PART
I
ITEM
1. BUSINESS
Formation
and Extension
Origo
Acquisition Corporation (the “Company”, “we”, “our” and “us”) is a blank check
company formed on August 26, 2014 under the name CB Pharma Acquisition Corp. for the purpose of entering into a merger, share
exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more
businesses or entities. The Company’s efforts in identifying a prospective target business is not 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 $0.0001 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 redeemable 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. (“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 approximately $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 1,050,000 Ordinary Shares issued in connection with the organization of the Company 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 to purchase 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 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 2016 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 (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 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. 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, all the amendments to the Charter took effect upon their approval. Accordingly, we now 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 year ended November 30, 2017, we issued promissory notes to our management and EBC for an aggregate of $361,590 and $211,575,
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 remaining net proceeds of the offering and the
Private Placement, although substantially all of the remaining net proceeds are intended to be applied generally towards consummating
a business combination successfully.
Business
Combination Initiatives
On December
19, 2016, we entered into a Merger Agreement (the “Merger Agreement”) with Aina Le’a Inc., a Delaware corporation
(“Aina Le’a”), Aina Le’a Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Aina
Le’a (“Merger Sub”), and Jose Aldeanueva, in the capacity as the representative for the stockholders of the
Company and their successors and assign (the “OAC Representative”).
On
February 17, 2017, we sent a letter (the “Termination Letter”) to Aina Le’a to terminate the Merger Agreement
(1) pursuant to Sections 8.1(e) of the Merger Agreement because Aina Le’a breached the non-solicitation covenant contained
in Section 5.7 of the Merger Agreement and (2) pursuant to Section 8.1(f) because there has been a Material Adverse Effect on
Aina Le’a which is uncured and continuing. In addition, we provided notice of additional breaches by Aina Le’a of
the Merger Agreement based on information available to us as of the date of the Termination Letter, including, among others, breaches
of the following provisions: Section 5.1(a) (by failing to give us and our representatives access to requested information about
Aina Le’a and its operations, including without limitation Aina Le’a’s ongoing financing activities), Section
5.8(iv) (failure to provide prompt notice of the filing of a foreclosure action on a parcel of land material to the initial phase
of Aina Le’a’s development project), Section 5.8(v) (failure to provide prompt notice of the filing of a foreclosure
action on a parcel of land material to the initial phase of Aina Le’a’s development project), Sections 5.9 and 5.11
(Aina Le’a’s failure to use commercially reasonable efforts and to cooperate fully with us and our representatives
to prepare and file the Registration Statement). The Termination Letter served as a notice to cure with respect to these provisions
to the extent required by Section 8.1(e) of the Merger Agreement. However, we did not believe these breaches were curable and
therefore the Termination Letter terminated the Merger Agreement immediately as of February 17, 2017.
On
February 22, 2017, we sent to Aina Le’a a supplement to the Termination Letter (the “Supplement”). The Supplement
noted that Aina Le’a’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 (“From 10-Q”),
which was filed on February 21, 2017, inaccurately described the Termination Letter. Furthermore, the Supplement indicated that
the Form10-Q contained further information that we believe demonstrates that a Material Adverse Effect had occurred on Aina Le’a’s
business and was continuing. The Supplement further reiterated that the termination of the Merger Agreement was effective as of
the date of the Termination Letter.
On
July 24, 2017, we entered into a merger agreement, which was later amended on September 27, 2017 (collectively, the “HTH
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”). Pursuant to the HTH Merger
Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the HTH Merger
Agreement (the “Closing”), we will merge with and into Merger Sub, with Merger Sub continuing as the surviving entity
(the “Merger”). As a result of the consummation of the Merger, we will cease to exist and the holders of the Company’s
equity securities and warrants, options and rights to acquire or convert into the Company’s equity securities will convert
into the successor’s equity securities and warrants, options and rights to acquire or convert into the successor’s
equity securities.
The description of the HTH Merger Agreement is qualified in its entirety
by reference to the full text of the Merger Agreement which was filed with the SEC on July 27, 2017 on Form 8-K. The full text
of the amendment to the HTH Merger Agreement was filed with the SEC on October 3, 2017 on Form 8-K. You are urged to read the
entire HTH Merger Agreement, amendment thereto and the other exhibits attached thereto. Our board of directors has approved the
HTH Merger Agreement. Unless specifically stated, this Annual Report does not give effect to the HTH merger and does not contain
the risks associated with the HTH merger. Such risks and effects relating to the HTH merger are included in our preliminary proxy
statement filed with the SEC on Form S-4 (File No. 333-221527).
Competitive
Advantages
We
believe our competitive strengths to be the following:
Status
as a Public Company
We
believe our structure will make us an attractive business combination partner to target businesses. As an existing public company,
we offer a target business an alternative to the traditional initial public offering through a merger or other business combination.
In this situation, the owners of the target business may exchange their shares in the target business for our shares or for a
combination of shares and cash, allowing us to tailor the consideration to the specific needs of the sellers. We believe target
businesses might find this method a more certain and cost-effective method to becoming a public company than the typical initial
public offering. In a typical initial public offering, there are additional expenses incurred in marketing, roadshow and public
reporting efforts that will likely not be present to the same extent in connection with a business combination with us. Furthermore,
once the business combination is consummated, the target business will have effectively become public, whereas an initial public
offering is always subject to the underwriters’ ability to complete the offering as well as general market conditions that
could prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital
and an additional means of providing management incentives consistent with stockholders’ interests than it would have as
a privately-held company. It can offer further benefits by augmenting a company’s profile among potential new customers
and vendors and aid in attracting talented employees.
With
respect to the Merger, pursuant to the HTH Merger Agreement, subject to the terms and conditions set forth therein, at the closing
of the transactions contemplated by the Merger Agreement, we will merge with and into the Merger Sub, with the Merger Sub continuing
as the surviving entity. As a result of the consummation of the Merger, we will cease to exist and the holders of our equity securities
and warrants, options and rights to acquire or convert into our equity securities will convert into HTH equity securities and
warrants, options and rights to acquire or convert into HTH equity securities.
While
we believe that our status as a public company will make us an attractive business partner, some potential target businesses may
view the inherent limitations in our status as a blank check company as a deterrent and may prefer to effect a business combination
with a more established entity or with a private company.
Financial
Position
With
funds held in trust available for our initial business combination in the amount of $17,616,785 as of December 31, 2017, we offer
a target business such as HTH a variety of options such as providing the owners of a target business with shares in a public company
and a public means to sell such shares, providing cash for stock, and providing capital for the potential growth and expansion
of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to consummate our initial
business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to
use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its
needs and desires.
Effecting
a Business Combination
General
We
are not presently engaged in any substantive commercial business until we complete a business combination, including the Merger.
We intend to utilize cash derived from the proceeds of our initial public offering and the private placement of Private Placement
Units, our share capital, debt or a combination of these, as well as the contributions made by our Current Management in connection
with the initial, second, third and fourth extension, in effecting a business combination. Although substantially all of the remaining
net proceeds of the initial public offering and the private placement of Private Placement Units are intended to be applied generally
toward effecting a business combination, which may include the Merger, the proceeds are not otherwise being designated for any
more specific purposes. A business combination (if not HTH pursuant to the Merger) may involve the acquisition of, or merger with,
a company which does not need substantial additional capital but which desires to establish a public trading market for its shares,
while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays,
significant expense, loss of voting control and compliance with various Federal and state securities laws. In the alternative,
we may seek to consummate a business combination with a company that may be financially unstable or in its early stages of development
or growth. While we may seek to effect simultaneous business combinations with more than one target business, we will probably
have the ability, as a result of our limited resources, to effect only a single business combination.
Sources
of Target Businesses
While
we are presently focusing all efforts on completing the Merger with HTH, historically, target business candidates have been brought
to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity funds,
leveraged buyout funds, management buyout funds and other members of the financial community. These sources have introduced us
to target businesses they think we may be interested in on an unsolicited basis, since many of these sources will have read this
prospectus and know what types of businesses we are targeting. Our officers and directors, as well as their respective affiliates,
have also brought to our attention target business candidates that they become aware of through their business contacts as a result
of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. To the extent we
engage the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we
have and may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation
based on the terms of the transaction. In no event, however, will any of our existing officers, directors, special advisors or
initial shareholders, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation
prior to, or for any services they render in order to effectuate, the consummation of a business combination (regardless of the
type of transaction). If the Merger with HTH is not consummated and we decide to enter into a business combination with a target
business that is affiliated with our officers, directors or initial shareholders, we will do so only if we have obtained an opinion
from an independent investment banking firm that the business combination is fair to our unaffiliated shareholders from a financial
point of view.
Selection
of a Target Business and Structuring of a Business Combination
Subject
to the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (excluding
taxes payable on the income earned on the trust account) at the time of the execution of a definitive agreement for our initial
business combination, as described below in more detail, our management will have virtually unrestricted flexibility in identifying
and selecting a prospective target business. We have not established any other specific attributes or criteria (financial or otherwise)
for prospective target businesses. In evaluating a prospective target business, our management has considered a variety of factors,
including one or more of the following:
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financial
condition and results of operation;
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experience
and skill of management and availability of additional personnel;
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stage
of development of its products, processes or services;
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degree
of current or potential market acceptance of the products, processes or services;
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proprietary
features and degree of intellectual property or other protection for its products, processes or services;
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costs
associated with effecting the business combination.
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We
believe such factors will be important in evaluating prospective target businesses, regardless of the location or industry in
which such target business operates. However, this list is not intended to be exhaustive. Furthermore, if the Merger with HTH
is not consummated, we may decide to enter into a business combination with a target business that does not meet these criteria
and guidelines. We considered the foregoing in our evaluation of the HTH merger, and a discussion of our business combination
with HTH is included in our preliminary proxy statement filed with the SEC
on Form S-4 (File
No. 333-221527).
Any
evaluation relating to the merits of a particular business combination has been or will be based, to the extent relevant, on the
above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent
with our business objective. In evaluating a prospective target business, we have or will conduct a due diligence review which
will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial
and other information which is made available to us. This due diligence review will be conducted either by our management or by
unaffiliated third parties we may engage.
The
time and costs required to select and evaluate a target business and to structure and complete the business combination cannot
presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of
a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce
the amount of capital available to otherwise complete a business combination.
Fair
Market Value of Target Business
Pursuant
to Nasdaq listing rules, the target business or businesses that we acquire must collectively have a fair market value equal to
at least 80% of the balance of the funds in the trust account (excluding taxes payable on the income earned on the trust account)
at the time of the execution of a definitive agreement for our initial business combination, although we may acquire a target
business whose fair market value significantly exceeds 80% of the trust account balance. A business combination can be structured
where we acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure a business
combination where we merge directly with the target business (such as the Merger). We can also structure a business combination
where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the
target management team or shareholders or for other reasons, but we will only complete such business combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940,
as amended. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders
prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations
ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we
issue a substantial number of new shares in exchange for all of the outstanding capital of a target. In this case, we would acquire
a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our shareholders
immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our
initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned
or acquired by the post-transaction company, only the portion of such business or businesses that is owned or acquired is what
will be valued for purposes of the 80% of net assets test. In order to consummate such an acquisition, we may issue a significant
amount of our debt or equity securities to the sellers of such businesses and/or seek to raise additional funds through a private
offering of debt or equity securities. The fair market value of the target will be determined by our 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). If our board is not able to independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that
commonly renders valuation opinions on the type of target business we are seeking to acquire, with respect to the satisfaction
of such criteria. We will not be required to obtain an opinion from an independent investment banking firm, or another independent
entity that commonly renders valuation opinions on the type of target business we are seeking to acquire, as to the fair market
value if our board of directors independently determines that the target business complies with the 80% threshold. We did not
obtain such an opinion in connection with the Merger.
Business
Combination Procedures
In
connection with any proposed business combination, we will either (1) seek shareholder approval of our initial business combination
at a meeting called for such purpose at which public shareholders may seek to convert their 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 our public shareholders with the opportunity to sell their public
shares to us 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), in each case subject to the limitations
described herein. Notwithstanding the foregoing, as described below, our initial shareholders have agreed, pursuant to written
letter agreements with us, not to convert any shares held by them into their pro rata share of the aggregate amount then on deposit
in the trust account or sell any shares to us in any tender offer in connection with a proposed business combination. For the
Merger, we intend to seek shareholder approval of the Merger with HTH at a meeting called for such purpose at which public shareholders
may seek to convert their public shares, regardless of whether they vote for or against the Merger, into their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable).
We
chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under
the Securities Act. The $5,000,001 net tangible asset value would be determined once a target business is located and we can assess
all of the assets and liabilities of the combined company (which would include the fee payable to EBC in an amount equal to 4.0%
of the total gross proceeds raised in the offering as described elsewhere in this annual report, any out-of-pocket expenses incurred
by our initial shareholders, officers, directors or their affiliates in connection with certain activities on our behalf, such
as identifying and investigating possible business targets and business combinations that have not been repaid at that time, as
well as any other liabilities of ours and the liabilities of the target business). However, if we seek to consummate an initial
business combination with a target business that imposes any type of working capital closing condition or requires us to have
a minimum amount of funds available from the trust account upon consummation of such initial business combination, our net tangible
asset threshold may limit our ability to consummate such initial business combination (as we may be required to have a lesser
number of shares converted or sold to us) and may force us to seek third party financing which may not be available on terms acceptable
to us or at all. As a result, we may not be able to consummate such initial business combination and we may not be able to locate
another suitable target within the applicable time period, if at all. With respect to the Merger, as part of the closing conditions,
we must (i) have net tangible assets of at least $5,000,001 after giving effect to any redemptions of public shareholders required
by our organizational documents and our IPO prospectus (the “Closing Redemption Offer”), and (ii) after giving effect
to the Closing Redemption Offer and deducting any unpaid transaction expenses, extension costs and deferred IPO offering costs,
have cash and cash equivalents of at least $15,000,000.
Our
initial shareholders and our officers and directors have agreed (1) to vote any ordinary shares owned by them in favor of any
proposed business combination, (2) not to convert any ordinary shares in connection with a shareholder vote to approve a proposed
initial business combination and (3) not sell any ordinary shares in any tender in connection with a proposed initial business
combination.
Conversion/Tender
Rights
At
any meeting called to approve an initial business combination, public shareholders may seek to convert their 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, less any taxes then due but not yet paid. Any such conversions will be effected under our charter,
as amended, and Cayman Islands law as repurchases. A holder will always have the ability to vote against a proposed business combination
and not seek conversion of his shares.
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 our initial public offering. Accordingly, all shares in excess of 30%
of the shares sold in our initial public offering held by a holder will not be converted to cash. We believe this restriction
will prevent shareholders from accumulating large blocks of shares before the vote is held to approve a proposed business combination
and attempt to use the conversion right as a means to force us or our management to purchase their shares at a significant premium
to the then current market price. By limiting a shareholder’s ability to convert no more than 30% of the ordinary shares
sold in our initial public offering, we believe we have limited the ability of a small group of shareholders to unreasonably attempt
to block a transaction which is favored by our other public shareholders.
Alternatively,
if we engage in a tender offer (which we are not doing for the Merger), each public shareholder will be provided the opportunity
to sell their public shares to us in such tender offer. The tender offer rules require us to hold the tender offer open for at
least 20 business days. Accordingly, this is the minimum amount of time we would need to provide holders to determine whether
they want to sell their public shares to us in the tender offer or remain an investor in our company.
Our
initial shareholders will not have conversion rights with respect to any ordinary shares owned by them, directly or indirectly,
whether acquired prior to our initial public offering or purchased by them in our initial public offering or in the aftermarket.
EBC will not have conversion rights with respect to the shares included in the Private Placement Units, or “private shares.”
We
may also require public shareholders, whether they are a record holder or hold their shares in “street name,” to either
tender their certificates to our transfer agent at any time through the vote on the business combination or to deliver their shares
to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at
the holder’s option. Once the shares are converted by the beneficial holder, and effectively repurchased by us under Cayman
Island law, the transfer agent will then update our Register of Shareholders to reflect all conversions. The proxy solicitation
materials that we will furnish to shareholders in connection with the vote for any proposed business combination (including for
the Merger) will indicate whether we are requiring shareholders to satisfy such delivery requirements. Accordingly, a shareholder
would have from the time the shareholder received our proxy statement through the vote on the business combination to deliver
his shares if he wishes to seek to exercise his conversion rights. Under our amended and restated memorandum and articles of association,
we are required to provide at least 10 days’ advance notice of any shareholder meeting, which would be the minimum amount
of time a shareholder would have to determine whether to exercise conversion rights.
There
is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the
DWAC system. The transfer agent will typically charge the tendering broker $45 and it would be up to the broker whether or not
to pass this cost on to the converting holder. However, this fee would be incurred regardless of whether or not we require holders
seeking to exercise conversion rights. The need to deliver shares is a requirement of exercising conversion rights regardless
of the timing of when such delivery must be effectuated. However, in the event we require shareholders seeking to exercise conversion
rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated
this may result in an increased cost to shareholders.
Any
request to convert or tender such shares once made, may be withdrawn at any time up to the vote on the proposed business combination
or expiration of the tender offer. Furthermore, if a holder of a public share delivered his certificate in connection with an
election of their conversion or tender and subsequently decides prior to the vote on the business combination or the expiration
of the tender offer not to elect to exercise such rights, he may simply request that the transfer agent return the certificate
(physically or electronically).
If
the initial business combination is not approved or completed for any reason, then our public shareholders who elected to exercise
their conversion or tender rights would not be entitled to convert or tender their shares for the applicable pro rata share of
the trust account. In such case, we will promptly return any shares delivered by public holders.
Automatic
Liquidation of trust account if No Business Combination
If
we do not complete a business combination by March 12, 2018, it will trigger our automatic winding up, dissolution and liquidation
pursuant to the terms of our amended and restated memorandum and articles of association. As a result, this has the same effect
as if we had formally gone through a voluntary liquidation procedure under the Companies Law. Accordingly, no vote would be required
from our shareholders to commence such a voluntary winding up, dissolution and liquidation.
The
amount in the trust account (less $164 representing the aggregate nominal par value of the shares of our public shareholders)
under the Companies Law will be treated as share premium which is distributable under the Cayman Companies Law provided that immediately
following the date on which the proposed distribution is proposed to be made, we are able to pay our debts as they fall due in
the ordinary course of business. If we are forced to liquidate the trust account, we anticipate that we would distribute to our
public shareholders the amount in the trust account calculated as of the date that is two days prior to the distribution date
(including any accrued interest). Prior to such distribution, we would be required to assess all claims that may be potentially
brought against us by our creditors for amounts they are actually owed and make provision for such amounts, as creditors take
priority over our public shareholders with respect to amounts that are owed to them. We cannot assure you that we will properly
assess all claims that may be potentially brought against us. As such, our shareholders could potentially be liable for any claims
of creditors to the extent of distributions received by them as an unlawful payment in the event we enter an insolvent liquidation.
Furthermore, while we will seek to have all vendors and service providers (which would include any third parties we engaged to
assist us in any way in connection with our search for a target business) and prospective target businesses execute agreements
with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, there
is no guarantee that they will execute such agreements. Nor is there any guarantee that, even if such entities execute such agreements
with us, they will not seek recourse against the trust account or that a court would conclude that such agreements are legally
enforceable.
Each
of our initial shareholders has agreed to waive its rights to participate in any liquidation of our trust account or other assets
with respect to the insider shares and private shares and to vote their insider shares and private shares in favor of any dissolution
and liquidation proposal which we submit to a vote of shareholders. There will be no distribution from the trust account with
respect to our warrants and rights, which will expire worthless.
If
we are unable to complete an initial business combination and expend all of the net proceeds of our initial public offering, other
than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account,
the per-share distribution from the trust account as of March 12, 2018 (“Liquidation Date”) would be approximately
$10.80.
The
proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would be prior to
the claims of our public shareholders. Although we will seek to have all vendors, including lenders for money borrowed, prospective
target businesses or other entities we engage execute agreements with us waiving any right, title, interest or claim of any kind
in or to any monies held in the trust account for the benefit of our public shareholders, there is no guarantee that they will
execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the
trust account, including but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims,
as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with a claim against
our assets, including the funds held in the trust account. If any third party refused to execute an agreement waiving such claims
to the monies held in the trust account, we would perform an analysis of the alternatives available to us if we chose not to engage
such third party and evaluate if such engagement would be in the best interest of our shareholders if such third party refused
to waive such claims. Examples of possible instances where we may engage a third party that refused to execute a waiver include
the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly
superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a provider
of required services willing to provide the waiver. In any event, our management would perform an analysis of the alternatives
available to it and would only enter into an agreement with a third party that did not execute a waiver if management believed
that such third party’s engagement would be significantly more beneficial to us than any alternative. In addition, there
is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason.
Fortress
had agreed that, if we liquidate the trust account prior to the consummation of a business combination, it will be liable to pay
debts and obligations to target businesses or vendors or other entities that are owed money by us for services rendered or contracted
for or products sold to us in excess of the net proceeds of our initial public offering not held in the trust account, but only
to the extent necessary to ensure that such debts or obligations do not reduce the amounts in the trust account and only if such
parties have not executed a waiver agreement. As part of the resignations and appointment of the Current Management (as described
elsewhere in this Annual Report), Mr. Fred, our Chief Executive Officer, agreed to be responsible for such obligations and Fortress
has been released from such obligations. However, we cannot assure you that Mr. Fred will be able to satisfy those obligations
if he is required to do so. Accordingly, the actual per-share distribution as of Liquidation Date could be less than $10.80, plus
interest, due to claims of creditors. Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case
is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law,
and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders.
To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public shareholders
at least $10.80 per share as of Liquidation Date.
Competition
In
identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business
objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources
than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. Our ability
to compete in acquiring certain sizable target businesses may be limited by our available financial resources.
The
following also may not be viewed favorably by certain target businesses:
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our
obligation to seek shareholder approval of a business combination or obtain the necessary financial information to be sent to
shareholders in connection with such business combination may delay or prevent the completion of a transaction;
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our
obligation to convert ordinary shares held by our public shareholders may reduce the resources available to us for a business
combination;
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Nasdaq
may require us to file a new listing application and meet its initial listing requirements to maintain the listing of our securities
following a business combination;
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our
outstanding rights, warrants and unit purchase options, and the potential future dilution they represent;
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our
obligation to pay EBC a fee of 4.0% of the gross proceeds of the IPO upon consummation of our initial business combination
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our
obligation to either repay or issue Private Placement Units upon conversion of up to $500,000 of working capital loans that may
be made to us by our initial shareholders and current or former officers, directors or their affiliates;
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our
obligation to register the resale of the insider shares, as well as the Private Placement Units (and underlying securities) and
any securities issued to our initial shareholders, officers, directors or their affiliates upon conversion of working capital
loans; and
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the
impact on the target business’ assets as a result of unknown liabilities under the securities laws or otherwise depending
on developments involving us prior to the consummation of a business combination.
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Any
of these factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management
believes, however, that our status as a public entity and potential access to the United States public equity markets may give
us a competitive advantage over privately-held entities having a similar business objective as ours in acquiring a target business
with significant growth potential on favorable terms.
If
we succeed in effecting a business combination, including the Merger, there will be, in all likelihood, intense competition from
competitors of the target business. We cannot assure you that, subsequent to a business combination, including the Merger, we
will have the resources or ability to compete effectively.
Employees
We
have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters and intend
to devote only as much time as they deem necessary to our affairs. The amount of time they will devote in any time period will
vary based on whether a target business has been selected for the business combination and the stage of the business combination
process the company is in. Accordingly, once management locates a suitable target business to acquire, they will spend more time
investigating such target business and negotiating and processing the business combination (and consequently spend more time to
our affairs) than they would prior to locating a suitable target business. We presently expect each of our executive officers
to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full-time
employees prior to the consummation of a business combination.
ITEM
1A. RISK FACTORS
An
investment in our securities involves a high degree of risk. You should consider carefully the material risks described below,
which we believe represent the material risks related to our business and our securities, together with the other information
contained in this Form 10-K, before making a decision to invest in our securities. This Form 10-K also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking
statements as a result of specific factors, including the risks described below. Unless specifically stated, this Annual Report
does not give effect to the Merger and does not contain the risks associated with the Merger. A discussion on the risks and effects
relating to the Merger will be included in our preliminary proxy statement and definitive proxy statement to be filed with the
SEC.
If
we are unable to consummate a business combination, our public shareholders may be forced to wait until March 12, 2018 before
receiving liquidation distributions.
We
have until March 12, 2018 to complete a business combination. We have no obligation to return funds to investors prior to such
date unless we consummate a business combination prior thereto and only then in cases where investors have sought to convert their
shares. Only after the expiration of this full-time period will public shareholders be entitled to liquidation distributions if
we are unable to complete a business combination. Accordingly, investors’ funds may be unavailable to them until after such
date and to liquidate your investment, you may be forced to sell your securities potentially at a loss. Adding to this risk is
the material risk that we may be unable to consummate our business combination with HTH pursuant to the Merger.
Our
independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt
about our ability to continue as a “going concern.”
Our
independent registered public accounting firm has expressed in its report on our consolidated financial statements included as
part of this Annual Report a substantial doubt regarding our ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from our ability to continue as a going concern. Moreover, there is
no assurance that we will consummate our initial business combination, including the Merger. As of November 30, 2017, we had approximately
$8,000 in cash and cash equivalents, approximately $56,000 in interest income available to us for working capital purposes from
our investments in the Trust account, and a working capital deficit of approximately $2.7 million. Further, we have incurred and
expect to continue to incur significant costs in pursuit of its acquisition plans. 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. Following
the initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet
our 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 factors raise substantial doubt about our
ability to continue as a going concern.
The
requirement that we complete an initial business combination by March 12, 2018 may give HTH or other potential target businesses
leverage over us in negotiating a business transaction.
We
have until March 12, 2018 to complete an initial business combination. HTH and any other potential target business with which
we enter into negotiations concerning a business combination is or will be aware of this requirement. Consequently, HTH or such
other target businesses may obtain leverage over us in negotiating a business combination, knowing that if we do not complete
a business combination with that particular target business, we may be unable to complete a business combination with any other
target business. This risk will increase as we get closer to the time limits referenced above.
We
may issue ordinary or preferred shares or debt securities to complete a business combination, which would reduce the equity interest
of our shareholders and likely cause a change in control of our ownership.
We
may issue a substantial number of additional ordinary shares or preferred shares, or a combination of ordinary shares and preferred
shares, to complete a business combination. The issuance of additional ordinary shares or preferred shares:
● may significantly reduce the equity interest of investors;
● may subordinate the rights of holders of ordinary shares if we issue preferred shares with rights senior to those afforded to
our ordinary shares;
● may cause a change in control if a substantial number of ordinary shares are issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers
and directors; and
● may adversely affect prevailing market prices for our ordinary shares.
Similarly,
if we issue debt securities, it could result in:
● default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt
obligations;
● acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach
certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that
covenant;
● our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain
such financing while the debt security is outstanding.
The
funds held in the trust account may not earn significant interest and, as a result, we may be limited to the funds held outside
of the trust account to fund our search for target businesses, to pay our tax obligations and to complete our initial business
combination.
As
of December 31, 2017, we had approximately $64,000 available to us to fund our working capital requirements. This amount was comprised
of approximately $8,000 available in our operating account and approximately $56,000 of interest income available to us for working
capital purpose from our investments in the trust account. We will depend on sufficient interest being earned on the proceeds
held in the trust account to provide us with additional working capital, as well as any funds from Current Management’s
ability to fund our working capital needs. We will need to identify one or more target businesses and to complete our initial
business combination, as well as to pay any tax obligations that we may owe. Interest rates on permissible investments for us
have been less than 1% over the last several years. Accordingly, if we do not earn a sufficient amount of interest on the funds
held in the trust account and use all of the funds held outside of the trust account, we may not have sufficient funds available
with which to structure, negotiate or close an initial business combination. In such event, we may be forced to cease searching
for a target business.
If
third parties bring claims against us, the proceeds held in trust could be reduced and the per-share liquidation price received
by shareholders may be less than $10.80 as of Liquidation Date.
Our
placing of funds in trust may not protect those funds from third party claims against us. Although we will seek to have all vendors
and service providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right,
title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders,
they may not execute such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse
against the monies held in the trust account. A court may not uphold the validity of such agreements. Accordingly, the proceeds
held in trust could be subject to claims which could take priority over those of our public shareholders. If we liquidate the
trust account before the completion of a business combination, Mr. Fred, our Chief Executive Officer, has agreed that he will
be liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors
or other entities that are owed money by us for services rendered or contracted for or products sold to us and which have not
executed a waiver agreement. However, Mr. Fred may not be able to meet such obligation. Therefore, the per-share distribution
from the trust account in such a situation may be less than $10.80 as of Liquidation Date, plus interest, due to such claims.
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, or if
we otherwise enter compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable
bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the
claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our
public shareholders at least $10.80 as of Liquidation Date.
Our
shareholders may be held liable for claims by third parties against us to the extent of distributions received by them.
Our
charter, as amended, provides that we will continue in existence only until March 12, 2018 unless we complete an initial business
combination by such date.
As
such, our shareholders could potentially be liable for any claims to the extent of distributions received by them pursuant to
such process and any liability of our shareholders may extend beyond the date of such distribution. Accordingly, we cannot assure
you that third parties, or us under the control of an official liquidator, will not seek to recover from our shareholders amounts
owed to them by us.
If
we are unable to consummate a transaction within the required time period, upon notice from us, the trustee of the trust account
will distribute the amount in our trust account to our public shareholders. Concurrently, we shall pay, or reserve for payment,
from funds not held in trust, our liabilities and obligations, although we cannot assure you that there will be sufficient funds
for such purpose. If there are insufficient funds held outside the trust account for such purpose, Mr. Fred, our Chief Executive
Officer, has agreed that he will be liable to ensure that the proceeds in the trust account are not reduced by the claims of target
businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products
sold to us and which have not executed a waiver agreement.
If
we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful
payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts
as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by our
shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or
may have acted in bad faith, and thereby exposing themselves and our company to claims, by paying public shareholders from the
trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for
these reasons. We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid
out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would
be guilty of an offense and may be liable to a fine of US$15,000 and to imprisonment for five years in the Cayman Islands.
Holders
of rights and warrants will not have redemption rights if we are unable to complete an initial business combination within the
required time period.
If
we are unable to complete an initial business combination within the required time period and we redeem the funds held in the
trust account, the rights and warrants will expire and holders will not receive any of such proceeds with respect to such rights
and warrants, respectively.
We
have no obligation to net cash settle the rights or warrants.
In
no event will we have any obligation to net cash settle the rights or warrants. Furthermore, there are no contractual penalties
for failure to deliver securities to the holders of the rights upon consummation of an initial business combination. Accordingly,
the rights and warrants may expire worthless unless converted and/or exercised.
We
may amend the terms of the rights in a way that may be adverse to holders with the approval by the holders of a majority of the
then outstanding rights.
Our
rights will be issued in registered form under a rights agreement between Continental Stock Transfer & Trust Company, as rights
agent, and us. The rights agreement provides that the terms of the rights may be amended without the consent of any holder to
cure any ambiguity or correct any defective provision. The rights agreement requires the approval by the holders of a majority
of the then outstanding rights (including the rights underlying the private units) in order to make any change that adversely
affects the interests of the registered holders.
If
we do not maintain a current and effective prospectus relating to the ordinary shares issuable upon exercise of the warrants,
public holders will only be able to exercise such warrants on a “cashless basis” which would result in a fewer number
of shares being issued to the holder had such holder exercised the warrants for cash.
If
we do not maintain a current and effective prospectus relating to the ordinary shares issuable upon exercise of the public warrant
at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis”
provided that an exemption from registration is available. As a result, the number of ordinary shares that a holder will receive
upon exercise of its public warrants will be fewer than it would have been had such holder exercised its warrant for cash. Further,
if an exemption from registration is not available, holders would not be able to exercise their warrants on a cashless basis and
would only be able to exercise their warrants for cash if a current and effective prospectus relating to the ordinary shares issuable
upon exercise of the warrants is available. Under the terms of the warrant agreement, we have agreed to use our best efforts to
meet these conditions and to maintain a current and effective prospectus relating to the ordinary shares issuable upon exercise
of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so. If we are unable
to do so, the potential “upside” of the holder’s investment in our company may be reduced or the warrants may
expire worthless. Notwithstanding the foregoing, the warrants included in the Private Placement Units, or “private warrants,”
may be exercisable for unregistered ordinary shares for cash even if the prospectus relating to the ordinary shares issuable upon
exercise of the warrants is not current and effective.
An
investor will only be able to exercise a warrant if the issuance of ordinary shares upon such exercise has been registered or
qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No
public warrants will be exercisable for cash and we will not be obligated to issue ordinary shares unless the ordinary shares
issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the warrants. At the time that the warrants become exercisable, we expect to continue to be listed
on a national securities exchange, which would provide an exemption from registration in every state. However, we cannot assure
you of this fact. If the ordinary shares issuable upon exercise of the warrants are not qualified or exempt from qualification
in the jurisdictions in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the
warrants may be limited and they may expire worthless if they cannot be sold
Our
management’s ability to require holders of our warrants to exercise such warrants on a cashless basis will cause holders
to receive fewer ordinary shares upon their exercise of the warrants than they would have received had they been able to exercise
their warrants for cash.
If
we call our public warrants for redemption after the redemption criteria have been satisfied, our management will have the option
to require any holder that wishes to exercise his warrant (including any warrants held by our initial shareholders or their permitted
transferees) to do so on a “cashless basis.” If our management chooses to require holders to exercise their warrants
on a cashless basis, the number of ordinary shares received by a holder upon exercise will be fewer than it would have been had
such holder exercised his warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s
investment in our company.
We
may amend the terms of the warrants in a way that may be adverse to holders with the approval by the holders of a majority of
the then outstanding warrants.
Our
warrants have been issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company,
as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of
any holder to cure any ambiguity or correct any defective provision. The warrant agreement requires the approval by the holders
of a majority of the then outstanding warrants (including the private warrants) in order to make any change that adversely affects
the interests of the registered holders.
Other
than HTH, we have not yet selected a particular industry or target business with which to complete a business combination and
are unable to currently ascertain the merits or risks of the industry or business in which we may ultimately operate other than
the business and industry in which HTH operates.
We
are not limited in locations or industries for our target businesses and may consummate a business combination with a company
in any location or industry we choose. Accordingly, there is no current basis for you to evaluate the possible merits or risks
of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire other than
HTH. To the extent we complete a business combination with a financially unstable company or an entity in its development stage,
we may be affected by numerous risks inherent in the business operations of those entities. If we complete a business combination
with an entity in an industry characterized by a high level of risk, we may be affected by the currently unascertainable risks
of that industry. Although our management will endeavor to evaluate the risks inherent in a particular industry or target business,
we cannot assure you that we will properly ascertain or assess all of the significant risk factors.
The
requirement that the target business or businesses that we acquire must collectively have a fair market value equal to at least
80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial business
combination may limit the type and number of companies that we may complete such a business combination with.
Pursuant
to the Nasdaq listing rules, the target business or businesses that we acquire must collectively have a fair market value equal
to at least 80% of the balance of the funds in the trust account
(
excluding
t
axes payable on the income earned on
the trust account
)
at the time of the execution of a definitive agreement for our initial business combination. This restriction
may limit the type and number of companies that with which may complete a business combination. If we are unable to locate a target
business or businesses that satisfy this fair market value test, we may be forced to liquidate and you will only be entitled to
receive your pro rata portion of the funds in the trust account.
The
Nasdaq Stock Market LLC may delist our securities from quotation on its exchange which could limit investors’ ability to
make transactions in our securities and subject us to additional trading restrictions.
Our
securities are listed on the Nasdaq Capital Market. On February 21, 2017, we received a written notice (the “Notice”)
from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in
compliance with Listing Rule 5550(a)(3) (the “Minimum Public Holders Rule”), which requires us to have at least 300
public holders for continued listing 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.
On
August 23, 2017, the Company received a written notice from Nasdaq stating that we 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 (the “Panel”) was held in connection with such appeal in October 2017. On October 23, 2017, the Panel
determined to grant the Company’s request for the continued listing of its securities on The Nasdaq Capital Market, pursuant
to an extension through February 19, 2018 to complete its proposed merger with
HTH and,
in connection therewith, to evidence compliance with all applicable requirements for the continued listing of the combined
company’s securities on Nasdaq, post-merger. The Company is taking definitive steps to timely evidence compliance with the
terms of the Panel’s decision (including the
Minimum Public Holders Rule)
;
however, there can be no assurances given that it will be able to do so.
On
December 4, 2017, the Company received written notice from the Listing Qualifications Department of Nasdaq indicating that the
Company did not satisfy Nasdaq Listing Rule 5620(a) (the “Annual Meeting Requirement”) because the Company did not
timely hold an annual meeting for the fiscal year ended November 30, 2016 on or before November 30, 2017. The notice indicated
that the Company’s non-compliance with the Annual Meeting Requirement could serve as an additional basis for the delisting
of the Company’s securities from The Nasdaq Capital Market and, as such, the Company should present its plan to evidence
compliance with that requirement for review by the Panel.
The
Company plans to provide an update to the Panel regarding its plan to evidence compliance with the Annual Meeting Requirement.
We
cannot assure you that our securities will continue to be listed on Nasdaq in the future prior to an initial business combination.
Additionally, in connection with our initial business combination, it is likely that Nasdaq will require us to file a new initial
listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements. We
cannot assure you that we will be able to meet those initial listing requirements at that time.
If
Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity with respect to our securities;
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a determination that our ordinary shares are “penny stock” which will require brokers
trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in
the secondary trading market for our ordinary shares;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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Our
ability to successfully effect a business combination and to be successful thereafter will be totally dependent upon the efforts
of our key personnel, some of whom may join us following a business combination. While we intend to closely scrutinize any individuals
we engage after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct.
Our
ability to successfully effect a business combination is dependent upon the efforts of our key personnel. We believe that our
success depends on the continued service of our key personnel, at least until we have consummated our initial business combination.
We cannot assure you that any of our key personnel will remain with us for the immediate or foreseeable future. In addition, none
of our officers are required to commit any specified amount of time to our affairs and, accordingly, they will have conflicts
of interest in allocating management time among various business activities, including identifying potential business combinations
and monitoring the related due diligence. We do not have employment agreements with, or key-man insurance on the life of, any
of our officers. The unexpected loss of the services of our key personnel could have a detrimental effect on us.
The
role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel
may remain with the target business in senior management or advisory positions following a business combination, it is likely
that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals
we engage after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct.
These individuals may be unfamiliar with the requirements of operating a public company which could cause us to have to expend
time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead
to various regulatory issues which may adversely affect our operations.
Our
officers and directors may not have significant experience or knowledge regarding the jurisdiction or industry of the target business
we may seek to acquire.
We
may consummate a business combination with a target business in any geographic location or industry we choose. We cannot assure
you that our officers and directors will have enough experience or have sufficient knowledge relating to the jurisdiction of the
target or its industry to make an informed decision regarding a business combination. If we become aware of a potential business
combination outside of the geographic location or industry where our officers and directors have their most experience, our management
may determine to retain consultants and advisors with experience in such industries to assist in the evaluation of such business
combination and in our determination of whether or not to proceed with such a business combination. However, our management is
not required to engage such consultants and advisors in any situation. If they do not engage any consultants or advisors to assist
them in the evaluation of a particular target business or business combination, our management may not properly analyze the risks
attendant with such target business or business combination. As a result, we may enter into a business combination that is not
in our shareholders’ best interests.
Our
key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business
combination. These agreements may provide for them to receive compensation following a business combination and as a result, may
cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our
key personnel will be able to remain with the company after the consummation of a business combination only if they are able to
negotiate employment or consulting agreements or other appropriate arrangements in connection with the business combination. Such
negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals
to receive compensation in the form of cash payments and/or our securities for services they would render to the company after
the consummation of the business combination. The personal and financial interests of such individuals may influence their motivation
in identifying and selecting a target business.
Our
officers and directors will allocate their time to other businesses thereby potentially limiting the amount of time they devote
to our affairs. This conflict of interest could have a negative impact on our ability to consummate our initial business combination.
Our
officers and directors are not required to commit their full time to our affairs, which could create a conflict of interest when
allocating their time between our operations and their other commitments. We presently expect each of our employees to devote
such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full-time employees
prior to the consummation of our initial business combination. All of our officers and directors are engaged in several other
business endeavors and are not obligated to devote any specific number of hours to our affairs. If our officers’ and directors’
other business affairs require them to devote more substantial amounts of time to such affairs, it could limit their ability to
devote time to our affairs and could have a negative impact on our ability to consummate our initial business combination. We
cannot assure you these conflicts will be resolved in our favor.
Our
officers and directors have pre-existing fiduciary and contractual obligations and accordingly, may have conflicts of interest
in determining to which entity a particular business opportunity should be presented.
Our
officers and directors have pre-existing fiduciary and contractual obligations to other companies, including companies that are
engaged in business activities similar to those intended to be conducted by us. Accordingly, they may participate in transactions
and have obligations that may be in conflict or competition with our consummation of our initial business combination. As a result,
a potential target business may be presented by our management team to another entity prior to its presentation to us and we may
not be afforded the opportunity to engage in a transaction with such target business.
Our
officers’ and directors’ personal and financial interests may influence their motivation in determining whether a
particular target business is appropriate for a business combination.
Our
officers and directors have waived their right to convert their insider shares, private shares or any other ordinary shares, or
to receive distributions with respect to their insider shares or private shares upon our liquidation if we are unable to consummate
our initial business combination. Accordingly, these securities will be worthless if we do not consummate our initial business
combination. Their private rights, private warrants and any other rights or warrants they acquire will also be worthless if we
do not consummate an initial business combination. In addition, our officers and directors have and may continue to loan funds
to us after our initial public offering and may be owed reimbursement for expenses incurred in connection with certain activities
on our behalf which would only be repaid if we complete an initial business combination. The personal and financial interests
of our directors and officers may influence their motivation in timely identifying and selecting a target business and completing
a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting a suitable
target business may result in a conflict of interest when determining whether the terms, conditions and timing of a particular
business combination are appropriate and in our shareholders’ best interest. If this were the case, it would be a breach
of their fiduciary duties to us as a matter of Cayman Islands law and we might have a claim against such individuals. However,
we might not ultimately be successful in any claim we may make against them for such reason.
We
may only be able to complete one business combination with the proceeds of our initial public offering, which will cause us to
be solely dependent on a single business which may have a limited number of products or services.
We
may only be able to complete one business combination with the proceeds of our initial public offering. By consummating a business
combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory
developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting
of losses, unlike other entities which may have the resources to complete several business combinations in different industries
or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely
dependent upon the performance of a single business, or
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dependent
upon the development or market acceptance of a single or limited number of products, processes or services.
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This
lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may
have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination.
Alternatively,
if we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need
for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business
combinations, which may make it more difficult for us, and delay our ability, to complete the business combination. With multiple
business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple
negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent
assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable
to adequately address these risks, it could negatively impact our profitability and results of operations.
The
ability of our public shareholders to exercise their conversion rights or sell their public shares to us in a tender offer may
not allow us to effectuate the most desirable business combination or optimize our capital structure.
If
our business combination requires us to use substantially all of our cash to pay the purchase price, because we will not know
how many shareholders may exercise conversion rights or seek to sell their public shares to us in a tender offer, we may either
need to reserve part of the trust account for possible payment upon such conversion, or we may need to arrange third party financing
to help fund our business transaction. In the event that the business combination involves the issuance of our shares as consideration,
we may be required to issue a higher percentage of our shares to make up for a shortfall in funds. Raising additional funds to
cover any shortfall may involve dilutive equity financing or incurring indebtedness at higher than desirable levels. This may
limit our ability to effectuate the most attractive business combination available to us.
We
may be unable to consummate a business combination if a target business requires that we have cash in excess of the minimum amount
we are required to have at closing and public shareholders may have to remain shareholders of our company and wait until our liquidation
to receive a pro rata share of the trust account or attempt to sell their shares in the open market.
A
potential target may make it a closing condition to our business combination that we have a certain amount of cash in excess of
the $5,000,001 of net tangible assets we are required to have pursuant to our organizational documents available at the time of
closing. In the Merger, we are required, as a closing condition, after giving effect to the Closing Redemption Offer and deducting
any unpaid transaction expenses, extension costs and deferred IPO offering costs, to have cash and cash equivalents of at least
$15,000,000. If the number of our shareholders electing to exercise their conversion rights has the effect of reducing the
amount of money available to us to consummate a business combination below such minimum amount required by the target business
and we are not able to locate an alternative source of funding, we will not be able to consummate such business combination and
we may not be able to locate another suitable target within the applicable time period, if at all. In that case, public shareholders
may have to remain shareholders of our company and wait until March 12, 2018 in order to be able to receive a pro rata portion
of the trust account, or attempt to sell their shares in the open market prior to such time, in which case they may receive less
than a pro rata share of the trust account for their shares.
In
connection with any meeting held to approve an initial business combination, we will offer each public shareholder the option
to vote in favor of a proposed business combination and still seek conversion of his, her or its shares, which may make it more
likely that we will consummate a business combination.
In
connection with any meeting held to approve an initial business combination, we will offer each public shareholder (but not our
initial shareholders) the right to have his, her or its ordinary shares converted to cash (subject to the limitations described
elsewhere herein) regardless of whether such shareholder votes for or against such proposed business combination. Furthermore,
we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation
and a majority of the outstanding shares voted are voted in favor of the business combination. Accordingly, public shareholders
owning shares sold in our initial public offering may exercise their conversion rights and we could still consummate a proposed
business combination so long as a majority of shares voted at the meeting are voted in favor of the proposed business combination.
This is different than other similarly structured blank check companies where shareholders are offered the right to convert their
shares only when they vote against a proposed business combination. This is also different than other similarly structured blank
check companies where there is a specific number of shares sold in the offering which must not exercise conversion rights for
the company to complete a business combination. This threshold and the ability to seek conversion while voting in favor of a proposed
business combination may make it more likely that we will consummate our initial business combination.
In
connection with any meeting held to approve an initial business combination, public shareholders, together with any affiliates
of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking
conversion rights with respect to more than 30% of the shares sold in our initial public offering.
In
connection with any meeting held to approve an initial business combination, we will offer each public shareholder (but not holders
of our insider shares) the right to have his, her, or its ordinary shares converted into cash. Notwithstanding the foregoing,
a public shareholder, together with any of its affiliates or any other person with whom it is acting in concert or as a “group”
will be restricted from seeking conversion rights with respect to more than 30% of the shares sold in our initial public offering.
Accordingly, if you hold more than 30% of the shares sold in our initial public offering and a proposed business combination is
approved, you will not be able to seek conversion rights with respect to the full amount of your shares and may be forced to hold
such shares following the business combination over 30% or sell them in the open market. We cannot assure you that the value of
such shares will appreciate over time following a business combination or that the market price of our ordinary shares will exceed
the per-share conversion price.
We
may require shareholders who wish to convert their shares in connection with a proposed business combination to comply with specific
requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline
for exercising their rights.
In
connection with any shareholder meeting called to approve a proposed initial business combination, each public shareholder will
have the right, regardless of whether it is voting for or against such proposed business combination, to demand that we convert
its shares into a share of the trust account. Such conversion will be effectuated under Cayman Islands law as a repurchase of
the shares, with the repurchase price to be paid being the applicable pro-rata portion of the monies held in the trust account.
We may require public shareholders who wish to convert their shares in connection with a proposed business combination to either
tender their certificates to our transfer agent at any time prior to the vote taken at the shareholder meeting relating to such
business combination or to deliver their shares to the transfer agent electronically using the Depository Trust Company’s
DWAC (Deposit/Withdrawal At Custodian) System. In order to obtain a physical share certificate, a shareholder’s broker and/or
clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding that shareholders
should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because we do not
have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical
share certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, this may not
be the case. Accordingly, if it takes longer than we anticipate for shareholders to deliver their shares, shareholders who wish
to convert may be unable to meet the deadline for exercising their conversion rights and thus may be unable to convert their shares.
Investors
may not have sufficient time to comply with the delivery requirements for conversion.
Pursuant
to our memorandum and articles of association, we are required to give a minimum of only ten days’ notice for each general
meeting. As a result, if we require public shareholders who wish to convert their public shares into the right to receive a pro
rata portion of the funds in the trust account to comply with specific delivery requirements for conversion, holders may not have
sufficient time to receive the notice and deliver their shares for conversion. Accordingly, investors may be forced to retain
our securities when they otherwise would not want to.
If
we require public shareholders who wish to convert their ordinary shares to comply with the delivery requirements for conversion,
such converting shareholders may be unable to sell their securities when they wish to in the event that the proposed business
combination is not approved.
If
we require public shareholders who wish to convert their ordinary shares to comply with specific delivery requirements for conversion
described above and such proposed business combination is not consummated, we will promptly return such certificates to the tendering
public shareholders. Accordingly, investors who attempted to convert their shares in such a circumstance will be unable to sell
their securities after the failed acquisition until we have returned their securities to them. The market price for our shares
may decline during this time and you may not be able to sell your securities when you wish to, even while other shareholders that
did not seek conversion may be able to sell their securities.
Because
of our limited resources and structure, other companies may have a competitive advantage and we may not be able to consummate
an attractive business combination.
We
expect to encounter intense competition from entities other than blank check companies having a business objective similar to
ours, including venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these
entities are well established and have extensive experience in identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical, human and other resources than we do and our financial resources
will be relatively limited when contrasted with those of many of these competitors. While we believe that there are numerous potential
target businesses that we could acquire with the net proceeds of our initial public offering, our ability to compete in acquiring
certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives
others an advantage in pursuing the acquisition of certain target businesses. Furthermore, seeking shareholder approval of a business
combination may delay the consummation of a transaction. Additionally, our outstanding warrants and unit purchase options, and
the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of the foregoing
may place us at a competitive disadvantage in successfully negotiating a business combination.
Our
initial shareholders and former and current officers and directors control a substantial interest in us and thus may influence
certain actions requiring a shareholder vote.
Our
initial shareholders and former and current officers and directors collectively own approximately 44.9% of our issued and outstanding
ordinary shares. In connection with any vote for a proposed business combination, all of our initial shareholders, as well as
all of our current and former officers and directors, have agreed to vote the ordinary shares owned by them immediately before
our initial public offering as well as any ordinary shares acquired in our initial public offering or private placement or in
the aftermarket in favor of such proposed business combination.
Our
board of directors is and will be divided into three classes, each of which will generally serve for a term of three years with
only one class of directors being elected in each year. There is no requirement under the Companies Law for us to hold annual
or general meetings or elect directors. Accordingly, shareholders would not have the right to such a meeting or election of directors,
unless the holders of not less than 10% in par value capital of our company requests such a meeting. If there is an annual meeting,
as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered
for election and our initial shareholders, because of their ownership position, will have considerable influence regarding the
outcome. Accordingly, our initial shareholders will continue to exert control at least until the consummation of a business combination.
Our
outstanding rights, warrants and unit purchase options may have an adverse effect on the market price of our ordinary shares and
make it more difficult to effect a business combination.
We
have outstanding rights, warrants and unit purchase options that may result in the issuance of additional securities. Additionally,
to the extent we issue ordinary shares to effect a business combination, the potential for the issuance of a substantial number
of additional shares upon exercise of these warrants could make us a less attractive acquisition vehicle in the eyes of a target
business. Such securities, when exercised, will increase the number of issued and outstanding ordinary shares and reduce the value
of the shares issued to complete the business combination. Accordingly, our rights, warrants and unit purchase options may make
it more difficult to effectuate a business combination or increase the cost of acquiring the target business. Additionally, the
sale, or even the possibility of sale, of the shares underlying the warrants and unit purchase options could have an adverse effect
on the market price for our securities or on our ability to obtain future financing. If and to the extent these warrants and options
are exercised, you may experience dilution to your holdings.
We
may redeem the warrants at a time that is not beneficial to public investors.
We
may call the public warrants for redemption at any time after the redemption criteria described elsewhere have been satisfied.
If we call the public warrants for redemption, public shareholders may be forced to accept a nominal redemption price or sell
or exercise the warrants when they may not wish to do so.
If
our shareholders exercise their registration rights with respect to their securities, it may have an adverse effect on the market
price of our ordinary shares and the existence of these rights may make it more difficult to effect a business combination.
Our
initial shareholders are entitled to make a demand that we register the resale of their insider shares at any time commencing
three months prior to the date on which their shares may be released from escrow. Additionally, the purchasers of the private
units and our initial shareholders, officers and directors are entitled to demand that we register the resale of the private units
(and the underlying securities) and any securities our initial shareholders, officers, directors or their affiliates may be issued
in payment of working capital loans made to us at any time after we consummate a business combination. The presence of these additional
securities trading in the public market may have an adverse effect on the market price of our securities. In addition, the existence
of these rights may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business,
as the shareholders of the target business may be discouraged from entering into a business combination with us or will request
a higher price for their securities because of the potential effect the exercise of such rights may have on the trading market
for our ordinary shares.
If
we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities
may be restricted, which may make it difficult for us to complete a business combination.
A
company that, among other things, is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business
of investing, reinvesting, owning, trading or holding certain types of securities would be deemed an investment company under
the Investment Company Act of 1940. Since we will invest the proceeds held in the trust account, it is possible that we could
be deemed an investment company. Notwithstanding the foregoing, we do not believe that our anticipated principal activities will
subject us to the Investment Company Act of 1940. To this end, the proceeds held in trust may be invested by the trustee only
in United States government treasury bills, notes or bonds having a maturity of 180 days or less or in money market funds meeting
the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940 and that invest solely in United
States treasuries. By restricting the investment of the proceeds to these instruments, we intend to meet the requirements for
the exemption provided in Rule 3a-1 promulgated under the Investment Company Act of 1940.
If
we are nevertheless deemed to be an investment company under the Investment Company Act of 1940, we may be subject to certain
restrictions that may make it more difficult for us to complete a business combination, including:
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restrictions
on the nature of our investments; and
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restrictions
on the issuance of securities.
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In
addition, we may have imposed upon us certain burdensome requirements, including:
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registration
as an investment company;
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adoption
of a specific form of corporate structure; and
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reporting,
record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations.
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Compliance
with these additional regulatory burdens would require additional expense for which we have not allotted.
We
may not seek an opinion from an unaffiliated third party as to the fair market value of the target business we acquire or that
the price we are paying for the business is fair to our shareholders from a financial point of view.
We
are not required to obtain an opinion from an unaffiliated third party that the target business we select has a fair market value
in excess of at least 80% of the balance of the trust account unless our board of directors cannot make such determination on
its own. We are also not required to obtain an opinion from an unaffiliated third party indicating that the price we are paying
is fair to our shareholders from a financial point of view unless the target is affiliated with our officers, directors, initial
shareholders or their affiliates. If no opinions are obtained, our shareholders will be relying on the judgment of our board of
directors, whose collective experience in business evaluations for blank check companies like ours is not significant. Furthermore,
our directors may have a conflict of interest in analyzing the transaction due to their personal and financial interests.
Because
we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability
to protect your rights through the U.S. Federal courts may be limited.
We
are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs will be governed by our amended
and restated memorandum and articles of association, the Companies Law (as the same may be supplemented or amended from time to
time) or the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority
shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed
by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial
precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority,
but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our
directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some
jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared
to the United States, and certain states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a Federal court
of the United States.
We
have been advised by our Cayman Islands legal counsel that the courts of the Cayman Islands are unlikely (i) to recognize or enforce
against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws
of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us
predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the
liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement
in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce
a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that
a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been
given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be
final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman
Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind
the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple
damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent
proceedings are being brought elsewhere.
As
a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions
taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a
United States company.
Foreign
currency fluctuations could adversely affect our business and financial results.
A
target business with which we may combine may do business and generate sales within other countries. Foreign currency fluctuations
may affect the costs that we incur in such international operations. It is also possible that some or all of our operating expenses
may be incurred in non-U.S. dollar currencies. The appreciation of non-U.S. dollar currencies in those countries where we have
operations against the U.S. dollar would increase our costs and could harm our results of operations and financial condition.
If
we effect a business combination with a company located outside of the United States, we would be subject to a variety of additional
risks that may negatively impact our business operations and financial results.
If
we consummate a business combination with a target business in one of these areas, or another location outside of the United States,
we would be subject to any special considerations or risks associated with companies operating in the target business’ governing
jurisdiction, including any of the following:
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rules
and regulations or currency redemption or corporate withholding taxes on individuals;
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tariffs
and trade barriers;
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regulations
related to customs and import/export matters;
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economic
policies and market conditions;
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unexpected
changes in regulatory requirements;
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challenges
in managing and staffing international operations;
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tax
issues, such as tax law changes and variations in tax laws as compared to the United States;
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challenges
in collecting accounts receivable;
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cultural
and language differences;
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protection
of intellectual property; and
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employment
regulations.
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We
cannot assure you that we would be able to adequately address these additional risks. If we were unable to do so, our operations
might suffer.
If
we effect a business combination with a company located outside of the United States, the laws applicable to such company will
likely govern all of our material agreements and we may not be able to enforce our legal rights.
If
we effect a business combination with a company located outside of the United States, the laws of the country in which such company
operates will govern almost all of the material agreements relating to its operations. We cannot assure you that the target business
will be able to enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system
of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as
in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant
loss of business, business opportunities or capital. Additionally, if we acquire a company located outside of the United States,
it is likely that substantially all of our assets would be located outside of the United States and some of our officers and directors
might reside outside of the United States. As a result, it may not be possible for investors in the United States to enforce their
legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated
upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws.
Because
we must furnish our shareholders with financial statements of the target business prepared in accordance with U.S. GAAP or IFRS
or reconciled to U.S. GAAP, we may not be able to complete an initial business combination with some prospective target businesses.
The
federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial
significance tests include historical and/or pro forma financial statement disclosure in periodic reports. These financial statements
may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United
States of America, or GAAP, or international financial reporting standards as promulgated by the International Accounting Standards
Board, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance
with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements
may limit the pool of potential target businesses we may acquire.
Compliance
with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and
costs of completing an acquisition.
Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our system of internal controls and may require
us to have such system audited by an independent registered public accounting firm. If we fail to maintain the adequacy of our
internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or shareholder litigation. Any
inability to provide reliable financial reports could harm our business. A target may also not be in compliance with the provisions
of the Sarbanes-Oxley Act regarding the adequacy of internal controls. The development of the internal controls of any such entity
to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of
adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail
to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our securities.
We
are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging
growth companies will make our securities less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company”
for up to five years. However, if our non-convertible debt issued within a three-year period exceeds $1 billion, our revenues
exceed $1.07 billion, or the market value of our ordinary shares that are held by non-affiliates exceeds $700 million on the last
day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following
fiscal year. As an emerging growth company, we are not required to comply with the auditor attestation requirements of section
404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements, and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company,
we have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and
private companies until those standards apply to private companies. As such, our consolidated financial statements may not be
comparable to companies that comply with public company effective dates. We cannot predict if investors will find our shares less
attractive because we may rely on these provisions. If some investors find our shares less attractive as a result, there may be
a less active trading market for our shares and our share price may be more volatile.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We
have 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, we, as an emerging growth company, will not adopt the new or revised
standard until the time private companies are required to adopt the new or revised standard. This may make comparison of our consolidated
financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant
standards used.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None
ITEM
2. PROPERTY
We
maintain our principal executive offices at 708 Third Avenue, New York, NY, which we lease at rate of $100 per month from an unaffiliated
third party. We consider our current office space, combined with the other office space otherwise available to our executive officers,
adequate for our current operations.
ITEM
3. LEGAL PROCEEDINGS
None.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
PART
II
ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Our
units are listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “OACQU.” The ordinary shares, rights and
warrants are listed on the Nasdaq under the symbols “OACQ,” “OACQR” and “OACQW,” respectively.
Units not separated continue to be listed under the symbol “OACQU.”
The
following table sets forth the range of high and low sales prices for the units, ordinary shares, rights and warrants for the
periods indicated since the units commenced public trading on December 12, 2014, and since the ordinary shares, rights and warrants
commenced public trading on January 7, 2015.
|
|
Units
|
|
Ordinary
Shares
|
|
Rights
|
|
Warrants
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016-2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
11.01
|
|
|
11.01
|
|
|
10.705
|
|
|
10.55
|
|
|
0.5999
|
|
|
0.33
|
|
|
0.42
|
|
|
0.23
|
|
Third Quarter
|
|
10.7076
|
|
|
10.6989
|
|
|
10.4721
|
|
|
10.4603
|
|
|
0.3376
|
|
|
0.3097
|
|
|
0.2504
|
|
|
0.2031
|
|
Second Quarter
|
|
10.60
|
|
|
10.60
|
|
|
10.51
|
|
|
10.10
|
|
|
0.32
|
|
|
0.15
|
|
|
0.33
|
|
|
0.60
|
|
First Quarter
|
|
10.60
|
|
|
10.50
|
|
|
10.75
|
|
|
10.35
|
|
|
0.39
|
|
|
0.06
|
|
|
0.17
|
|
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015-2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
10.60
|
|
|
10.50
|
|
|
10.35
|
|
|
10.30
|
|
|
0.16
|
|
|
0.115
|
|
|
0.1498
|
|
|
0.0597
|
|
Third Quarter
|
|
10.60
|
|
|
10.25
|
|
|
10.25
|
|
|
10.19
|
|
|
0.19
|
|
|
0.11
|
|
|
0.15
|
|
|
0.055
|
|
Second Quarter
|
|
10.34
|
|
|
10.21
|
|
|
10.15
|
|
|
10.00
|
|
|
0.17
|
|
|
0.06
|
|
|
0.146
|
|
|
0.04
|
|
First Quarter
|
|
10.54
|
|
|
10.15
|
|
|
10.10
|
|
|
9.75
|
|
|
0.33
|
|
|
0.15
|
|
|
0.222
|
|
|
0.07
|
|
Holders
As
of January 30, 2018, there were 3 holders of record of our units, 6 holders of record of our ordinary shares, 1 holder of record
of our rights and 1 holder of record of our warrants.
Dividends
We
have not paid any cash dividends on our ordinary shares to date and do not intend to pay cash dividends prior to the completion
of an initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings,
if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of
any dividends subsequent to a business combination will be within the discretion of our board of directors at such time. It is
the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly,
our board of directors does not anticipate declaring any dividends in the foreseeable future. Further, if we incur any indebtedness,
our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Use
of Proceeds
On
December 17, 2014, we closed our initial public offering of 4,000,000 units, with each unit consisting of one Ordinary Share,
one Right to automatically receive one-tenth of one Ordinary Share upon consummation of an initial business combination and one
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. On December 24, 2014, we sold an additional 200,000 units to EBC upon the exercise
notice of the Over-Allotment. The units from the initial public offering (including the Over-Allotment) were sold at an offering
price of $10.00 per unit, generating total gross proceeds of $42,000,000.
Simultaneous
with the consummation of the initial public offering, we consummated the private placement of 285,000 Private Placement Units
at a price of $10.00 per Private Placement Unit, generating total proceeds of $2,850,000. Of the Private Placement Units, 265,000
were purchased by Fortress, an affiliate of one of our former executive officers, and 20,000 were purchased by EBC in the initial
public offering. Simultaneously with the consummation of the exercise of the Over-Allotment, EBC purchased an additional 1,000
Private Placement Units at $10.00 per unit for $10,000.
EBC
acted as representative of the underwriters for the initial public offering. The securities sold in the offering were registered
under the Securities Act of 1933, as amended, on a registration statement on Form S-1 (No. 333-99558). The Securities and Exchange
Commission declared the registration statement effective on December 12, 2014.
We
paid total transaction costs of approximately $1,845,000, inclusive of $1,365,000 of underwriting fees. After deducting the underwriting
discounts and commissions and the offering expenses, an aggregate of $42,845,000 was deposited into the trust account. As of November
30, 2017, proceeds not held in trust account were approximately $8,000. Interest income available from our investments in trust
was approximately $56,000 as of November 30, 2017. The net proceeds deposited into the trust fund remain on deposit in the trust
fund earning interest. As of November 30, 2017, there was $17,616,785 held in the trust fund, including interest.
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, 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, our Current Management provided
a loan to us 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. In addition to the contribution, the Lender loaned to us an additional $370,880 for our working
capital needs, for an aggregate amount of $1,000,000 evidenced by the Note.
At
the December Meeting, shareholders holding 36,594 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, $380,580 (or approximately $10.40 per share) was removed from the
trust account to pay such holders. In connection with the Second Extension, the Current 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. In exchange for the additional funding, we and the Lender entered into an amendment to the Note pursuant
to which the principal amount of the Note was increased by $320,000.
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 Current
Management provided 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. The loan did not bear interest and will be repayable by us to the lenders upon consummation of 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 Current Management provided a loan to the Company for $0.025 for each Public Share that was not converted, or approximately
$41,000, 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 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. The loan will not bear interest and will be repayable by us to the lenders upon consummation of an initial Business
Combination.
Purchases
of Equity Securities by Issuer and Affiliates
No
purchases of our equity securities have been made by us or affiliated purchasers within the fourth quarter of the fiscal year
ended November 30, 2017.
ITEM
6. SELECTED FINANCIAL DATA
Not
applicable.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 consolidated 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
All
statements other than statements of historical fact included in this Annual Report on Form 10-K including, without limitation,
statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding
our financial position, business strategy and the plans and objectives of management for future operations, are forward looking
statements. When used in this Form 10-K, words such as “may,” “should,” “could,” “would,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,”
or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward looking statements.
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. Such forward looking
statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our
management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could
be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this Annual
Report on Form 10-K should be read as being applicable to all forward-looking statements whenever they appear in this Annual Report.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act. Actual results could differ materially from those contemplated by the forward looking statements as a result
of certain factors detailed in our filings with the Securities and Exchange Commission. All subsequent written or oral forward
looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
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 (“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 to purchase 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 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 2016 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. 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. 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, all 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 year ended November 30, 2017, we issued promissory notes to our management and EBC for an aggregate of $361,590 and $211,575,
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 remaining net proceeds of the offering and the
Private Placement, although substantially all of the remaining 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 year ended November 30, 2017, we had net losses of approximately $615,000, which consisted of operating expenses of approximately
$670,000, interest expense on the Note of approximately $87,000, offset by interest income from our Trust Account of approximately
$143,000.
For
the year ended November 30, 2016, we had net losses of approximately $716,000, which consisted of operating expenses of approximately
$842,000, offset by interest income from our Trust Account of approximately $126,000. For the year ended November 30, 2015, we
had net losses of approximately $384,000, which consisted of operating expenses of approximately $413,000 offset by interest income
from our Trust Account of approximately $29,000.
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, 2017, 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.
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.
During
the year ended November 30, 2017, the Current management and EBC loaned us an aggregate of $361,590 and $211,575, respectively.
The loans are unsecured and non-interest bearing and are due upon consummation of a Business Combination. This additional funding
was used for working capital and to maintain the requirements of the Trust Account. An aggregate amount of approximately $682,000
was deposited in the Trust Account during the year end November 30, 2017. In exchange for the additional funding, we issued new
promissory notes. The loans are unsecured and non-interest bearing and are due upon consummation of a Business Combination.
Subsequent
to November 30, 2017, we received an aggregate of approximately $88,120 of loan amount from both the new management and EBC under
the form of promissory notes. The loans are unsecured, non-interest bearing and are due upon consummation of a Business Combination.
An aggregate of approximately $82,000 was deposited to the Trust Account subsequent to November 30, 2017.
We intend to use substantially
all of the remaining 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 consolidated
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 November 30, 2017, we had approximately
$8,000 in cash and cash equivalents, approximately $56,000 in interest income available to us for working capital purposes of from
our investments in the Trust account, and a working deficit of approximately $2.7 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 consolidated
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 consolidated 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 November
30, 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 November 30, 2017, the aggregate amount deferred for the legal firm and the consultant was approximately $1.3 million. The
deferred amount is an unrecognized contingent liability, as closing of a potential business combination was not considered probable
as of November 30, 2017.
Contractual
Obligations
As
a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this
information.
Off-Balance
Sheet Arrangements
We
did not have any off-balance sheet arrangements as of November 30, 2017.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As
of November 30, 2017, we were not subject to any market or interest rate risk. The net proceeds of our initial public offering,
including amounts in the trust account, have been invested in United States government treasury bills, bonds or notes having a
maturity of 180 days or less, or in money market funds meeting the applicable conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940 and that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we
believe there will be no associated material exposure to interest rate risk.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This
information appears following Item 15 of this Report and is incorporated herein by reference.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM
9A. CONTROL 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 year ended November 30, 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.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed
by, or under the supervision of, our principal executive, principal financial and principal accounting officer, and effected by
our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted
accounting principles, and includes those policies and procedures that:
|
1)
|
Pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets;
|
|
2)
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
|
|
3)
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the consolidated financial statements.
|
Internal
control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its
inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and
is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations
are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce,
though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial
reporting for the company.
Our
management’s assessment of the effectiveness of our internal control system as of November 30, 2017 was based on the framework
for effective internal control over financial reporting described in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission, known as COSO. Based on this assessment, our principal executive,
principal financial and principal accounting officer has concluded that our internal control over financial reporting was effective
as of November 30, 2017.
This
Form 10-K does not include an attestation report of internal controls from the company’s registered public accounting firm
due to our status as a smaller reporting company and an emerging growth company under the JOBS Act.
Changes
in Internal Control over Financial Reporting
There
was no change in our internal control over financial reporting that occurred during the fiscal quarter ended November 30, 2017
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
and Executive Officers
Our
current directors and executive officers are as follows:
Name
|
|
Age
|
|
Position
|
Edward
J. Fred
|
|
58
|
|
Chief
Executive Officer, President and Director
|
Jose
M. Aldeanueva
|
|
49
|
|
Chief
Financial Officer, Treasurer, Secretary and Director
|
Stephen
B. Pudles
|
|
57
|
|
Director
|
Jeffrey
J. Gutovich
|
|
61
|
|
Director
|
Barry
Rodgers
|
|
78
|
|
Director
|
Edward
J. Fred
has served as our Chief Executive Officer, President as a director since June 2016. He brings over 35 years of experience
in the executive and financial management of publicly-traded and privately-held companies, including nearly 30 years in the aerospace
and defense industry. Mr. Fred retired from CPI Aerostructures, Inc. in March 2014 having been an officer commencing in February
1995 and a director commencing in January 1999. He was CPI’s controller from February 1995 to April 1998, when he was appointed
chief financial officer, a position he held until June 2003 and then from January 2004 to May 2004. He was executive vice president
from May 2000 until December 2001 and was appointed President in January 2002 and Chief Executive Officer in January 2003 and
served in such capacities until he retired. For approximately ten years prior to joining CPI, Mr. Fred served in various positions
for the international division of Grumman, where he last held the position of controller. Mr. Fred serves on the Board of Trustees
of Island Harvest and is active in The March of Dimes, the Sid Jacobson Community Center, 1 in 9 Breast Cancer Action Coalition
- Hewlett House (co-founder of a golf outing that has raised nearly $500,000 for this cause), the Salvation Army, the Coalition
Against Child Abuse & Neglect, the Children’s Sports Connection, and The Cradle of Aviation. Mr. Fred is a director
on the board of directors of TOMI Environmental Solutions, Inc. (“TOMI”) since January 2016 and serves on TOMI’s
Audit Committee, Compensation Committee and Nominating and Governance Committee. Mr. Fred holds a Bachelor of Business Administration
in Accounting from Dowling College and an Executive MBA from Hofstra University. We believe Mr. Fred is well-qualified to serve
as a member of our board of directors due to his business experience and contacts.
Jose
Aldeanueva
has served as our Chief Financial Officer, Treasurer, Secretary and as a director since June 2016. He brings 20
years of strategic advisory, mergers and acquisitions, corporate finance and industrial operations experience. Mr. Aldeanueva
founded Stone Capital, an independent advisory practice focused on founder-owned growth companies and direct private investments,
in 2007. Since its founding, Stone Capital has advised NASDAQ-listed and privately held companies in a broad range of industries
such as energy, telecom services, financial services, real estate, private banking, and aviation and aerospace. Prior to Stone
Capital, Mr. Aldeanueva held global client responsibilities for the energy sector with HSBC Corporate Investment Banking and Markets
in New York from 2005 to 2007. His previous experience includes investment banking roles with Credit Suisse, PaineWebber and Hill
Street Capital, as well as industrial operating roles with General Electric. Mr. Aldeanueva holds an MBA from the University of
Chicago, a MS in Industrial Engineering from Columbia University, and a BS in Aerospace Engineering from the University of Notre
Dame. We believe Mr. Aldeanueva is well-qualified to be a member of our board of directors due to his business experience and
contacts.
Stephen
Pudles
has served as a director of the Company since June 2016. He brings over 30 years of executive experience in the aerospace,
electronics and defense industries. Mr. Pudles has been retired since 2013. Prior to his retirement, Mr. Pudles served as the
Chief Executive Officer of Spectral Response, an electronic contract manufacturing services company that was sold to Hunter Technology
in 2014. Prior to this, Mr. Pudles was with API Nanotronics Corp. where he was Chief Executive Officer from April 2008 to June
2011 and a director from November 2008 to June 2011. From 2000 until joining API, Mr. Pudles was employed by OnCore Manufacturing
Services LLC (formerly known as Nu Visions Manufacturing LLC) (“OnCore”), where he served as President and CEO from
2002 to 2007, Executive Vice President from 2007 until joining API, and Vice President from 2000 to 2001. OnCore is a contract
manufacturer of printed circuit boards and other electronic hardware. Previously, he has held senior management positions with
Tanon Manufacturing, Electronic Associates, IEC and Restor Industries. Mr. Pudles has a Masters of Science in management and a
Bachelor of Engineering from Stevens Institute of Technology in Hoboken, New Jersey. We believe Mr. Pudles is well-qualified to
serve as a member of our board of directors due to his business experience and contacts.
Jeff
Gutovich
has served as a director of the Company since June 2016. He brings over 30 years of entrepreneurial and executive
experience that includes financial services, aviation and aerospace buy-out and operations. In February 2004, Mr. Gutovich founded
Sentry Financial Services Group, Inc., a Los Angeles-based firm specialized in wealth preservation, tax minimization, and insurance
strategies across a broad asset spectrum that includes aviation and aerospace, and has served as its Chief Executive Officer since
its founding. Prior to Sentry, Mr. Gutovich co-founded Financial Resources Group, a professional services practice specialized
in insurance, retirement and estate planning, employee benefits, and asset management, in 1986. Also in 1986, Mr. Gutovich was
a partner in the leverage buyout team that acquired four operating companies from Lear Siegler, a Fortune 500 industrial conglomerate.
He served as an executive officer of the new entity, BFM Aerospace Corporation, where he was responsible for corporate human resources
and risk management. BFM Aerospace was sold in 1992. Mr. Gutovich began his career in 1975 as a corporate pilot. He currently
maintains his commercial pilot credentials and consults with other families that have an interest in aviation related assets or
activities. We believe Mr. Gutovich is well-qualified to serve as a member of our board of directors due to his business experience
and contacts.
Barry
Rodgers
has served as a director of the Company since June 2016. He brings 50 years of entrepreneurial and executive experience,
including over 30 years in the aerospace, defense, and electronics industries. Mr. Rodgers is the founder of Rodgers Consulting
Services, an independent corporate advisory practice he founded in September 2010. Mr. Rodgers’ aerospace background includes
a 20-year career with Lear Siegler, a Fortune 500 industrial conglomerate with a leading aerospace and defense business. The company
was acquired by Forstmann Little & Co in a leveraged buy-out in December 1986. Prior to the leveraged buy-out, Mr. Rodgers
served as Corporate Vice President for all of Lear Siegler’s Electronics and Material Handling Companies from July 1985
until December 1986. After the leveraged buy-out, he was responsible for managing the companies initially identified as divestitures
under Forstmann Little’s ownership that ended in June 1987. During his career at Lear Siegler, Mr. Rodgers held a variety
of engineering and executive roles of increasing responsibility that included work in the field of unmanned aircraft vehicles
for the U.S. Air Force and the design and implementation of digital Fly by Wire systems for a variety of military aircraft. After
leaving Lear Siegler in April 1987, Mr. Rodgers was one of three founders of an investments firm, Raebarn Partners, which orchestrated
a leveraged buy-out of a number of Lear Siegler businesses to form BFM Aerospace in November 1987. He served as Chairman and Chief
Executive Officer of BFM Aerospace from its formation in November 1987 until its sale was completed in October 1992. Following
the sale of BFM Aerospace, Mr. Rodgers founded Medox in April 1993, a medical equipment company that was sold to its Japanese
partners in June 1995. Mr. Rodgers earned a ME from UCLA and an MSc from Cranfield Institute of Technology in the UK. During 1995,
he became a Member of the Board of Trustees of Chapman University in Orange, California. In April 1997, he and his wife founded
the Rodgers Center for Holocaust Education at Chapman University. We believe Mr. Rodgers is well-qualified to serve as a member
of our board of directors due to his business experience and contacts.
Director
Independence and Board Committees
The
Company believes that each of Messrs. Pudles, Gutovich and Rodgers are considered independent.
Family
Relationships
There
are no family relationships among the Company’s directors.
Audit
Committee
Effective
December 12, 2014, we established an audit committee of the board of directors. The audit committee currently consists of Messrs.
Pudles, Gutovich and Rodgers, each of whom is an independent director under the Nasdaq’s listing standards. The audit committee’s
duties, which are specified in our Audit Committee Charter, include, but are not limited to:
|
●
|
reviewing
and discussing with management and the independent auditor the annual audited financial statements, and recommend to the board
whether the audited financial statements should be included in our Form 10-K;
|
|
●
|
discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of our financial statements;
|
|
●
|
discussing
with management major risk assessment and risk management policies;
|
|
●
|
monitoring
the independence of the independent auditor;
|
|
●
|
verifying
the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law;
|
|
●
|
reviewing
and approving all related-party transactions;
|
|
●
|
inquiring
and discussing with management our compliance with applicable laws and regulations;
|
|
●
|
pre-approving
all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of
the services to be performed;
|
|
●
|
appointing
or replacing the independent auditor;
|
|
●
|
determining
the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management
and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related
work;
|
|
●
|
establishing
procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding our financial statements or accounting policies; and
|
|
●
|
approving
reimbursement of expenses incurred by our management team in identifying potential target businesses.
|
Financial
Experts on Audit Committee
The
audit committee will at all times be composed exclusively of “independent directors” who are “financially literate”
as defined under Nasdaq listing standards. Nasdaq listing standards define “financially literate” as being able to
read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow
statement.
In
addition, we must certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment
experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background
that results in the individual’s financial sophistication. The board of directors has determined that Mr. Pudles qualifies
as an “audit committee financial expert,” as defined under rules and regulations of the SEC.
Nominating
Committee
Effective
December 12, 2014, we have established a nominating committee of the board of directors. The current nominating committee consists
of Messrs. Pudles, Gutovich and Rodgers each of whom is an independent director under Nasdaq’s listing standards. The nominating
committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating
committee considers persons identified by its members, management, shareholders, investment bankers and others.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that the persons
to be nominated:
|
●
|
should
have demonstrated notable or significant achievements in business, education or public service;
|
|
●
|
should
possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and
bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
|
|
●
|
should
have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the shareholders.
|
Compensation
Committee
Effective
as of December 12, 2014, we established a compensation committee of the board of directors. The current compensation committee
consists of Messrs. Pudles, Gutovich and Rodgers, each of whom is an independent director under Nasdaq’s listing standards.
The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited
to:
|
●
|
reviewing
and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation,
evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving
the remuneration (if any) of our Chief Executive Officer’s based on such evaluation;
|
|
●
|
reviewing
and approving the compensation of all of our other executive officers;
|
|
●
|
reviewing
our executive compensation policies and plans;
|
|
●
|
implementing
and administering our incentive compensation equity-based remuneration plans;
|
|
●
|
assisting
management in complying with our proxy statement and annual report disclosure requirements;
|
|
●
|
approving
all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers
and employees;
|
|
●
|
if
required, producing a report on executive compensation to be included in our annual proxy statement; and
|
|
●
|
reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors.
|
Notwithstanding
the foregoing, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our directors,
or any of their respective affiliates, prior to, or for any services they render in order to effectuate, the consummation of a
business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation
committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection
with such initial business combination.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and ten percent stockholders are required by regulation to furnish us with copies of all Section 16(a) forms
they file. Based solely on copies of such forms received or written representations from certain reporting persons that no Form
5s were required for those persons, we believe that, during the fiscal year ended November 30, 2017, all filing requirements applicable
to our officers, directors and greater than ten percent beneficial owners were complied with.
Code
of Ethics
On
December 12, 2014, our board of directors adopted a code of ethics that applies to our executive officers, directors and employees.
The code of ethics codifies the business and ethical principles that governs aspects of our business.
ITEM
11. EXECUTIVE COMPENSATION
No
executive officer or director has received any cash compensation for services rendered to us. Commencing on the date of the IPO
through May 20, 2016, we agreed to pay Fortress, an affiliate of certain of our former executive officers and directors, a fee
of $10,000 per month for providing us with office space and certain office and secretarial services. However, this arrangement
was solely for our benefit and was not intended to provide our executive officers or directors compensation in lieu of a salary.
Such agreement was terminated on May 20, 2016, and Fortress agreed to convert all amounts owed under such arrangement, or $175,000,
to capital. Other than this administrative fee, no compensation of any kind, including finders, consulting or other similar fees,
will be paid to any of our officers or directors, or any of their respective affiliates, prior to, or for any services they render
in order to effectuate, the consummation of a business combination. However, such individuals will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket expenses and there will be
no review of the reasonableness of the expenses by anyone other than our board of directors and audit committee, which includes
persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth information regarding the beneficial ownership of our ordinary shares as of December 31, 2017, by:
|
●
|
each
person known by us to be the beneficial owner of more than 5% of our outstanding ordinary;
|
|
●
|
each
of our officers and directors; and
|
|
●
|
all
our officers and directors as a group.
|
As
November 30, 2017, there were a total of 2,977,631 ordinary shares. Unless otherwise indicated, we believe that all persons named
in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them. The following
table does not reflect record of beneficial ownership of any Ordinary Shares issuable upon exercise of Warrants or Rights as such
securities are not exercisable or convertible within 60 days.
Name and Address of Beneficial Owner(1)
|
|
Amount
and Nature of
Beneficial
Ownership
|
|
|
Percent of
Class
|
|
|
|
|
|
|
|
|
Edward J. Fred
|
|
|
524,334
|
(2)
|
|
|
17.6
|
%
|
Jose M. Aldeanueva
|
|
|
117,000
|
|
|
|
3.9
|
%
|
Stephen B. Pudles
|
|
|
264,333
|
|
|
|
8.9
|
%
|
Jeffrey J. Gutovich
|
|
|
134,333
|
(3)
|
|
|
4.5
|
%
|
Barry Rodgers
|
|
|
10,000
|
|
|
|
*
|
|
Polar Asset Management Partneres Inc.(4)
|
|
|
330,000
|
(5)
|
|
|
11.1
|
%
|
AQR Capital Management, LLC (6)
|
|
|
325,500
|
|
|
|
10.9
|
%
|
Fortress Biotech, Inc. (7)
|
|
|
265,000
|
|
|
|
8.9
|
%
|
All directors and executive officers as a group (five individuals)
|
|
|
1,050,000
|
|
|
|
35.3
|
%
|
*Less
than one percent.
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals is c/o Origo Acquisition Corporation, 708 Third Avenue, New
York, NY 10017.
|
|
(2)
|
Represents
shares held by EJF Opportunities, LLC which Mr. Fred controls.
|
|
(3)
|
Represents
shares held by the Jeffrey J. Gutovich Profit Sharing Plan which Mr. Gutovich controls.
|
|
(4)
|
The business
address of Polar Asset Management Partners Inc. is 401 Bay Street, Suite 1900, PO Box 19, Toronto,
Ontario M5H 2Y4, Canada. Information derived from a Form 4 filed on March 20, 2017.
|
|
(5)
|
Includes
Ordinary Shares held by North Pole Capital Master Fund, for which Polar Securities Inc. serves as investment manager.
|
|
(6)
|
The business
address of AQR Capital Management, LLC is Two Greenwich Plaza, Greenwich, CT 06830. AQR Capital Management, LLC in a wholly
owned subsidiary of AQR Capital Management Holdings, LLC. CNH Partners, LLC is deemed to be controlled by AQR Capital
Management, LLC. Such entities have shared voting and dispositive shares held thereby. Information derived from a Schedule
13G filed on February 14, 2017.
|
|
(7)
|
Includes
Ordinary Shares underlying the units purchased by Fortress Biotech, Inc. in a private
placement consummated simultaneously with the Company’s initial public offering.
Fortress Biotech, Inc. is an affiliate of one of our former executive officers.
|
All
of the insider shares outstanding have been placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent,
until (1) with respect to 50% of the insider shares, the earlier of one year after the date of the consummation of our initial
business combination and the date on which the closing price of our 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 our initial business combination and (2) with respect to the remaining 50% of the insider shares, one year after
the date of the consummation of our initial business combination, or earlier, in either case, if, subsequent to our initial business
combination, we consummate a liquidation, merger, share exchange or other similar transaction which results in all of our shareholders
having the right to exchange their shares for cash, securities or other property.
During
the escrow period, the holders of these shares will not be able to sell or transfer their securities except (i) for transfers
to an entity’s members upon its liquidation, (ii) to relatives and trusts for estate planning purposes, (iii) by virtue
of the laws of descent and distribution upon death, (iv) pursuant to a qualified domestic relations order, (v) by certain pledges
to secure obligations incurred in connection with purchases of our securities, (vi) by private sales made at or prior to the consummation
of a business combination at prices no greater than the price at which the shares were originally purchased or (vii) to us for
no value for cancellation in connection with the consummation of our initial business combination, in each case (except for clause
(vii)) where the transferee agrees to the terms of the escrow agreement, but will retain all other rights as our shareholders,
including, without limitation, the right to vote their ordinary shares and the right to receive cash dividends, if declared. If
dividends are declared and payable in ordinary shares, such dividends will also be placed in escrow. If we are unable to effect
a business combination and liquidate the trust account, none of our initial shareholders will receive any portion of the liquidation
proceeds with respect to their insider shares.
Equity
Compensation Plans
As
of November 30, 2017, we had no compensation plans (including individual compensation arrangements) under which equity securities
were authorized for issuance.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Initial
Shares
In
August 2014, we 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 in the IPO was not exercised in full or in part, so that the initial
shareholders would collectively own 20.0% of the issued and outstanding shares after the IPO (excluding the sale of the private
units). Of these shares, 100,000 ordinary shares were repurchased in January 2015 leaving the remaining 1,050,000 initial shares
outstanding.
Simultaneous
with the consummation of the IPO, we consummated the private placement of 285,000 Private Placement Units at a price of $10.00
per Private Placement Unit, generating total proceeds of $2,850,000. Of the Private Placement Units, 265,000 were purchased by
Fortress and 20,000 were purchased by EBC, the representative of the underwriters in the IPO.
On
May 20, 2016, we entered into the Transfer Agreement with the holders of the 1,050,000 ordinary shares issued by us prior to the
IPO (such shares being referred to as the “initial shares” and the holders of the initial shares (including the transferees
described herein) being referred to as the “initial shareholders”) and each of EJF Opportunities, LLC, Stephen B.
Pudles, Jose M. Aldeanueva, Jeffrey J. Gutovich Profit Sharing Plan and Barry Rodgers (collectively being referred to as the “investors”)
pursuant to which the initial shareholders transferred to the investors the 1,050,000 initial shares held by them. Our former
directors also appointed Edward J. Fred, Jose M. Aldeanueva, Stephen B. Pudles, Jeffrey J. Gutovich and Barry Rodgers as members
of our board of directors and Messrs. Fred and Aldeanueva as Chief Executive Officer and President and Chief Financial Officer,
Treasurer and Secretary of the Company, respectively, all to take effect upon approval of the Initial Extension.
The
initial shares are identical to the ordinary shares included in the units sold in the IPO. However, the holders have agreed (A)
to vote their initial shares (as well as any shares acquired after the IPO) in favor of any proposed business combination, (B)
not to propose, or vote in favor of, an amendment to the charter 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 IPO) 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 charter 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 holders 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.
Promissory
Notes
Convertible
Notes
As
of November 30, 2017 and November 30, 2016, we 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, we 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 us 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 November 30, 2017, the Note remained outstanding, and the amount of accrued interest that was owed under the
Note was $87,335.
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 year ended November 30, 2017, the new management and EBC loaned us an aggregate of $361,590 and $211,575, 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 us and all amounts owed thereunder by us will be forgiven, except to the extent that we had funds available
to it outside of the Trust Account.
Administrative
Service Fee
From
December 12, 2014 through the date of the Transfer Agreement, the Company agreed to pay Fortress a monthly fee of $10,000 for
general and administrative services. As of May 19, 2016, amount due to Fortress was approximately $183,000; of which approximately
$175,000 represents the accrued service fee and $7,715 represents invoices of the Company paid by Fortress. On May 20, 2016, this
arrangement was terminated, and Fortress agreed to convert all amounts owed under such arrangement, or $175,000, to capital.
Related
Party Policy
Our
Code of Ethics, which we adopted upon consummation of our initial public offering, requires us to avoid, wherever possible, all
related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved by
the board of directors (or the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate
amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant,
and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our
ordinary shares, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct
or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another
entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to
perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her
family, receives improper personal benefits as a result of his or her position.
We
also require each of our directors and executive officers to annually complete a directors’ and officers’ questionnaire
that elicits information about related party transactions.
Our
audit committee, pursuant to its written charter, is responsible for reviewing and approving related-party transactions to the
extent we enter into such transactions. All ongoing and future transactions between us and any of our officers and directors or
their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated
third parties. Such transactions will require prior approval by our audit committee and a majority of our uninterested “independent”
directors, or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense,
to our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority
of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to
us than those that would be available to us with respect to such a transaction from unaffiliated third parties. Additionally,
we require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that
elicits information about related party transactions.
These
procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents
a conflict of interest on the part of a director, employee or officer.
To
further minimize potential conflicts of interest, we have agreed not to consummate a business combination with an entity, which
is affiliated with any of our initial shareholders unless we obtain an opinion from an independent investment banking firm that
the business combination is fair to our unaffiliated shareholders from a financial point of view. Furthermore, in no event will
any of our existing officers, directors, special advisors or initial shareholders, or any entity with which they are affiliated,
be paid any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate,
the consummation of a business combination.
Director
Independence
Currently
Messrs. Pudles, Gutovich and Rodgers would each be considered an “independent director” under the Nasdaq listing rules,
which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual
having a relationship, which, in the opinion of the company’s board of directors would interfere with the director’s
exercise of independent judgment in carrying out the responsibilities of a director. Our independent directors will have regularly
scheduled meetings at which only independent directors are present.
We
will only enter into a business combination if it is approved by a majority of our independent directors. Additionally, we will
only enter into transactions with our officers and directors and their respective affiliates that are on terms no less favorable
to us than could be obtained from independent parties. Any related-party transactions must be approved by our audit committee
and a majority of disinterested independent directors.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The
firm of Marcum LLP acts as our independent registered public accounting firm. The following is a summary of fees paid to Marcum
LLP for services rendered.
Audit
Fees
During
the fiscal years ended November 30, 2017 and 2016, audit fees for our independent registered public accounting firm were approximately
$64,000 and $53,000, respectively.
Audit-Related
Fees
During the fiscal
years ended November 30, 2017 and 2016, audit-related fees for our independent registered public accounting firm were approximately
$21,000 and $10,000, respectively.
Tax
Fees
During
the fiscal years ended November 30, 2017 and 2016, fees for tax services for our independent registered public accounting firm
were $0.
All
Other Fees
During
the fiscal years ended November 30, 2017 and 2016, fees for other services were $0.
Audit
Committee Approval
The
Audit Committee has reviewed summaries of the services provided and the related fees and has determined that the provision of
non-audit services is compatible with maintaining the independence of Marcum LLP.
It
is the Audit Committee’s policy to pre-approve all audit and permitted non-audit services, except that
de minimis
non-audit services, as defined in Section 10A(i)(1) of the Exchange Act, may be approved prior to the completion of the independent
auditor’s audit. The Audit Committee was formed in December 12, 2014 and pre-approved all of the services described above
that were rendered after such time. The Board pre-approved all services that were provided prior to the formation of the Audit
Committee.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 November 30, 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 approximately $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 $682,000 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 year ended November 30, 2017. Subsequent to
November 30, 2017, the Company deposited an addition of approximately $82,000 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 remaining 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.
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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
December 12, 2016, the Company held its annual general meeting of shareholders (the “December 2016 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. 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, all the amendments to the Charter took effect upon their approval. Accordingly, the
Company now 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 year ended November 30, 2017, the Company issued promissory notes to the new management and EBC for an aggregate of $361,590
and $211,575, respectively. The loans are unsecured and non-interest bearing and are due upon consummation of a Business Combination.
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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 December 19, 2016,
the Company entered into a Merger Agreement (the “Merger Agreement”) with Aina Le’a Inc., a Delaware corporation
(“Aina Le’a”), Aina Le’a Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Aina
Le’a (“Merger Sub”), and Jose Aldeanueva, in the capacity as the representative for the stockholders of the
Company and their successors and assign (the “OAC Representative”).
On
February 17, 2017, the Company sent a letter (the “Termination Letter”) to Aina Le’a to terminate the Merger
Agreement (1) pursuant to Sections 8.1(e) of the Merger Agreement because Aina Le’a breached the non-solicitation covenant
contained in Section 5.7 of the Merger Agreement and (2) pursuant to Section 8.1(f) because there has been a Material Adverse
Effect on Aina Le’a which is uncured and continuing. In addition, the Company provided notice of additional breaches by
Aina Le’a of the Merger Agreement based on information available to the Company as of the date of the Termination Letter,
including, among others, breaches of the following provisions: Section 5.1(a) (by failing to give the Company and its representatives
access to requested information about Aina Le’a and its operations, including without limitation Aina Le’a’s
ongoing financing activities), Section 5.8(iv) (failure to provide prompt notice of the filing of a foreclosure action on a parcel
of land material to the initial phase of Aina Le’a’s development project), Section 5.8(v) (failure to provide prompt
notice of the filing of a foreclosure action on a parcel of land material to the initial phase of Aina Le’a’s development
project), Sections 5.9 and 5.11 (Aina Le’a’s failure to use commercially reasonable efforts and to cooperate fully
with the Company and its representatives to prepare and file the Registration Statement). The Termination Letter served as a notice
to cure with respect to these provision to the extent required by Section 8.1(e) of the Merger Agreement. However, the Company
did not believe these breaches were curable and therefore the Termination Letter terminated the Merger Agreement immediately as
of February 17, 2017.
On
February 22, 2017, the Company sent to Aina Le’a a supplement to the Termination Letter (the “Supplement”).
The Supplement noted that Aina Le’a’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 (“From
10-Q”), which was filed on February 21, 2017, inaccurately described the Termination Letter. Furthermore, the Supplement
indicated that the Form10-Q contained further information that the Company believes demonstrated that a Material Adverse Effect
had occurred on Aina Le’a’s business and was continuing. The Supplement further reiterated that the termination of
the Merger Agreement was effective as of the date of the Termination Letter.
On July 24, 2017,
the
Company
entered into a merger agreement, which was later amended on September 27, 2017 (the “HTH 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”). Pursuant to the HTH Merger Agreement,
subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the HTH Merger Agreement
(the “Closing”),
the Company
will merge with and into Merger Sub, with
Merger Sub continuing as the surviving entity (the “Merger”). As a result of the consummation of the Merger,
the
Company
will cease to exist and the holders of the Company’s equity securities and warrants, options and rights to
acquire or convert into the Company’s equity securities will convert into the successor’s equity securities and warrants,
options and rights to acquire or convert into the successor’s equity securities (see Note 8).
The
Company’s board of directors has approved the HTH Merger Agreement.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Going
Concern
The
accompanying consolidated 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 November 30, 2017, the Company had approximately $8,000 in cash and cash equivalents, approximately $56,000 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 $2.7 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 consolidated 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
Principles of Consolidation
The consolidated financial
statements include the Company’s accounts and those of its wholly-owned subsidiaries. All material intercompany transactions
and balances have been eliminated in the accompanying consolidated financial statements.
Basis
of Presentation
The accompanying consolidated
financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of
the U.S. Securities and Exchange Commission (the “SEC”).
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 November 30, 2017, cash and marketable securities,
which are classified as trading securities, held in the Trust Account consisted of approximately $17.6 million in U.S. Treasury
Bills. At November 30, 2017, there was approximately $56,000 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
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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 November 30, 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 922,276 and 2,533,704 Ordinary Shares subject to possible conversion at November 30, 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 consolidated
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 consolidated financial
statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes under FASB
ASC 740,
Income Taxes
(“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the
expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those
benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
no unrecognized tax benefits as of December 31, 2017. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on
income by the Government of the Cayman Islands.
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 consolidated financial statements.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 November 30, 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 November 30, 2017, the Note remained outstanding, and the amount of accrued interest that was
owed under the Note was $87,335.
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 year ended November 30, 2017, the new management and EBC loaned the Company an aggregate of $361,590 and $211,575, 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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
As
of November 30, 2017, the aggregate amount deferred for the legal firm and the consultant was approximately $1.3 million. The
deferred amount is an unrecognized contingent liability, as closing of a potential business combination was not considered probable
as of November 30, 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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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. On October 23, 2017, Nasdaq panel had determined to grant
the Company’s request for the continued listing of its securities on The Nasdaq Capital Market, pursuant to an extension
through February 19, 2018 to complete its proposed merger with
HTH and,
in connection
therewith, to evidence compliance with all applicable requirements for the continued listing of the combined company’s securities
on Nasdaq, post-merger. The Company is taking definitive steps to timely evidence compliance with the terms of the Panel’s
decision (including the
Minimum Public Holders Rule)
; however, there can be no assurances
given that it will be able to do so.
On
December 4, 2017,
the Company
received
written notice from
Nasdaq stating t
he Company did not satisfy Nasdaq Listing Rule
because the Company did not timely hold an annual meeting for the fiscal year ended November 30, 2016 on or before November 30,
2017. The notice indicated that the Company’s non-compliance with the Annual Meeting Requirement could serve as an additional
basis for the delisting of the Company’s securities from The Nasdaq Capital Market and, as such, the Company should present
its plan to evidence compliance with that requirement for review by the Nasdaq panel.
On
December 4, 2017, the Company received written notice from the Listing Qualifications Department of Nasdaq indicating that the
Company did not satisfy Nasdaq Listing Rule 5620(a) (the “Annual Meeting Requirement”) because the Company did not
timely hold an annual meeting for the fiscal year ended November 30, 2016 on or before November 30, 2017. The notice indicated
that the Company’s non-compliance with the Annual Meeting Requirement could serve as an additional basis for the delisting
of the Company’s securities from The Nasdaq Capital Market and, as such, the Company should present its plan to evidence
compliance with that requirement for review by the Nasdaq Hearings Panel (the “Panel”).
The
Company timely requested a hearing and presented its plan to evidence compliance with the Minimum Public Holders Rule for the
Panel’s consideration, subsequent to which the Panel granted the Company’s request for the continued listing of its
securities on The Nasdaq Capital Market subject to the Company evidencing compliance with all applicable requirements for listing
on Nasdaq by no later than February 19, 2018, including compliance with the applicable criteria for initial listing upon completion
of the Company’s proposed business combination with Hightimes Holding Corp.
The
Company plans to provide an update to the Panel regarding its plan to evidence compliance with the Annual Meeting Requirement.
The
Company cannot provide assurances 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.
ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 November 30, 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 2016 Meeting, March Meeting and September Meeting, shareholders holding 36,594, 1,123,568, and 343,806 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 2,055,355 Ordinary Shares outstanding as of November 30, 2017. Of these, an aggregate
of 922,276 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”):
|
●
|
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”)).
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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).
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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.
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ORIGO ACQUISITION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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.
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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.
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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 CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note
9 - Subsequent Events
Subsequent
to November 30, 2017, the Company received an aggregate of approximately $88,120 of loan amount from both the new management and
EBC under the form of promissory notes. The loans are unsecured, non-interest bearing and are due upon consummation of a Business
Combination. An aggregate of approximately $82,000 was deposited to the Trust Account subsequent to November 30, 2017.