Item 1. Financial Statements.
Origo Acquisition Corp and Subsidiary
Condensed
Consolidated Balance Sheets
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|
August 31, 2017
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|
|
November 30, 2016
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|
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|
(Unaudited)
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Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
860
|
|
|
$
|
97,261
|
|
Prepaid expenses
|
|
|
24,095
|
|
|
|
11,064
|
|
Total current assets
|
|
|
24,955
|
|
|
|
108,325
|
|
Cash and marketable securities held in Trust Account
|
|
|
21,163,824
|
|
|
|
32,728,640
|
|
Total Assets
|
|
$
|
21,188,779
|
|
|
$
|
32,836,965
|
|
|
|
|
|
|
|
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Liabilities and Shareholders’ Equity
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Current Liabilities:
|
|
|
|
|
|
|
|
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Accounts payable
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|
$
|
276,626
|
|
|
$
|
186,055
|
|
Accounts payable - related party
|
|
|
7,715
|
|
|
|
7,715
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|
Accrued interest - related party
|
|
|
87,335
|
|
|
|
—
|
|
Notes payable - related parties
|
|
|
2,109,665
|
|
|
|
1,292,665
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|
Total Current Liabilities
|
|
|
2,481,341
|
|
|
|
1,486,435
|
|
|
|
|
|
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Commitments
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|
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Ordinary shares subject to possible conversion, $.0001 par value; 1,285,875 and 2,533,704 shares at conversion value at August 31, 2017 and November 30, 2016, respectively
|
|
|
13,707,427
|
|
|
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26,350,521
|
|
|
|
|
|
|
|
|
|
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Shareholders’ Equity:
|
|
|
|
|
|
|
|
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Preferred shares, $.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at August 31, 2017 and November 30, 2016, respectively
|
|
|
—
|
|
|
|
—
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|
Ordinary shares, $.0001 par value; 100,000,000 shares authorized; 2,035,562 and 1,947,895 shares issued and outstanding at August 31, 2017 and November 30, 2016, respectively (excluding 1,285,875 and 2,533,704 shares subject to conversion at August 31, 2017 and November 30, 2016, respectively)
|
|
|
204
|
|
|
|
195
|
|
Additional paid-in capital
|
|
|
6,573,532
|
|
|
|
6,108,532
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|
Accumulated deficit
|
|
|
(1,573,725
|
)
|
|
|
(1,108,718
|
)
|
Total Shareholders’ Equity
|
|
|
5,000,011
|
|
|
|
5,000,009
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|
Total Liabilities and Shareholders’ Equity
|
|
$
|
21,188,779
|
|
|
$
|
32,836,965
|
|
Origo Acquisition Corp and Subsidiary
Condensed
Consolidated Statements of Operations
(Unaudited)
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For the three months ended August 31,
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For the nine months ended August 31,
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2017
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|
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2016
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|
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2017
|
|
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2016
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|
Operating costs
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$
|
119,859
|
|
|
$
|
147,166
|
|
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$
|
480,657
|
|
|
$
|
421,874
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|
Operating cost - related party
|
|
|
—
|
|
|
|
—
|
|
|
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—
|
|
|
|
60,000
|
|
Loss from operations
|
|
|
(119,859
|
)
|
|
|
(147,166
|
)
|
|
|
(480,657
|
)
|
|
|
(481,874
|
)
|
|
|
|
|
|
|
|
|
|
|
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|
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Other income (expense):
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|
|
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|
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Interest income
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42,721
|
|
|
|
16,065
|
|
|
|
102,985
|
|
|
|
110,421
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|
Interest expense
|
|
|
—
|
|
|
|
—
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|
|
|
(87,335
|
)
|
|
|
—
|
|
Total other income (expense)
|
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|
42,721
|
|
|
|
16,065
|
|
|
|
15,650
|
|
|
|
110,421
|
|
Net loss
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|
$
|
(77,138
|
)
|
|
$
|
(131,101
|
)
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|
$
|
(465,007
|
)
|
|
$
|
(371,453
|
)
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Basic and diluted net loss per ordinary share
|
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$
|
(0.04
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Weighted average shares outstanding, basic and diluted (1)
|
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|
2,019,950
|
|
|
|
1,859,367
|
|
|
|
1,990,016
|
|
|
|
1,856,926
|
|
(1) This number excludes an aggregate of up to 1,285,875
and 2,557,018 shares subject to conversion at August 31, 2017 and 2016, respectively
Origo Acquisition Corp and Subsidiary
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
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|
For the nine months ended
|
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August 31, 2017
|
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August 31, 2016
|
|
Cash Flows from Operating Activities
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|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(465,007
|
)
|
|
$
|
(371,453
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Interest income in cash and marketable securities held in Trust Account
|
|
|
(102,985
|
)
|
|
|
(110,421
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(13,031
|
)
|
|
|
1,061
|
|
Accounts payable
|
|
|
90,571
|
|
|
|
85,471
|
|
Accounts payable - related party
|
|
|
—
|
|
|
|
60,000
|
|
Accrued interest - related party
|
|
|
87,335
|
|
|
|
—
|
|
Net cash used in operating activities
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|
|
(403,117
|
)
|
|
|
(335,342
|
)
|
|
|
|
|
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|
|
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|
Cash Flows from Investing Activities
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|
|
|
|
|
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Principal deposited in Trust Account
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|
|
(609,086
|
)
|
|
|
(629,120
|
)
|
Interest released from Trust Account
|
|
|
98,802
|
|
|
|
29,001
|
|
Withdrawal from Trust Account upon redemption
|
|
|
12,178,086
|
|
|
|
10,756,146
|
|
Net cash provided by investing activities
|
|
|
11,667,802
|
|
|
|
10,156,027
|
|
|
|
|
|
|
|
|
|
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Cash Flows from Financing Activities
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|
|
|
|
|
|
|
|
Proceeds from note payable to related parties
|
|
|
817,000
|
|
|
|
1,175,000
|
|
Repayment of note payable to related parties
|
|
|
—
|
|
|
|
(32,335
|
)
|
Redemption of ordinary shares
|
|
|
(12,178,086
|
)
|
|
|
(10,756,146
|
)
|
Net cash (used in) provided by financing activities
|
|
|
(11,361,086
|
)
|
|
|
(9,613,481
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)
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in
cash and cash equivalents
|
|
|
(96,401
|
)
|
|
|
207,204
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning
|
|
|
97,261
|
|
|
|
26,192
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - ending
|
|
$
|
860
|
|
|
$
|
233,396
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash investing and financing activities:
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|
|
|
|
|
|
|
|
Change in value of ordinary shares subject to possible conversion
|
|
$
|
465,009
|
|
|
$
|
196,454
|
|
Conversion of accounts payable - related party to additional paid in capital
|
|
$
|
—
|
|
|
$
|
175,000
|
|
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
Note
1 - Organization, Plan of Business Operations
Origo
Acquisition Corporation, formerly known as CB Pharma Acquisition Corp. (the “Company”), was incorporated in the Cayman
Islands on August 26, 2014 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition,
share purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a
“Business Combination”). The Company’s effort to identify a prospective target business is not limited to a
particular industry or geographic region of the world.
All
activity through August 31, 2017 relates to the Company’s formation, the initial public offering (“Initial Public
Offering”) and a 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 was declared effective on December 12, 2014. The Company
consummated the Initial Public Offering of 4,000,000 units (“Units”) at $10.00 per Unit on December 17, 2014, generating
gross proceeds of $40 million (Note 3). On December 24, 2014, the Company consummated the closing of the sale of 200,000 additional
Units upon receiving notice of EarlyBirdCapital, Inc.’s (“EBC”), the representative of the underwriters in the
Initial Public Offering election to exercise its over-allotment option, generating an additional gross proceeds of $2 million
(“Over-allotment”).
Simultaneously
with the closing of the Initial Public Offering and the Over-allotment, the Company consummated the private placement (“Private
Placement”) selling 286,000 units (“Private Placement Units”) at a price of $10.00 per Unit, to Fortress Biotech,
Inc. (“Fortress”), formerly known as Coronado Biosciences, Inc., an affiliate of the Company’s former executive
officers and the holder of a majority of the Company’s Ordinary Shares prior to the Initial Public Offering, and EBC, generating
an aggregate of $2.86 million in gross proceeds (Note 4).
An
aggregate amount of approximately $42.85 million (approximately $10.20 per Unit) from the net proceeds of the sale of the
Units in the Initial Public Offering, the Over-Allotment, and the Private Placement Units, net of fees of approximately $1.84
million associated with the Initial Public Offering, inclusive of approximately $1.37 million of underwriting fees, was
placed in a trust account (“Trust Account”) immediately after the sales and invested in U.S. government treasury
bills. In connection with the Initial Extension, Second Extension, Third Extension, and Fourth Extension as discussed
below, an aggregate of approximately $10.76 million, $380,600, $11.8 million, and $3.7 million was removed from the
Trust Account in June 2016, December 2016, March 2017 and September 2017, respectively, to fund conversions of ordinary shares.
In addition, the Company’s management deposited an aggregate of approximately $609,000 in the Trust Account to
increase the conversion amount per share in any subsequent Business Combination or liquidation out of loans from the new
management and EBC during the nine months ended August 31, 2017. Subsequent to August 31, 2017, the Company deposited an
addition of approximately $41,000 to the Trust Account.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public
Offering and the Private Placement, although substantially all of the net proceeds are intended to be applied to consummating
a Business Combination.
On
June 10, 2016, the Company held an extraordinary general meeting of shareholders (the “June Meeting”). At the June
Meeting, the shareholders approved each of the following items: (i) an amendment to the Company’s Amended and Restated Memorandum
and Articles of Association (the “Charter”) to extend the date by which the Company has to consummate a business combination
(“Liquidation Date”) from June 12, 2016 to December 12, 2016 (the “Initial Extension”), (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 (as defined below) into their pro rata portion of the funds held in the Trust Account,
and (iii) to change the Company’s name from “CB Pharma Acquisition Corp.” to “Origo Acquisition Corporation”.
In
connection with the Initial Extension, effective as of June 10, 2016, (i) each of Lindsay A. Rosenwald, Michael Weiss, George
Avgerinos, Adam J. Chill, Arthur A. Kornbluth and Neil Herskowitz resigned from his position as an officer and/or director of
the Company and (ii) Edward J. Fred and Jose M. Aldeanueva were appointed as Chief Executive Officer and President and Chief Financial
Officer, Secretary and Treasurer, respectively, of the Company and Edward J. Fred, Jose M. Aldeanueva, Stephen Pudles, Jeffrey
J. Gutovich and Barry Rodgers became directors of the Company. On May 20, 2016, the Initial Shares (as defined below) were transferred
to the new management in connection with the resignation of the then-officers and directors of the Company upon the consummation
of the Initial Extension.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
At
the June Meeting, shareholders holding 1,054,401 Public Shares exercised their right to convert such Public Shares into a pro
rata portion of the funds in the Trust Account. As a result, an aggregate of approximately $10.76 million (or approximately $10.20
per share) was removed from the Trust Account to pay such holders. In connection with the Initial Extension, the new management
of the Company provided a loan to the Company of $0.20 for each Public Share that was not converted, for an aggregate amount of
approximately $629,000, which was deposited in the Trust Account.
On
December 12, 2016, the Company held its annual general meeting of shareholders (the “December Meeting”). At the December
Meeting, the shareholders approved for an amendment to extend the Liquidation Date from December 12, 2016 to March 12, 2017 (the
“Second Extension”). At the meeting, shareholders holding 36,594 Public Shares exercised their right to convert such
shares into a pro rata portion of the funds in the Trust Account. As a result, an aggregate of approximately $380,600 (or approximately
$10.40 per share) was removed from the Trust Account in December 2016 to pay such shareholders. In connection with the Second
Extension, the Company’s management provided a loan to the Company for an aggregate amount of $320,000, of which an aggregate
of approximately $311,000, or $0.10 for each Public Share that was not converted, was deposited in the Trust Account to increase
the conversion amount per share in any subsequent Business Combination or liquidation to approximately $10.50 per share.
On
March 10, 2017, the Company held another extraordinary general meeting of shareholders (the “March Meeting”) and requested
shareholders’ approval to extend the Liquidation Date from March 12, 2017 to September 12, 2017 (the “Third Extension”).
At the March Meeting, shareholders holding 1,123,568 Public Shares exercised their right to convert such shares into a pro rata
portion of the funds in the Trust Account. As a result, an aggregate of approximately $11.8 million (or approximately $10.50 per
share) was removed from the Trust Account in March 2017 to pay such shareholders. In connection with the Third Extension, the
Company’s management agreed to provide a loan to the Company for $0.025 for each Public Share that was not converted, or
approximately $50,000, for each calendar month (commencing on March 12, 2017 and on the 12th day of each subsequent month), or
portion thereof, to be deposited in the Company’s Trust Account. As of September 12, 2017, the conversion amount per share
at the meeting for such Business Combination or the Company’s subsequent liquidation was approximately $10.65 per share.
The loan did not bear interest and will be repayable by the Company to the lenders upon consummation of an initial Business Combination.
On
September 11, 2017, the Company held another extraordinary general meeting of shareholders (the “September Meeting”)
and requested shareholders’ approval to extend the Liquidation Date from September 12, 2017 to March 12, 2018 (the “Fourth
Extension”). Under Cayman Islands law, the amendments to the Charter took effect upon their approval. Accordingly, the Company
has until March 12, 2018 to consummate an initial Business Combination. At the September Meeting, shareholders holding 343,806
Public Shares exercised their right to convert such shares into a pro rata portion of the funds in the Trust Account. As a result,
an aggregate of approximately $3.7 million (or approximately $10.65 per share) was removed from the Trust Account in September
2017 to pay such shareholders. In connection with the Fourth Extension, the Company’s management agreed to provide a loan
to the Company for $0.025 for each Public Share that was not converted for each calendar month (commencing on September 12, 2017
and on the 12th day of each subsequent month), or portion thereof, to be deposited in the Company’s Trust Account. If the
Company takes the full time through March 12, 2018 to complete the initial Business Combination, the conversion amount per share
at the meeting for such Business Combination or the Company’s subsequent liquidation will be approximately $10.80 per share.
The loan will not bear interest and will be repayable by the Company to the lenders upon consummation of an initial Business Combination.
During
the nine months ended August 31, 2017, the Company issued promissory notes to the new management and EBC for an aggregate of $222,000
and $150,000, respectively. The loans are unsecured and non-interest
bearing and are due upon consummation of a Business Combination.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
The
Company’s current Chief Executive Officer has agreed that he will be personally 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 service rendered, contracted for or products sold to the Company. However, such officer may not
be able to satisfy those obligations should they arise. The remaining net proceeds (not held in the Trust Account) may be used
to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative
expenses. In addition, 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 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 not held in the Trust Account; provided,
however, that in order to meet its working capital needs following the consummation of the Initial Public Offering, the Company’s
shareholders prior to the Initial Public Offering, including their subsequent transferees (collectively the “Initial Shareholders”),
officers and directors or their affiliates (including Fortress) 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,
unless otherwise provided, or, at the lender’s discretion, converted upon consummation of the Company’s Business Combination
into additional Private Placement Units at a price of $10.00 per Unit. If the Company does not complete a Business Combination,
the loans would not be repaid.
The
Company will either seek shareholder approval of any 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”) into their pro rata share of the aggregate amount then on deposit in the Trust Account,
less any taxes then due but not yet paid, or provide Public Shareholders with the opportunity to sell their Public Shares to the
Company by means of a tender offer for an amount equal to their pro rata share of the aggregate amount then on deposit in the
Trust Account, less any taxes then due but not yet paid. The Company will proceed with a Business Combination only if it will
have net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, solely if shareholder approval
is sought, a majority of the outstanding Ordinary Shares of the Company voted, are voted in favor of the 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 Exchange Act) will be restricted from seeking conversion
rights with respect to 30% or more of the Ordinary Shares sold in the Initial Public Offering. Accordingly, all shares purchased
by a holder in excess of 30% of the shares sold in the Initial Public Offering will not be converted to cash. In connection with
any shareholder vote required to approve any Business Combination, the Initial Shareholders have agreed (i) to vote any of their
respective shares, including the 1,050,000 Ordinary Shares issued in connection with the organization of the Company (the “Initial
Shares”), in favor of the initial Business Combination and (ii) not to convert such respective shares into a pro rata portion
of the Trust Account or seek to sell their shares in connection with any tender offer the Company engages in.
If
the Company has not completed a Business Combination by March 12, 2018, pursuant to the amended Charter, it will trigger the automatic
liquidation of the Trust Account and the voluntary liquidation of the Company. If the Company is required to liquidate, Public
Shareholders are entitled to share ratably in the Trust Account, including any interest, and any net assets remaining available
for distribution to them after payment of liabilities. The Initial Shareholders have agreed to waive their rights to share in
any distribution with respect to their Initial Shares.
On
July 24, 2017, the Company entered into a merger agreement, which was later amended on September 27, 2017 (“Merger Agreement”),
with Hightimes Holding Corp., a Delaware corporation (“
HTH
”), HTHC Merger Sub, Inc., a Delaware corporation
and a newly-formed wholly
-
owned subsidiary of Origo (“
Merger Sub
”).
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
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 $900 in cash and cash equivalents, approximately $15,000 in interest income available to the
Company for working capital purposes from the Company’s investments in the Trust account, and a working capital deficit
of approximately $2.46 million. 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 March 12, 2018. 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 - Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited consolidated 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 Securities
and Exchange Commission. 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
Securities and Exchange Commission on January 18, 2017.
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 of 1933, as amended (“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 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 an original maturity of three months or less when purchased to be cash equivalents.
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, net of amounts removed
from the Trust Account for conversions (see Note 1) 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 marketable securities,
which are classified as trading securities, held in the Trust Account consisted of approximately $21 million in U.S. Treasury
Bills. At August 31, 2017, there was approximately $15,000 of interest income held in the Trust Account available to be released
to the Company.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
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
conversion (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable Ordinary
Shares (including Ordinary Shares that features conversion rights that are either within the control of the holder or subject
to conversion 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 conversion 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.
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.
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 1,285,875 and 2,557,018 Ordinary Shares subject to possible conversion 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 earnings in the Trust Account. The Company has not considered the
effect of (i) warrants sold in the Public Offering and Private Placement to purchase 2,243,000 Ordinary Shares of the
Company, (ii) rights to acquire 448,600 Ordinary Shares of the Company and (iii) 400,000 Ordinary Shares, warrants to
purchase 200,000 Ordinary Shares and rights to acquire 40,000 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 and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Recent
Accounting Pronouncements
Management
does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying financial statements.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
Note
3 - Initial Public Offering
In
December 2014, the Company consummated the Initial Public Offering and the Over-allotment of 4,200,000 Units. Each Unit consists
of one ordinary share, $.0001 par value per share (“Ordinary Share”), one right (“Right”) to receive one-tenth
of one Ordinary Share upon consummation of the Company’s initial Business Combination and one warrant entitling the holder
to purchase one-half of one Ordinary Share (“Warrant”). The Units were sold at an offering price of $10.00 per Unit,
generating gross proceeds of $42,000,000. Each Warrant entitles the holder to purchase one-half of one Ordinary Share at a price
of $11.50 per full Ordinary Share commencing upon 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 in whole and not in part, 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 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
of 1933, as amended. 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. If an initial Business Combination
is not consummated, the Rights and Warrants will expire and will be worthless.
Note
4 - Private Placement
Simultaneously
with the consummation of the Initial Public Offering and the Over-allotment, the Company consummated the Private Placement of
286,000 Private Placement Units at a price of $10.00 per Private Placement Unit, generating total proceeds of $2.86 million. Of
the Private Placement Units, 265,000 were purchased by an Initial Shareholder that was an affiliate of the Company’s former
executive officers and 21,000 were purchased by EBC, the representative of the underwriters of the Initial Public Offering. The
Private Placement Units are identical to the Units sold in the Initial Public Offering, except the warrants included in the Private
Placement Units will be non-redeemable, may be exercised on a cashless basis and may be exercisable for unregistered Ordinary
Shares if the prospectus relating to the Ordinary Shares issuable upon exercise of the Warrants is not current and effective,
in each case so long as they continue to be held by the initial purchasers or their permitted transferees. The holders of the
Private Placement Units have agreed (A) to vote the Ordinary Shares included in the Private Placement Units (“Private Shares”)
in favor of any initial Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended
and restated memorandum and articles of association with respect to the Company’s 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 Company’s Trust Account in connection with any such
vote, (C) not to convert any Private Shares into the right to receive cash from the Trust Account in connection with a shareholder
vote to approve the Company’s initial Business Combination or a vote to amend the provisions of the Company’s amended
and restated memorandum and articles of association relating to shareholders’ 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 within the required time period. 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 the Company’s initial Business
Combination. The holders have agreed not to sell their shares to the Company in any tender offer in connection with the initial
Business Combination.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
Note
5 - Related Party Transactions
Initial
Shares
In
August 2014, the Company issued 1,150,000 Initial Shares to the Initial Shareholders for an aggregate purchase price of $25,000.
The Initial Shares included an aggregate of up to 150,000 shares subject to compulsory repurchase for an aggregate purchase price
of $0.01 to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Initial
Shareholders would collectively own 20.0% of issued and outstanding shares after the Initial Public Offering (excluding the sale
of the Private Placement Units). On December 18, 2014, EBC notified the Company that it had elected to exercise a portion of the
over-allotment option for 200,000 additional units at $10.00 per unit for an additional $2,000,000. The partial exercise resulted
in a reduction of 50,000 Ordinary Shares subject to compulsory repurchase resulting in a total of 100,000 Ordinary Shares being
repurchased for an aggregate amount of $0.01 on January 5, 2015. On May 20, 2016, the Initial Shares were transferred to the new
management in connection with the resignation of the then-officers and directors of the Company upon the consummation of the Initial
Extension.
The
Initial Shares are identical to the Ordinary Shares included in the Units sold in the Initial Public Offering. However, the holders
of the Initial Shares have agreed (A) to vote their Initial Shares (as well as any shares acquired 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 Initial Shares
(as well as any other shares acquired 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 relating to shareholders’ rights or pre-Business Combination
activity and (D) that the Initial 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 Initial Shares
(except to certain permitted transferees) until (1) with respect to 50% of the Initial 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 Initial 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.
Loans
from Related Party
Convertible
Notes
As
of August 31, 2017 and November 30, 2016, the Company had an aggregate of $325,000 in convertible promissory notes to Fortress
outstanding. The loans are unsecured and non-interest bearing and are due upon consummation of a Business Combination. The holder
has agreed to convert the principal balance of $325,000 in convertible promissory notes into 32,500 Units at a price of $10.00
per Unit upon consummation of a Business Combination. The terms of the units into which the convertible promissory note will convert
will be identical to the Private Placement Units.
As
of November 30, 2016, the Company had an aggregate of $967,665 in convertible promissory notes (“Note”) to the
new management outstanding. In December 2016 and January 2017, the new management loaned the Company an addition of $320,000
and $125,000, respectively, and amended the note in December 2016 and January 2017, pursuant to which: (i) the principal
balance of the note was increased to $1,412,665, and (ii) the note will accrue interest, retroactively from its date of
issuance in June 2016, at a rate of 13% per annum up to a maximum of $87,335 in interest, which interest will be payable on
the due date for payment of the principal of the Note. As of August 31, 2017, the amount of accrued interest that was owed
under the Note was $87,335.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
The
note was unsecured and payable at the consummation of a Business Combination. Upon consummation of a Business Combination, up
to $175,000 of the principal balance of such note may be converted, at the holders’ option, into Units at a price of $10.00
per Unit. The terms of the units into which the convertible promissory note will convert will be identical to the Private Placement
Units. If new management converts the entire $175,000 of the principal balance of the note, they would receive 17,500 Units.
Notes
Payable
During
the nine months ended August 31, 2017, the new management and EBC loaned the Company an aggregate of $222,000 and $150,000, respectively.
The loans are unsecured and non-interest bearing and are due upon consummation of a Business Combination.
If
a Business Combination is not consummated, the convertible notes and notes payable owed to Fortress, the new management and EBC
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 had funds available to it outside of the Trust Account.
Administrative
Service Fee
Commencing
on December 12, 2014, the Company had agreed to pay an Initial Shareholder a monthly fee of $10,000 for general and administrative
services. As of May 19, 2016, amount due to such Initial Shareholder was approximately $183,000; of which approximately $175,000
represents the accrued service fee and $7,715 represents invoices of the Company paid by such Initial Shareholder. On May 20,
2016, this arrangement was terminated, and such Initial Shareholder agreed to convert all amounts owed under such arrangement,
or $175,000, to capital.
Note
6 - Commitments and Contingencies
Underwriting
Agreement
On
December 12, 2014, the Company entered into an agreement with EBC (“Underwriting Agreement”). The Underwriting Agreement
required the Company to pay an underwriting discount of 3.25% of the gross proceeds of the Initial Public Offering as an underwriting
discount. The Company has further engaged EBC to assist the Company with its initial Business Combination. Pursuant to this arrangement,
the Company anticipates that the underwriter 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 agreed
to pay EBC a cash fee of 4% of the gross proceeds of the Initial Public Offering (or $1.68 million) for such services upon the
consummation of its initial Business Combination (exclusive of any applicable finders’ fees which might become payable).
The Company is not obligated to pay the 4% fee if no business combination is consummated.
Other
agreements
In
August 2016, the Company entered into an agreement with a legal firm to assist the Company with a potential
business combination and related securities and corporate work. The agreement called for a retainer of $37,500 and the
Company has agreed to pay a portion of the invoices and the payment of the remaining amount will be deferred until the consummation of the Business Combination.
In
December 2016, the Company entered into an agreement with a consultant for investor relations services. The agreement called for
an initial payment of $13,000, and a deferred monthly fee of $8,000 until the consummation of the Business Combination. The Company
agreed to pay the consultant all of the deferred fees plus a contingency fee of $20,000 upon consummation of the Business Combination.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
As
of August 31, 2017, the aggregate amount deferred for the legal firm and the consultant was approximately $1.2 million. The deferred
amount is an unrecognized contingent liability, as closing of a potential business combination was not considered probable as
of August 31, 2017.
Purchase
Option
In
December 2014, the Company sold to EBC, for $100, a unit purchase option to purchase up to a total of 400,000 units exercisable
at $11.00 per unit (or an aggregate exercise price of $4,400,000) commencing on the consummation of a Business Combination. The
unit purchase option expires on December 12, 2019. The units issuable upon exercise of this option are identical to the Units
being offered in the Initial Public Offering. Accordingly, after the Business Combination, the purchase option will be to purchase
440,000 Ordinary Shares (which include 40,000 Ordinary Shares to be issued for the rights included in the units) and 400,000 Warrants
to purchase 200,000 Ordinary Shares. The Company has agreed to grant to the holders of the unit purchase option, demand and “piggy
back” registration rights for periods of five and seven years, respectively, from the effective date of the Initial Public
Offering, including securities directly and indirectly issuable upon exercise of the unit purchase option.
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 this unit purchase option to be approximately $2.92 million (or $7.30 per unit) using the Black-Scholes option-pricing
model. The fair value of the unit purchase option granted to EBC was estimated as of the date of grant using the following assumptions:
(1) expected volatility of 99.10%, (2) risk-free interest rate of 1.53% 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 (except in the case of a forced
cashless exercise upon the Company’s redemption of the Warrants, as described in Note 3), 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
underlying Warrants 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 the
Warrants underlying the unit purchase option. The holder of the unit purchase option will not be entitled to exercise the unit
purchase option or the Warrants underlying the unit purchase option unless a registration statement covering the securities underlying
the unit purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the
unit purchase option or underlying Warrants, the unit purchase option or Warrants, as applicable, will expire worthless.
Registration
Rights
The
Initial Shareholders are entitled to registration rights with respect to their initial shares (and any securities issued upon
conversion of working capital loans) and the purchasers of the Private Placement Units are entitled to registration rights with
respect to the Private Placement Units (and underlying securities), pursuant to an agreement dated December 12, 2014. The holders
of the majority of the initial shares are entitled to demand that the Company register these shares at any time commencing three
months prior to the first anniversary of the consummation of a Business Combination. The holders of the Private Placement Units
(or underlying securities) are entitled to demand that the Company register these securities at any time after the Company consummates
a Business Combination. In addition, the holders have certain “piggy-back” registration rights on registration statements
filed after the Company’s consummation of a Business Combination.
Nasdaq
Listing Rules
On
February 21, 2017, the Company received a written notice (the “Notice”) from the Listing Qualifications Department
of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company is not in compliance with Listing Rule 5550(a)(3)
(the “Minimum Public Holders Rule”), which requires the Company to have at least 300 public holders for continued
listing on the Nasdaq Capital Market. The Notice was only a notification of deficiency, not of imminent delisting, and had no
current effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market. In April 2017, the Company
submitted a plan to evidence compliance with the Minimum Public Holders Rule and Nasdaq granted the Company until August 21, 2017
to evidence compliance with the Minimum Public Holders Rule.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
On
August 23, 2017, the Company received a written notice from Nasdaq stating that the Company had not regained compliance
with the Minimum Public Holders Rule for continued listing on Nasdaq. The notice further stated that, unless the Company
requested an appeal of Nasdaq’s determination, trading of the Company’s securities would be suspended at the open
of business on September 1, 2017. As permitted under Nasdaq rules, the Company requested an appeal of the
delisting determination, and a hearing before a Nasdaq panel was held in connection with such appeal in October 2017. As of
the date of this report, the panel’s decision has not been rendered, and pending the Nasdaq panel’s
determination, the Company’s securities will continue to trade on Nasdaq. If the panel’s determination is
adverse to the Company, and absent any other remedies available to the Company, the Company’s securities would be
subject to suspension from trading and Nasdaq could file a Form 25 to remove the
Company’s securities from listing and registration on Nasdaq.
The
Company cannot assure that its securities will continue to be listed on Nasdaq in the future prior to an initial Business Combination.
Additionally, in connection with the initial Business Combination, it is likely that Nasdaq will require the Company to file a
new initial listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements.
The Company cannot assure that it will be able to meet those initial listing requirements at that time.
Note
7 - 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.
At
the Meeting on June 10, 2016, shareholders holding 1,054,401 Public Shares exercised their right to convert such Public Shares
into a pro rata portion of the Trust Account (see Note 1). As a result, the Company has an aggregate of 4,481,599 Ordinary Shares
outstanding as of November 30, 2016. Of these, an aggregate of 2,533,704 Ordinary Shares subject to possible conversion were classified
as temporary equity in the accompanying Balance Sheet.
At
the December Meeting and March Meeting, shareholders holding 36,594 and 1,123,568 Public Shares exercised their right to
convert such Public Shares into a pro rata portion of the Trust Account, respectively (see Note 1). As a result, the Company
has an aggregate of 3,321,437 Ordinary Shares outstanding as of August 31, 2017. Of these, an aggregate of 1,285,875 Ordinary
Shares subject to possible conversion are classified as temporary equity in the accompanying Balance Sheet.
Note
8 – Merger Agreement
Merger
Agreement
On
July 24, 2017, the Company entered into a Merger Agreement with HTH, which was later amended on September 27, 2017 (“Amended
Merger Agreement”). Pursuant to the terms of the Amended Merger Agreement, the Merger Sub will merge with and into HTH,
with HTH continuing as the surviving entity (the “Merger”) and all holders of HTH equity securities and warrants,
options and rights to acquire or securities that convert into HTH equity securities (collectively, “HTH Securities”)
will convert into Origo common shares and, with respect to options, options to acquire Origo common shares. More specifically
at the effective time of the Merger (the “Effective Time”):
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
|
●
|
All
holders of HTH Securities (excluding HTH options, as described below) shall be entitled
to receive in the Merger an aggregate of 23,474,178 common shares of Origo (the “Merger
Consideration”), which is equal to $250 million divided by the agreed upon value
of the Origo common shares to be issued as Merger Consideration of $10.65 per share.
In the event HTH receives in excess of $5,000,001 in net proceeds from one or more separate
sales of common or preferred stock prior to the Closing, then the amount in excess of
$5,000,001 shall increase the HTH’s valuation on a dollar-for-dollar basis and
increase the number of Origo common shares representing the Merger Consideration by dividing
the increased HTH valuation by the agreed upon value of the Origo common shares to be
issued as Merger Consideration.
|
|
●
|
Each
holder of capital stock of HTH shall receive for each share of capital stock of HTH its
pro rata share of the Merger Consideration, treating any outstanding shares of HTH’s
preferred stock on an as-converted to Class A common stock basis (and after deducting
from the Merger Consideration payable to such holders of capital stock, the Origo common
shares issuable to the holders of HTH’s 8% senior secured convertible promissory
notes in an initial aggregate principal amount of $30 million (“HTH Purchase Notes”)).
|
|
●
|
Any
warrants and other rights to acquire equity securities of HTH, and all other securities
that are convertible into or exchangeable for equity securities of HTH, (A) if exercised
or converted prior to the Effective Time, shall have the resulting shares of capital
stock of HTH issued upon such exercise treated as outstanding shares of capital stock
of HTH, and (B) if not exercised or converted prior to the Effective Time will be terminated
and extinguished at the Effective Time (except for the HTH Purchase Notes and ExWorks
Convertible Not, which shall be converted as described below, and the outstanding HTH
options, which shall be assumed by Origo as described below).
|
|
●
|
HTH
shall be permitted to increase the principal amount of HTH’s existing secured loan
from ExWorks Capital Fund I, L.P (“ExWorks”) to up to $11.5 million from
$7.5 million. Additionally, Origo acknowledged that any shares of HTH Class A common
stock issued to ExWorks pursuant to the convertible note evidencing the ExWorks loan
(the “ExWorks Convertible Note”) shall be converted into Origo common shares
at a conversion price equal to 90% of the per share value of the Merger Consideration
(i.e., $10.65, or an ExWorks conversion price of $9.585). Origo further agreed that all
Origo common shares issued upon conversion of the ExWorks Convertible Note shall not
be deemed to be part of the Merger Consideration and shall dilute all holders of Origo
common shares on an equitable pro-rata basis. Origo also acknowledged that HTH and ExWorks
entered into an amendment, pursuant to which ExWorks granted HTH an option, exercisable
at any time on or before January 29, 2018, to extend the maturity date of the ExWorks
loan to August 28, 2018. If HTH elects to exercise the option, it will be obligated to
pay ExWorks an additional fee of $600,000 and issue an additional warrant to ExWorks
to purchase shares of HTH Class A common stock. HTH agreed that prior to the Closing
Date of the Merger, HTH shall either refinance its indebtedness to ExWorks or exercise
the foregoing option to extend the terminate date of the ExWorks loan to August 28, 2018.
|
|
●
|
The
HTH Purchase Notes that are outstanding as of the Closing shall automatically be converted
in a number of Origo common shares calculated by dividing the outstanding principal and
interest of all such HTH Purchase Notes and dividing such amount by the closing price
of Origo’s common shares on the date of the Closing.
|
|
●
|
All
outstanding HTH options will be assumed by Origo and be converted into an option to purchase
Origo common shares (each, an “Origo Assumed Option”). Origo Assumed Options
shall be in addition to the Merger Consideration and will dilute all holders of Origo
securities.
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|
●
|
If,
prior to the Closing Date (i) Origo has less than $5,000,001 in net tangible assets (excluding
the net tangible assets of HTH) and (ii) HTH shall consummate a HTH Public Offering,
then (A) on the Closing Date, HTH will utilize up to ten percent (10%) of the gross proceeds
of such HTH Public Offering (up to $20 million of such gross proceeds) to pay for all
or a portion of Origo deferred expenses as directed by Origo and (B) if the gross proceeds
of a HTH Public Offering exceeds $20 million, HTH will utilize up to $5.0 million of
the gross proceeds of such HTH Public Offering to pay for all or a portion of Origo deferred
expenses as directed by Origo.
|
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
The
Merger Agreement also provides that, immediately prior to the Effective Time, Origo will reincorporate under the laws of the State
of Nevada, whether by reincorporation, statutory conversion or otherwise.
The
obligations of each party to consummate the Merger are subject to the satisfaction or waiver of customary conditions and Closing
deliverables, including (1) the Registration Statement having been declared and remain effective, (2) Origo’s shareholders
having approved the Merger Agreement and the related transactions at the extraordinary general meeting of Origo shareholders,
(3) any required governmental and third party approvals having been obtained, (4) the consents required to be obtained or made
from any third party (other than a governmental authority) in order to consummate the transactions contemplated by the Merger
Agreement shall have been obtained or made; (5) no governmental authority having enacted any law which has the effect of making
the transactions or agreements contemplated by the Merger Agreement illegal or which otherwise prevents or prohibits consummation
of the transactions contemplated by the Merger Agreement, (6) there shall be no pending action brought by a third party non-affiliate
to enjoin or otherwise restrict the consummation of the Closing, (7) upon the Closing, after giving effect to the completion of
Origo’s redemption of its public stockholders in connection with the Merger and the payment of all accrued and unpaid expenses,
Origo shall have net tangible assets of at least $5,000,001 (which shall include the consolidated net tangible assets of HTH and
its subsidiaries), (8) HTH shall have received its required stockholder approval, (9) the parties’ respective representations
and warranties shall be true and correct as of the Closing Date (subject to certain materiality qualifiers), (10) each of the
parties shall have performed in all material respects all of its obligations and complied in all material respects with all of
its agreements and covenants under the Merger Agreement to be performed or complied with by it on or prior to the Closing Date,
and (11) no event having occurred since the date of the Merger Agreement resulting in a material adverse effect upon the business,
assets, liabilities, results of operations, prospects or condition of the other party and its subsidiaries, taken as a whole,
or the other party’s ability to consummate the transactions contemplated by the Merger Agreement and ancillary documents
on a timely basis (subject in each case to customary exceptions) (a “Material Adverse Effect”), which is continuing
and uncured. The obligation of Origo and Merger Sub to consummate the Merger is also subject to the satisfaction or waiver or
certain additional conditions.
Consulting
Services Agreement
At
the Closing, the successor will enter into a consulting services agreement with Oreva Capital Corp., a Delaware corporation, pursuant
to which the consultant is to perform certain services for the successor, including administrative services, dealing with investment
bankers, investor relations consultants and other members of the investment community (as authorized from time to time by the
Board of Directors), and assisting in connection with proposed acquisitions, dispositions and financings. In consideration for
such services, the successor will pay the consultant a monthly consulting fee of $35,000. Commencing in 2018, the consultant may
elect to have all or any portion of the consulting fee deferred and paid in shares of the successor’s common stock, at a
per share price equal to 100% of the closing price of the stock of the successor. Adam Levin, the Chief Executive Officer and
a director of HTH, is the Managing Director of Oreva Capital Corp.
Origo Acquisition Corp and Subsidiary
Notes
to Unaudited condensed consolidated financial statements
August
31, 2017
Note
9 - Subsequent Events
On
September 11, 2017, the Company held the September Meeting to extend the Liquidation Date from September 12, 2017 to March 12,
2018. At the September Meeting, shareholders holding 343,806 Public Shares exercised their right to convert such shares into a
pro rata portion of the funds in the Trust Account. As a result, an aggregate of approximately $3.7 million (or approximately
$10.65 per share) was removed from the Trust Account in September 2017 to pay such shareholders. In connection with the Fourth
Extension, the Company’s management agreed to provide a loan to the Company for $0.025 for each Public Share that was not
converted for each calendar month (commencing on September 12, 2017 and on the 12th day of each subsequent month), or portion
thereof, to be deposited in the Company’s Trust Account. If the Company takes the full time through March 12, 2018 to complete
the initial Business Combination, the conversion amount per share at the meeting for such business combination or the Company’s
subsequent liquidation will be approximately $10.80 per share. The loan will not bear interest and will be repayable by the Company
to the lenders upon consummation of an initial Business Combination.
Subsequent
to August 31, 2017, the Company received an aggregate of approximately $94,000 of loan amount from both the new management and EBC under the form of promissory notes. An aggregate of $21,000 loan commitment from the new management under the promissory notes were still outstanding. The loans
are unsecured, non-interest bearing and are due upon consummation of a Business Combination. An aggregate of approximately $41,000
was deposited to the Trust Account subsequent to August 31, 2017.
For
a description of the Amended Merger Agreement entered into on September 27, 2017, see Note 8.
Item
2. Management’s Discussion and Analysis
References
in this report to “we,” “us” or the “Company” refer to Origo Acquisition Corporation, formerly
known as CB Pharma Acquisition Corp. 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 Origo Acquisition Corporation, except where the context
requires otherwise. The following discussion should be read in conjunction with our consolidated 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 August 26, 2014 to acquire, through a merger, share exchange, asset
acquisition, share purchase, recapitalization, reorganization or other similar business combination, one or more businesses or
entities (a “business combination”). Our efforts to identify a prospective target business will not be limited to
a particular industry or geographic region of the world.
On
December 17, 2014, we consummated our initial public offering (the “Initial Public Offering” or “IPO”)
of 4,000,000 units (“Units”), generating gross proceeds of $40 million, with each Unit consisting of one ordinary
share, par value $.0001 per share (“Ordinary Share”), one right (“Right”) to automatically receive one-tenth
of one Ordinary Share upon consummation of an initial business combination and one warrant (“Warrant”) entitling the
holder to purchase one-half of one Ordinary Share at a price of $11.50 per full share commencing on our completion of an initial
business combination. Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement
of 285,000 private Units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit, generating total
proceeds of $2.85 million. Of the Private Placement Units, 265,000 were purchased by an initial shareholder who was an affiliate
of our former executive officers and 20,000 were purchased by EarlyBirdCapital, Inc.’s (“EBC”), the representative
of the underwriters in the Initial Public Offering. On December 24, 2014, we consummated the closing of the sale of 200,000 Units,
which were sold pursuant to the underwriters’ over-allotment option (“Over-Allotment”), and an additional 1,000
Private Placement Units to EBC in a simultaneous Private Placement, generating $2.01 million in gross proceeds.
An
aggregate amount of approximately $42.85 million (approximately $10.20 per Unit) from the net proceeds of the sale of the Units
in the Initial Public Offering, the Over-Allotment and the Private Placement Units, net of fees of approximately $1.84 million
associated with the Initial Public Offering, inclusive of $1.37 million of underwriting fees, was placed in a trust account immediately
after the sales and invested in U.S. government treasury bills.
On
June 10, 2016, we held an extraordinary general meeting of shareholders (the “June Meeting”), at which 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 (the “Initial Extension”),
(ii) an amendment to the charter to allow the holders (“Public Shareholders”) of the outstanding Ordinary Shares sold
in the Initial Public Offering (the “Public Shares”) to elect to convert their Public Shares into their pro rata portion
of the funds held in the trust account if the Initial Extension is approved, and (iii) to change our company name from CB Pharma
Acquisition Corp. to Origo Acquisition Corporation (the “Name Change”).
In
connection with the Initial Extension, effective as of June 10, 2016, (i) each of Lindsay A. Rosenwald, Michael Weiss, George
Avgerinos, Adam J. Chill, Arthur A. Kornbluth and Neil Herskowitz resigned from his position as an officer and/or director of
our company and (ii) Edward J. Fred and Jose M. Aldeanueva were appointed as Chief Executive Officer and President and Chief Financial
Officer, Secretary and Treasurer, respectively, of our Company (collectively, the “Current Management”) and Edward
J. Fred, Jose M. Aldeanueva, Stephen Pudles, Jeffrey J. Gutovich and Barry Rodgers became directors of our company. On May 20,
2016, the initial shares were transferred to the new management in connection with the resignation of the then-officers and directors
of our company upon the consummation of the Initial Extension.
During
the June Meeting, shareholders holding 1,054,401 Public Shares exercised their right to convert such Public Shares into a pro
rata portion of the funds in the trust account. As a result, approximately $10.76 million (or approximately $10.20 per share)
was removed from the trust account to pay such holders. In connection with the Initial Extension, the Current Management provided
a loan to us of approximately $629,000, which was deposited in the trust account. In addition to the contribution, the Current
Management loaned us an additional $370,880 for our working capital needs, for an aggregate amount of $1,000,000. The loan was
evidenced by a promissory note (the “Note”) and was unsecured, non-interest bearing and is payable at our consummation
of a business combination. Up to $175,000 of the principal amount of the Note is convertible at the option of the Current Management
into 17,500 Private Placement Units (consisting of one Ordinary Share, one Right and one Warrant for one-half of an Ordinary Share)
at $10.00 per Unit. The terms of the units are identical to the units issued by us in our Initial Public Offering except that
the warrants included in such units are non-redeemable by us and will be exercisable for cash or on a “cashless” basis,
in each case, if held by the initial holders or their permitted transferees. If the Current Management converts the entire $175,000
of the principal balance of the Note, they would receive 17,500 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
outside of the trust account.
On
December 12, 2016, we held an annual meeting of shareholders (the “December Meeting”), at which the shareholders approved
among other items, an amendment to the charter to extend the date by which we must consummate a business combination from December
12, 2016 to March 12, 2017 (the “Second Extension”). In connection with the Second Extension, shareholders holding
36,594 Public Shares exercised their right to convert such shares into a pro rata portion of the funds in the trust account. As
a result, an aggregate of approximately $380,600 (or approximately $10.40 per share) was removed from the trust account to pay
such shareholders. As the Second Extension was approved, our management provided a loan to us for an aggregate amount of $320,000,
of which approximately $310,900, or $0.10 for each Public Share that was not converted, was deposited in the trust account to
increase the conversion amount per share in any subsequent business combination or liquidation to approximately $10.50 per share.
On
March 10, 2017, we held an annual meeting of shareholders (the “March Meeting”), at which the shareholders approved
among other items, an amendment to the charter to extend the date by which we must consummate a business combination from March
12, 2017 to September 12, 2017 (the “Third Extension”). At the March Meeting, shareholders holding 1,123,568 Public
Shares exercised their right to convert such Public Shares into a pro rata portion of the funds in the trust account (“Trust
Account”). As a result, an aggregate of approximately $11.8 million (or $10.50 per share) was removed from the Trust Account
to pay such holders. In connection with the Third Extension, our management agreed to provide a loan to us for $0.025 for each
Public Share that was not converted, or approximately $50,000, for each calendar month (commencing on March 12, 2017 and on the
12th day of each subsequent month), or portion thereof, to be deposited in our Trust Account. If we take the full time through
September 12, 2017 to complete the business combination, the conversion amount per share at the meeting for such business combination
or our subsequent liquidation will be approximately $10.65 per share. The loan will not bear interest and will be repayable by
us to the lenders upon consummation of an initial business combination.
On
September 11, 2017, we held another extraordinary general meeting of shareholders (the “September Meeting”) and requested
shareholders’ approval to extend the Liquidation Date from September 12, 2017 to March 12, 2018 (the “Fourth Extension”).
Under Cayman Islands law, the amendments to the Charter took effect upon their approval. Accordingly, we have until March 12,
2018 to consummate an initial Business Combination. At the September Meeting, shareholders holding 343,806 Public Shares exercised
their right to convert such shares into a pro rata portion of the funds in the Trust Account. As a result, an aggregate of approximately
$3.7 million (or approximately $10.65 per share) was removed from the Trust Account in September 2017 to pay such shareholders.
In connection with the Fourth Extension, our management agreed to provide a loan to us for $0.025 for each Public Share that was
not converted for each calendar month (commencing on September 12, 2017 and on the 12th day of each subsequent month), or portion
thereof, to be deposited in our Trust Account. If we take the full time through March 12, 2018 to complete the initial Business
Combination, the conversion amount per share at the meeting for such Business Combination or our subsequent liquidation will be
approximately $10.80 per share.
During
the nine months ended August 31, 2017, we issued promissory notes to our management and EBC for an aggregate of $222,000 and $150,000,
respectively. The loans are unsecured and non-interest bearing and
are due upon consummation of a Business Combination.
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
successfully.
On
July 24, 2017, we entered into a merger agreement, which was later amended on September 27, 2017 (“Merger Agreement”),
with Hightimes Holding Corp., a Delaware corporation (“
HTH
”), HTHC Merger Sub, Inc., a Delaware corporation
and a newly-formed wholly
-
owned subsidiary of Origo (“
Merger Sub
”).
Critical
Accounting Policy
Ordinary
Shares Subject to Possible Conversion
We
account for our Ordinary Shares subject to possible conversion in accordance with the guidance provided in ASC 480 “Distinguishing
Liabilities from Equity”. Ordinary Shares subject to mandatory conversion (if any) are classified as a liability instrument
and measured at fair value. Conditionally convertible Ordinary Shares (including Ordinary Shares that feature conversion rights
that are either within the control of the holder or subject to conversion 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 stockholders’
equity. Our Ordinary Shares feature certain conversion rights that are considered by the Company to be outside of the Company’s
control and subject to the 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.
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 the IPO on December 17, 2014 was in preparation for that event. Subsequent to the IPO, 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 losses of approximately $77,000, which consisted of operating expenses of approximately
$120,000, offset by interest income from our Trust Account of approximately $43,000. For the three months ended August 31, 2016,
we had net losses of approximately $131,000, which consisted of operating expenses of approximately $147,000, offset by interest
income from our Trust Account of approximately $16,000.
For
the nine months ended August 31, 2017, we had net losses of approximately $465,000, which consisted of operating expenses of approximately
$481,000, interest expense on the Note of approximately $87,000, offset by interest income from our Trust Account of approximately
$103,000. For the nine months ended August 31, 2016, we had net losses of approximately $371,000, which consisted of operating
expenses of approximately $482,000, offset by interest income from our Trust Account of approximately $110,000.
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.
Liquidity
and Capital
Resources
Through
November 30, 2016, our liquidity needs were satisfied through receipt of approximately $407,000 from the net proceeds of the sale
of the Units in the Initial Public Offering, the Over-Allotment, and the Private Placement Units held outside of the Trust Account
and proceeds from the convertible note in an aggregate original principal amount of $1 million from the Current Management (“Note”)
following the Initial Extension, of which $370,880 was provided for our working capital needs, and $325,000 from Fortress Biotech,
Inc. (“Fortress”) under the form of an unsecured, non-interest bearing convertible note. We repaid approximately $32,000
to Current Management in June 2016. In addition to these convertible notes, Fortress had deferred payment of their administrative
service fee of $175,000 through May 2016. On May 20, 2016, Fortress agreed to convert the deferred administrative service fee
of $175,000 to capital.
In
December 2016, Current Management loaned us an additional amount of $320,000, of which an aggregate of approximately $311,000,
or $0.10 for each Public Share that was not converted was deposited in the Trust Account, and the remaining balance of approximately
$9,000 was provided for working capital purposes. In January 2017, Current Management loaned us an additional amount of $125,000
for working capital. In exchange for the additional funding, we amended the Note in December 2016 and January 2017, pursuant to
which: (i) the principal amount of the note was increased to $1,412,665, and (ii) the Note accrued interest, retroactively from
its date of issuance in June 2016, at a rate of 13% per annum up to a maximum of $87,335 in interest, which interest will be payable
on the due date for payment of the principal of the Note.
During
the nine months ended August 31, 2017, the Current management and EBC loaned us an aggregate of $222,000 and $150,000, respectively.
The loans are unsecured and non-interest bearing and are due upon consummation of a Business Combination.
These
convertible notes are unsecured and are payable to Fortress and Current Management upon consummation of a Business
Combination. Upon consummation of a Business Combination, up to $175,000 of the principal balance of the $1.4 million Note
from Current Management may be converted, at the holders’ option, into Units at a price of $10.00 per Unit. If the
Current Management converts the entire $175,000 of the principal balance of the Note, they would receive 17,500 Private
Placement Units. Fortress has agreed to convert all of its principal balance of the convertible promissory notes into 32,500
Units at a price of $10.00 per Unit upon consummation of a business combination. The terms of the units into which these
convertible promissory notes will convert will be identical to the Private Placement Units. If a business combination is not
consummated, these convertible notes 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 outside of the Trust Account.
Subsequent
to August 31, 2017, we received an aggregate of approximately $94,000 of loan amount from both the Current Management and EBC under the form of promissory notes. An aggregate of $21,000 loan commitment from the Current Management under the promissory notes were still outstanding. The loans are
unsecured, non-interest bearing and are due upon consummation of a Business Combination. An aggregate of approximately $41,000
was deposited to the Trust Account subsequent to August 31, 2017.
We
intend to use substantially all of the net proceeds of the Offering, including the funds held in the Trust Account, to acquire
a target business or businesses and to pay our expenses relating thereto, upon consummation of our initial business combination,
including the Merger. To the extent that our capital stock is used in whole or in part as consideration to affect our initial
business combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be
used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety
of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing,
research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’
fees which we may have incurred prior to the completion of our initial business combination if the funds available to us outside
of the Trust Account were insufficient to cover such expenses.
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 $900 in cash and cash equivalents, approximately $15,000 in interest income available to us for working capital
purposes of from our investments in the Trust account, and a working deficit of approximately $2.46 million. Further, we have
incurred and expect to continue to incur significant costs in pursuit of our acquisition plans. Our plans to raise capital or
to consummate the initial business combination may not be successful. Based on the foregoing, we may have insufficient funds
available to operate our business through the earlier of consummation of a business combination or March 12, 2018. These matters,
among others, raise substantial doubt about our ability to continue as a going concern.
The
accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going
concern.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
Commitments
Underwriting
Agreement
On
December 12, 2014, we entered into an agreement with EBC (“Underwriting Agreement”). The Underwriting Agreement required
us to pay an underwriting discount of 3.25% of the gross proceeds of the Initial Public Offering as an underwriting discount.
We have further engaged EBC to assist us with our initial business combination. Pursuant to this arrangement, we anticipate that
the underwriter will assist us in holding meetings with shareholders to discuss the potential business combination and the target
business’ attributes, introduce us to potential investors that are interested in purchasing our securities, assist us in obtaining
shareholder approval for the business combination and assist us with our press releases and public filings in connection with
the business combination. We agreed to pay EBC a cash fee of 4% of the gross proceeds of the Initial Public Offering (or $1.68
million) for such services upon the consummation of its initial business combination (exclusive of any applicable finders’ fees
which might become payable). We are not obligated to pay the 4% fee if no business combination is consummated. The 4% fee is an
unrecognized contingent liability, as closing of a potential business combination was not considered probable as of August 31,
2017.
Other
agreements
In
August 2016, we entered into an agreement with a legal firm to assist us with a potential business combination and related securities
and corporate work. The agreement called for a retainer of $37,500 and we have agreed to pay a portion of the invoices and the
payment of the remaining amount will be deferred until the consummation of the business combination.
In
December 2016, we entered into an agreement with a consultant for investor relations services. The agreement called for an upfront
payment of $13,000, and the monthly fee of $8,000 will be deferred until the consummation of the business combination. We agreed
to pay the consultant all of the deferred fees plus a contingency fee of $20,000 upon consummation of the business combination.
As
of August 31, 2017, the aggregate amount deferred for the legal firm and the consultant was approximately $1.2 million. The deferred
amount is an unrecognized contingent liability, as closing of a potential business combination was not considered probable as
of August 31, 2017.
Off-Balance
Sheet Arrangements
We
did not have any off-balance sheet arrangements as of August 31, 2017.