UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

o 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: 001-36477

 

WL ROSS HOLDING CORP.
(Exact name of registrant as specified in its charter)

 

Delaware		46-5188282
(State or other jurisdiction of incorporation		(I.R.S. Employer  Identification Number)
or organization)
1166 Avenue of the Americas
New York, New York		10036
(Address of principal executive offices)		(Zip Code)

  

Registrant’s telephone number, including area code: (212) 826-1100

 

Not Applicable
(Former name or former address, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o	Accelerated filer x
Non-accelerated filer   o	Smaller reporting company o
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

 

As of May 10, 2016, there were 62,531,250 shares of Company’s common stock issued and outstanding.

 

 

WL ROSS HOLDING CORP.
TABLE OF CONTENTS

 

PART 1 – FINANCIAL INFORMATION	F-1
ITEM 1. FINANCIAL STATEMENTS	F-1 - F-15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	7
ITEM 4. CONTROLS AND PROCEDURES	7
PART II – OTHER INFORMATION	8
ITEM 1. LEGAL PROCEEDINGS	8
ITEM 1A. RISK FACTORS	8
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	9
ITEM 4. MINE SAFETY DISCLOSURES	9
ITEM 5. OTHER INFORMATION	10
ITEM 6. EXHIBITS	10

 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1 – FINANCIAL STATEMENTS

 

WL ROSS HOLDING CORP.

CONDENSED BALANCE SHEETS

             

		March 31, 2016				December 31, 2015
		(unaudited)				(audited)
ASSETS:
Current assets:
Cash		$	187			$	10,000
Prepaid expenses			58,670				48,654
Total current assets			58,857				58,654
Noncurrent assets:
Investments and cash held in trust account			501,023,695				500,647,797
Total assets		$	501,082,552			$	500,706,451
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses		$	1,619,413			$	386,811
Sponsor convertible note			744,714				310,644
Sponsor promissory note			235,032				-
State franchise tax accrual			45,000				68,294
Total current liabilities			2,644,159				765,749
Other liabilities:
Deferred underwriting compensation			18,309,150				18,309,150
Total liabilities			20,953,309				19,074,899
Common stock subject to possible redemption; 47,512,924 and 47,663,155 shares at March 31, 2016 and December 31, 2015, respectively (at redemption value of $10.00 per share)			475,129,240				476,631,550
Stockholders' equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding			-				-
Common stock, $0.0001 par value; 200,000,000 shares authorized, 15,018,326 and 14,868,095 shares issued and outstanding (excluding 47,512,924 and 47,663,155 subject to possible redemption) at March 31, 2016 and December 31, 2015, respectively			1,501				1,486
Additional paid-in-capital			7,870,509				6,368,214
Accumulated deficit			(2,872,007	)			(1,369,698	)
Total stockholders' equity			5,000,003				5,000,002
Total liabilities and stockholders' equity		$	501,082,552			$	500,706,451

 

See accompanying notes to condensed financial statements.

 

 

WL ROSS HOLDING CORP.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

		For the Three Months Ended March 31, 2016				For the Three Months Ended March 31, 2015
Revenue		$	-			$	-
Professional fees and other expenses			(1,823,998	)			(165,820	)
State franchise taxes, other than income tax			(45,107	)			(43,890	)
Interest on Sponsor convertible note			(9,070	)			-
Interest on Sponsor promissory note			(32	)			-
Loss from operations			(1,878,207	)			(209,710	)
Other income - Interest income			375,898				83,095
Net loss attributable to common shares		$	(1,502,309	)		$	(126,615	)
Weighted average common shares outstanding, basic and
diluted (excluding shares subject to possible redemption)			14,869,747				14,834,975
Net loss per common share:		$	(0.10	)		$	(0.01	)
Basic and diluted

 

See accompanying notes to condensed financial statements.

 

 

WL ROSS HOLDING CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three months ended March 31, 2016 and March 31, 2015

(unaudited)

 

		Common Stock								Additional
										Paid-in				Accumulated				Stockholders'
		Shares				Amount				Capital				Deficit				Equity
Balances, January 1, 2016			14,868,095			$	1,486			$	6,368,214			$	(1,369,698	)		$	5,000,002
Change in shares subject to possible redemption			150,231				15				1,502,295				—				1,502,310
Net loss for the period ended March 31, 2016			—				—				—				(1,502,309	)			(1,502,309	)
Balances, March 31, 2016			15,018,326			$	1,501			$	7,870,509			$	(2,872,007	)		$	5,000,003

 

		Common Stock								Additional
										Paid-in				Accumulated				Stockholders'
		Shares				Amount				Capital				Deficit				Equity
Balances, January 1, 2015			14,834,834			$	1,483			$	6,035,607			$	(1,037,086	)		$	5,000,004
Change in shares subject to possible redemption			12,662				1				126,619				—				126,620
Net loss for the period ended March 31, 2015			—				—				—				(126,615	)			(126,615	)
Balances, March 31, 2015			14,847,496			$	1,484			$	6,162,226			$	(1,163,701	)		$	5,000,009

 

See accompanying notes to condensed financial statements.

 

 

WL ROSS HOLDING CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

		For the Three Months Ended March 31, 2016				For the Three Months Ended March 31, 2015
Cash flows from operating activities:
Net loss		$	(1,502,309	)		$	(126,615	)
Adjustments to reconcile net loss to net cash used in operations:
Increase in prepaid expenses			(10,016	)			(5,199	)
Decrease in accrued state franchise tax			(23,294	)			(95,722	)
Increase in accrued expenses			1,232,602				123,550
Accrued interest on Sponsor convertible note			9,070				-
Accrued interest on Sponsor promissory note			32				-
Amortization of original issue discount			(303,932	)			(83,081	)
Interest on investments			(71,966	)			(14	)
Net cash used in operating activities			(669,813	)			(187,081	)
Cash flows from financing activities:
Proceeds from Sponsor convertible note			425,000				-
Proceeds from Sponsor promissory note			235,000				-
Net cash provided by financing activities			660,000				-
Decrease in cash			(9,813	)			(187,081	)
Cash at beginning the period			10,000				801,415
Cash at end of the period		$	187			$	614,334
Supplemental disclosure of cash flow information
Cash paid for state franchise taxes		$	(68,401	)		$	(139,612	)

 

See accompanying notes to condensed financial statements.

 

 

 

WL ROSS HOLDING CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(unaudited)

 

1.

Organization and Business Operations

 

Organization and General

 

WL Ross Holding Corp. (the “Company”) was incorporated in Delaware on March 24, 2014. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has neither engaged in any operations nor generated any revenue to date. The Company’s management has broad discretion with respect to the Business Combination. The Company’s sponsor is WL Ross Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The Company has selected December 31 as its fiscal year-end.

 

At March 31, 2016, the Company had not commenced any operations. All activity for the period from March 24, 2014 (inception) through March 31, 2016 relates to the Company’s formation, initial public offering (“Public Offering”) described below and efforts directed toward locating a suitable Business Combination. The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering.

 

Financing

 

The Company intends to finance a Business Combination with the proceeds from a $500,250,000 Public Offering (Note 3) and an $11,200,000 private placement (Note 4).

 

Upon the closing of the Public Offering and the private placement, $500,250,000 was placed in a trust account with the Continental Stock Transfer & Trust Company (the “Trust Account”) acting as Trustee.

 

Trust Account

 

The Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. As of March 31, 2016 and December 31, 2015 the Trust Account consisted of U.S. government treasury bills and investment in a money market fund.

 

The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, none of the funds held in trust will be released until the earlier of: (i) the completion of the Business Combination; or (ii) the redemption of 100% of the shares of common stock included in the units being sold in the Public Offering if the Company is unable to complete a Business Combination within 24 months from the closing of the Public Offering (June 11, 2016), subject to the requirements of law and stock exchange rules.

 

Business Combination

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” 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 (less any deferred underwriting commissions and taxes payable on interest earned) at the time of the Company signing a definitive agreement in connection with the Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination.

 

 

The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by NASDAQ rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem or repurchase its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption or repurchase of its public shares and the related Business Combination, and instead may search for an alternate Business Combination.

 

If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, public stockholders will have the opportunity to have public shares redeemed or repurchased for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination or commencement of the tender offer, respectively, including interest but less taxes payable. As a result, such shares have been classified as common stock subject to possible redemption, in accordance with ASC 480, “Distinguishing Liabilities from Equity.”

 

Unless the Company’s stockholders vote to extend the time the Company has to complete a Business Combination, the Company will only have 24 months from the closing date of the Public Offering (June 11, 2016) to complete its Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $50,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor has entered into letter agreements with the Company, pursuant to which it has waived its rights to participate in any redemption with respect to its initial shares; however, if the Sponsor or any of the Company’s officers, directors or affiliates acquire shares of common stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within the required time period.

 

In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Public Offering.

 

Proposed Nexeo Business Combination

 

On March 21, 2016 the Company entered into the Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Neon Acquisition Company LLC (“Blocker Merger Sub”), Neon Holding Company LLC (“Company Merger Sub”), Nexeo Solutions Holdings, LLC (“Nexeo”), Nexeo Holdco LLC (“New Holdco”) and TPG Accolade Delaware, L.P. (“Blocker”) to acquire Nexeo, a large global chemical and plastics distributor which provides broad logistics capabilities, in-depth market knowledge, dedicated technical expertise and environmental services. With operations worldwide, Nexeo has approximately 2,450 employees, connects a network of over 1,300 suppliers with a diverse base of more than 27,500 customers and offers over 23,000 products used in a broad cross-section of industries, including chemicals manufacturing, oil and gas, paints and coatings, automotive, healthcare and personal care (the “Proposed Nexeo Business Combination”). Pursuant to the provisions of the Company’s amended and restated certificate of incorporation, the Company currently has until June 11, 2016 to complete a Business Combination. However, in connection with the Proposed Nexeo Business Combination, the Company is currently in the process of seeking stockholder approval to extend the time the Company has to complete a Business Combination until August 20, 2016 (the “Extension”). If the Extension is approved by stockholders, the Company will file an amendment to the Company’s amended and restated certificate of incorporation providing for such additional time to complete a Business Combination.

 

 

Subject to the terms of the Merger Agreement and customary adjustments set forth therein, the aggregate purchase price for the Business Combination and related transactions is expected to be approximately $1,575,000,000, which amount will be reduced by, among other things, the aggregate amount of funds used to repay certain debt obligations of Nexeo and the assumption of capital lease obligations of Nexeo as set forth in the Merger Agreement. The consideration to be paid to holders of equity interests in Nexeo and Blocker as of the time immediately prior to the Proposed Nexeo Business Combination (“Selling Equityholders”) will be funded through a combination of cash and stock consideration. The amount of cash consideration is the sum of (i) cash held by Nexeo and certain of its subsidiaries at the closing of the Proposed Nexeo Business Combination, (ii) cash available to us from our Trust Account that holds the proceeds (including interest) of our IPO, and after giving effect to taxes payable, any redemptions that may be elected by any of our public stockholders for their pro rata share of the aggregate amount of funds on deposit prior to closing the Proposed Nexeo Business Combination and certain transaction fees and expenses in connection with the Proposed Nexeo Business Combination, including the payment of deferred underwriting commissions agreed to at the time of our IPO, (iii) the net proceeds of our anticipated debt financing and (iv) the anticipated proceeds from the sale of shares of newly issued common stock of the Company in a private placement (the “PIPE Investment”), less (i) certain transaction fees and expenses and (ii) the aggregate amount of funds paid to discharge certain debt obligations of Nexeo. The amount of stock consideration (the “Stock Consideration”), is a number of newly issued shares of our common stock, which shares will be valued at $10.00 per share for purposes of determining the aggregate number of shares payable to Selling Equityholders for their ownership interests therein. To the extent not utilized to consummate the Proposed Nexeo Business Combination or to repay the remainder of certain of Nexeo’s existing debt and capital lease obligations at the closing of the Proposed Nexeo Business Combination, the proceeds from our Trust Account, debt financing and PIPE Investment will be used for general corporate purposes, including, but not limited to, working capital for operations, capital expenditures and future potential acquisitions.

 

Under the Merger Agreement, Selling Equityholders will also receive at the closing of the Proposed Nexeo Business Combination as consideration from our Sponsor a portion of the Founder Shares issued to our Sponsor at the time of our IPO (the “Founder Shares Transfer”). Our Sponsor is providing this consideration (the “Founder Share Consideration”), in lieu of transferring such Founder Shares back to the Company for cancellation, in exchange for no consideration, and reissuance of such Founder Shares to Selling Equityholders by the Company. The Founder Shares transferred to Selling Equityholders in connection with the Proposed Nexeo Business Combination will be subject to the conditions and restrictions set forth in the Founder Share Transfer Letter Agreement (the “Founder Share Transfer Letter Agreement”), dated March 21, 2016, as may be amended from time to time, by and among Nexeo Holdco, LLC, Sponsor and the Company, the Shareholders’ and Registration Rights Agreement, dated as of March 21, 2016, as it may be amended from time to time, by and among New Holdco and certain of its affiliates, our Sponsor and the Company (the “SHRRA”), and the underwriting agreement that the Company entered into with the underwriters at the time of our IPO. The number of Founder Shares to be transferred to Selling Equityholders by our Sponsor will be a pro rata portion of 12,506,250 Founder Shares (less 30,000 Founder Shares being transferred to our independent directors) equal to the Stock Consideration, payable to Selling Equityholders (including any shares by which the Stock Consideration shall be reduced to cause the percentage of outstanding capital stock of the Company represented by the Stock Consideration and the Founder Share Consideration to equal 35% of all the outstanding capital stock, or the “Excess Shares”,) divided by the total shares of common stock of the post-combination company (including any shares issued in the PIPE Investment and any Excess Shares) and will be subject to forfeiture, transfer restrictions and restrictions on dividend distributions in the event that certain stock price milestones are not met.

 

The Company filed a definitive proxy statement with the SEC in connection with the Proposed Nexeo Business Combination on May 9, 2016 (the “Proxy Statement”). The Proxy Statement contains important information regarding the Proposed Nexeo Business Combination.

  

 

 

Emerging Growth Company

 

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

 

2.

Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”), and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of March 31, 2016 and December 31, 2015 and the results of operations and cash flows for the periods presented.  Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.  The accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K filed with the SEC on January 14, 2016.

 

Loss Per Common Share

 

Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period, plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At March 31, 2016, the Company had outstanding warrants to purchase 36,212,500 shares of common stock and notes that could convert into warrants and potentially be exercised or converted into common shares. For all periods presented, the weighted average of these shares was excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, dilutive loss per share of common stock is equal to basic loss per share of common stock.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

 

Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets.

 

Offering Costs

 

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A – “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and were charged to stockholders’ equity upon the completion of the Public Offering. Accordingly, at March 31, 2016 and December 31, 2015, offering costs totaling approximately $28,473,750 (including $27,513,750 in underwriters’ fees) have been charged to stockholders’ equity.

 

 

Redeemable Common Stock

 

As discussed in Note 3, all of the 50,025,000 common shares sold as part of the units in the Public Offering contain a redemption feature which allows for the redemption of common shares under the Company’s Liquidation or Tender Offer/Stockholder Approval provisions. In accordance with ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001.

 

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against accumulated deficit.

 

Accordingly, at March 31, 2016 and December 31, 2015, 47,512,924 and 47,663,155, respectively, of the 50,025,000 public shares were classified outside of permanent equity at its redemption value.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC 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 liabilities or 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 liabilities as income tax expense. No amounts were accrued for the payment of interest and penalties at March 31, 2016 and December 31, 2015. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

 

The Company may be subject to potential examination by U.S. federal, states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amount various tax jurisdictions and compliance with U.S. federal, states or foreign tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.

 

 

Going Concern Consideration

 

If the Company does not complete an initial Business Combination by June 11, 2016, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the common stock sold as part of the units in the Public Offering, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of franchise and income taxes payable and less up to $50,000 of such net interest which may be distributed to the Company to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. This mandatory liquidation and subsequent dissolution requirement raises substantial doubt about the Company’s ability to continue as a going concern.

 

In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Public Offering. In addition if the Company fails to complete its Business Combination by June 11, 2016, there will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless.  

 

In addition, at March 31, 2016, the Company had current liabilities of $2,644,159 and negative working capital of $2,585,302 largely due to amounts owed to professionals, consultants, advisors and others who are working on seeking or completing a Business Combination described in Note 1. Such work is continuing after March 31, 2016 and amounts are continuing to accrue. The Company expects to pay many of these costs upon consummation of the Business Combination. The uncertainty regarding the lack of resources to pay the above noted liabilities raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be unable to continue operations.

 

3.

Public Offering

 

Public Units

 

On June 11, 2014, the Company sold 50,025,000 at a price of $10.00 per unit (the “Public Units”) in the Public Offering. Each Unit consists of one share of the Company’s common stock, $0.0001 par value per share and one redeemable common stock purchase warrant (the “Warrants”).

 

Under the terms of the warrant agreement, the Company has agreed to use its best efforts to file a new registration statement under the Securities Act following the completion of the Business Combination. Each Warrant entitles the holder to purchase one-half of one share of common stock at a price of $5.75. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the warrant holder. Each Warrant will become exercisable on the later of 30 days after the completion of the Company’s Business Combination or 12 months from the closing of the Public Offering and will expire five years after the completion of the Company’s Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its Business Combination on or prior to the 24-month period allotted to complete the Business Combination, the Warrants will expire at the end of such period. If the Company is unable to deliver registered shares of common stock to the holder upon exercise of Warrants issued in connection with the 50,025,000 Public Units during the exercise period, there will be no net cash settlement of these Warrants and the Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the warrants become exercisable, the Company may redeem the outstanding warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, only in the event that the last sale price of the Company’s shares of common stock equals or exceeds $24.00 per share for any 20 trading days within the 30-trading day period ending on the third trading day before the Company sends the notice of redemption to the warrant holders.

 

 

The Company paid an upfront underwriting discount of approximately 1.84% ($9,204,600) of the per unit offering price to the underwriters at the closing of the Public Offering, with an additional fee (the “Deferred Discount”) of 3.66% ($18,309,150) of the gross offering proceeds payable upon the Company’s completion of a Business Combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount.

 

4.

Related Party Transactions

 

Founder Shares

 

In March 2014, the Sponsor purchased 14,375,000 shares of common stock (the “Founder Shares”) for $25,000, or approximately $0.002 per share. The Founder Shares are identical to the common stock included in the Units sold in the Public Offering except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below. Immediately prior to the Public Offering, the Sponsor forfeited 1,868,750 Founder Shares so that the remaining founder shares represent 20.0% of the outstanding shares upon the completion of the Public Offering.

 

The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier of (A) one year after the completion of the Business Combination, or earlier if, subsequent to the Business Combination, the last sale price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the Business Combination that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock Up Period”).

 

Rights - The Founder Shares are identical to the public shares except that (i) The Founder Shares are subject to certain transfer restrictions, as described above, and (ii) the Sponsor has agreed to waive redemption rights in connection with the Business Combination with respect to the Founders Shares and any public shares they may purchase, and to waive their redemption rights with respect to the Founder Shares if the Company fails to complete a Business Combination within 24 months from the closing of the Public Offering (June 11, 2016).

 

Voting – If the Company seeks stockholder approval of a Business Combination, the Sponsor has agreed to vote its Founder Shares and any public shares purchased during or after the Public Offering in favor of the Business Combination.

 

Redemption – Although the Sponsor and its permitted transferees will waive their redemption rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the prescribed time frame, they will be entitled to redemption rights with respect to any public shares they may own.

 

Prior to the Public Offering, the Company had granted the Sponsor the option to purchase, simultaneously with the consummation of an initial Business Combination, up to an additional 10,000,000 shares of common stock at a price of $10.00 per share.

 

On March 21, 2016, the Company, the Sponsor and New Holdco entered into the Founder Share Transfer Letter Agreement which provides that, under the Merger Agreement, holders of equity interests in Nexeo and Blocker as of the time immediately prior to the Proposed Nexeo Business Combination (the "Selling Equityholders") will receive at the closing of the Proposed Nexeo Business Combination as consideration from the Sponsor, a portion of its shares of the Company’s common stock (the “Founder Shares”) issued at the time of the Public Offering to the Sponsor, pursuant to the Amended and Restated Securities Subscription Agreement, dated April 4, 2014 (the “Founder Shares Transfer”). The Sponsor is providing this consideration in lieu of transferring such Founder Shares back to the Company for cancellation, in exchange for no consideration, and reissuance of such Founder Shares to Selling Equityholders by the Company. This brief summary of the Founder Shares Transfer is qualified in all respects by reference to the complete text of the Founder Share Transfer Letter Agreement, dated as of March 21, 2016, by and among the Company, the Sponsor and New Holdco, which was filed with the SEC on March 22, 2016 as Exhibit 10.4 to the Company's Current Report on Form 8-K.

 

Private Placement Warrants

 

The Sponsor has purchased from the Company an aggregate of 22,400,000 warrants at a price of $0.50 per warrant (a purchase price of $11,200,000) in a private placement that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one-half of one share of common stock at $5.75 per share. The purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering to be held in the Trust Account pending completion of the Business Combination.

 

 

The Private Placement Warrants (including the common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Business Combination and they will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants included in the units being sold in the Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants sold as part of the units in the Public Offering and have no net cash settlement provisions.

 

On March 21, 2016, the Company, the Sponsor and Nexeo entered into the Private Placement Warranty Exchange Letter Agreement which provides that the Private Placement Warrants will be exchanged by the Sponsor for the Company’s common stock at an exchange ratio of 0.10 shares of common stock for each Private Placement Warrant at the closing of the Proposed Nexeo Business Combination (the “Private Placement Warrant Exchange”). This brief summary of the Private Placement Warrant Exchange is qualified in all respects by reference to the complete text of the Private Placement Warranty Exchange Letter Agreement, dated as of March 21, 2016, by and among the Company, the Sponsor and Nexeo, which was filed with the SEC on March 22, 2016 as Exhibit 10.3 to the Company's Current Report on Form 8-K.

 

If the Company does not complete a Business Combination, then the Private Placement Warrants proceeds will be part of the liquidation distribution to the public stockholders and the Private Placement Warrants will expire worthless.

 

Registration Rights

 

The holders of the Founder Shares and Private Placement Warrants hold registration rights to require the Company to register the sale of any of the securities held by them pursuant to a registration rights agreement. The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable Lock Up Period. The Company will bear the costs and expenses of filing any such registration statements.

 

Related Party

 

The Sponsor loaned the Company $350,000 in the aggregate by the issuance of unsecured promissory notes (the “Notes”) for $350,000 to cover expenses related to the Public Offering. These Notes were non-interest bearing and payable on the earlier of March 31, 2015 or the completion of the Public Offering. The Notes were repaid in full on June 12, 2014.

 

On March 26, 2015, the Company issued a convertible promissory note (the “Convertible Note”) to the Sponsor that provides for the Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of the Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of our common stock at a conversion price of $0.60 per warrant. Each warrant will entitle the Sponsor to purchase one-half of one share of our common stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to the Sponsor. On April 16, 2015, the Company borrowed the total proceeds of $300,000 from the Convertible Note entered with the Sponsor. For the three months ended March 31, 2016, the Company incurred $3,830 of interest expense which under the terms of the Convertible Note has been added to the principal amount.  On January 4, 2016, the Company issued a second convertible promissory note, (the “Second Convertible Note”) to borrow additional proceeds of $425,000 from the Sponsor. The Company incurred $5,240 of interest expense for the three months ended March 31, 2016 which under the terms of the Convertible Note has been added to the principal amount.  As of March 31, 2016, the outstanding balance of both Convertible Notes is $744,714.  As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.

 

On March 31, 2016, the Sponsor issued a promissory note (the “Notes”) with the Company to borrow up to $750,000, the promissory note is interest bearing at 5% per annum and is due and payable on the first to occur of (1) the consummation of the Proposed Nexeo Business Combination or (2) June 11, 2016 (or such later or such later date as may be approved by our stockholders by amendment of our charter to complete an initial Business Combination). The Sponsor loaned the Company $235,000 in the aggregate by the issuance of the notes to cover expenses related to daily operations. As of March 31, 2016, the outstanding balance of promissory note is $235,032.

 

Administrative Service Agreement

 

On March 31, 2016, the Company has agreed to pay $10,000 a month for office space, administrative services and secretarial support to WL Ross & Co. LLC, an affiliate of the Sponsor. Upon the completion of the Business Combination or the liquidation of the Company, the Company will cease paying these monthly fees. The Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations of the Company for office space, administrative services and secretarial support for the year beginning on January 1, 2015 to December 31, 2016.

 

 

5.

Deferred Underwriting Compensation

 

The Company is committed to pay the Deferred Discount totaling $18,309,150 or 3.66% of the gross offering proceeds of the Public Offering, to the underwriters upon the Company’s consummation of a Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount, and no Deferred Discount is payable to the underwriters if there is no Business Combination.

 

6.

Income Taxes

 

Components of the Company’s deferred tax asset at March 31, 2016 are as follows:

 

Net operating loss			452,396
Valuation allowance			(452,396	)
			-

 

Components of the Company’s deferred tax asset at December 31, 2015 are as follows:

 

Net operating loss			415,233
Valuation allowance			(415,233	)
			-

 

The Company established a valuation allowance of approximately $452,000 as of March 31, 2016 and $415,000 as of December 31, 2015, which fully offsets the deferred tax asset as of March 31, 2016 and December 31, 2015 of approximately $452,000 and $415,000 respectively.  The deferred tax asset results from applying an effective combined federal and state tax rate of 35% to net operating loss of approximately $1,292,500 as of March 31, 2016 and $1,186,000 as of December 31, 2015, respectively. The Company’s net operating losses will expire beginning 2034. 

 

7.

Investments and cash held in Trust

 

As of March 31, 2016 investment securities in the Company’s Trust Account consist of $312,597,363 in United States Treasury Bills and $188,426,332 in a money market fund. As of December 31, 2015, investment securities in the Company’s Trust Account consist of $499,848,764 in United States Treasury Bills and $799,033 in money market fund. The Company classifies its United States Treasury and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.

 

 

The carrying amount, excluding accrued interest income, gross unrealized holding gains and fair value of held to maturity securities at December 31, 2015 and December 31, 2014 are as follows:

 

						Gross
		Carrying Amount				Unrealized
		March 31, 2016				Holding Gains				Fair Value
Held-to-maturity:
U.S. Treasury Securities (Maturity dates range from 4/28/16 to 5/19/16)		$	312,597,363			$	94,477			$	312,691,840

 

						Gross
		Carrying Amount				Unrealized
		December 31, 2015				Holding Gains				Fair Value
Held-to-maturity:
U.S. Treasury Securities (Maturity dates range from 3/31/16 to 5/19/16)		$	499,848,764			$	41,283			$	499,890,047

 

8.

Fair Value Measurement

 

The Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

 

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:

 

						Quoted Prices in				Significant Other				Significant Other
						Active Markets				Observable				Unobservable
Description		March 31, 2016				(Level 1)				Inputs (Level 2)				Inputs (Level 3)
Investments in treasury bills held in trust account			312,691,840				312,691,840				-				-
Investments in money market fund held in trust account			188,426,332				188,426,332				-				-
Total		$	501,118,172			$	501,118,172			$	-			$	-

  

						Quoted Prices in				Significant Other				Significant Other
						Active Markets				Observable				Unobservable
Description		December 31, 2015				(Level 1)				Inputs (Level 2)				Inputs (Level 3)
Investments in treasury bills held in trust account			499,890,047				499,890,047				-				-
Investments in money market fund held in trust account			799,033				799,033				-				-
Total		$	500,689,080			$	500,689,080			$	-			$	-

 

 

9.

Stockholders’ Equity

 

Common Stock

 

The Company is authorized to issue 200,000,000 shares of common stock. Holders of the Company’s common stock are entitled to one vote for each share of common stock. At March 31, 2016, there were 62,531,250 shares of common stock outstanding, including 47,512,924 shares subject to possible redemption. At December 31, 2015, there were 62,531,250 shares of common stock outstanding, including 47,663,155 shares subject to possible redemption.

 

Preferred Stock

 

The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. At March 31, 2016 and December 31, 2015, there were no shares of preferred stock issued and outstanding.

 

10.

Subsequent Events

 

Promissory Note

 

Subsequent to the period covered by this report, on April 29, 2016, the Company borrowed an additional $50,000 on the promissory notes issued March 31, 2016.

 

Subscription Agreements

 

In connection with the Proposed Nexeo Business Combination, the Company entered into a subscription agreement, dated May 9, 2016, with Fidelity Select Portfolios: Chemicals Portfolio, Fidelity Advisor Series I: Fidelity Advisor Value Fund, Fidelity Capital Trust: Fidelity Value Fund, Fidelity Select Portfolios: Materials Portfolio, Fidelity Central Investment Portfolios LLC: Fidelity Materials Central Fund and Variable Insurance Products Fund IV: Materials Portfolio, which funds we collectively refer to as “Fidelity” and which subscription agreement we refer to as the “Fidelity Subscription Agreement”, pursuant to which Fidelity has agreed to purchase up to approximately 3.86 million shares, or $38.6 million, of shares of Common Stock on a private placement basis immediately prior to the closing of the Business Combination.

 

Also in connection with the Proposed Nexeo Business Combination, the Company entered into a subscription agreement, dated May 6, 2016, with MFS Series Trust X on behalf of MFS Global Alternative Strategy Fund, MFS Series Trust I on behalf of MFS New Discovery Fund and MFS Variable Insurance Trust on behalf of MFS New Discovery Series, which funds we collectively refer to as “MFS” and which subscription agreement we refer to as the “MFS Subscription Agreement” and, together with the Fidelity Subscription Agreement, the “Subscription Agreements”, pursuant to which MFS has agreed to purchase up to approximately 0.37 million shares, or $3.7 million, of shares of Common Stock on a private placement basis immediately prior to the closing of the Business Combination.

 

Pursuant to the Subscription Agreements, the Company has agreed to register the shares sold in the private placement under the Securities Act by filing with the SEC a registration statement registering the resale of such shares by Fidelity and MFS, subject to customary terms and conditions. Copies of the Subscription Agreements are filed with this Quarterly Report on Form 10-Q as Exhibit 10.6 and Exhibit 10.7, and are incorporated herein by reference, and the foregoing description of the Subscription Agreements are qualified in their entirety by reference thereto.

 

Other than the foregoing, management has performed an evaluation of subsequent events through the date of issuance of the financial statements, noting no items which require adjustments or disclosure.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

References to the “Company,” “our,” “us” or “we” refer to WL Ross Holding Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed 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

 

All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements under “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. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission (“SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.

 

Overview

 

We are a blank check company incorporated on March 24, 2014 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). We intend to effectuate a Business Combination using cash from the proceeds of a public offering (the “Public Offering”) and the private placement of the private placement warrants that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”), our capital stock, debt or a combination of cash, stock and debt.

 

As indicated in the accompanying financial statements, as of March 31, 2016 and December 31, 2015, we had $187 and $10,000, respectively, in cash held outside of our trust account (“Trust Account”) maintained by Continental Stock Transfer & Trust Company, acting as trustee, and deferred offering costs of approximately $18,309,150. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial Business Combination will be successful.

 

As more fully described below in the section entitled “Proposed Nexeo Business Combination”, on March 21, 2016 we entered into the Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Neon Acquisition Company LLC, Neon Holding Company LLC, Nexeo Solutions Holdings, LLC (“Nexeo”), Nexeo Holdco LLC (“New Holdco”) and TPG Accolade Delaware, L.P. to acquire Nexeo, a large global chemical and plastics distributor which provides broad logistics capabilities, in-depth market knowledge, dedicated technical expertise and environmental services. With operations worldwide, Nexeo has approximately 2,450 employees, connects a network of over 1,300 suppliers with a diverse base of more than 27,500 customers and offers over 23,000 products used in a broad cross-section of industries, including chemicals manufacturing, oil and gas, paints and coatings, automotive, healthcare and personal care (the “Proposed Nexeo Business Combination”). Pursuant to the provisions of our amended and restated certificate of incorporation, we currently have until June 11, 2016 to complete a Business Combination. However, in connection with the Proposed Nexeo Business Combination, we are currently in the process of seeking stockholder approval to extend the time we have to complete a Business Combination until August 20, 2016 (the “Extension”). If the Extension is approved by stockholders, we will file an amendment to our amended and restated certificate of incorporation providing for such additional time to complete a Business Combination.

 

 

Results of Operations

 

For the three months ended March 31, 2016 and 2015, we had net losses of $1,502,309 and $126,615, respectively. Our entire activity since our Public Offering has been limited to identifying and evaluating prospective acquisition targets for an initial Business Combination.

 

Liquidity and Capital Resources

 

Prior to our Public Offering, on March 24, 2014, WL Ross Sponsor LLC, a Delaware limited liability company (our “Sponsor”) purchased an aggregate of 14,375,000 shares of common stock (the “Founder Shares”) for an aggregate purchase price of $25,000, or approximately $0.002 per share. Immediately prior to the pricing of the Public Offering, on June 5, 2014, our Sponsor forfeited 1,868,750 Founder Shares so that the remaining 12,506,250 Founder Shares represented 20.0% of the outstanding shares upon completion of the Public Offering. On June 11, 2014, we consummated the Public Offering of 50,025,000 units (which includes the full exercise of the underwriters’ over-allotment option) at a price of $10.00 per unit generating gross proceeds of $500,250,000 before underwriting discounts and expenses. Simultaneously with the commencement of the Public Offering, on June 5, 2014, we consummated the private sale of an aggregate of 22,400,000 Private Placement Warrants, each exercisable to purchase one-half of one share of our common stock at $5.75 per half share, to our Sponsor, at a price of $0.50 per Private Placement Warrant, generating proceeds, before expenses, of $11,200,000. We received net proceeds from the Public Offering and the sale of the Private Placement Warrants of approximately $501,345,400, net of the non-deferred portion of the underwriting commissions of $9,204,600 and offering costs and other expenses of approximately $900,000. The amount of proceeds not deposited in our Trust Account was $1,095,400 at closing of the Public Offering. In addition, interest income on the funds held in our Trust Account may be released to us to pay our franchise and income tax obligations. For a description of the proceeds generated in the Public Offering and a discussion of the use of such proceeds, we refer you to Note 3 of the financial statements included in Part I, Item 1 of this Report.

 

As of March 31, 2016, investment securities in our Trust Account consisted of $312,597,363 invested in U.S. government treasury bills with a maturity of 49 days or less, and $188,426,332 in a money market fund. As of December 31, 2015, investment securities in our Trust Account consisted of $499,848,764 invested in U.S. government treasury bills with a maturity of 140 days or less and $799,033 in a money market fund.

 

On March 26, 2015, we issued a convertible promissory note (the “Convertible Note”) to our Sponsor that provides for our Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of our common stock at a conversion price of $0.60 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of our common stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to our Sponsor. On April 16, 2015 we borrowed the total proceeds of $300,000 from the Convertible Note entered with our Sponsor. For the three months ended March 31, 2016, the Company incurred $3,830 of interest expense, which under the terms of the Convertible Note has been added to the principal amount. As of March 31, 2016, the outstanding balance of the Convertible Note was $314,474. As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.

 

On January 5, 2016, we issued a convertible promissory note (the “Second Convertible Note”) to our Sponsor that provides for our Sponsor to loan us up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On January 5, 2016, we borrowed the total proceeds of $425,000 from the Second Convertible Note entered with our Sponsor. For the three months ended March 31, 2016, the Company incurred $5,240 of interest expense, which under the terms of the Convertible Note has been added to the principal amount. As of March 31, 2016, the outstanding balance of the Convertible Note was $430,240.

 

 

On March 31, 2016, we issued a promissory note (the “March 2016 Note”) to our Sponsor pursuant to which we may borrow up to $750,000. The March 2016 Note is interest bearing at 5% per annum and is due and payable on the first to occur of (1) the consummation of the Proposed Nexeo Business Combination or (2) June 11, 2016 (or such later or such later date as may be approved by our stockholders by amendment of our charter to complete an initial Business Combination). As of March 31, 2016, the outstanding balance of the March 2016 Note was $235,032, including $32 of accrued interest.

 

As of March 31, 2016 and December 31, 2015, we had cash held outside of our Trust Account of $187 and $10,000, respectively, to fund our working capital requirements.

 

In addition, at March 31, 2016, we had current liabilities of $2,644,159 and negative working capital of $2,585,302 largely due to amounts owed to professionals, consultants, advisors and others who worked on seeking a Business Combination and the Proposed Nexeo Business Combination. Such work is continuing after March 31, 2016 and amounts are continuing to accrue. We expect to pay many of these costs upon consummation of the Business Combination. If the Business Combination were not consummated by June 11, 2016 (or such later date in case an Extension is approved), we would (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Public Offering. Although our plan is to complete the Business Combination, there is no assurance that our plan can be accomplished. The uncertainty regarding the lack of resources to pay the above noted liabilities raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be unable to continue operations.

 

We intend to use substantially all of the funds held in our Trust Account, including interest (which interest shall be net of taxes payable) to consummate a Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to consummate a Business Combination, the remaining proceeds held in our Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategy.

 

As more fully described below in the section entitled “Proposed Nexeo Business Combination”, we intend to raise additional funds through a private offering of debt and equity to consummate the Proposed Nexeo Business Combination.

 

Off-balance sheet financing arrangements

 

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

 

We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or enter into any non-financial agreements involving assets.

 

Contractual obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an administrative agreement to pay an affiliate of our Sponsor a monthly fee of $10,000. This amount covers secretarial and administrative services provided to members of our management team by our Sponsor, members of our Sponsor, and our management team or their affiliates. Upon completion of a Business Combination or our liquidation, we will cease paying this monthly fee.

 

 

On March 26, 2015, our Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations for the period beginning on January 1, 2015 and ending on December 31, 2015. On January 13, 2016, our Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations for the period beginning on January 1, 2016 and ending on December 31, 2016.

 

Critical Accounting Policies

 

The preparation of financial statements and related disclosures in conformity with 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 as our critical accounting policies:

 

Offering costs

 

We comply with the requirements of Accounting Standards Codification (“ASC”) 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and were charged to stockholders’ equity upon the completion of the Public Offering. Accordingly, at each of March 31 2016 and 2015, offering costs totaling approximately $28,473,750 (including $27,513,750 in underwriters’ fees) have been charged to stockholders’ equity.

 

Redeemable Common Stock

 

All of the 50,025,000 common shares sold as part of the units in the Public Offering contain a redemption feature which allows for the redemption of common shares under our Liquidation or Tender Offer/Stockholder Approval provisions. In accordance with ASC 480, redemption provisions not solely within our control require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although we did not specify a maximum redemption threshold, our charter provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets (stockholders’ equity) to be less than $5,000,001.

 

We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against accumulated deficit.

 

As of March 31, 2016, 47,512,924 of the 50,025,000 public shares were classified outside of permanent equity at its redemption value. As of December 31, 2015, 47,663,155 of the 50,025,000 public shares were classified outside of permanent equity at its redemption value.

 

Loss per share of Common Stock

 

Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period, plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At March 31, 2016 and 2015, we had outstanding warrants to purchase 36,212,500 shares of common stock and notes that could convert into warrants and potentially be exercised or converted into common stock. For all periods presented, the weighted average of these shares was excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, dilutive loss per share of common stock is equal to basic loss per share of common stock.

 

 

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.

 

Proposed Nexeo Business Combination

 

The following is a brief summary of the terms and background of the Merger Agreement. Any description in this Quarterly Report on Form 10-Q of the Merger Agreement is qualified in all respects by reference to the complete text of the Merger Agreement, which was filed with the SEC on March 22, 2016 as Exhibit 2.1 to our Current Report on Form 8-K. We have filed a definitive proxy statement with the SEC in connection with the Proposed Nexeo Business Combination on May 9, 2016 (the “Proxy Statement”). The Proxy Statement contains important information regarding the Proposed Nexeo Business Combination. The following description of the Merger Agreement is qualified in all respects by reference to the more detailed description in the Proxy Statement.

 

On March 21, 2016, we entered into the Merger Agreement. Pursuant to the Proposed Nexeo Business Combination, first, Company Merger Sub will merge with and into Nexeo (the “Company Merger”), with Nexeo continuing as the surviving entity, with the Company and Blocker as its sole owners. Nexeo, immediately following the effectiveness of the Company Merger, Blocker Merger Sub will merge with and into Blocker, with Blocker continuing as the surviving entity and as a wholly-owned subsidiary of the Company.

 

Subject to the terms of the Merger Agreement and customary adjustments set forth therein, the aggregate purchase price for the Business Combination and related transactions is expected to be approximately $1,575 million, which is the value implied by adding (i) approximately $298 million equity value consideration to be issued to the Selling Equityholders (as defined below), (ii) approximately $420 million of cash consideration payable to the Selling Equityholders, (iii) the assumption or refinancing of Nexeo’s net debt of $811 million as of December 31, 2015, and (iv) approximately $46 million in Deferred Cash Consideration (as defined in the Merger Agreement) paid to Selling Equityholders, and which amount will be reduced by, among other things, the aggregate amount of funds used to repay certain debt obligations of Nexeo and the assumption of capital lease obligations of Nexeo as set forth in the Merger Agreement. The consideration to be paid to holders of equity interests in Nexeo and Blocker as of the time immediately prior to the Proposed Nexeo Business Combination (“Selling Equityholders”) will be funded through a combination of cash and stock consideration. The amount of cash consideration is the sum of (i) cash held by Nexeo and certain of its subsidiaries at the closing of the Proposed Nexeo Business Combination, (ii) cash available to us from our Trust Account that holds the proceeds (including interest) of our IPO, and after giving effect to taxes payable, any redemptions that may be elected by any of our public stockholders for their pro rata share of the aggregate amount of funds on deposit prior to closing the Proposed Nexeo Business Combination and certain transaction fees and expenses in connection with the Proposed Nexeo Business Combination, including the payment of deferred underwriting commissions agreed to at the time of our IPO, (iii) the net proceeds of our anticipated debt financing and (iv) the anticipated proceeds from the sale of shares of newly issued common stock of the Company in a private placement (the “PIPE Investment”), less (i) certain transaction fees and expenses and (ii) the aggregate amount of funds paid to discharge certain debt obligations of Nexeo. The amount of stock consideration (the “Stock Consideration”), is a number of newly issued shares of our common stock, which shares will be valued at $10.00 per share for purposes of determining the aggregate number of shares payable to Selling Equityholders for their ownership interests therein. To the extent not utilized to consummate the Proposed Nexeo Business Combination or to repay the remainder of certain of Nexeo’s existing debt and capital lease obligations at the closing of the Proposed Nexeo Business Combination, the proceeds from our Trust Account, debt financing and PIPE Investment will be used for general corporate purposes, including, but not limited to, working capital for operations, capital expenditures and future potential acquisitions.

 

Under the Merger Agreement, Selling Equityholders will also receive at the closing of the Proposed Nexeo Business Combination as consideration from our Sponsor a portion of the Founder Shares issued to our Sponsor at the time of our IPO (the “Founder Shares Transfer”). Our Sponsor is providing this consideration (the “Founder Share Consideration”), in lieu of transferring such Founder Shares back to the Company for cancellation, in exchange for no consideration, and reissuance of such Founder Shares to Selling Equityholders by the Company. The Founder Shares transferred to Selling Equityholders in connection with the Proposed Nexeo Business Combination will be subject to the conditions and restrictions set forth in the Founder Share Transfer Letter Agreement (the “Founder Share Transfer Letter Agreement”), dated March 21, 2016, as may be amended from time to time, by and among Nexeo Holdco, LLC, Sponsor and the Company, the Shareholders’ and Registration Rights Agreement, dated as of March 21, 2016, as it may be amended from time to time, by and among New Holdco and certain of its affiliates, our Sponsor and the Company (the “SHRRA”), and the underwriting agreement that the Company entered into with the underwriters at the time of our IPO. The number of Founder Shares to be transferred to Selling Equityholders by our Sponsor will be a pro rata portion of 12,506,250 Founder Shares (less 30,000 Founder Shares being transferred to our independent directors) equal to the Stock Consideration, payable to Selling Equityholders (including any shares by which the Stock Consideration shall be reduced to cause the percentage of outstanding capital stock of the Company represented by the Stock Consideration and the Founder Share Consideration to equal 35% of all the outstanding capital stock, or the “Excess Shares”,) divided by the total shares of common stock of the post-combination company (including any shares issued in the PIPE Investment and any Excess Shares) and will be subject to forfeiture, transfer restrictions and restrictions on dividend distributions in the event that certain stock price milestones are not met.

 

 

In addition to the transactions contemplated by the Merger Agreement and in connection with the Proposed Nexeo Business Combination, the Company’s private placement warrants issued to our Sponsor at the time of our IPO will be exchanged by our Sponsor for the Company’s common stock at an exchange ratio of 0.10 shares of common stock for each private placement warrant at the closing of the Proposed Nexeo Business Combination.

 

Pursuant to the terms of the Merger Agreement, the aggregate stock ownership of Selling Equityholders from the stock consideration and the Founder Shares Transfer will be capped at 35% (the “35% Cap”). If the 35% Cap applies and the Company does not otherwise satisfy the remaining purchase price in cash at closing, the Selling Equityholders will receive the remaining purchase price as deferred cash consideration. Selling Equityholders’ rights to the payment of such deferred cash consideration are subject to the terms and conditions set forth in the Merger Agreement and SHRRA.

 

Prior to or at the closing of the Proposed Nexeo Business Combination, the Company will also enter into the tax receivable agreement with Selling Equityholders. This tax receivable agreement will generally provide for the payment by the Company to the Selling Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Proposed Nexeo Business Combination as a result of (i) certain increases in tax basis resulting from the Company Merger, (ii) certain tax attributes of Nexeo existing prior to the Proposed Nexeo Business Combination, (iii) net operating losses and certain other tax attributes of Blocker available to the Company as a result of the Blocker Merger, and (iv) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, payments it makes under this tax receivable agreement. The Company will retain the benefit of the remaining 15% of these cash savings.

 

As promptly as practicable after the date of the Merger Agreement described herein, the Company has agreed to provide its stockholders with the opportunity to redeem shares of common stock in conjunction with a stockholder vote on the transactions contemplated by the Merger Agreement. The Company has further agreed (i) not to terminate or withdraw such redemption rights other than in connection with a valid termination of the Merger Agreement and (ii) extend such period for public stockholders to exercise their redemption rights for any period required by any rule, regulation, interpretation or position of the SEC or The NASDAQ Stock Market.

 

The consummation of the transactions contemplated by the Merger Agreement is subject to a number of conditions set forth in the Merger Agreement including, among others, receipt of the requisite approval of the stockholders of the Company.

 

The foregoing summary of the Proposed Nexeo Business Combination is qualified in all respects by reference to the complete text of the Merger Agreement, the form of tax receivable agreement, the founder share transfer letter agreement and the shareholders’ and registration rights agreement which are attached as Exhibit 2.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.1, respectively, to our Current Report on Form 8-K filed with the SEC on March 22, 2016.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

To date, our efforts have been limited to organizational activities and activities relating to the Public Offering and the identification of a target business. We have neither engaged in any operations nor generated any revenues. As the proceeds from the Public Offering held in our Trust Account have been invested in short term investments, our only market risk exposure relates to fluctuations in interest rates. However, due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. As of March 31, 2016, the effective annualized interest rate payable on our investments was approximately 0.15 %.

 

As of March 31, 2016 and December 31, 2015, approximately $482,714,545 and $482,338,647, respectively (excluding approximately $18,309,150 of deferred underwriting discounts), was held in our Trust Account for the purposes of consummating a Business Combination. As of March 31, 2016, the proceeds held in our Trust Account (including the deferred underwriting discounts) consist of $312,597,363 invested in U.S. government treasury bills and $188,426,332 in a money market fund. As of December 31, 2015, the proceeds held in our Trust Account (including the deferred underwriting discounts) consist of $499,848,764 invested in U.S. government treasury bills and $799,033 in a money market fund.

 

We have not engaged in any hedging activities since our inception on March 24, 2014. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

 

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 Securities Exchange Act of 1934, as amended (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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2016. 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.

 

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.

 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

Other than the risk factors disclosed in the Proxy Statement, which we incorporated herein by reference, there have been no material changes to the risk factors disclosed in our Annual Report filed on January 14, 2016 with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Unregistered Sales

 

On March 24, 2014, our Sponsor purchased an aggregate of 14,375,000 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.002 per share. Immediately prior to the pricing of the Public Offering, on June 5, 2014, our Sponsor forfeited 1,868,750 Founder Shares so that the remaining 12,506,250 Founder Shares represented 20.0% of the outstanding shares upon completion of the Public Offering.

 

On June 5, 2014, simultaneously with the commencement of the Public Offering, we consummated a sale of 22,400,000 Private Placement Warrants at a price of $0.50 per Private Placement Warrant, generating total proceeds of $11,200,000. The Private Placement Warrants, which were purchased by our Sponsor, are substantially similar to the warrants underlying the units issued in the Public Offering, except that if held by the original holder or their permitted assign, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption and (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of a Business Combination. If the Private Placement Warrants are held by holders other than its initial holders, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Warrants.

 

On March 26, 2015, we issued a convertible promissory note (the “Convertible Note”) to our Sponsor that provides for our Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of our common stock at a conversion price of $0.60 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of our common stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to our Sponsor. On April 16, 2015 we borrowed the total proceeds of $300,000 from the Convertible Note entered with our Sponsor. For the three months ended March 31, 2016, the Company incurred $3,830 of interest expense, which under the terms of the Convertible Note has been added to the principal amount. As of March 31, 2016, the outstanding balance of the Convertible Note was $314,474. As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.

 

On January 5, 2016, we issued a convertible promissory note (the “Second Convertible Note”) to our Sponsor that provides for our Sponsor to loan us up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On January 5, 2016, we borrowed the total proceeds of $425,000 from the Second Convertible Note entered with our Sponsor. For the three months ended March 31, 2016, the Company incurred $5,240 of interest expense, which under the terms of the Convertible Note has been added to the principal amount. As of March 31, 2016, the outstanding balance of the Convertible Note was $430,240.

 

 

On March 31, 2016, we issued a promissory note (the “March 2016 Note”) to our Sponsor pursuant to which we may borrow up to $750,000. The March 2016 Note is interest bearing at 5% per annum and is due and payable on the first to occur of (1) the consummation of the Proposed Nexeo Business Combination or (2) June 11, 2016 (or such later or such later date as may be approved by our stockholders by amendment of our charter to complete an initial Business Combination). As of March 31, 2016, the outstanding balance of the March 2016 Note was $235,032, including $32 of accrued interest.

 

In connection with the Proposed Nexeo Business Combination, we entered into a subscription agreement, dated May 9, 2016, with Fidelity Select Portfolios: Chemicals Portfolio, Fidelity Advisor Series I: Fidelity Advisor Value Fund, Fidelity Capital Trust: Fidelity Value Fund, Fidelity Select Portfolios: Materials Portfolio, Fidelity Central Investment Portfolios LLC: Fidelity Materials Central Fund and Variable Insurance Products Fund IV: Materials Portfolio, which funds we collectively refer to as “Fidelity” and which subscription agreement we refer to as the “Fidelity Subscription Agreement”, pursuant to which Fidelity has agreed to purchase up to approximately 3.86 million shares, or $38.6 million, of shares of Common Stock on a private placement basis immediately prior to the closing of the Business Combination.

 

Also in connection with the Proposed Nexeo Business Combination, we entered into a subscription agreement, dated May 6, 2016, with MFS Series Trust X on behalf of MFS Global Alternative Strategy Fund, MFS Series Trust I on behalf of MFS New Discovery Fund and MFS Variable Insurance Trust on behalf of MFS New Discovery Series, which funds we collectively refer to as “MFS” and which subscription agreement we refer to as the “MFS Subscription Agreement” and, together with the Fidelity Subscription Agreement, the “Subscription Agreements”, pursuant to which MFS has agreed to purchase up to approximately 0.37 million shares, or $3.7 million, of shares of Common Stock on a private placement basis immediately prior to the closing of the Business Combination.

 

Pursuant to the Subscription Agreements, we have agreed to register the shares sold in the private placement under the Securities Act by filing with the SEC a registration statement registering the resale of such shares by Fidelity and MFS, subject to customary terms and conditions. Copies of the Subscription Agreements are filed with this Quarterly Report on Form 10-Q as Exhibit 10.6 and Exhibit 10.7, and are incorporated herein by reference, and the foregoing description of the Subscription Agreements are qualified in their entirety by reference thereto.

 

The sale of the above securities were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.

 

Use of Proceeds

 

On June 5, 2014, our registration statement on Form S-1 (File No. 333-195854) was declared effective by the SEC and also on June 5, 2014 our subsequent registration statement on Form S-1 (File No. 333-196547) became effective upon filing with the SEC in accordance with Rule 462(b) under the Securities Act, for our Public Offering. In our Public Offering, we sold an aggregate 50,025,000 units at an offering price to the public of $10.00 per unit for an aggregate offering price of $500,250,000, with each unit consisting of one share of common stock and one Warrant. Each Warrant entitles the holder thereof to purchase one-half of one share of our common stock at a price of $5.75 per half share. Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as book runners (the “Underwriters”). The Public Offering commenced as of June 6, 2014 and did not terminate before all of the securities registered in the registration statement were sold. On June 11, 2014, we closed the sale of such units, resulting in net proceeds to us of $500,250,000.

 

We paid a total of approximately $9,204,600 in underwriting discounts and commissions and approximately $960,000 for other costs and expenses related to the Public Offering. In addition, the Underwriters agreed to defer up to approximately $18,309,150 in underwriting discounts and commissions, which amount will be payable upon consummation of an initial Business Combination, if consummated. We also repaid the $350,000 in loans made to us by our Sponsor to cover expenses related to the Public Offering. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from the Public Offering as described in our final prospectus filed with the SEC on June 5, 2014.

 

Net proceeds of $500,250,000 from the Public Offering and simultaneous sale of the Private Placement Warrants including $18,309,150 of deferred underwriting commissions are being held in our Trust Account, invested in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 (the “1940 Act”) with a maturity of 180 days or less or in any open ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (e)(2), (e)(3) and (e)(4) of Rule 2a 7 of the 1940 Act, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of our Trust Account as described below.

 

The amount of proceeds not deposited in our Trust Account was $1,095,400. In addition, interest income on the funds held in our Trust Account may be released to us to pay our franchise and income tax obligations.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

ITEM 5. OTHER INFORMATION

 

On January 11, 2016, we entered into a letter agreement with Robert C. Dinerstein which contains certain rights and obligations with respect of us, including, but not limited to, certain voting obligations and transfer restrictions in respect of our capital stock that may be owned by Mr. Dinerstein, and restrictions on Mr. Dinerstein’s involvement with other blank check companies. Each of our other directors and executive officers had previously executed a substantially similar letter agreement. The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Letter Agreement, dated January 11, 2016, between the Company and Robert C. Dinerstein, which is filed as Exhibit 10.8 hereto and incorporated by reference herein.

 

Also on January 11, 2016, we entered into an indemnity agreement with Mr. Dinerstein. Each of our other directors had previously executed a substantially similar agreement. The indemnity agreement provides Mr. Dinerstein, as a director of the Company, with contractual indemnification in addition to the indemnifications provided for in our amended and restated certificate of incorporation. The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Indemnity Agreement, dated January 11, 2016, between the Company and Robert C. Dinerstein, which is filed as Exhibit 10.9 hereto and incorporated by reference herein.

 

ITEM 6. EXHIBITS

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated March 21, 2016, by and among the Company, Neon Acquisition Company LLC, Neon Holding Company LLC, TPG Accolade Delaware, LP, Nexeo Solutions Holdings, LLC and Nexeo Holdco, LLC (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on March 22, 2016).
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to the document previously filed with Amendment No. 3 to the Form S-1 filed by the Company on June 4, 2014).
3.2		Bylaws (incorporated by reference to the document previously filed to the Form S-1 filed by the Company on May 9, 2014).
4.1		Specimen Common Stock Certificate (incorporated by reference to the document previously filed with Amendment No. 1 to the Form S-1 filed by the Company on May 30, 2014).
4.2		Warrant Agreement (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on June 16, 2014).
10.1		Shareholders’ and Registration Rights Agreement, dated March 21, 2016, by and among the Company, TPG Capital LLC and WL Ross Sponsor LLC (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on March 22, 2016).
10.2		Form of Tax Receivable Agreement by and among the Company and the other parties thereto (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on March 22, 2016).
10.3		Private Placement Warranty Exchange Letter Agreement, dated March 21, 2016, by and among the Company, WL Ross Sponsor LLC and Nexeo Solutions Holdings, LLC (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on March 22, 2016).
10.4		Founder Share Transfer Letter Agreement, dated March 21, 2016, by and among the Company, WL Ross Sponsor LLC and Nexeo Holdco, LLC (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on March 22, 2016).
10.5		Promissory Note, dated March 31, 2016, issued to WL Ross Sponsor LLC (incorporated by reference to the document previously filed to the Form 8-K filed by the Company on April 5, 2016).
10.6*		Fidelity Subscription Agreement, dated May 9, 2016, by and between the Company and Fidelity Select Portfolios: Chemicals Portfolio, Fidelity Advisor Series I: Fidelity Advisor Value Fund, Fidelity Capital Trust: Fidelity Value Fund, Fidelity Select Portfolios: Materials Portfolio, Fidelity Central Investment Portfolios LLC: Fidelity Materials Central Fund and Variable Insurance Products Fund IV: Materials Portfolio.
10.7*		MFS Subscription Agreement, dated May 6, 2016, by and between the Company and MFS Series Trust X on behalf of MFS Global Alternative Strategy Fund, MFS Series Trust I on behalf of MFS New Discovery Fund and MFS Variable Insurance Trust on behalf of MFS New Discovery Series.
10.8*		Letter Agreement, dated January 11, 2016, between the Company and Robert C. Dinerstein.
10.9*		Indemnity Agreement between the Company and Robert C. Dinerstein.
31.1*		Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*		Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1**		Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2**		Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

 

*

Filed herewith

 

**

The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of WL Ross Holding Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q irrespective of any general incorporation language contained in such filing.

 

 

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.

 

	WL ROSS HOLDING CORP.
Date: May 10, 2016	/s/ Wilbur L. Ross, Jr.
	Name:	Wilbur L. Ross, Jr.
	Title:	Chief Executive Officer (Principal Executive Officer)
Date: May 10, 2016	/s/ Michael J. Gibbons
	Name:	Michael J. Gibbons
	Title:	Chief Financial Officer and Secretary
		(Principal Financial and Accounting Officer)