Attached files
| file | filename |
|---|---|
| EX-32.1 - Andina Acquisition Corp. II | ex32-1.htm |
| EX-31.2 - Andina Acquisition Corp. II | ex31-2.htm |
| EX-31.1 - Andina Acquisition Corp. II | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 2017
[ ] 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: 001-37628
ANDINA ACQUISITION CORP. II
(Exact Name of Registrant as Specified in Its Charter)
| Cayman Islands | 6770 | 47-5245051 | ||
(State
or Other Jurisdiction of |
(Primary Standard Industrial Classification Code Number) |
(IRS Employer Identification No.) |
250 West 57th St
Suite 2223
New York, NY 10107
(Address of principal executive offices)
(646) 565-3861
(Issuer’s telephone number)
Indicate by check mark whether the registrant (1) 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data 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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] | |
| Non-accelerated filer | [ ] | (Do not check if smaller reporting company) | Smaller reporting company | [X] |
| Emerging growth company | [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of October 16, 2017, 4,877,231 Ordinary Shares, par value $0.0001 per share, were issued and outstanding.
ANDINA ACQUISITION CORP. II
FORM 10-Q FOR THE QUARTER ENDED AUGUST 31, 2017
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
ANDINA ACQUISITION CORP. II
| August 31, 2017 | November 30, 2016 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 17,142 | $ | 63,789 | ||||
| Prepaid expenses | 279,618 | 259,053 | ||||||
| Other receivable | 5,839 | - | ||||||
| Total current assets | 302,599 | 322,842 | ||||||
| Cash and marketable securities held in Trust Account | 40,607,272 | 40,651,426 | ||||||
| Total assets | $ | 40,909,871 | $ | 40,974,268 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | 44,729 | $ | 2,166 | ||||
| Accounts payable | 73,361 | 18,944 | ||||||
| Notes payable - related parties | 100,000 | - | ||||||
| Total current liabilities | 218,090 | 21,110 | ||||||
| Commitments | ||||||||
| Ordinary shares subject to possible conversion, $0.0001 par value, 3,515,801 and 3,537,686 shares at conversion value at August 31, 2017 and November 30, 2016, respectively | 35,691,772 | 35,953,149 | ||||||
| Shareholders’ Equity: | ||||||||
| Preferred shares, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at August 31, 2017 and November 30, 2016 | - | - | ||||||
| Ordinary shares, $0.0001 par value, 100,000,000 shares authorized; 1,794,199 and 1,772,314 shares issued and outstanding at August 31, 2017 and November 30, 2016, respectively (excluding 3,515,801 and 3,537,686 shares subject to possible conversion at August 31, 2017 and November 30, 2016, respectively) | 179 | 177 | ||||||
| Additional paid-in capital | 5,678,151 | 5,416,776 | ||||||
| Accumulated deficit | (678,321 | ) | (416,944 | ) | ||||
| Total shareholders’ equity | 5,000,009 | 5,000,009 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 40,909,871 | $ | 40,974,268 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
ANDINA ACQUISITION CORP. II
(Unaudited)
| For
The Three Months Ended August 31, | For
The Nine Months Ended August 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| General and administrative | $ | 198,840 | $ | 113,654 | $ | 464,131 | $ | 427,730 | ||||||||
| Loss from operations | (198,840 | ) | (113,654 | ) | (464,131 | ) | (427,730 | ) | ||||||||
| Interest income | 88,003 | 32,327 | 202,754 | 134,050 | ||||||||||||
| Net income (loss) | $ | (110,837 | ) | $ | (81,327 | ) | $ | (261,377 | ) | $ | (293,680 | ) | ||||
| Weighted average shares outstanding, basic and diluted (1) | 1,784,872 | 1,763,851 | 1,779,784 | 1,749,392 | ||||||||||||
| Basic and diluted net loss per ordinary share | (0.06 | ) | (0.05 | ) | (0.15 | ) | (0.17 | ) | ||||||||
(1) This number excludes 3,515,801 and 3,545,137 ordinary shares subject to possible conversion at August 31, 2017 and August 31, 2016, respectively.
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
ANDINA ACQUISITION CORP. II
(Unaudited)
| For The Nine Months Ended August 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (261,377 | ) | $ | (293,680 | ) | ||
| Adjustments to reconcile net loss to net cash used in operation activities: | ||||||||
| Interest earned on cash and marketable securities held in Trust Account | (202,741 | ) | (134,033 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | (20,565 | ) | (251,063 | ) | ||||
| Other receivable | (5,839 | ) | (5,000 | ) | ||||
| Accrued expenses | 42,563 | 10,000 | ||||||
| Accounts payable | 54,417 | (71,468 | ) | |||||
| Net cash used in operating activities | (393,542 | ) | (745,244 | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Principal deposited in Trust Account | - | (40,600,000 | ) | |||||
| Interest released from Trust Account | 246,895 | 102,995 | ||||||
| Net cash provided by (used in) investing activities | 246,895 | (40,497,005 | ) | |||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds received under note payable to related parties | 100,000 | - | ||||||
| Proceeds from initial public offering, net of costs | - | 38,699,151 | ||||||
| Proceeds from private placement | - | 3,100,000 | ||||||
| Repayment of advance from related party | - | (139,172 | ) | |||||
| Payment of deferred offering costs included in accounts payable | - | (76,121 | ) | |||||
| Payment of deferred offering costs included in accrued expenses | - | (220,623 | ) | |||||
| Net cash provided by financing activities | 100,000 | 41,363,235 | ||||||
| Net change in cash | (46,647 | ) | 120,986 | |||||
| Cash - beginning of the period | 63,789 | 100 | ||||||
| Cash - ending of the period | $ | 17,142 | $ | 121,086 | ||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Reclassification of deferred offering costs to equity | $ | - | $ | 454,149 | ||||
| Initial value of ordinary shares subject to possible conversion | $ | - | $ | 36,313,487 | ||||
| Change in value of ordinary shares subject to possible conversion | $ | (261,377 | ) | $ | (294,899 | ) | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
Note 1 – Organization, Plan of Business Operations
Andina Acquisition Corp. II (the “Company”) was incorporated in the Cayman Islands on July 1, 2015 as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business are not limited to a particular industry or geographic region, although the Company is currently focusing on target businesses in the Andean region of South America and in Central America.
All activity through August 31, 2017 relates to the Company’s formation, the initial public offering described below and the search for a Business Combination candidate. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
The registration statement for the Company’s initial public offering (“Initial Public Offering”) was declared effective on November 24, 2015. The Company consummated the Initial Public Offering of 4,000,000 units (“Units”) at $10.00 per unit on December 1, 2015, generating gross proceeds of $40.0 million. Offering costs were approximately $1.8 million, inclusive of $454,000 of deferred offering costs incurred prior to the closing of the Initial Public Offering (Note 4).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 310,000 Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, of which 265,000 Private Placement Units were sold to certain shareholders of the Company and their affiliates and designees, and 45,000 Private Placement Units were sold to EarlyBirdCapital, Inc. (“EBC”), the representative of the underwriters in the Initial Public Offering, generating gross proceeds of an aggregate of $3.1 million (Note 5).
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and Private Placement, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
An aggregate amount of $40.6 million ($10.15 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Units in the Private Placement was placed in a United States-based trust account (“Trust Account”) at UBS maintained by Continental Stock Transfer & Trust Company, acting as trustee, and is invested in U.S. government treasury bills, until the earlier of: (i) the consummation of a Business Combination or (ii) the Company’s failure to consummate a Business Combination within the required time period set forth in the Company’s Amended and Restated Memorandum and Articles of Association (“Charter”). One of the Company’s Directors has agreed that he will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company and that have not executed a waiver agreement with the Company. However, such Director may not be able to satisfy those obligations should they arise.
The remaining net proceeds (not held in the Trust Account) were used to pay for business, legal and accounting due diligence on prospective Business Combinations and continuing general and administrative expenses. In addition, (i) interest income earned on the funds in the Trust Account may be released to the Company to pay its income or other tax obligations and (ii) any remaining interest earned on the funds in the Trust Account may be released to the Company for its working capital requirements. With these exceptions, expenses incurred by the Company may be paid prior to a Business Combination only from the net proceeds of the Initial Public Offering and Private Placement not held in the Trust Account; provided, however, that in order to meet its working capital needs, the Company’s shareholders prior to the Initial Public Offering (the “Initial Shareholders”), officers and directors or their affiliates may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of the Company’s initial Business Combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of the Company’s Business Combination into additional Private Placement Units at a price of $10.00 per Private Placement Unit. If the Company does not complete a Business Combination, the loans would not be repaid.
| 6 |
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
Pursuant to the Nasdaq Capital Markets listing rules, the Company’s initial Business Combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the balance in the Trust Account (excluding taxes payable) at the time of the execution of a definitive agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. The fair market value of the target will be determined by the Company’s board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). The target business or businesses that the Company acquires may have a collective fair market value substantially in excess of 80% of the Trust Account balance. In order to consummate such a Business Combination, the Company may issue a significant amount of its debt or equity securities to the sellers of such business and/or seek to raise additional funds through a private offering of debt or equity securities.
In connection with any proposed initial Business Combination, the Company will either (1) seek shareholder approval of such initial Business Combination at a meeting called for such purpose at which holders of the outstanding ordinary shares sold in the Initial Public Offering (“Public Shareholders”) may seek to convert such shares (“Public Shares”), regardless of whether they vote for or against the proposed Business Combination, into their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable) or (2) provide Public Shareholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable). As of August 31, 2017, the amount in the Trust Account is $10.15 per Public Share (excluding interest in the amount of approximately $7,300 that may be released to the Company as described above).
If the Company determines to engage in a tender offer, such tender offer will be structured so that each Public Shareholder may tender any or all of his, her or its Public Shares rather than some pro rata portion of his, her or its shares. In that case, the Company will file tender offer documents with the Securities and Exchange Commission (“SEC”) which will contain substantially the same financial and other information about the initial Business Combination as is required under the SEC’s proxy rules. The decision as to whether the Company will seek shareholder approval of a proposed Business Combination or will allow shareholders to sell their shares to it in a tender offer will be made by the Company based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require it to seek shareholder approval. The Company will consummate an initial Business Combination only if it has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, solely if it seeks shareholder approval, a majority of the outstanding ordinary shares voted are voted in favor of the Business Combination.
The Initial Shareholders have agreed to certain obligations and restrictions relating to their securities, including to vote in favor of any proposed Business Combination and in certain cases not to convert any shares in connection with a shareholder vote to approve, or sell their shares to the Company in any tender offer in connection with, a proposed initial Business Combination (See Note 6). The Representative has also agreed to vote its shares included in the Private Placement Units (the “private shares”) in favor of any proposed Business Combination.
Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) will be restricted from seeking conversion rights with respect to 20% or more of the ordinary shares sold in the Initial Public Offering without the prior consent of the Company. Accordingly, all shares in excess of 20% of the shares sold in the Initial Public Offering held by a holder will not be converted to cash.
On August 30, 2017, the Company held an extraordinary general meeting of shareholders (the “August Meeting”). At the August Meeting, the shareholders approved each of the following items: (i) an amendment to the Charter to extend the date by which the Company has to consummate a Business Combination (“Liquidation Date”) from September 1, 2017 to November 1, 2017 and (ii) an amendment to the Charter to allow the holders of the Company’s ordinary shares issued in the Company’s Initial Public Offering to elect to convert their public shares into their pro rata portion of the funds held in the Trust Account (the “Extension”). Shareholders holding 432,769 Public Shares exercised their right to convert such shares into a pro rata portion of the Trust Account. As a result, an aggregate of approximately $4.4 million (or $10.15 per share) was removed from the Trust Account to pay such holders in September 2017.
| 7 |
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
In connection with the Extension, certain of the Company’s shareholders prior to the Initial Public Offering agreed to loan the Company $0.03 for each Public Share that was not converted, or $107,017, for each month following the Extension. Accordingly, an aggregate of approximately $214,000 was loaned to the Company and deposited in the Trust Account in September 2017. The loans will not bear interest and will be repayable by the Company to the lenders upon consummation of an initial Business Combination. If an initial Business Combination is not consummated by the required time period, the loans will be forgiven.
If the Company has not completed a Business Combination by the Liquidation Date, it will trigger the automatic liquidation of the Trust Account and the voluntary liquidation of the Company. In such event, holders of Public Shares will share ratably in the Trust Account, including any interest not previously released to the Company, and any net assets remaining available for distribution to them after payment of liabilities. The Representative and the holders of the insider shares (as defined in Note 5), private shares, and rights and warrants included in the Private Placement Units (the “private rights” and “private warrants” respectively) will not participate in any liquidation distribution with respect to their insider shares, private shares, private rights or private warrants.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of August 31, 2017, the Company had approximately $17,100 in its operating bank account and approximately $7,300 of interest income held in the Trust Account available to be released to the Company.
Through August 31, 2017, the Company’s liquidity needs were satisfied through receipt of approximately $686,000 from the sale of the Units held outside of the Trust Account upon closing of the Initial Public Offering, $25,000 from the sale of the insider shares (as described in Note 6), advances from a director in an aggregate amount of $139,000, which was repaid on December 1, 2015 from the proceeds received upon closing of the Initial Public Offering, a promissory note for up to $100,000 from related party, which is currently outstanding, and interest released from the Trust Account for working capital purposes.
Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. Based on the foregoing, the Company may have insufficient funds available to operate its business through the earlier of consummation of a Business Combination or November 1, 2017. Following the initial Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. The Company’s plans to raise capital or to consummate the initial Business Combination may not be successful. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 2 – Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended August 31, 2017 are not necessarily indicative of the results that may be expected for the year ending November 30, 2017. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2016, filed with SEC on February 28, 2017.
| 8 |
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
Note 3 - Significant Accounting Policies
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 registration statement under the Securities Act of 1933, as amended (“Securities Act”), declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At August 31, 2017, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Cash and Marketable Securities Held in Trust Account
The amounts held in the Trust Account represent substantially all of the proceeds of the Initial Public Offering and are classified as restricted assets since such amounts can only be used by the Company in connection with the consummation of a Business Combination. As of August 31, 2017, cash and cash equivalents held in the Trust Account consisted of approximately $36.2 million in United States Treasury Bills and approximately $4.4 million in cash. At August 31, 2017, there was approximately $7,300 of interest income held in the Trust Account available to be released to the Company.
Ordinary Shares Subject to Possible Conversion
The Company accounts for its Ordinary Shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary Shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable Ordinary Shares (including Ordinary Shares that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Ordinary Shares are classified as shareholders’ equity. The Company’s Ordinary Shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Ordinary Shares subject to possible conversion at conversion value are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
| 9 |
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
Net Loss per Share
Loss per share is computed by dividing net loss by the weighted-average number of Ordinary Shares outstanding during the period. An aggregate of 3,515,801 and 3,545,137 Ordinary Shares subject to possible redemption at August 31, 2017 and 2016, respectively, have been excluded from the calculation of basic loss per ordinary share since such Ordinary Shares, if redeemed, only participate in their pro rata share of the trust earnings. The Company has not considered the effect of (i) warrants sold in the Public Offering and Private Placement to purchase 2,155,000 Ordinary Shares of the Company, (ii) rights to acquire 615,713 Ordinary Shares of the Company and (iii) 400,000 Ordinary Shares, warrants to purchase 200,000 Ordinary Shares and rights to acquire 57,142 Ordinary Shares included in the unit purchase option sold to the underwriter, in the calculation of diluted loss per share, since the exercise of the unit purchase option and warrants as well as the conversion of rights is contingent on the occurrence of future events.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 4 - Initial Public Offering
On December 1, 2015, the Company consummated the Initial Public Offering of 4,000,000 Units. The Units were sold at an offering price of $10.00 per Unit, generating net proceeds of approximately $38.2 million, net of offering costs of approximately $1.8 million, inclusive of $454,000 of deferred offering costs incurred prior to the closing of the Initial Public Offering.
Each Unit consists of one ordinary share in the Company, one right to receive one-seventh (1/7) of a share upon consummation of an initial Business Combination and one redeemable warrant (“Warrant”) to purchase one half of one ordinary share for $11.50 per full share. No fractional shares will be issued. In the event the Company will not be the surviving company upon completion of an initial Business Combination, each holder of a right will be required to affirmatively convert his, her or its rights in order to receive the 1/7 of a share underlying each right upon consummation of the Business Combination. There is no length of time within which an investor must affirmatively elect to convert the rights. However, until a holder affirmatively elects to convert his, her or its rights, the right certificates held by such holder will not represent the ordinary shares they are convertible for but instead will simply represent the right to receive such ordinary shares.
Each Warrant entitles the holder to purchase one-half of one ordinary share at a price of $11.50 per full ordinary share commencing on the Company’s completion of its initial Business Combination, and expiring five years from the completion of the Company’s initial Business Combination. The Company will not issue fractional shares. As a result, investors must exercise Warrants in multiples of two Warrants, at a price of $11.50 per full share, subject to adjustment, to validly exercise the Warrants. The Company may redeem the Warrants at a price of $0.01 per Warrant upon 30 days’ notice, only in the event that the last sale price of the ordinary shares is at least $24.00 per share for any 20 trading days within a 30-trading day period (“30-Day Trading Period”) ending on the third day prior to the date on which notice of redemption is given, provided there is a current registration statement in effect with respect to the ordinary shares underlying such Warrants commencing five business days prior to the 30-Day Trading Period and continuing each day thereafter until the date of redemption. If the Company redeems the Warrants as described above, management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In accordance with the warrant agreement relating to the Warrants sold and issued in the Initial Public Offering the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants. If a registration statement is not effective within 90 days following the consummation of a Business Combination, Warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. In the event that a registration statement is not effective at the time of exercise or no exemption is available for a cashless exercise, the holder of such Warrant shall not be entitled to exercise such Warrant for cash and in no event (whether in the case of a registration statement being effective or otherwise) will the Company be required to net cash settle the Warrant exercise. Additionally, in no event will the Company be required to net cash settle the Rights.
| 10 |
ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
If the Company is unable to complete an initial Business Combination within the required time period and the Company redeems the Public Shares for the funds held in the Trust Account, holders of rights and warrants will not receive any of such funds for their rights and warrants and the rights and warrants will expire worthless.
Note 5 - Private Placement
Simultaneously with the consummation of the Initial Public Offering, the Company consummated the Private Placement of 310,000 Private Placement Units, at $10.00 per Private Placement Unit for a total purchase price of $3.1 million. Of the Private Placement Units, 265,000 were purchased by Initial Shareholders and their affiliates and designees and 45,000 were purchased by EBC. The Private Placement Units are identical to the units sold in the Initial Public Offering except the warrants included in the Private Placement Units are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. Additionally, because the warrants included in the Private Placement Units were issued in a private transaction, the holders and their transferees will be allowed to exercise such warrants for cash even if a registration statement covering the ordinary shares issuable upon exercise of such warrants is not effective and receive unregistered ordinary shares. Furthermore, the purchasers have agreed (A) to vote the private shares in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s proposed amended and restated memorandum and articles of association to be effected prior to the completion of the Initial Public Offering that would affect the substance or timing of the Company’s obligation to allow holders of Public Shares to exercise conversion rights with respect thereto as described herein unless the Company provides dissenting Public Shareholders with the opportunity to convert their Public Shares in connection with any such vote, (C) not to convert any private shares for cash from the Trust Account in connection with a shareholder vote to approve a proposed initial Business Combination (or to sell such shares to the Company in any tender offer the Company may engage in) or a vote to amend the provisions of the Company’s amended and restated memorandum and articles of association as described above and (D) that the private shares shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated. The purchasers have also agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to certain permitted transferees) until the completion of an initial Business Combination.
Note 6 - Related Party Transactions
Initial Shares
In July 2015, the Company issued 1,150,000 ordinary shares (the “insider shares”) to the Initial Shareholders for an aggregate purchase price of $25,000. The insider shares held by the Initial Shareholders included an aggregate of 150,000 shares repurchased for an aggregate purchase price of $0.01 and cancelled by the Company in December 2015 upon receiving notice that the underwriters’ over-allotment option was not exercised in full.
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ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
The insider shares are identical to the ordinary shares included in the Units sold in the Initial Public Offering. However, the Initial Shareholders have agreed (subject to certain exceptions) (A) to vote their insider shares (as well as any public shares acquired in or after the Initial Public Offering) in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the amended and restated memorandum and articles of association with respect to pre-Business Combination activities prior to the consummation of such a Business Combination unless the Company provides dissenting public shareholders with the opportunity to convert their public shares into the right to receive cash from the trust account in connection with any such vote, (C) not to convert any insider shares (as well as any other shares acquired in or after the Initial Public Offering) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a proposed initial Business Combination (or sell any shares they hold to the Company in a tender offer in connection with a proposed initial Business Combination) or a vote to amend the provisions of the amended and restated memorandum and articles of association as described above and (D) that the insider shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated. Additionally, the Initial Shareholders have agreed not to transfer, assign or sell any of the insider shares (except to certain permitted transferees) until (1) with respect to 50% of the insider shares, the earlier of one year after the date of the consummation of initial Business Combination and the date on which the closing price of ordinary shares equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after initial business combination and (2) with respect to the remaining 50% of the insider shares, one year after the date of the consummation of initial Business Combination, or earlier, in either case, if, subsequent to initial business combination, the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Related Party Transactions
Prior to the closing of the Initial Public Offering, a director advanced an aggregate of approximately $139,000 to cover expenses related to the Company’s formation and the Initial Public Offering. The Company repaid this amount on December 1, 2015 from the proceeds received upon closing of the Initial Public Offering. Following the commitment letter from one of the Company’s directors and non-executive Chairman of the Board to provide working capital to the Company, on April 28, 2017, the Company issued a $100,000 convertible promissory note to a related party. The loan is unsecured, non-interest bearing and is payable upon consummation of a Business Combination. Upon consummation of a Business Combination, the principal balance of the note may be converted, at the holder’s option, to Private Placement Units at a price of $10.00 per Private Placement Unit. If the lender converts the entire principal balance of the convertible promissory note, he would receive 10,000 Private Placement Units. If a Business Combination is not consummated, the note will not be repaid by the Company and all amounts owed thereunder by the Company will be forgiven except to the extent that the Company has funds available to it outside of its Trust Account established in connection with the Initial Public Offering. As of August 31, 2017, the $100,000 convertible promissory note was outstanding.
Also, in connection with the Extension, certain of the Company’s shareholders prior to the Initial Public Offering agreed to loan the Company for $0.03 for each Public Share that was not converted, or approximately $107,017, for each month following the Extension. Accordingly, an amount of approximately $214,000 was loaned to the Company and deposited in the Trust Account in September 2017. The loans will not bear interest and will be repayable by the Company to the lenders upon consummation of an initial Business Combination. If an initial Business Combination is not consummated by the required time period, the loans will be forgiven.
The Company maintains its principal executive offices in office space provided to the Company at no cost by a third party affiliated with one of the Company’s directors.
The Company is also permitted to pay consulting fees to its officers, directors, shareholders or their affiliates for assisting us in consummating our initial Business Combination in an amount not to exceed an aggregate of $500,000.
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ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
Note 7 - Commitments and Contingencies
Underwriting Agreement
On November 24, 2015, the Company entered into an agreement with EBC (“Underwriting Agreement”), pursuant to which the Company paid an underwriting discount of $1.3 million. The Company has further engaged EBC to assist the Company with its initial Business Combination. Pursuant to this arrangement, the Company anticipates that EBC will assist the Company in holding meetings with shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities, assist the Company in obtaining shareholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay EBC a cash fee of $1,600,000 for such services upon the consummation of its initial Business Combination (exclusive of any applicable finders’ fees which might become payable); provided that up to 25% of the fee may be allocated at the Company’s sole discretion to one or more advisors that assist the Company in identifying and consummating an initial Business Combination. The Company will also reimburse EBC for up to $20,000 of its reasonable costs and expenses incurred by it (including reasonable fees and disbursements of counsel) in connection with the performance of its services pursuant to the agreement; provided, however, all expenses in excess of $5,000 in the aggregate shall be subject to prior written approval, which approval will not be unreasonably withheld. The Company is not obligated to pay these fees if no business combination is consummated. These fees are an unrecognized contingent liability, as closing of a potential business combination was not considered probable as of August 31, 2017.
Unit Purchase Option
In November 2015, the Company sold to EBC and its designees for $100, unit purchase options to purchase an aggregate of 400,000 units (collectively, the “Unit Purchase Option”). The Unit Purchase Option is exercisable at $10.00 per unit, commencing on the later of the consummation of a Business Combination and November 24, 2016. The Unit Purchase Option expires on November 24, 2020. Since the option is not exercisable until the consummation of a Business Combination at the earliest, and the rights will result in the issuance of shares upon consummation of a Business Combination, the option will effectively represent the right to purchase an aggregate 457,142 ordinary shares (which includes the 57,142 ordinary shares issuable for the rights included in the units, as well as 400,000 warrants to purchase 200,000 ordinary shares for $11.50 per share). The Unit Purchase Option grants to the holders demand and “piggy back” registration rights for periods of five and seven years, respectively, from November 24, 2015 with respect to the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves.
The Company accounted for the fair value of the Unit Purchase Option, inclusive of the receipt of a $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to shareholders’ equity. The Company estimated that the fair value of the Unit Purchase Option was approximately $2 million (or $5.01 per unit) using the Black-Scholes option-pricing model. The fair value of the Unit Purchase Option was estimated as of the date of grant using the following assumptions: (1) expected volatility of 57.71%, (2) risk-free interest rate of 1.52%, and (3) expected life of five years. The Unit Purchase Option may be exercised for cash or on a “cashless” basis, at the holder’s option, such that the holder may use the appreciated value of the Unit Purchase Option (the difference between the exercise prices of the Unit Purchase Option and the market price of the Units and underlying ordinary shares) to exercise the Unit Purchase Option without the payment of any cash. The Company will have no obligation to net cash settle the exercise of the Unit Purchase Option or underlying rights and warrants.
Other Agreements
On October 8, 2015, the Company engaged B. Riley & Co. LLC (“B. Riley”) to provide certain advisory services in connection with the Company’s initial Business Combination in exchange for $250,000 in service fees, which were paid in December 2015 and is included in Prepaid Expenses in the accompanying Condensed Balance Sheets as B. Riley has not provided material services to date.
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ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
The Company has also signed agreements with individuals in the business community of their respective countries (the “Originators”) to supplement the efforts of the management team on its search of targets for a potential Business Combination. The agreements with the Originators are for a period of three to six months. In exchange for the services, the Company agreed to pay the Originators a finder’s fee of 0.75% of the transaction value, payable upon the completion of a Business Combination. The aggregated amount of the finders’ fee for the Financial Advisor and the Originators should be below 2.8% of the amount invested by the Company in the target company. To date, no fees have been incurred in connection with the agreements yet.
In July 2017, the Company entered into a financial advisory and private placement agreement with an advisor in connection with a potential Business Combination. Pursuant to the agreement, the Company agreed to pay the advisor a cash fee of $200,000, plus placement agent fees, as well as issue the advisor warrants to purchase ordinary shares of the Company, if the Business Combination is consummated and a capital raise is closed. The fees and warrants are all payable upon the closing of the Business Combination. The Company is not obligated to pay these fees if no Business Combination is consummated. These fees are an unrecognized contingent liability, as closing of a potential Business Combination was not considered probable as of August 31, 2017.
In August 2017, the Company entered into an engagement letter to obtain legal advisory services in connection with a potential Business Combination, pursuant to which the legal agreed to defer all additional fee charges (“deferred charges”) after the certain retainer amount is used. The Company is not obligated to pay deferred fees if no Business Combination is consummated. As of August 31, 2017, no material services were provided yet. The deferred charges are an unrecognized contingent liability, as closing of a potential Business Combination was not considered probable as of August 31, 2017.
Registration Rights
The Initial Shareholders and purchasers of the private Placement Units are entitled to registration rights with respect to their securities, pursuant to an agreement dated as of November 24, 2015. The holders of the majority of the insider shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Placement Units (or underlying securities) issued in payment of working capital loans made to the Company can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Note 8 - Shareholder Equity
Preferred Shares
The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors.
As of August 31, 2017, there are no preferred shares issued or outstanding.
Ordinary Shares
The Company is authorized to issue 100,000,000 ordinary shares with a par value of $0.0001 per share.
As of August 31, 2017, after the consummation of the Initial Public Offering and the Private Placement, the Company has an aggregate of 5,310,000 ordinary shares outstanding, inclusive of 3,515,801 and 3,537,686 ordinary shares subject to possible conversion classified as temporary equity in the accompanying Balance Sheet as of August 31, 2017 and November 30, 2016, respectively.
In connection with the Extension, shareholders holding 432,769 Public Shares exercised their right to convert such shares into a pro rata portion of the Trust Account. As a result, an aggregate of approximately $4.4 million (or $10.15 per share) was removed from the Trust Account to pay such holders in September 2017.
Note 9 - Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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ANDINA ACQUISITION CORP. II
Notes to Condensed Financial Statements
August 31, 2017
(Unaudited)
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information about the Company’s assets that are measured on a recurring basis as of August 31, 2017, and November 30, 2016 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Quoted Prices in Active Markets | ||||||||
| (Level 1) | ||||||||
| Description | August 31, 2017 | November 30, 2016 | ||||||
| Cash and marketable securities held in Trust Account | $ | 40,607,272 | 40,651,426 | |||||
Approximately $4.4 million and $44,000 of the balance in the Trust Account was held in cash as of August 31, 2017 and November 30, 2016.
Note 10 - Subsequent Events
In September 2017, in connection with the Extension, the Company paid an aggregate of approximately $4.4 million (or $10.15 per share) out of the Trust Account to pay shareholders holding 432,769 Public Shares who exercised their right to convert such shares into a pro rata portion of the Trust Account.
In addition, certain of the Company’s shareholders prior to the Initial Public Offering agreed to loan the Company for $0.03 for each Public Share that was not converted, or $107,017, for each month following the Extension. Accordingly, an aggregate of approximately $214,000 was loaned to the Company and deposited in the Trust Account in September 2017. The loans will not bear interest and will be repayable by the Company to the lenders upon consummation of an initial Business Combination. If an initial Business Combination is not consummated by the required time period, the loans will be forgiven.
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Item 2. Management’s Discussion and Analysis.
References in this report to “we,” “us” or the “Company” refer to Andina Acquisition Corp II. References to our “management” or our “management team” refers to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us”, “our” or the “Company” are to Andina Acquisition Corp II., except where the context requires otherwise. The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.
Overview
We are a blank check company in the development stage, formed on July 1, 2015 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. Our efforts to identify a prospective target business are not limited to a particular industry or geographic region, although we are currently focusing on target businesses in the Andean region of South America and in Central America.
We consummated our initial public offering (“Initial Public Offering”) of 4,000,000 units at $10.00 per unit on December 1, 2015, generating gross proceeds of $40 million. Offering costs associated with the initial public offering was approximately $1.8 million, inclusive of $1.3 million of underwriting fees and approximately $454,000 of offering costs incurred prior to the closing of the initial public offering.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement of 310,000 Private Placement Units at a price of $10.00 per Private Placement Unit, of which 265,000 Private Placement Units were sold to the initial shareholders and their affiliates and designees, and 45,000 Private Placement Units were sold to EarlyBirdCapital, Inc., the representative of the underwriters in the initial public offering, generating gross proceeds of $3.1 million.
An aggregate amount of $40.6 million ($10.15 per Unit) from the net proceeds of the sale of the units in The Initial Public Offering and the Private Placement Units was placed in a United States-based trust account (“Trust Account”) at UBS maintained by Continental Stock Transfer & Trust Company, acting as trustee, and is invested in U.S. government treasury bills, until the earlier of: (i) the consummation of a business combination or (ii) our failure to consummate a business combination within the required time frame. B. Luke Weil has agreed that he will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by us for services rendered, contracted for or products sold to the Company and that did not execute a waiver agreement with us. However, he may not be able to satisfy those obligations should they arise.
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On August 30, 2017, we held an extraordinary general meeting of shareholders (the “August Meeting”). At the August Meeting, the shareholders approved each of the following items: (i) an amendment to our Amended and Restated Memorandum and Articles of Association (the “Charter”) to extend the date by which we have to consummate a Business Combination (“Liquidation Date”) from September 1, 2017 to November 1, 2017 and (ii) an amendment to the Charter to allow the holders of our ordinary shares issued in our Initial Public Offering to elect to convert their public shares into their pro rata portion of the funds held in the Trust Account (the “Extension”). Shareholders holding 432,769 public shares exercised their right to convert such shares into a pro rata portion of the Trust Account. As a result, an aggregate of approximately $4.4 million (or $10.15 per share) was removed from the Trust Account to pay such holders in September 2017.
In connection with the Extension, certain of our shareholders prior to the Initial Public Offering agreed to loan us for $0.03 for each Public Share that was not converted, or $107,017, for each month following the Extension. Accordingly, an aggregate of approximately $214,000 was loaned to us and deposited in the Trust Account in September 2017. The loans will not bear interest and will be repayable by us to the lenders upon consummation of an initial Business Combination. If an initial Business Combination is not consummated by the required time period, the loans will be forgiven.
Our management has broad discretion with respect to the specific application of the net proceeds of the offering and the private placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.
Critical Accounting Policy
Ordinary Shares Subject to Possible Conversion
We account for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible conversion at the conversion value are presented as temporary equity, outside of the shareholders’ equity section of our balance sheet.
Results of Operations
We have neither engaged in any business operations nor generated any revenues to date. Our entire activity from inception up to the closing of our initial public offering on December 1, 2015 was in preparation for that event. Subsequent to the initial public offering, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We have, and expect to continue to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in view of current low interest rates on risk-free investments (treasury securities). We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended August 31, 2017, we had net loss of approximately $111,000, which consisted of operating expenses of approximately $199,000 offset by interest income from our Trust Account of approximately $88,000.
For the three months ended August 31, 2016, we had net losses of approximately $81,000, which consisted of operating expenses of approximately $114,000 offset by interest income from our Trust Account of approximately $32,000.
For the nine months ended August 31, 2017, we had net losses of approximately $261,000, which consisted of operating expenses of approximately $464,000 offset by interest income from our Trust Account of approximately $203,000.
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For the nine months ended August 31, 2016, we had net losses of approximately $294,000, which consisted of operating expenses of approximately $428,000 offset by interest income from our Trust Account of approximately $134,000.
Our operating expenses principally consisted of expenses related to our public filings and listing and identification and due diligence related to a potential target business, and to general operating expenses including printing, insurance and office expenses. Until we consummate a business combination, we will have no operating revenues.
Going Concern
The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of August 31, 2017, we had approximately $17,100 in its operating bank account and approximately $7,300 of interest income held in the Trust Account available to be released to us.
Through August 31, 2017, our liquidity needs were satisfied through receipt of approximately $686,000 from the sale of the Units held outside of the Trust Account upon closing of the Initial Public Offering, $25,000 from the sale of the insider shares (as described in Note 6), advances from a director in an aggregate amount of $139,000, which was repaid on December 1, 2015 from the proceeds received upon closing of the Initial Public Offering, a convertible promissory note for up to $100,000 from related party, which is currently outstanding, and interest released from the Trust Account for working capital purposes.
If needed to finance transaction costs in connection with searching for a target business or consummating an intended initial business combination, our initial shareholders, officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional Private Placement Units at a price of $10.00 per unit (which, for example, would result in the holders being issued 57,142 Ordinary Shares if $500,000 of notes were so converted as the rights included in the units would result in an additional 7,142 shares being issued, as well as 50,000 Warrants to purchase 25,000 Ordinary Shares).
Further, we have incurred and expects to continue to incur significant costs in pursuit of our acquisition plans. Based on the foregoing, we may have insufficient funds available to operate its business through the earlier of consummation of a Business Combination or November 1, 2017. Following the initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet its obligations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our plans to raise capital or to consummate the initial Business Combination may not be successful. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Related Party Transactions
Prior to the closing of our initial public offering, B. Luke Weil advanced to us an aggregate of approximately $139,000 to cover expenses related to our formation and the initial public offering, which we already paid on December 1, 2015 from the proceeds received upon closing of the initial public offering. In February 2017, one of our directors and non-executive Chairman of the Board provided a commitment letter, which was later amended in April 2017, to loan us up to an aggregate of $110,000 for working capital purposes. Following the commitment letter, on April 28, 2017, we issued a $100,000 convertible promissory note to a related party. The loan is unsecured, non-interest bearing and is payable upon consummation of a Business Combination. Upon consummation of a Business Combination, the principal balance of the note may be converted, at the holder’s option, to Private Placement Units at a price of $10.00 per Private Placement Units. If the lender converts the entire principal balance of the convertible promissory note, he would receive 10,000 Private Placement Units. If a Business Combination is not consummated, the note will not be repaid by us and all amounts owed thereunder by us will be forgiven except to the extent that we have funds available to it outside of our trust account established in connection with the Initial Public Offering. As of August 31, 2017, the note was fully outstanding.
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Also, in connection with the Extension, certain of our shareholders prior to the Initial Public Offering agreed to loan us for $0.03 for each Public Share that was not converted, or approximately $107,017, for each month following the Extension. Accordingly, an amount of approximately $214,000 was contributed to us and deposited in the Trust Account in September 2017. The contributions will not bear interest and will be repayable by us to the lenders upon consummation of an initial Business Combination. If an initial Business Combination is not consummated by the required time period, the loans will be forgiven.
We maintain our principal executive offices in office space provided to us at no cost by a third party affiliated with B. Luke Weil, one of our directors.
We are also permitted to pay consulting fees to our officers, directors, shareholders or their affiliates for assisting us in consummating our initial business combination in an amount not to exceed an aggregate of $500,000.
If financing is needed to finance transaction costs in connection with searching for a target business or consummating an intended initial business combination, our initial shareholders, officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional private placement units at a price of $10.00 per unit (which, for example, would result in the holders being issued 57,142 ordinary shares if $500,000 of notes were so converted as the rights included in the units would result in an additional 7,142 shares being issued, as well as 50,000 warrants to purchase 25,000 ordinary shares). We believe the purchase price of these units will approximate the fair value of such units when issued. However, if it is determined, at the time of issuance, that the fair value of such units exceeds the purchase price, we would record compensation expense for the excess of the fair value of the units on the day of issuance over the purchase price in accordance with Accounting Standards Codification (“ASC”) 718 - Compensation - Stock Compensation.
Recent Accounting Standards
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of August 31, 2017.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of August 31, 2017, we were not subject to any market or interest rate risk. Following the consummation of our initial public offering, the net proceeds of our initial public offering, including amounts in the Trust Account, may be invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended August 31, 2017, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2017 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
In July 2015, the Company issued an aggregate of 1,150,000 ordinary shares to our initial shareholders for an aggregate purchase price of $25,000, or approximately $0.02 per share, in connection with our organization pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.
On December 1, 2015, we consummated our initial public offering of 4,000,000 units (“Units”). Each unit consisted of one ordinary share, one redeemable warrant to purchase one-half of one ordinary share and one right, each to receive one-seventh of one ordinary share upon consummation of a business combination. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $40,000,000. EarlyBirdCapital, Inc. acted as the underwriter of the initial public offering. The securities in the offering were registered under the Securities Act of 1933 on a registration statement on Form S-1 (No. 333-207037). The Securities and Exchange Commission declared the registration statement effective on November 24, 2015.
Simultaneous with the consummation of the initial public offering, we consummated the private placement (“Private Placement”) of 310,000 private Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total proceeds of $3,100,000. The Private Placement Units were purchased by the Company’s initial shareholders (and affiliates and designees) and EarlyBirdCapital, Inc. These issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The Private Placement Units are identical to the Units sold in the initial public offering. However, the holders of the Private Placement Units have agreed (A) to vote their private shares in favor of any proposed business combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-business combination activities prior to the consummation of such a business combination, (C) not to convert any private shares into the right to receive cash from the trust account in connection with a stockholder vote to approve our proposed initial business combination or a vote to amend the provisions of our amended and restated certificate of incorporation relating to stockholders’ rights or pre-business combination activity and (D) that such private shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated. Additionally, the purchasers have agreed not to transfer, assign or sell any of the Private Placement Units (except to certain permitted transferees) until the completion of our initial business combination.
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Following the consummation of the initial public offering, the underwriters notified the Company that they would not be exercising the over-allotment option. As a result, the initial shareholders had 150,000 ordinary shares held by them compulsorily repurchased by the Company for an aggregate purchase price of $0.01 so that they collectively own 20.0% of the Company’s issued and outstanding ordinary shares after the initial public offering (not including the Private Shares).
We paid a total of $1,300,000 in underwriting discounts and commissions and approximately $500,000 for other costs and expenses related to our formation and the offering.
On August 30, 2017, we held an extraordinary general meeting of shareholders. At the meeting, the shareholders approved each of the following items: (i) an amendment to the Charter to extend the date by which the Company has to consummate a Business Combination (“Liquidation Date”) from September 1, 2017 to November 1, 2017 and (ii) an amendment to the Charter to allow the holders of the Company’s ordinary shares issued in the Company’s Initial Public Offering to elect to convert their public shares into their pro rata portion of the funds held in the Trust Account (the “Extension”). Shareholders holding 432,769 Public Shares exercised their right to convert such shares into a pro rata portion of the Trust Account. As a result, an aggregate of approximately $4.4 million (or $10.15 per share) was removed from the Trust Account to pay such holders in September 2017.
For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-Q.
| 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.PRE | XBRL Taxonomy Extension Label Linkbase. |
| 101.LAB | XBRL Taxonomy Extension Presentation Linkbase. |
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ANDINA ACQUISITION CORP. II | ||
| By: | /s/ Julio A. Torres | |
| Julio A. Torres | ||
Chief Executive Officer (Principal executive officer) | ||
| By: | /s/ Mauricio Orellana | |
| Mauricio Orellana | ||
Chief Financial Officer (Principal financial and accounting officer) | ||
Date: October 16, 2017
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