NRX Pharmaceuticals, Inc. - Quarter Report: 2020 March (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 March 31, 2020
or
☐
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
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82-2844431
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification Number)
|
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2645 N. Federal Highway, Suite 230
Delray Beach, FL
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33483
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (310) 734-2300
N/A
(Former
name, former address and former fiscal year if changed since last
report)
Securities
registered pursuant to section 12(b) of the Act:
|
Title of each class
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Trading Symbol(s)
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Name of each exchange on
which registered
|
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Units,
each consisting of one share of Common Stock, one Right and
one-half of one Warrant
|
|
BRPAU
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The
NASDAQ Stock Market LLC
|
|
Common
Stock, par value $0.001 per share
|
|
BRPA
|
|
The
NASDAQ Stock Market LLC
|
|
Rights,
exchangeable into one-tenth of one share of Common
Stock
|
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BRPAR
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The
NASDAQ Stock Market LLC
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Warrants,
each whole warrant exercisable for one share of Common Stock at an
exercise price of $11.50
|
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BRPAW
|
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The
NASDAQ Stock Market LLC
|
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
every Interactive Date File required to be submitted 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 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 ☒
|
|
|
|
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
May 15, 2020, there were 2,716,028 shares of the Company’s
common stock, par value $0.001, issued and
outstanding.
TABLE OF CONTENTS
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PART
I.
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FINANCIAL
INFORMATION
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PART
II.
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OTHER
INFORMATION
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i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIG ROCK PARTNERS ACQUISITION CORP.
CONDENSED BALANCE SHEETS
|
|
March
31,
2020
|
December 31,
2019
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
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Current
Assets
|
|
|
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Cash
|
$80,774
|
$6
|
|
Prepaid income
taxes
|
—
|
69,483
|
|
Total Current
Assets
|
80,774
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69,489
|
|
|
|
|
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Cash and marketable
securities held in Trust Account
|
6,192,007
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32,005,205
|
|
Total
Assets
|
$6,192,007
|
$32,074,694
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts payable
and accrued expenses
|
$313,236
|
$622,441
|
|
Income taxes
payable
|
3,145
|
—
|
|
Total Current
Liabilities
|
316,381
|
622,441
|
|
|
|
|
|
Promissory note
– related party
|
548,787
|
416,141
|
|
Promissory notes
payable
|
1,631,869
|
1,535,623
|
|
Total
Liabilities
|
2,497,037
|
2,574,205
|
|
|
|
|
|
Commitments
and Contingencies (Note 7)
|
|
|
|
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Common stock
subject to possible redemption, -0- and 2,305,335 shares at
redemption value as of March 31, 2020 and December 31, 2019,
respectively
|
—
|
24,500,488
|
|
|
|
|
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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; 2,716,028 and
2,844,414 shares issued and outstanding (excluding -0- and
2,305,335 shares subject to possible redemption) as of March 31,
2020 and December 31, 2019, respectively
|
2,716
|
2,844
|
|
Additional paid-in
capital
|
3,130,313
|
4,627,662
|
|
Retained
earnings
|
642,715
|
369,495
|
|
Total
Stockholders’ Equity
|
3,775,744
|
5,000,001
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$6,272,781
|
$32,074,694
|
The
accompanying notes are an integral part of the condensed financial
statements.
1
BIG ROCK PARTNERS ACQUISITION CORP.
CONDENSED STATEMENTS OF
OPERATIONS
(UNAUDITED)
|
|
Three Months
Ended March 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Operating
expenses
|
$119,300
|
$163,181
|
|
Loss
from operations
|
(119,300)
|
(163,181)
|
|
|
|
|
|
Other
income:
|
|
|
|
Forgiveness of
debt
|
352,071
|
—
|
|
Interest
income
|
113,077
|
382,862
|
|
Other
income
|
465,148
|
382,862
|
|
|
|
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Income before
provision for income taxes
|
345,848
|
219,681
|
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Provision for
income taxes
|
(72,628)
|
(31,716)
|
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Net
income
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$273,220
|
$187,965
|
|
|
|
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Weighted average
shares outstanding, basic and diluted (1)
|
2,844,414
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2,725,039
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Basic
and diluted net income (loss) per common share (2)
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$0.10
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$(0.03)
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(1)
Excludes an
aggregate of up to -0- and 6,241,203 shares subject to possible
redemption at March 31, 2020 and 2019, respectively.
(2)
Net
loss per common share - basic and diluted excludes income
attributable to common stock subject to possible redemption of $-0-
and $272,387 for the three months ended March 31, 2020 and 2019,
respectively (see Note 2).
The
accompanying notes are an integral part of the condensed financial
statements.
2
BIG ROCK PARTNERS ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three Months Ended March 31, 2020
|
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Common
Stock
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Additional
Paid-in
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Retained
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Total
Stockholders’
|
|
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Shares
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Amount
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Capital
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Earnings
|
Equity
|
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Balance
– January 1, 2020
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2,844,414
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$2,844
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$4,627,662
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$369,495
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$5,000,001
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Change in value of
common stock subject to possible redemption
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(128,386)
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(128)
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(1,497,349)
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—
|
(1,497,477)
|
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Net
income
|
—
|
—
|
—
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273,220
|
273,220
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|
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|
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Balance
– March 31, 2020
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2,716,028
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$2,716
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$3,130,313
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$642,715
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$3,775,744
|
Three Months Ended March 31, 2019
|
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Common
Stock
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Additional
Paid-in
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Retained
Earnings/ (Accumulated
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Total
Stockholders’
|
|
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Shares
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Amount
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Capital
|
Deficit)
|
Equity
|
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Balance
– January 1, 2019
|
2,725,039
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$2,725
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$5,036,213
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$(38,932)
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$5,000,006
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Change in value of
common stock subject to possible redemption
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69,258
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69
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(188,035)
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—
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(187,966)
|
|
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Net
income
|
—
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—
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—
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187,965
|
187,965
|
|
|
|
|
|
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Balance
– March 31, 2019
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2,794,297
|
$2,794
|
$4,848,178
|
$149,033
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$5,000,005
|
The
accompanying notes are an integral part of the condensed financial
statements.
3
BIG ROCK PARTNERS ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
|
|
Three
Months Ended March 31,
|
|
|
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2020
|
2019
|
|
Cash
Flows from Operating Activities:
|
|
|
|
Net
income
|
$273,220
|
$187,965
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
Interest earned on
cash and marketable securities held in Trust Account
|
(113,077)
|
(382,862)
|
|
Forgiveness of
debt
|
(352,071)
|
—
|
|
Changes in
operating assets and liabilities:
|
|
|
|
Prepaid expenses
and other current assets
|
—
|
(29,784)
|
|
Prepaid incomes
taxes
|
69,483
|
—
|
|
Accounts payable
and accrued expenses
|
42,866
|
(104,731)
|
|
Income taxes
payable
|
3,145
|
31,716
|
|
Net
cash used in operating activities
|
(76,434)
|
(297,696)
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
Cash withdrawn from
Trust Account to pay redeeming stockholders
|
25,997,965
|
—
|
|
Cash withdrawn from
Trust Account to pay franchise taxes
|
120,830
|
181,793
|
|
Investment of cash
in Trust Account
|
(192,520)
|
(690,000)
|
|
Net
cash provided by (used in) investing activities
|
25,926,275
|
(508,207)
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
Proceeds from
promissory notes
|
96,246
|
861,642
|
|
Repayment of
promissory notes
|
—
|
(65,000)
|
|
Proceeds from
promissory note – related party
|
132,646
|
—
|
|
Redemption of
common stock
|
(25,997,965)
|
—
|
|
Net
cash (used in) provided by financing activities
|
(25,769,073)
|
796,642
|
|
|
|
|
|
Net
Change in Cash
|
80,768
|
(9,261)
|
|
Cash –
Beginning
|
6
|
11,079
|
|
Cash
– Ending
|
$80,774
|
$1,818
|
|
|
|
|
|
Non-Cash
Investing and Financing activities:
|
|
|
|
Change in value of
common stock subject to possible redemption
|
$1,497,477
|
$187,966
|
The
accompanying notes are an integral part of the condensed financial
statements.
4
BIG ROCK PARTNERS ACQUISITION
CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
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 (a
“Business Combination”). The Company is not limited to
a particular industry or geographic region for purposes of
consummating a Business Combination.
All
activity through March 31, 2020 relates to the Company’s
formation, its initial public offering (“Initial Public
Offering”), which is described below, and the search for a
target business with which to complete a Business
Combination.
The
registration statement for the Company’s Initial Public
Offering was declared effective on November 20, 2017. On November
22, 2017, the Company consummated the Initial Public Offering of
6,000,000 units (the “Units” and, with respect to the
common stock included in the Units being offered, the “Public
Shares”), generating gross proceeds of $60,000,000, which is
described in Note 3. Each Unit consists of one share of common
stock, one right (“Public Right”) and one-half of one
warrant (“Public Warrant”). Each Public Right will
convert into one-tenth (1/10) of one share of common stock upon
consummation of a Business Combination. Each whole Public Warrant
entitles the holder to purchase one share of common stock at an
exercise price of $11.50 per whole share.
Simultaneously
with the Initial Public Offering, the Company consummated the sale
of 250,000 units (the “Private Placement Units”) at a
price of $10.00 per Unit in a private placement to Big Rock
Partners Sponsor, LLC (the “Sponsor”), generating gross
proceeds of $2,500,000, which is described in Note 4.
Following
the closing of the Initial Public Offering, $60,000,000 ($10.00 per
Unit) from the net proceeds of the sale of the Units in the Initial
Public Offering and the Private Placement Units was placed in a
trust account (the “Trust Account”) which may be
invested in U.S. government securities, within the meaning set
forth in Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the “Investment Company Act”), with a maturity
of 180 days or less or in any open-ended investment company that
holds itself out as a money market fund selected by the Company
meeting the conditions of Rule 2a-7 of the Investment Company Act,
as determined by the Company, until the earlier of: (i) the
consummation of a Business Combination or (ii) the distribution of
the Trust Account, as described below.
On
November 29, 2017, in connection with the underwriters’
exercise of their over-allotment option in full, the Company
consummated the sale of an additional 900,000 Units, and the sale
of an additional 22,500 Private Placement Units at $10.00 per unit,
generating total gross proceeds of $9,225,000. A total of
$9,000,000 of the net proceeds were deposited in the Trust Account,
bringing the aggregate proceeds held in the Trust Account to
$69,000,000.
At the
closing of the Initial Public Offering, the Company issued
EarlyBirdCapital, Inc. ("EarlyBirdCapital") and its designees
120,000 shares of common stock (the “Representative
Shares”). On November 29, 2017, the Company issued an
additional 18,000 Representative Shares for no consideration (see
Note 8).
Transaction
costs amounted to $2,172,419, consisting of $1,725,000 of
underwriting fees and $447,419 of Initial Public Offering
costs.
The
Company’s management has broad discretion with respect to the
specific application of the net proceeds of the Initial Public
Offering and Private Placement Units, although substantially all of
the net proceeds are intended to be applied generally toward
consummating a Business Combination. The Company’s initial
Business Combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the
balance in the Trust Account (excluding taxes payable on income
earned on the Trust Account) at the time of the signing an
agreement to enter into a Business Combination. The Company will
only complete a Business Combination if the post-Business
Combination company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to
register as an investment company under the Investment Company Act.
There is no assurance that the Company will be able to successfully
effect a Business Combination.
The
Company will provide its stockholders with the opportunity to
redeem all or a portion of their shares included in the Units sold
in the Initial Public Offering (the “Public Shares”)
upon the completion of a Business Combination either (i) in
connection with a stockholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. The
decision as to whether the Company will seek stockholder approval
of a Business Combination or conduct a tender offer will be made by
the Company, solely in its discretion. The stockholders will be
entitled to redeem their shares for a pro rata portion of the
amount then on deposit in the Trust Account ($10.00 per share, plus
any pro rata interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its franchise and
income tax obligations). There will be no redemption rights upon
the completion of a Business Combination with respect to the
Company’s warrants.
The
Company will proceed with a Business Combination if the Company has
net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and, if the Company seeks stockholder
approval, a majority of the outstanding shares voted are voted in
favor of the Business Combination. If a stockholder vote is not
required by law and the Company does not decide to hold a
stockholder vote for business or other legal reasons, the Company
will, pursuant to its Amended and Restated Certificate of
Incorporation, conduct the redemptions pursuant to the tender offer
rules of the Securities and Exchange Commission (the
“SEC”), and file tender offer documents with the SEC
prior to completing a Business Combination. If, however, a
stockholder approval of the transaction is required by law, or the
Company decides to obtain stockholder approval for business or
other legal reasons, the Company will offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy rules
and not pursuant to the tender offer rules. If the Company seeks
stockholder approval in connection with a Business Combination, the
Company’s Sponsor, officers and directors (the “Initial
Stockholders”) have agreed (a) to vote their Founder’s
Shares (as defined in Note 5), Placement Shares (as defined in Note
4) and any Public Shares held by them in favor of approving a
Business Combination and (b) not to convert any Founder’s
Shares, Placement Shares and any Public Shares held by them in
connection with a stockholder vote to approve a Business
Combination or sell any such shares to the Company in a tender
offer in connection with a Business Combination. Additionally, each
public stockholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed
transaction.
5
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
The
Company initially had until November 22, 2018 to complete a
Business Combination. However, if the Company anticipated that it
could not be able to consummate a Business Combination by November
22, 2018, the Company could extend the period of time to consummate
a Business Combination up to two times, each by an additional three
months. 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.
On
November 20, 2018, the period of time for the Company to consummate
a Business Combination was extended for an additional three-month
period ending on February 22, 2019, and, accordingly, $690,000 was
deposited into the Trust Account. On February 21, 2019, the Company
further extended the time required to consummate a Business
Combination to May 22, 2019 and deposited an additional $690,000
into the Trust Account. The deposits were funded by non-interest
bearing unsecured promissory notes from BRAC Lending Group LLC, an
affiliate of the underwriter (the “Investor”) (see Note
6). The notes are repayable upon the consummation of a Business
Combination (see Note 6).
On May
21, 2019, the Company’s stockholders approved an amendment to
its Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company was required to consummate a
Business Combination to August 22, 2019. The number of shares of
common stock presented for redemption in connection with the
extension was 2,119,772. The Company paid cash in the aggregate
amount of $22,099,233, or approximately $10.43 per share, to
redeeming stockholders. The Company agreed to deposit, or cause to
be deposited on its behalf, into the Trust Account $0.02 for each
public share outstanding for each 30-day extension period utilized
through August 22, 2019. In connection with this extension, the
Company deposited an aggregate of $286,814 into the Trust
Account, of which $280,000 was contributed to the Trust
Account by a third party and is not required to be repaid by the
Company. Accordingly, the Company has recorded this amount as a
credit to additional paid in capital in the accompanying statements
of stockholders’ equity. In order to pay for part of the
third extension payment, the Company issued an unsecured promissory
note (the “Second Note”) in favor of the Investor, in
the original principal amount of $6,814 (see Note 6).
On
August 21, 2019, the Company stockholders approved an amendment to
the Company’s Amended and Restated Certificate of
Incorporation to extend the period of time for which the Company is
required to consummate a Business Combination (the
“Extension”) from August 22, 2019 to November 22, 2019.
The number of shares of common stock presented for redemption in
connection with the Extension was 846,888. The Company paid cash in
the aggregate amount of $8,891,378, or approximately $10.50 per
share, to redeeming stockholders. The Company agreed to deposit, or
cause to be deposited on its behalf, into the Trust Account $0.02
for each public share outstanding for each 30-day extension period
utilized through the Extension. In connection with this extension,
the Company deposited an aggregate of $236,000 into the Trust
Account to fund this extension payment, which amount was loaned to
the Company by AZ Property Partners, LLC (“AZ Property
Partners”), an entity majority owned and controlled by
Richard Ackerman, the Company's Chairman, President and Chief
Executive Officer, and Investor (see Note 6).
On
November 21, 2019, the Company's stockholders approved an amendment
to the Company's Amended and Restated Certificate of Incorporation
to extend the period of time for which the Company is required to
consummate a Business Combination (the “Second
Extension”) from November 22, 2019 to March 23, 2020. The
number of shares of common stock presented for redemption in
connection with the Second Extension was 919,091. The Company paid
cash in the aggregate amount of $9,736,077, or approximately $10.59
per share, to redeeming stockholders. The Company agreed to
deposit, or cause to be deposited on its behalf, into the Trust
Account $0.02 for each public share outstanding for each 30-day
extension period utilized through the Second Extension. In
connection with this extension, the Company deposited an aggregate
of $60,285 into the Trust Account to fund the first thirty-day
extension through December 22, 2019, which amount was loaned to the
Company by AZ Property Partners and Investor (see Note 6). In
January and February 2020, AZ Property Partners and Investor loaned
the Company an additional aggregate amount of $90,427 each to pay
for the extension through March 23, 2020, which was deposited into
the Trust Account.
On
March 23, 2020, the Company's stockholders approved an amendment to
the Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a
Business Combination (the “Third Extension”) from March
23, 2020 to July 23, 2020 (the “Extended Date”). The
number of shares of common stock presented for redemption in
connection with the Third Extension was 2,433,721. The Company paid
cash in the aggregate amount of $25,997,965, or approximately
$10.68 per share, to redeeming stockholders. The Company agreed to
deposit, or cause to be deposited on its behalf, into the Trust
Account $0.02 for each public share outstanding for each 30-day
extension period utilized through the Third Extension. Notwithstanding the
foregoing, if the volume weighted average price of the Company's
common stock during the 10-day trading period ending on the
3rdday prior to the end of any
applicable monthly period is equal to or greater than $11.00 and
the trading volume during the 10-day trading period exceeds 100,000
shares, the obligation to make any particular deposit would
terminate with respect to the immediately following monthly period
(but not with respect to any other future monthly period).
In connection with this extension, as of March 31, 2020, the
Company deposited an aggregate of $11,637 into the Trust Account to
fund the first thirty-day extension through April 23, 2020, which
amount was loaned to the Company by AZ Property Partners and
Investor. In April 2020, the AZ Property Partners and Investor
loaned the Company an additional aggregate amount of $5,805 each to
pay for the extension through May 23, 2020, which was deposited
into the Trust Account.
If the
Company is unable to complete a Business Combination by the
Extended Date, the Company will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible
but no more than ten business days thereafter, redeem 100% of the
outstanding Public Shares, at a per share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account,
including interest earned (net of taxes payable), divided by the
number of then outstanding Public Shares, which redemption will
completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject
to the approval of the remaining stockholders and the
Company’s board of directors, proceed to commence a voluntary
liquidation and thereby a formal dissolution of the Company,
subject in each case to its obligations to provide for claims of
creditors and the requirements of applicable law. In the event of
such distribution, it is possible that the per share value of the
assets remaining available for distribution (including Trust
Account assets) will be less than the $10.00 per Unit in the
Initial Public Offering.
6
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
The
Initial Stockholders have agreed to (i) waive their redemption
rights with respect to Founder Shares, Placement Shares and any
Public Shares they may acquire during or after the Initial Public
Offering in connection with the consummation of a Business
Combination, (ii) to waive their rights to liquidating
distributions from the Trust Account with respect to their
Founder’s Shares and Placement Shares if the Company fails to
consummate a Business Combination by the Extended Date and (iii)
not to propose an amendment to the Company’s Amended and
Restated Certificate of Incorporation that would affect the
substance or timing of the Company’s obligation to redeem
100% of its Public Shares if the Company does not complete a
Business Combination, unless the Company provides the public
stockholders with the opportunity to redeem their Public Shares in
conjunction with any such amendment. However, the Initial
Stockholders will be entitled to liquidating distributions with
respect to any Public Shares acquired if the Company fails to
consummate a Business Combination or liquidates by Extended
Date.
In
order to protect the amounts held in the Trust Account, A/Z
Property Partners, has agreed that it will be liable to ensure that
the proceeds in the Trust Account are not reduced below $10.00 per
share by the claims of target businesses or claims of vendors or
other entities that are owed money by the Company for services
rendered or contracted for or products sold to the Company.
Additionally, the agreement entered into by AZ Property Partners
specifically provides for two exceptions to the indemnity it has
given: it will have no liability (1) as to any claimed amounts owed
to a target business or vendor or other entity who has executed an
agreement with the Company waiving any right, title, interest or
claim of any kind they may have in or to any monies held in the
Trust Account, or (2) as to any claims for indemnification by the
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the “Securities
Act”). The Company will seek to reduce the possibility that
AZ Property Partners will have to indemnify the Trust Account due
to claims of creditors by endeavoring to have all vendors, service
providers, prospective target businesses or other entities with
which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in
or to monies held in the Trust Account.
NASDAQ Notifications
On
January 7, 2019, the Company received a notice from the staff of
the Listing Qualifications Department of Nasdaq (the
“Staff”) stating that the Company was no longer in
compliance with Nasdaq Listing Rule 5620(a) for continued listing
due to its failure to hold an annual meeting of stockholders within
twelve months of the end of the Company’s fiscal year ended
December 31, 2017. The Company submitted a plan of compliance with
Nasdaq and Nasdaq granted the Company an extension until May 22,
2019 to regain compliance with the rule by holding an annual
meeting of stockholders. The Company held its annual meeting of
stockholders on May 21, 2019 and, accordingly, the Staff determined
that the Company is currently in compliance with Nasdaq Listing
Rule 5620(a) for continued listing and the matter was
closed.
On
August 9, 2019, the Company received a notice from the Staff
stating that the Company was no longer in compliance with Nasdaq
Listing Rule 5550(a)(3) for continued listing due to its failure to
maintain a minimum of 300 public holders (the “Rule”).
The Company had until September 23, 2019 to provide Nasdaq with a
specific plan to achieve and sustain compliance with the listing
requirement. The notice is a notification of deficiency, not of
imminent delisting, and had no current effect on the listing or
trading of the Company's securities on Nasdaq.
On
September 23, 2019 and October 28, 2019, the Company submitted a
plan to regain compliance with Nasdaq and requested an extension
through February 5, 2020. On October 28, 2019, Nasdaq requested
additional information regarding the Company's compliance plan, to
which the Company responded on November 8, 2019. On February 11,
2020, the Company received a notice from the Staff stating that,
based upon the Company’s non-compliance with the Rule, the
Staff had determined to delist the Company’s common stock
from Nasdaq unless the Company timely requests a hearing before the
Nasdaq Hearings Panel (the “Panel“). The Company was
also notified that as a result of Nasdaq’s determination to
delist the Company’s common stock, the Company’s
warrants and rights no longer comply with Nasdaq Listing Rule
5560(a), which requires the underlying securities of such
exercisable securities to remain listed on Nasdaq, and the
Company’s Units no longer comply with Nasdaq Listing Rule
5225(b)(1)(A), which requires all component parts of units to meet
the requirements for initial and continued listing, and the
Company’s units, warrants and rights are now subject to
delisting. The Company requested a hearing, which request
automatically stayed any further action by the Staff pending the
ultimate conclusion of the hearing process.
On
March 25, 2020, the Company received formal notice from Nasdaq
indicating that the Staff had granted the Company’s request
for continued listing on Nasdaq. The decision follows the
Company’s hearing before the Panel, which took place on March
19, 2020. The Company’s continued listing is subject to the
Company’s satisfaction of a number of conditions, including,
ultimately, completion of a Business Combination with an operating
company by no later than August 10, 2020, and the combined
entity’s compliance with all applicable criteria for initial
listing on Nasdaq at the time of the merger. The Company failed to
meet certain of the conditions contained in the extension grant and
has submitted a modified extension request to the Staff. The
Company has not received a response from the Staff as of yet and
cannot give assurance that it will not be delisted prior to August
10, 2020.
Liquidity
As of
March 31, 2020, the Company had $80,774 in its operating bank
account, $6,192,007 in cash and 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 $209,062, which excludes franchise and income
taxes payable of 26,545, of which such amounts will be paid from
interest earned on the Trust Account and prepaid income taxes,
which have been paid from amounts in the Trust Account. As of March
31, 2020, approximately $143,000 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 $676,000 of interest from the Trust Account
in order to pay the Company’s franchise and income taxes, of
which approximately $121,000 was withdrawn during the three months
ended March 31, 2020.
7
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
On
November 17, 2018, the Company entered into an agreement (the
“Agreement”) with the Sponsor and the Investor,
pursuant to which the Sponsor agreed to be responsible for all
liabilities of the Company as of November 17, 2018 and to loan the
Company the funds necessary to pay the expenses of the Company
other than Business Combination expenses through the closing of a
Business Combination when and as needed. If a Business Combination
is not consummated, all outstanding loans made by the Sponsor will
be forgiven (see Note 6). In addition, the Investor agreed to loan
the Company all funds necessary to pay expenses incurred in
connection with and in order to consummate a business combination
(the “Business Combination Expenses”) and such loans
will be added to the Notes (as defined in Note 6). If the Company
does not consummate a Business Combination, all outstanding loans
under the Notes will be forgiven, except to the extent of any funds
held outside of the Trust Account after paying all other fees and
expenses of the Company incurred prior to the date of such failure
to consummate a Business Combination (see Note 6).
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 does not believe it will need to raise additional funds in
order to meet expenditures required for operating its business.
Neither the Sponsor, nor any of the stockholders, officers or
directors, or third parties are under any obligation to advance
funds to, or invest in, the Company, except as discussed above.
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 suspending
the pursuit of a potential transaction. 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 July 23, 2020 to consummate a Business Combination. There
is no assurance that the Company will be able to do so prior to
July 23, 2020.
2. 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, 2019 as filed with the SEC on
March 30, 2020, which contains the audited financial statements and
notes thereto. The interim results for the three months ended March
31, 2020 are not necessarily indicative of the results to be
expected for the year ending December 31, 2020 or for any future
interim periods.
Emerging growth company
The
Company is an “emerging growth company,” as defined in
Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and
it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are
not emerging growth companies including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not
previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial
accounting standards until private companies (that is, those that
have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the
Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a
company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth
companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition
period which means that when a standard is issued or revised and it
has different application dates for public or private companies,
the Company, as an emerging growth company, will 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.
8
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
Use of estimates
The
preparation of condensed 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
condensed 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.
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
March 31, 2020 and December 31, 2019.
Cash and marketable securities held in Trust Account
At
March 31, 2020 and December 31, 2019, the assets held in the Trust
Account were held in money market funds, which are invested in U.S.
Treasury securities. Through March 31, 2020, the Company has
withdrawn $676,188 of interest from the Trust Account in order to
pay the Company’s franchise and income taxes, of which
$120,830 was withdrawn during the three months ended March 31,
2020.
Common stock subject to possible redemption
The
Company accounts for its common stock subject to possible
redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory
redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including
common stock that features redemption rights that are either within
the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within the
Company’s control) is classified as temporary equity. At all
other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain
redemption rights that are considered to be outside of the
Company’s control and subject to occurrence of uncertain
future events. Accordingly, common stock subject to possible
redemption is presented at redemption value as temporary equity,
outside of the stockholders’ equity section of the
Company’s condensed balance sheets.
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 recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. As of
March 31, 2020 December 31, 2019, 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 effective tax rate of 14%
differs from the statutory tax rate of 21% for the three months
ended March 31, 2019 primarily due to the non-deductibility of
transactional expenses incurred in connection with the search for
potential targets for a Business Combination.
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
March 27, 2020, President Trump signed the Coronavirus Aid, Relief,
and Economic Security "CARES" Act into law. The CARES Act includes
several significant business tax provisions that, among other
things, would eliminate the taxable income limit for certain net
operating losses ("NOL) and allow businesses to carry back NOLs
arising in 2018, 2019 and 2020 to the five prior years, suspend the
excess business loss rules, accelerate refunds of previously
generated corporate alternative minimum tax credits, generally
loosen the business interest limitation under IRC section 163(j)
from 30 percent to 50 percent among other technical corrections
included in the Tax Cuts and Jobs Act tax provisions. The Company
does not believe that the CARES Act will have a significant impact
on Company's financial position or statement of
operations.
9
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
Net loss per common share
Net
loss per common share is computed by dividing net income (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 March 31, 2020 and 2019, which are not currently
redeemable and are not redeemable at fair value, have been excluded
from the calculation of basic net loss per share since such shares,
if redeemed, only participate in their pro rata share of the Trust
Account earnings. 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 are contingent upon the
occurrence of future events. As a result, diluted loss per common
share is the same as basic income per common share for the periods
presented.
Reconciliation of net loss per common share
The
Company’s net income is adjusted for the portion of income
that is attributable to common stock subject to possible
redemption, as these shares only participate in the earnings of the
Trust Account and not the income or losses of the Company.
Accordingly, basic and diluted loss per share is calculated as
follows:
|
|
Three
Months Ended
March
31,
|
|
|
|
2020
|
2019
|
|
Net
income
|
$273,220
|
$187,965
|
|
Less: Income
attributable to common stock subject to possible
redemption
|
—
|
(272,387)
|
|
Adjusted net income
(loss)
|
$273,220
|
$(84,422)
|
|
|
|
|
|
Weighted average
shares outstanding, basic and diluted
|
2,844,414
|
2,725,039
|
|
|
|
|
|
Basic and diluted
net income (loss) per common share
|
$0.10
|
$(0.03)
|
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. The Company has 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 Measurement,” approximates the carrying amounts
represented in the accompanying condensed balance sheets, primarily
due to their short-term nature.
Recently issued accounting standards
Management
does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a
material effect on the Company’s condensed financial
statements.
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 6,900,000 Units at
a purchase price of $10.00 per Unit, which includes the full
exercise by the underwriters of their over-allotment option of
900,000 Units at $10.00 per Unit. Each Unit consists of one share
of common stock, one Public Right and one Public Warrant. Each
Public Right will convert into one-tenth (1/10) of one share of
common stock upon consummation of a Business Combination (see Note
8). Each whole Public Warrant entitles the holder to purchase one
share of common stock at an exercise price of $11.50 per whole
share (see Note 8).
4. PRIVATE PLACEMENT
Simultaneously
with the Initial Public Offering, the Sponsor purchased 250,000
Private Placement Units, at $10.00 per Private Placement Unit, for
an aggregate purchase price of $2,500,000. On November 29, 2017,
the Company consummated the sale of an additional 22,500 Private
Placement Units at a price of $10.00 per unit, which were purchased
by the Sponsor, generating gross proceeds of $225,000. Each Private
Placement Unit consists of one share of common stock
(“Placement Share”), one right (“Placement
Right”) and one-half of one warrant (each, a “Placement
Warrant”), each whole Placement Warrant exercisable to
purchase one share of common stock at an exercise price of $11.50.
The proceeds from the Private Placement Units were added to the
proceeds from the Initial Public Offering held in the Trust
Account. If the Company does not complete a Business Combination
within the Combination Period, the proceeds from the sale of the
Private Placement Units will be used to fund the redemption of the
Public Shares (subject to the requirements of applicable law), and
the Placement Rights and the Placement Warrants will expire
worthless.
10
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
The
Private Placement Units are identical to the Units sold in the
Initial Public Offering except that the Placement Warrants (i) are
not redeemable by the Company and (ii) may be exercised for cash or
on a cashless basis, so long as they are held by the initial
purchaser or any of its permitted transferees. In addition, the
Private Placement Units and their component securities may not be
transferable, assignable or salable until after the consummation of
a Business Combination, subject to certain limited exceptions. If
the Placement Warrants are held by someone other than the initial
purchasers or their permitted transferees, the Placement Warrants
will be redeemable by the Company and exercisable by such holders
on the same basis as the Public Warrants.
5. RELATED PARTY TRANSACTIONS
Founder Shares
In
September 2017, the Company issued an aggregate of 1,437,500 shares
of common stock to the Sponsor (the “Founder Shares”)
for an aggregate purchase price of $25,000. On November 20, 2017,
the Company effectuated a 1.2-for-1 stock dividend of its common
stock resulting in an aggregate of 1,725,000 Founder Shares
outstanding. The Founder Shares included an aggregate of up to
225,000 shares subject to forfeiture by the Sponsor to the extent
that the underwriters’ over-allotment was not exercised in
full or in part, so that the Initial Stockholders would own 20% of
the Company’s issued and outstanding shares after the Initial
Public Offering (assuming the Initial Stockholders did not purchase
any Public Shares in the Initial Public Offering and excluding the
Private Placement Units and the Representative Shares (as defined
in Note 8)). As a result of the underwriters’ election to
fully exercise their over-allotment option, 225,000 Founder Shares
are no longer subject to forfeiture.
The
Initial Stockholders have agreed not to transfer, assign or sell
any of the Founder’s Shares until the earlier of (i) one year
after the date of the consummation of a Business Combination, or
(ii) with respect to 50% of the Founder Shares, the date on which
the closing price of the Company’s common stock equals or
exceeds $12.50 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations) for any 20
trading days within any 30-trading day period commencing after a
Business Combination, or earlier, in each case, if subsequent to a Business Combination, the Company
consummates a subsequent liquidation, merger, stock exchange,
reorganization or other similar transaction which results in all of
the Company’s stockholders having the right to exchange their
common stock for cash, securities or other
property.
Related Party Loans
In
order to finance transaction costs in connection with a Business
Combination, the Sponsor, an affiliate of the Sponsor, or the
Company’s officers and directors may, but are not obligated
to, loan the Company funds from time to time or at any time, as may
be required (“Working Capital Loans”). Each Working
Capital Loan would be evidenced by a promissory note. The Working
Capital Loans would either be paid upon consummation of a Business
Combination, without interest, or, at the holder’s
discretion, up to $1,500,000 of the Working Capital Loans may be
converted into units at a price of $10.00 per unit. The units would
be identical to the Private Placement Units. In the event that a
Business Combination does not close, the loans will be forgiven.
There were no outstanding Working Capital Loans at March 31, 2020
and December 31, 2019.
6. INVESTOR AGREEMENT AND PROMISSORY NOTES
On
November 17, 2018, the Company entered into an Agreement with the
Sponsor and the Investor. Pursuant to the Agreement, the Sponsor
transferred an aggregate of 1,500,000 Founders Shares to the
Investor in exchange for the agreements set forth below and
aggregate cash consideration of $1.00.
Pursuant
to the Agreement, the Sponsor agreed to extend the period of time
the Company has to consummate a Business Combination up to two
times for an aggregate of up to six months and the Investor agreed
to loan the Company the funds necessary to obtain the extensions
(the “Extensions”). On November 20, 2018 and February
21, 2019, the Company issued unsecured promissory notes (the
“Initial Notes”) in favor of the Investor, in the
original principal amount of $690,000 each (or an aggregate of
$1,380,000), to provide the Company the funds necessary to obtain
an aggregate of six-month Extensions. Pursuant to the Agreement,
the Investor has also agreed to loan the Company all funds
necessary to pay expenses incurred in connection with and in order
to consummate a Business Combination (the “Business
Combination Expenses”) and such loans will be added to the
Notes.
In
connection with the stockholders’ approval of the extended
date of August 22, 2019, the Company issued another unsecured
promissory note (the “Second Note”) in favor of the
Investor in order to pay for part of the third extension payment in
the original principal amount of $6,814.
On
December 31, 2019, the Company issued an unsecured promissory note,
as amended on March 31, 2020, (the “Third Note” and,
together with the Initial Notes and the Second Note, the
“Extension Notes”) in favor of the Investor in the
aggregate principal amount of $269,667 in order to pay for part of
the extension payments. Through December 31, 2019, the Investor
loaned the Company an aggregate amount of $118,667 under the Third
Note to pay for part of the extension payment in connection with
the Extension to November 22, 2019.
In
November 2019, in connection with the stockholders’ approval
of the extended date of March 23, 2020, the Investor loaned the
Company an additional $30,142 under the Third Note to pay for part
of the extension through December 22, 2019. In January and February
2020, the Investor loaned the Company an additional $90,427 under
the Third Note to pay for part of the extension through March 23,
2020.
11
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
In
March 2020, in connection with the stockholders’ approval of
the Extended Date of July 23, 2020, the Investor loaned the Company
an additional $5,819 under the Third Note to pay for part of the
extension through April 23, 2020. In April 2020, the Investor
loaned the Company an additional $5,805 to pay for part of the
extension through May 23, 2020.
If the
Company does not consummate a Business Combination, all outstanding
loans under the Extension Notes will be forgiven, except to the
extent of any funds held outside of the Trust Account after paying
all other fees and expenses of the Company incurred prior to the
date of such failure to consummate a Business
Combination.
As of
March 31, 2020, the outstanding balance under the Extension Notes
amounted to an aggregate of $1,631,869.
The
Sponsor has agreed to be responsible for all liabilities of the
Company effective November 17, 2018, except for liabilities
associated with the possible redemption of shares by the
Company’s shareholders, as described in the Company’s
Amended and Restated Certificate of Incorporation. The Sponsor has
also agreed to loan the Company the funds necessary to pay the
expenses of the Company other than the Business Combination
Expenses through the closing of a Business Combination when and as
needed in order for the Company to continue in operation (the
“Non-Business Combination Related Expenses”). Upon
consummation of a Business Combination, up to $200,000 of the
Non-Business Combination Related Expenses will be repaid by the
Company to the Sponsor provided that the Company has funds
available to it sufficient to repay such expenses (the
“Cap”) as well as to pay for all stockholder
redemptions, all Business Combination Expenses, repayment of the
Extension Notes, and any funds necessary for the working capital
requirements of the Company following closing of the Business
Combination. Any remaining amounts in excess of the Cap will be
forgiven. On December 31, 2019, the Company issued an unsecured
promissory note to the Sponsor, as amended on March 31, 2020, in
the original principal amount of $579,676 to pay for Non-Business
Combination Related Expenses. Of the amount loaned to the Company,
$117,334 was used in order to pay for part of the extension
payments in connection with the Extension to November 22, 2019. If
the Company does not consummate a Business Combination, all
outstanding loans made by the Sponsor to cover the Non-Business
Combination Related Expenses will be forgiven, except as set forth
above.
In
November 2019, in connection with the stockholders’ approval
of the extended date of March 23, 2020, AZ Property Partners loaned
the Company an additional $30,143 to pay for part of the extension
through December 2019. In January and February 2020, AZ Property
Partners loaned the Company an aggregate additional amount of
$90,427 to pay for part of the extension through March 23,
2020.
In
March 2020, in connection with the stockholders’ approval of
the Extended Date of July 23, 2020, AZ Property Partners loaned the
Company an additional $5,818 to pay for part of the extension
through April 23, 2020. In April 2020, AZ Property Partners loaned
the Company an additional $5,805 to pay for part of the extension
through May 23, 2020.
Through
March 31, 2020, AZ Partners loaned the Company an aggregate amount
of $305,065, of which $36,400 was loaned during the three months
ended March 31, 2020, to pay for Non-Business Combination Related
Expenses.
As of
March 31, 2020, the outstanding balance under promissory note with
AZ Partners amounted to $548,787.
7. COMMITMENTS AND CONTINGENCIES
Forgiveness of Debt
During
the three months ended March 31, 2020, one of the Company’s
service providers forgave certain amounts due to them in connection
with previously provided services. As a result, the Company
recorded a forgiveness of debt in the amount of
$352,071.
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 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.
12
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
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.
8. 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 March 31, 2020 and December 31, 2019, 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 March 31, 2020 and December 31, 2019,
there were 2,716,028 and 2,844,414 shares of common stock issued
and outstanding, respectively (excluding -0- and 2,305,335 shares
of common stock subject to possible redemption,
respectively).
Rights — Each holder of a right will receive one-tenth
(1/10) of one share of common stock upon consummation of a Business
Combination, even if the holder of such right redeemed all shares
held by it in connection with a Business Combination. No fractional
shares will be issued upon conversion of the rights. No additional
consideration will be required to be paid by a holder of rights in
order to receive its additional shares upon consummation of a
Business Combination, as the consideration related thereto has been
included in the Unit purchase price paid for by investors in the
Initial Public Offering. If the Company enters into a definitive
agreement for a Business Combination in which the Company will not
be the surviving entity, the definitive agreement will provide for
the holders of rights to receive the same per share consideration
the holders of the common stock will receive in the transaction on
an as-converted into common stock basis and each holder of a right
will be required to affirmatively convert its rights in order to
receive 1/10 share underlying each right (without paying additional
consideration). The shares issuable upon conversion of the rights
will be freely tradable (except to the extent held by affiliates of
the Company).
If the
Company is unable to complete a Business Combination within the
Combination Period and the Company liquidates the funds held in the
Trust Account, holders of rights will not receive any of such funds
with respect to their rights, nor will they receive any
distribution from the Company’s assets held outside of the
Trust Account with respect to such rights, and the rights will
expire worthless. Further, there are no contractual penalties for
failure to deliver securities to the holders of the rights upon
consummation of a Business Combination. Additionally, in no event
will the Company be required to net cash settle the rights.
Accordingly, holders of the rights might not receive the shares of
common stock underlying the rights.
Warrants — Public Warrants may only be exercised for a
whole number of shares. No fractional shares will be issued upon
exercise of the Public Warrants. The Public Warrants will become
exercisable on the later of the completion of a Business
Combination and November 22, 2018; provided in that the Company has
an effective registration statement under the Securities Act
covering the shares of common stock issuable upon exercise of the
Public Warrants and a current prospectus relating to them is
available. The Company has agreed that as soon as practicable, the
Company will use its best efforts to file with the SEC a
registration statement for the registration, under the Securities
Act, of the shares of common stock issuable upon exercise of the
Public Warrants. The Company will use its best efforts to cause the
same to become effective and to maintain the effectiveness of such
registration statement, and a current prospectus relating thereto,
until the expiration of the Public Warrants in accordance with the
provisions of the warrant agreement. Notwithstanding the foregoing,
if a registration statement covering the shares of common stock
issuable upon exercise of the Public Warrants is not effective 90
days following the consummation of Business Combination, warrant
holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed
to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section
3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not
available, holders will not be able to exercise their warrants on a
cashless basis. The Public Warrants will expire five years after
the completion of a Business Combination or earlier upon redemption
or liquidation.
The
Company may redeem the Public Warrants:
●
in whole and not in
part;
●
at a price of $0.01
per warrant;
●
at any time during
the exercise period;
●
upon a minimum of
30 days’ prior written notice of redemption; and
●
if, and only if,
the last sale price of the Company’s common stock equals or
exceeds $21.00 per share for any 20 trading days within a
30-trading day period ending on the third business day prior to the
date on which the Company sends the notice of redemption to the
warrant holders.
●
If, and only if,
there is a current registration statement in effect with respect to
the shares of common stock underlying such warrants.
13
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
If the
Company calls the Public Warrants for redemption, management will
have the option to require all holders that wish to exercise the
Public Warrants to do so on a “cashless basis,” as
described in the warrant agreement.
The
exercise price and number of shares of common stock issuable upon
exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization,
reorganization, merger or consolidation. However, the warrants will
not be adjusted for issuance of common stock at a price below its
exercise price. Additionally, in no event will the Company be
required to net cash settle the warrants. If the Company is unable
to complete a Business Combination within the Combination Period
and the Company liquidates the funds held in the Trust Account,
holders of warrants will not receive any of such funds with respect
to their warrants, nor will they receive any distribution from the
Company’s assets held outside of the Trust Account with the
respect to such warrants. Accordingly, the warrants may expire
worthless.
Representative Shares
At the
closing of the Initial Public Offering, the Company issued
EarlyBirdCapital and its designees 120,000 Representative Shares.
On November 29, 2017, the Company issued an additional 18,000
Representative Shares for no consideration. The Company accounted
for the Representative Shares as an expense of the Initial Public
Offering resulting in a charge directly to stockholders’
equity. The Company determined the fair value of Representative
Shares to be $1,380,000 based upon the offering price of the Units
of $10.00 per Unit. The underwriter has agreed not to transfer,
assign or sell any such shares until the completion of a Business
Combination. In addition, the underwriter and its designees have
agreed (i) to waive their redemption rights with respect to such
shares in connection with the completion of a Business Combination
and (ii) to waive their rights to liquidating distributions from
the Trust Account with respect to such shares if the Company fails
to complete a Business Combination within the Combination
Period.
Unit Purchase Option
On
November 22, 2017, the Company sold to EarlyBirdCapital, for $100,
an option to purchase up to 600,000 Units exercisable at $10.00 per
Unit (or an aggregate exercise price of $6,000,000) commencing on
the later of November 20, 2018 or the consummation of a Business
Combination. The unit purchase option may be exercised for cash or
on a cashless basis, at the holder’s option, and expires five
years from November 20, 2017. The Units issuable upon exercise of
this option are identical to those offered in the Initial Public
Offering. The Company accounted for the unit purchase option,
inclusive of the receipt of $100 cash payment, as an expense of the
Initial Public Offering resulting in a charge directly to
stockholders’ equity. The Company estimated the fair value of
this unit purchase option to be $2,042,889 (or $3.40 per Unit)
using the Black-Scholes option-pricing model. The fair value of the
unit purchase option granted to the underwriters was estimated as
of the date of grant using the following assumptions: (1) expected
volatility of 35%, (2) risk-free interest rate of 2.05% and (3)
expected life of five years. The option and such units purchased
pursuant to the option, as well as the common stock underlying such
units, the rights included in such units, the common stock that is
issuable for the rights included in such units, the warrants
included in such units, and the shares underlying such warrants,
have been deemed compensation by FINRA and are therefore subject to
a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA’s
NASDAQ Conduct Rules. Additionally, the option may not be sold,
transferred, assigned, pledged or hypothecated for a one-year
period (including the foregoing 180-day period) following the date
of Initial Public Offering except to any underwriter and selected
dealer participating in the Initial Public Offering and their bona
fide officers or partners. The option grants to holders demand and
“piggy back” rights for periods of five and seven
years, respectively, from the effective date of the registration
statement with respect to the registration under the Securities Act
of the securities directly and indirectly issuable upon exercise of
the option. The Company will bear all fees and expenses attendant
to registering the securities, other than underwriting commissions
which will be paid for by the holders themselves. The exercise
price and number of units issuable upon exercise of the option may
be adjusted in certain circumstances including in the event of a
stock dividend, or the Company’s recapitalization,
reorganization, merger or consolidation. However, the option will
not be adjusted for issuances of common stock at a price below its
exercise price.
9. FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 for its financial assets
and liabilities that are re-measured and reported at fair value at
each reporting period, and non-financial assets and liabilities
that are re-measured and reported at fair value at least
annually.
The
fair value of the Company’s financial assets and liabilities
reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or
paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement
date. In connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable
inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about
how market participants would price assets and liabilities). The
following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs
used in order to value the assets and liabilities:
Level 1:
Quoted prices in active markets for identical assets or
liabilities. An active market for an asset or liability is a market
in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on
an ongoing basis.
Level 2:
Observable inputs other than Level 1 inputs. Examples of Level 2
inputs include quoted prices in active markets for similar assets
or liabilities and quoted prices for identical assets or
liabilities in markets that are not active.
Level 3:
Unobservable inputs based on our assessment of the assumptions that
market participants would use in pricing the asset or
liability.
The
following table presents information about the Company’s
assets that are measured at fair value on a recurring basis at
March 31, 2020 and December 31, 2019, and indicates the fair value
hierarchy of the valuation inputs the Company utilized to determine
such fair value:
14
BIG ROCK PARTNERS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2020
(Unaudited)
|
Description
|
Level
|
March
31,
2020
|
December
31,
2019
|
|
Assets:
|
|
|
|
|
Marketable
securities held in Trust Account
|
1
|
$6,192,007
|
$32,005,205
|
10. SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur
after the balance sheet date up to the date that the condensed
financial statements were issued. Other than as described in the
notes to these financial statements, the Company did not identify
any subsequent events that would have required adjustment or
disclosure in the condensed financial statements.
15
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, including the extent to which the COVID-19 pandemic
impacts our search for a business combination. 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, 2019 filed with the SEC on March 30, 2020. 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”). Our efforts in identifying a prospective
target business for our initial Business Combination are not
limited to a particular industry or geographic region. 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.
Recent
Developments
On
March 23, 2020, our stockholders approved an amendment to our
Amended and Restated Certificate of Incorporation to extend the
period of time for which we are required to consummate a Business
Combination from March 23, 2020 to July 23, 2020. The number of
shares of common stock presented for redemption in connection with
this extension was 2,433,721. We paid cash in the aggregate amount
of $25,997,965, or approximately $10.68 per share, to the redeeming
stockholders. We agreed to deposit, or cause to be deposited on our
behalf, into the Trust Account $0.02 for each public share
outstanding for each 30-day extension period utilized through July
23, 2020. Notwithstanding the
foregoing, if the volume weighted average price of the Company's
common stock during the 10-day trading period ending on the
3rdday prior to the end of any
applicable monthly period is equal to or greater than $11.00 and
the trading volume during the 10-day trading period exceeds 100,000
shares, the obligation to make any particular deposit would
terminate with respect to the immediately following monthly period
(but not with respect to any other future monthly period).
In connection with this extension, we deposited an aggregate of
$11,637 into the Trust Account to fund the first thirty-day
extension through April 23, 2020, which amounts were loaned to us
by A/Z Property and Investor. In April 2020, AZ Property
Partners and Investors loaned the Company an additional $11,610 to
pay for part of the extension through May 23, 2020.
On
August 9, 2019, we received a notice from the Staff stating that we
were no longer in compliance with Nasdaq Listing Rule 5550(a)(3)
for continued listing due to its failure to maintain a minimum of
300 public holders (the “Rule”). We had until September
23, 2019 to provide Nasdaq with a specific plan to achieve and
sustain compliance with the listing requirement. The notice is a
notification of deficiency, not of imminent delisting, and has no
current effect on the listing or trading of our securities on
Nasdaq.
On
September 23, 2019 and October 28, 2019, we submitted a plan to
regain compliance with Nasdaq and requested an extension through
February 5, 2020. On October 28, 2019, Nasdaq requested additional
information regarding our compliance plan, to which we responded on
November 8, 2019. On February 11, 2020, we received a notice from
the Staff stating that, based upon our non-compliance with the
Rule, the Staff had determined to delist our common stock from
Nasdaq unless we timely request a hearing before the Nasdaq
Hearings Panel (the “Panel“). We were also notified
that as a result of Nasdaq’s determination to delist our
common stock, our warrants and rights no longer comply with Nasdaq
Listing Rule 5560(a), which requires the underlying securities of
such exercisable securities to remain listed on Nasdaq, and our
Units no longer comply with Nasdaq Listing Rule 5225(b)(1)(A),
which requires all component parts of units to meet the
requirements for initial and continued listing, and our units,
warrants and rights are now subject to delisting. We requested a
hearing, which request automatically stayed any further action by
the Staff pending the ultimate conclusion of the hearing
process.
On
March 25, 2020, we received formal notice from Nasdaq indicating
that the Panel the Staff had granted our request for continued
listing on Nasdaq. The decision follows our hearing before the
Panel, which took place on March 19, 2020. Our continued listing is
subject to the satisfaction of a number of conditions, including,
ultimately, completion of a business combination with an operating
company by no later than August 10, 2020, and the combined
entity’s compliance with all applicable criteria for initial
listing on Nasdaq at the time of the merger. We failed to meet
certain of the conditions contained in the extension grant and have
submitted a modified extension request to the Staff. We have not
received a response from the Staff as of yet and cannot give
assurance that we won't be delisted prior to August 10,
2020.
16
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 are incurring
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 March 31, 2020, we had a net income of $273,220,
which consists of the forgiveness of previously recorded
professional fees of $352,071, interest income on securities held
in the trust account established for the benefit of our public
stockholders (the “Trust Account”) of $113,077, offset
by operating expenses of $119,300 and a provision for income taxes
of $72,628.
For the
three months ended March 31, 2019, we had a net income of $187,965,
which consists of interest income on securities held in the Trust
Account of $382,862, offset by operating costs of $163,181 and
provision for income taxes of $31,716.
Liquidity and Capital Resources
As of
March 31, 2020, we had cash and marketable securities held in the
Trust Account of $6,192,007 (including approximately $143,000 of
interest income) consisting of money market funds. Interest income
earned on the balance in the Trust Account may be used by us to pay
taxes. To date, we have withdrawn approximately $676,000 of
interest from the Trust Account in order to pay our income and
franchise taxes, of which approximately $121,000 was withdrawn
during the three months ended March 31, 2020.
For the
three months ended March 31, 2020, cash used in operating
activities amounted to $76,434. Net income of $273,220 was the
result of the forgiveness of previously recorded professional fees
in the amount of $352,071, interest earned on securities held in
the Trust Account of $113,077, offset by changes in operating
assets and liabilities, which provided $115,494 of cash for
operating activities.
For the
three months ended March 31, 2019, cash used in operating
activities amounted to $297,696. Net income of $187,965 was the
result of interest earned on securities held in the Trust Account
of $382,862, offset by changes in operating assets and liabilities,
which used $102,799 of cash for operating
activities.
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
March 31, 2020, A/Z Property has loaned us an aggregate of $548,787
in order to pay our Non-Business Combination Related Expenses and
extension payments. Upon consummation of a Business Combination, up
to $200,000 of the Non-Business Combination Related Expenses may
repaid by us to the Sponsor provided that we have funds available
to us sufficient to repay such expenses (the “Cap”) as
well as to pay for all stockholder redemptions, all Business
Combination Expenses, repayment of the Notes, and any funds
necessary for our working capital requirements following closing of
the Business Combination. Any remaining amounts in excess of the
Cap will be forgiven. If we do not consummate a Business
Combination, all outstanding loans made by the Sponsor to cover the
Non-Business Combination Related Expenses will be
forgiven.
As of
March 31, 2020, Investor has loaned us an aggregate of $1,631,869
in order to fund a portion of the extension payments.
We do
not believe we will need to raise additional funds in order to meet
expenditures required for operating our business. However, 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 may 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.
17
Off-balance sheet financing arrangements
We did
not have any off-balance sheet arrangements as of March 31,
2020.
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 us. We began
incurring these fees on November 20, 2017. Effective August 20,
2018, Sponsor agreed to stop charging us the monthly administrative
fee.
We have
engaged EarlyBirdCapital as an advisor in connection with a
Business Combination to assist us in holding meetings with its
stockholders to discuss a potential Business Combination and the
target business’ attributes, introduce us to potential
investors that are interested in purchasing securities, assist us
in obtaining stockholder approval for the Business Combination and
assist us with our press releases and public filings in connection
with a Business Combination. We 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.
Critical Accounting Policies
The
preparation of condensed 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. We
have identified the following critical accounting
policies:
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
(if any) is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within our control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders’ equity. Our common stock features certain
redemption rights that are considered to be outside of our control
and subject to occurrence of uncertain future events. Accordingly,
common stock subject to possible redemption is presented as
temporary equity, outside of the stockholders’ equity section
of our condensed balance sheets.
Net loss per common share
We
apply the two-class method in calculating earnings per share.
Common stock subject to possible redemption which is not currently
redeemable and is not redeemable at fair value, has been excluded
from the calculation of basic net loss per common share since such
shares, if redeemed, only participate in their pro rata share of
the Trust Account earnings. Our net income is adjusted for the
portion of income that is attributable to common stock subject to
possible redemption, as these shares only participate in the
earnings of the Trust Account and not our income or
losses.
Recent accounting pronouncements
Management
does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a
material effect on our condensed 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 investments, we do not believe that there
will be an associated material exposure to interest rate
risk.
18
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
management, with the participation of, 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 March 31, 2020. 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 March 31, 2020.
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.
19
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, 2019 filed with
the SEC on March 30, 2020. 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
On
March 23, 2020, the Company's stockholders approved to amend its
Amended and Restated Certificate of Incorporation to extend the
period of time for which the Company is required to consummate a
Business Combination to July 23, 2020. The number of shares of
common stock presented for redemption in connection with the
extension was 2,433,721. The Company paid cash in the aggregate
amount of $26.1 million, or approximately $10.71 per share, to
redeeming stockholders. For additional information, see Note 1 to
the condensed financial statements.
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.
20
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:
May 15, 2020
|
By:
|
/s/
Richard Ackerman
|
|
|
|
Name:
Richard Ackerman
|
|
|
|
Title:
Chairman, President and Chief Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
Date:
May 15, 2020
|
By:
|
/s/
Bennett Kim
|
|
|
|
Name:
Bennett Kim
|
|
|
|
Title:
Chief Financial Officer, Chief Investment Officer and
Director
|
|
|
|
(Principal
Financial and Accounting Officer)
|
21