to a particular industry or geographic region, we are
focusing our search on identifying a prospective target business in
the senior housing and care industry in the United States. We
intend to effectuate our Business Combination using cash from the
proceeds of our Initial Public Offering and the sale of Private
Placement Units that occurred simultaneously with the completion of
our Initial Public Offering, our securities, debt or a combination
of cash, securities and debt.
Results of Operations
Our
entire activity since September 18, 2017 (inception) up to November
20, 2017 was in preparation for our Initial Public Offering. Since
our Initial Public Offering, our activity has been limited to the
search for a prospective initial Business Combination, and we will
not be generating any operating revenues until the closing and
completion of our initial Business Combination. We expect to incur
increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the
three months ended June 30, 2018, we had a net loss of $6,602,
which consists of operating costs of $271,810 and a provision for
income taxes of $8,948, offset by interest income on marketable
securities held in the Trust Account of $272,482 and an unrealized
gain on marketable securities held in the Trust Account of
$1,674.
For the
six months ended June 30, 2018, we had net income of $8,879, which
consists of interest income on marketable securities held in the
Trust Account of $486,051 and an unrealized gain on marketable
securities held in the Trust Account of $75, offset by operating
costs of $464,184 and a provision for income taxes of
$13,063.
Liquidity and Capital Resources
As of
June 30, 2018, we had marketable securities held in the Trust
Account of $69,482,930 (including approximately $483,000 of
interest income and unrealized gains) consisting of U.S Treasury
bills with a maturity of 180 days or less. Interest income earned
on the balance in the Trust Account may be used by us to pay taxes.
During the six months ended June 30, 2018, we withdrew
approximately $33,000 of interest income from the Trust Account to
pay our franchise tax obligations.
For the
six months ended June 30, 2018, cash used in operating activities
amounted to $334,900. Net income of $8,879 was impacted by interest
earned on marketable securities held in the Trust Account of
$486,051 and an unrealized gain on marketable securities held in
our Trust Account of $75. Changes in operating assets and
liabilities provided $142,347 of cash for operating
activities.
8
We
intend to use substantially all of the net proceeds of the Initial
Public Offering, including the funds held in the Trust Account, to
acquire a target business or businesses and to pay our expenses
relating thereto. To the extent that our capital stock is used, in
whole or in part, as consideration to effect our Business
Combination, the remaining proceeds held in the Trust Account, as
well as any other net proceeds not expended, will be used as
working capital to finance the operations of the target business.
Such working capital funds could be used in a variety of ways
including, but not limited to, continuing or expanding the target
business’ operations, for strategic acquisitions and for
marketing, research and development of existing or new products.
Such funds could also be used to repay any expenses or
finders’ fees which we had incurred prior to the completion
of our Business Combination if the funds available to us outside of
the Trust Account were insufficient to cover such
expenses.
As of
June 30, 2018, we had $139,613 of cash held outside the Trust
Account and available for working capital purposes. We intend to
use the funds held outside the Trust Account primarily to pay the
expenses of being a public company and to identify and evaluate
target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, properties or
similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
On July
30, 2018, an affiliate of the Sponsor committed to provide us an
aggregate of $200,000 in loans in order to finance transaction
costs in connection with a Business Combination. To the extent
advanced, the loans will be evidenced by a promissory note, will be
non-interest bearing, unsecured and will only be repaid upon the
completion of a Business Combination. The loans may also be
convertible into units at a price of $10.00 per unit. The units
would be identical to the Private Placement Units. There are
no amounts currently outstanding. Based on the foregoing, we believe we will have
sufficient cash to meet our needs through November 22, 2018 (or May
22, 2019, if extended), the date that we will be required to cease
all operations except for the purpose of winding up, if a Business
Combination is not consummated.
If our
estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are
less than the actual amounts necessary to do so, we may have
insufficient funds available to operate our business prior to our
Business Combination. In order to
fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor, officers and
directors or their respective affiliates may, but are not obligated
to, except as described above, loan us funds as may be required. If
we complete a Business Combination, we would repay such loaned
amounts out of the proceeds of the Trust Account released to us. In
the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to
repay such loaned amounts but no proceeds from our Trust Account
would be used for such repayment. Up to $1,500,000 of such loans
may be convertible into units, at a price of $10.00 per unit
at the option of the lender. The units would be identical to the
Private Placement Units.
Moreover,
we may need to obtain additional financing either to complete our
Business Combination or because we become obligated to redeem a
significant number of our public shares upon completion of our
Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws,
we would only complete such financing simultaneously with the
completion of our Business Combination. If we are unable to
complete our Business Combination because we do not have sufficient
funds available to us, we will be forced to cease operations and
liquidate the Trust Account. In addition, following our Business
Combination, if cash on hand is insufficient, we may need to obtain
additional financing in order to meet our obligations.
Off-balance sheet financing arrangements
We did
not have any off-balance sheet arrangements as of June 30,
2018.
Contractual obligations
We do
not have any long-term debt, capital lease obligations, operating
lease obligations or long-term liabilities other than an agreement
to pay our sponsor a monthly fee of $10,000 for office space,
utilities and administrative support provided to the Company. We
began incurring these fees on November 20, 2017 and will continue
to incur these fees monthly until the earlier of the completion of
the Business Combination and the Company’s
liquidation.
Critical Accounting Policies
The
preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and
expenses during the periods reported. Actual results could
materially differ from those estimates. The Company has identified
the following critical accounting policy:
9
Common Stock subject to possible redemption
We
account for our common stock subject to possible conversion in
accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” Common stock subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable common stock (including common stock that
features redemption rights that are either within the control of
the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders’ equity. Our common stock features certain
redemption rights that are considered to be outside of our control
and subject to occurrence of uncertain future events. Accordingly,
at June 30, 2018 and December 31, 2017, the common stock subject to
possible redemption is presented at redemption value as temporary
equity, outside of the stockholders’ equity section of our
balance sheet.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Following
the consummation of our Initial Public Offering, we invested the
funds held in the Trust Account in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company
Act, which invest solely in United States Treasuries. Due to the
short-term nature of the money market fund’s investments, we
do not believe that there will be an associated material exposure
to interest rate risk.
ITEM 4. CONTROLS AND
PROCEDURES
Disclosure
controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our
Chief Executive Officer and Chief Financial Officer carried out an
evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of June 30, 2018. Based upon
their evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures (as
defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act)
were effective as of June 30, 2018.
Changes in Internal Control Over Financial Reporting
During
the most recently completed fiscal quarter, there has been no
change in our internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
10
PART II - OTHER
INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Factors
that could cause our actual results to differ materially from those
in this report include the risk factors described in our Annual
Report on Form 10-K for the year ended December 31, 2017 filed with
the SEC on March 23, 2018. As of the date of this Report, there
have been no material changes to the risk factors disclosed in our
Annual Report filed with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The
following exhibits are filed as part of this Quarterly Report on
Form 10-Q.
|
No.
|
|
Description of Exhibit
|
|
31.1 *
|
|
Certification
of Principal Executive Officer Pursuant to Securities Exchange Act
Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
|
|
31.2 *
|
|
Certification
of Principal Financial Officer Pursuant to Securities Exchange Act
Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
|
|
32.1 **
|
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,
as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2 **
|
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350,
as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
101.INS*
|
|
XBRL
Instance Document
|
|
101.CAL*
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
101.SCH*
|
|
XBRL
Taxonomy Extension Schema Document
|
|
101.DEF*
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
101.LAB*
|
|
XBRL
Taxonomy Extension Labels Linkbase Document
|
|
101.PRE*
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
*
Filed
herewith.
**
Furnished.
11
SIGNATURES
Pursuant to the
requirements of Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
BIG
ROCK PARTNERS ACQUISITION CORP.
|
|
|
|
|
|
|
|
|
Date: August 8,
2018
|
By:
|
/s/ Richard
Ackerman
|
|
|
|
|
Name: Richard
Ackerman
|
|
|
|
|
Title:
Chairman, President
and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: August 8,
2018
|
By:
|
/s/ Lori B.
Wittman
|
|
|
|
|
Name: Lori B.
Wittman
|
|
|
|
|
Title:
Chief Financial Officer and Director
(Principal
Financial and Accounting Officer)
|
|
12