Company Quick10K Filing
Quick10K
Gores Holdings III
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
8-K 2019-11-01 Enter Agreement, Sale of Shares, Regulation FD, Exhibits
FDC First Data 21,709
CATM Cardtronics 1,345
TRHC Tabula Rasa Healthcare 1,267
CO Global Cord Blood 528
INWK Innerworkings 233
IEA Infrastructure & Energy Alternatives 87
LHC Leo Holdings 49
SSNT Silversun Technologies 16
TZACU Tenzing Acquisition 0
FTCH Farfetch 0
GRSH 2019-09-30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 grsh-ex311_9.htm
EX-31.2 grsh-ex312_6.htm
EX-32.1 grsh-ex321_7.htm
EX-32.2 grsh-ex322_8.htm

Gores Holdings III Earnings 2019-09-30

GRSH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 grsh-10q_20190930.htm 10-Q grsh-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10‑Q

 

(Mark One)

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

For the quarterly period ended September 30, 2019

OR

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

FOR THE TRANSITION PERIOD FROM         TO        

Commission File Number: 001‑38643

 

GORES HOLDINGS III, INC.

(Exact name of registrant as specified in its Charter)

 

 

Delaware

 

82-3173473

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

9800 Wilshire Blvd.

 

 

Beverly Hills, CA

 

90212

(Address of principal executive offices)

 

(Zip Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbols

 

Name of each exchange on which registered

Class A Common Stock

 

GRSH

 

Nasdaq Capital Market

Warrants

 

GRSHW

 

Nasdaq Capital Market

Units

 

GRSHU

 

Nasdaq Capital Market

 

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES  NO 

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). YES   NO 

As of November 12, 2019, there were 40,000,000 shares of the Company’s Class A common stock, par value $0.0001 per share, and 10,000,000 shares of the Company’s Class F common stock, par value $0.0001 per share, issued and outstanding.

 

 

 


 

TABLE OF CONTENTS

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

Condensed Balance Sheets (Unaudited)

3

 

 

Condensed Statements of Operations (Unaudited)

4

 

 

Condensed Statements of Changes in Stockholders’ Equity (Unaudited)

5

 

 

Condensed Statements of Cash Flows (Unaudited)

7

 

 

Notes to Condensed Financial Statements (Unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

 

 

 

Item 4.

Controls and Procedures

22

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

23

 

 

 

Item 1A.

Risk Factors

23

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

 

 

 

Item 3.

Defaults Upon Senior Securities

24

 

 

 

Item 4.

Mine Safety Disclosures

24

 

 

 

Item 5.

Other Information

24

 

 

 

Item 6.

Exhibits

25

 

 


2


 

GORES HOLDINGS III, INC.

CONDENSED BALANCE SHEETS

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

(unaudited)

 

 

(audited)

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

1,108,749

 

 

$

 

856,182

 

Prepaid assets

 

 

 

134,115

 

 

 

 

206,849

 

       Total current assets

 

 

 

1,242,864

 

 

 

 

1,063,031

 

Deferred tax asset

 

 

 

308,341

 

 

 

 

 

Investments and cash held in Trust Account

 

 

 

407,067,134

 

 

 

 

402,605,952

 

       Total assets

 

$

 

408,618,339

 

 

$

 

403,668,983

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accrued expenses, formation and offering costs

 

$

 

1,872,153

 

 

$

 

25,658

 

     Current income tax payable

 

 

 

567,888

 

 

 

 

461,662

 

State franchise tax accrual

 

 

 

30,000

 

 

 

 

200,050

 

       Total current liabilities

 

 

 

2,470,041

 

 

 

 

687,370

 

Deferred underwriting compensation

 

 

 

14,000,000

 

 

 

 

14,000,000

 

       Total liabilities

 

 

 

16,470,041

 

 

 

 

14,687,370

 

Commitments and Contingencies:

 

 

 

 

 

 

 

 

 

 

Class A subject to possible redemption, 38,714,829 and 38,398,161 shares at September 30, 2019 and December 31, 2018, respectively (at redemption value of $10 per share)

 

 

 

387,148,290

 

 

 

 

383,981,610

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 200,000,000 shares authorized, 1,285,171 and 1,601,839 shares issued and outstanding (excluding 38,714,829 and 38,398,161 shares subject to possible redemption) at September 30, 2019 and December, 31, 2018, respectively

 

 

 

129

 

 

 

 

160

 

Class F common stock, $0.0001 par value; 20,000,000 shares authorized, 10,000,000 shares issued and outstanding

 

 

 

1,000

 

 

 

 

1,000

 

Additional paid-in capital

 

 

 

119,149

 

 

 

 

3,285,798

 

Retained earnings

 

 

 

4,879,730

 

 

 

 

1,713,045

 

       Total stockholders’ equity

 

 

 

5,000,008

 

 

 

 

5,000,003

 

       Total liabilities and stockholders’ equity

 

$

 

408,618,339

 

 

$

 

403,668,983

 

 

See accompanying notes to the unaudited, condensed, interim financial statements.

3


 

GORES HOLDINGS III, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

Three

 

 

 

Three

 

 

 

Nine

 

 

 

Nine

 

 

 

 

Months Ended

 

 

 

Months Ended

 

 

 

Months Ended

 

 

 

Months Ended

 

 

 

 

September 30, 2019

 

 

 

September 30, 2018

 

 

 

September 30, 2019

 

 

 

September 30, 2018

 

Professional fees and other expenses

 

 

 

(2,236,058

)

 

 

 

(44,312

)

 

 

 

(2,590,951

)

 

 

 

(63,629

)

State franchise taxes, other than income tax

 

 

 

(50,000

)

 

 

 

(10,591

)

 

 

 

(150,000

)

 

 

 

(11,791

)

     Net loss from operations

 

 

 

(2,286,058

)

 

 

 

(54,903

)

 

 

 

(2,740,951

)

 

 

 

(75,420

)

Other income - interest income

 

 

 

2,098,351

 

 

 

 

382,026

 

 

 

 

6,964,986

 

 

 

 

382,026

 

     Income/(loss) before income taxes

 

$

 

(187,707

)

 

$

 

327,123

 

 

$

 

4,224,035

 

 

$

 

306,606

 

Income tax

 

 

 

39,418

 

 

 

 

(75,501

)

 

 

 

(1,057,350

)

 

 

 

(75,501

)

     Net income attributable to common shares

 

$

 

(148,289

)

 

$

 

251,622

 

 

$

 

3,166,685

 

 

$

 

231,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss) per ordinary share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Class A ordinary shares - basic and diluted

 

$

 

0.01

 

 

$

 

0.04

 

 

$

 

0.10

 

 

$

 

0.12

 

   Class F ordinary  shares - basic and diluted

 

$

 

(0.04

)

 

$

 

(0.01

)

 

$

 

(0.08

)

 

$

 

(0.01

)

 

See accompanying notes to the unaudited, condensed, interim financial statements.

 

 

4


 

GORES HOLDINGS III, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

Three Months Ended September 30, 2018

 

 

 

Class A Ordinary Shares

 

Class F Ordinary Shares

 

 

Additional

 

 

Accumulated

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-In Capital

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2018

 

 

-

 

 

$

 

-

 

 

 

10,781,250

 

 

$

 

1,078

 

 

$

 

23,922

 

 

$

 

(44,201

)

 

$

 

(19,201

)

Proceeds from initial public offering of Units on September 11, 2018 at $10.00 per Unit

 

 

40,000,000

 

 

 

 

4,000

 

 

 

-

 

 

 

 

-

 

 

 

 

399,996,000

 

 

 

 

-

 

 

 

 

400,000,000

 

Sale of 6,666,666 Private Placement Warrants to Sponsor on September 11, 2018 at $1.50 per Private Placement Warrant

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

10,000,000

 

 

 

 

-

 

 

 

 

10,000,000

 

Underwriters discounts

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

(8,000,000

)

 

 

 

-

 

 

 

 

(8,000,000

)

Offering costs charged to additional paid-in capital

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

(731,922

)

 

 

 

-

 

 

 

 

(731,922

)

Deferred underwriting compensation

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

(14,000,000

)

 

 

 

-

 

 

 

 

(14,000,000

)

Class A common stock subject to possible redemption; 38,241,399 shares at a redemption price of $10.00

 

 

(38,250,049

)

 

 

 

(3,825

)

 

 

-

 

 

 

 

-

 

 

 

 

(382,496,665

)

 

 

 

-

 

 

 

 

(382,500,490

)

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

251,622

 

 

 

 

251,622

 

Balance at September 30, 2018

 

 

1,749,951

 

 

$

 

175

 

 

 

10,781,250

 

 

$

 

1,078

 

 

$

 

4,791,335

 

 

$

 

207,421

 

 

$

 

5,000,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2018

 

Balance at January 1, 2018

 

 

-

 

 

$

 

-

 

 

 

10,781,250

 

 

$

 

1,078

 

 

$

 

23,922

 

 

$

 

(23,684

)

 

$

 

1,316

 

Proceeds from initial public offering of Units on September 11, 2018 at $10.00 per Unit

 

 

40,000,000

 

 

 

 

4,000

 

 

 

-

 

 

 

 

-

 

 

 

 

399,996,000

 

 

 

 

-

 

 

 

 

400,000,000

 

Sale of 6,666,666 Private Placement Warrants to Sponsor on September 11, 2018 at $1.50 per Private Placement Warrant

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

10,000,000

 

 

 

 

-

 

 

 

 

10,000,000

 

Underwriters discounts

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

(8,000,000

)

 

 

 

-

 

 

 

 

(8,000,000

)

Offering costs charged to additional paid-in capital

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

(731,922

)

 

 

 

-

 

 

 

 

(731,922

)

Deferred underwriting compensation

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

(14,000,000

)

 

 

 

-

 

 

 

 

(14,000,000

)

Class A common stock subject to possible redemption; 38,241,399 shares at a redemption price of $10.00

 

 

(38,250,049

)

 

 

 

(3,825

)

 

 

-

 

 

 

 

-

 

 

 

 

(382,496,665

)

 

 

 

-

 

 

 

 

(382,500,490

)

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

231,105

 

 

 

 

231,105

 

Balance at September 30, 2018

 

 

1,749,951

 

 

$

 

175

 

 

 

10,781,250

 

 

$

 

1,078

 

 

$

 

4,791,335

 

 

$

 

207,421

 

 

$

 

5,000,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

 

 

Three Months Ended September 30, 2019

 

 

 

Class A Ordinary Shares

 

Class F Ordinary Shares

 

 

Additional

 

 

Retained

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-In Capital

 

 

Earnings

 

 

Equity

 

Balance at June 30, 2019

 

 

1,275,644

 

 

$

 

128

 

 

 

10,000,000

 

 

$

 

1,000

 

 

$

 

23,880

 

 

$

 

5,028,019

 

 

$

 

5,053,027

 

Change in proceeds subject to possible redemption to 38,714,829 shares at redemption value

 

 

9,527

 

 

 

 

1

 

 

 

-

 

 

 

 

-

 

 

 

 

95,269

 

 

 

 

-

 

 

 

 

95,270

 

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(148,289

)

 

 

 

(148,289

)

Balance at September 30, 2019

 

 

1,285,171

 

 

$

 

129

 

 

 

10,000,000

 

 

$

 

1,000

 

 

$

 

119,149

 

 

$

 

4,879,730

 

 

$

 

5,000,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

Balance at Januray 1, 2019

 

 

1,601,839

 

 

$

 

160

 

 

 

10,000,000

 

 

$

 

1,000

 

 

$

 

3,285,798

 

 

$

 

1,713,045

 

 

$

 

5,000,003

 

Change in proceeds subject to possible redemption to 38,714,829 shares at redemption value

 

 

(316,668

)

 

 

 

(31

)

 

 

-

 

 

 

 

-

 

 

 

 

(3,166,649

)

 

 

 

-

 

 

 

 

(3,166,680

)

Net income

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

3,166,685

 

 

 

 

3,166,685

 

Balance at September 30, 2019

 

 

1,285,171

 

 

$

 

129

 

 

 

10,000,000

 

 

$

 

1,000

 

 

$

 

119,149

 

 

$

 

4,879,730

 

 

$

 

5,000,008

 

 

See accompanying notes to the unaudited, condensed, interim financial statements

 

 

6


 

GORES HOLDINGS III, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine

 

 

 

Nine

 

 

 

 

Months Ended

 

 

 

Months Ended

 

 

 

 

September 30, 2019

 

 

 

September 30, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 

3,166,685

 

 

$

 

231,105

 

Changes in deferred income tax

 

 

 

(308,341

)

 

 

 

 

Changes in state franchise tax accrual

 

 

 

(170,050

)

 

 

 

11,182

 

Changes in prepaid assets

 

 

 

72,734

 

 

 

 

(23,417

)

Changes in deferred offering costs associated with public offering

 

 

 

 

 

 

 

153,198

 

Changes in income taxes payable

 

 

 

106,226

 

 

 

 

75,501

 

Changes in accrued expenses, formation and offering costs

 

 

 

1,846,495

 

 

 

 

266,210

 

Net cash provided by operating activities

 

 

 

4,713,749

 

 

 

 

713,779

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Cash deposited in Trust Account

 

 

 

 

 

 

 

(400,000,000

)

Interest reinvested in Trust Account

 

 

 

(4,461,182

)

 

 

 

(382,026

)

Net cash used in investing activities

 

 

 

(4,461,182

)

 

 

 

(400,382,026

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of Units in initial public offering

 

 

 

 

 

 

 

400,000,000

 

Proceeds from sale of Private Placement Warrants to Sponsor

 

 

 

 

 

 

 

10,000,000

 

Repayment of notes and advances payable – related party

 

 

 

 

 

 

 

(150,000

)

Payment of underwriter's discounts and commissions

 

 

 

 

 

 

 

(8,000,000

)

Payment of accrued offering costs

 

 

 

 

 

 

 

(731,922

)

Net cash provided by financing activities

 

 

 

 

 

 

 

401,118,078

 

Increase in cash

 

 

 

252,567

 

 

 

 

1,449,831

 

Cash at beginning of period

 

 

 

856,182

 

 

 

 

109,737

 

Cash at end of period

 

$

 

1,108,749

 

 

$

 

1,559,568

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

 

 

Deferred underwriting compensation

 

$

 

 

 

$

 

14,000,000

 

Offering costs included in accrued expenses

 

 

 

 

 

 

 

343,319

 

Cash paid for income and state franchise taxes

 

 

 

1,579,515

 

 

 

 

608

 

 

See accompanying notes to the unaudited, condensed, interim financial statements.

7


 

GORES HOLDINGS III, INC.

NOTES TO THE UNAUDITED, CONDENSED, INTERIM FINANCIAL STATEMENTS

1.       Organization and Business Operations

Organization and General

Gores Holdings III, Inc. (the “Company”) was incorporated in Delaware on October 23, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (the “Business Combination”). The Company has neither engaged in any operations nor generated any operating revenue to date. The Company’s management has broad discretion with respect to the Business Combination. The Company’s Sponsor is Gores Sponsor III, LLC, a Delaware limited liability company (the “Sponsor”). The Company has selected December 31st as its fiscal year-end.

At September 30, 2019, the Company had not commenced any operations. All activity for the period from October 23, 2017 (inception) through September 30, 2019 relates to the Company’s formation and initial public offering (“Public Offering”) described below and efforts directed toward locating a suitable Business Combination. The Company completed the Public Offering on September 11, 2018 (the “IPO Closing Date”). The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. Subsequent to the Public Offering, the Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering and the sale of the Private Placement Warrants (as defined below) held in the Trust Account (as defined below).

Proposed PAE Business Combination

On November 1, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, EAP Merger Sub, Inc. (“First Merger Sub”), EAP Merger Sub II, LLC (“Second Merger Sub”), Shay Holding Corporation, the ultimate parent of Pacific Architects and Engineers, LLC (“PAE”), and Platinum Equity Advisors, LLC, in its capacity as the stockholder representative (the “Stockholder Representative”), which provides for, among other things, (i) the merger of First Merger Sub with and into PAE, with PAE continuing as the surviving corporation (the “First Merger”) and (ii) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of PAE with and into Second Merger Sub with Second Merger Sub continuing as the surviving entity (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Proposed Business Combination”). As a result of the First Merger, the Company will own 100% of the outstanding common stock of PAE and each share of common stock of PAE will be cancelled and converted into the right to receive a portion of the consideration. As a result of the Second Merger, the Company will own 100% of the outstanding interests in the Second Merger Sub. Following the closing of the Proposed Business Combination, the Company will own, directly or indirectly, all the stock of PAE and its subsidiaries and the PAE stockholders as of immediately prior to the effective time of the First Merger (the “PAE Stockholders”) will hold a portion of the Company’s Class A common stock.

The Merger Agreement

Merger Consideration

Pursuant to the Merger Agreement, the aggregate merger consideration payable to the PAE Stockholders will consist of: (a) an amount in cash equal to the Closing Cash Payment Amount (as defined in the Merger Agreement), which is expected to be approximately $444 million; and (b) a number of shares of newly-issued Company Class A common stock equal to the Closing Number of Securities (as defined in the Merger Agreement), which are expected to have a value of approximately $251 million before adjusting for the cancellation of a portion of the shares of Class F common stock of the Company issued to Sponsor pursuant to that certain Securities Subscription Agreement, dated November 3, 2017, by and between Sponsor and the Company (the “Founder Shares”). The merger consideration

8


 

payable to the PAE Stockholders is also subject to adjustment based on PAE’s working capital, cash, transaction expenses and indebtedness as of the closing date, among other adjustments contemplated by the Merger Agreement. Including assumed indebtedness (net of available cash) of PAE of approximately $572 million at the closing (after giving effect to the partial repayment of existing indebtedness as contemplated by the Merger Agreement), the aggregate purchase price to be paid by the Company to acquire PAE is expected to be approximately $1.4 billion.

In addition to the consideration to be paid at the closing of the transactions contemplated by the Merger Agreement, PAE Stockholders will be entitled to receive additional earn-out payments from the Company of up to an aggregate of four million shares of Company Class A common stock, if the price of Class A common stock trading on the Nasdaq exceeds certain thresholds during the five-year period following the completion of the Mergers.

Consummation of the transactions contemplated by the Merger Agreement is subject to customary closing conditions as well as specified cash availability conditions. The Merger Agreement also contains customary representations and warranties and may be terminated by the parties thereto as specified therein.

Private Placement Subscription Agreements

On November 1, 2019, the Company entered into subscription agreements with certain investors, pursuant to which the investors have agreed to purchase in the aggregate 23,913,044 shares of Class A common stock in a private placement for $9.20 per share (the “Private Placement”). The anticipated gross proceeds from the Private Placement of approximately $220,000,000 will be used to partially fund the cash consideration to be paid to PAE.  The Private Placement is conditioned on, among other things, the closing of the Proposed Business Combination.

In order to facilitate the Private Placement, Sponsor has agreed to the cancellation of 3,000,000 of its Founder Shares and the shares of Class A common stock to be issued to the participants in the Private Placement will be issued at a discounted price of $9.20. The remaining Founder Shares will automatically be converted into shares of Class A common stock at the closing of the transactions contemplated by the Merger Agreement.

Financing

Upon the closing of the Public Offering and the sale of the Private Placement Warrants, an aggregate of $400,000,000 was placed in a Trust Account with Continental Stock Transfer & Trust Company acting as trustee (the “Trust Account”).

The Company intends to finance the Proposed Business Combination with the net proceeds from its $400,000,000 Public Offering and its sale of $10,000,000 of Private Placement Warrants and the Private Placement.

Trust Account

Funds held in the Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a‑7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government obligations. As of September 30, 2019, the Trust Account consisted of cash and treasury bills.

The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to fund regulatory compliance requirements and other costs related thereto (a “Regulatory Withdrawal”), subject to an annual limit of $750,000, for a maximum 24 months and/or additional amounts necessary to pay franchise and income taxes, if any, none of the funds held in trust will be released until the earliest of: (i) the completion of the Business Combination; or (ii) the redemption of any public shares of common stock properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of such public shares of common stock if the Company does not complete the Business Combination within 24 months from the closing of the Public Offering; or (iii) the redemption of 100% of the public shares of common stock if the Company is unable to complete a Business

9


 

Combination within 24 months from the closing of the Public Offering, subject to the requirements of law and stock exchange rules.

Business Combination

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination. The Business Combination must be with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (less any deferred underwriting commissions and taxes payable on interest income earned) at the time of the Company signing a definitive agreement in connection with the Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination, including the Proposed Business Combination.

The Company, after signing a definitive agreement for a Business Combination, is required to either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest income but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest income but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under NASDAQ rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are in favor of the Business Combination. In accordance with the Company’s charter, the Company will not redeem its public shares of common stock in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its public shares of common stock and the related Business Combination, and instead may search for an alternate Business Combination. For business and other reasons, the Company has elected to provide its stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote to approve the Proposed Business Combination rather than a tender offer.

As a result of the foregoing redemption provisions and as discussed in further detail in Note 2, the public shares of common stock will be recorded at the redemption amount and classified as temporary equity, in accordance with ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) in subsequent periods.

The Company will have 24 months from the IPO Closing Date to complete its Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest income, but less taxes payable (less up to $100,000 of such net interest income to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which they waived their rights to participate in any redemption with respect to their Founder Shares (as defined below); however, if the Sponsor or any of the Company’s officers, directors or affiliates acquire public shares of common stock, they will be entitled to a pro rata share of the Trust Account in the event the Company does not complete a Business Combination within the required time period.

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

10


 

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

2.       Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”), and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of September 30, 2019 and the results of operations and cash flows for the periods presented. Operating results for the nine months ended September 30, 2019 are not necessarily indicative of results that may be expected for the full year or any other period. The accompanying unaudited financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 18, 2019.

Net Income/(Loss) Per Common Share

The Company has two classes of shares, which are referred to as Class A common stock and Class F common stock. Net income/(loss) per common share is computed utilizing the two-class method. The two-class method is an earnings allocation formula that determines earnings per share separately for each class of common stock based on an allocation of undistributed earnings per the rights of each class. At September 30, 2019, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted net income/(loss) per common share is the same as basic net income/(loss) per common share for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income/(loss) per share for each class of common stock:

 

 

 

For the Three Months Ended September 30, 2019

 

 

For the Three Months Ended September 30, 2018

 

 

For the Nine Months Ended September 30, 2019

 

 

For the Nine Months Ended September 30, 2018

 

 

 

Class A

 

 

Class F

 

 

Class A

 

 

Class F

 

 

Class A

 

 

Class F

 

 

Class A

 

 

Class F

 

Basic and diluted net income/(loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Allocation of net income/(loss)

 

$

 

300,529

 

 

$

 

(448,818

)

 

$

 

332,628

 

 

$

 

(81,006

)

 

$

 

3,924,556

 

 

$

 

(757,871

)

 

$

 

358,373

 

 

$

 

(127,268

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Weighted-average shares outstanding

 

 

 

40,000,000

 

 

 

 

10,000,000

 

 

 

 

8,696,000

 

 

 

 

10,781,250

 

 

 

 

40,000,000

 

 

 

 

10,000,000

 

 

 

 

2,932,000

 

 

 

 

10,781,250

 

Basic and diluted net income/(loss) per share

 

$

 

0.01

 

 

$

 

(0.04

)

 

$

 

0.04

 

 

$

 

(0.01

)

 

$

 

0.10

 

 

$

 

(0.08

)

 

$

 

0.12

 

 

$

 

(0.01

)

 

11