NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Atlantic
Alliance Partnership Corp. (the “Company”) is a blank check company incorporated in the British Virgin Islands on
January 14, 2015. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and
amalgamation, contractual control arrangement with, purchasing all or substantially all of the assets of, or engaging in any other
similar initial business combination with one or more businesses or entities (“Business Combination”).
At
June 30, 2016, the Company had not yet commenced any operations. All activity through June 30, 2016 related to the Company’s
formation, its Initial Public Offering, which is described below, and identifying a target company for a Business Combination.
The
registration statement for the Company’s initial public offering (“Initial Public Offering”) was declared effective
on April 28, 2015. On May 4, 2015, the Company consummated the Initial Public Offering of 7,687,500 ordinary shares, no par value
per share (“Public Shares”), which includes a partial exercise by the underwriters of their over-allotment option
of 187,500 ordinary shares, at $10.00 per Public Share, generating gross proceeds of $76,875,000.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 778,438 ordinary shares (the “Private
Placement Shares”) at a price of $10.00 per share in a private placement to the Company’s sponsor, AAP Sponsor (PTC)
Corp., a British Virgin Islands company (“AAP Sponsor”), generating gross proceeds of $7,784,380, which is described
in Note 4.
Transaction
costs amounted to $5,907,302, consisting of $2,690,625 of underwriting fees, $2,690,625 of deferred underwriting fees (which
are held in the Trust Account (defined below)) and $526,052 of Initial Public Offering costs. In addition, as of June 30,
2016, cash held outside of the Trust Account and available for working capital purposes amounted to $78,826, which includes
advances from related parties in the aggregate amount of $500,000 (see Note 5).
Following
the closing of the Initial Public Offering on May 4, 2015, an amount of $80,718,750 ($10.50 per Public Share) from the net proceeds
of the sale of the Public Shares in the Initial Public Offering and the Private Placement Shares was placed in a trust account
(“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (the “1940 Act”), with a maturity of 180 days or less or in any open-ended
investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (c)(2),
(c)(3) and (c)(4) of Rule 2a-7 of the 1940 Act, as determined by the Company, until the earlier of: (i) the consummation of a
Business Combination or (ii) the distribution of the Trust Account as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public
Offering and Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. The Company’s Public Shares are listed on the Nasdaq Capital Market (“NASDAQ”).
Pursuant to the NASDAQ listing rules, the Company’s Business Combination must be with a target business or businesses whose
collective fair market value is equal to at least 80% of the balance in the Trust Account at the time of the execution of a definitive
agreement for such Business Combination. There is no assurance that the Company will be able to successfully effect a Business
Combination.
The
Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii)
by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or
conduct a tender offer will be made by the Company, solely in its discretion. The per-share price of the Public Shares to be redeemed
(initially $10.50 per Public Share), payable in cash, will be equal to the aggregate amount then on deposit in the Trust Account
as of two business days prior to the consummation of a Business Combination including interest earned on the funds held in the
Trust Account and not previously released to the Company to pay its tax obligations, divided by the number of then outstanding
Public Shares. The per-share amount to be distributed to investors who redeem their shares will not be reduced by the deferred
underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). However, in no event will the Company
redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. The Company’s
initial shareholder has agreed to waive its redemption rights with respect to its founder shares (as defined in Note 5), Private
Placement Shares and Public Shares in connection with the completion of a Business Combination. If a shareholder vote is not required
by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant
to its Amended Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities
and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination.
If,
however, a shareholder approval of the transaction is required by law, or the Company decides to obtain shareholder approval for
business or other legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval, it will complete a Business
Combination only if a majority of the outstanding ordinary shares voted are voted in favor of the Business Combination. Each public
shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
If
the Company seeks shareholder approval in connection with a Business Combination, the initial shareholder has agreed to vote its
founder shares, Private Placement Shares and any Public Shares purchased during or after the Initial Public Offering in favor
of a Business Combination.
If
the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions in connection with a Business
Combination pursuant to the tender offer rules, the Company’s Amended Memorandum and Articles of Association provides that
a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting
in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the shares sold in
the Initial Public Offering (“Excess Shares”). However, the Company would not be restricting the shareholders’
ability to vote all of their shares (including Excess Shares) for or against a Business Combination.
If
the Company is unable to complete a Business Combination by November 4, 2016 (the “Combination Period”), the Company
will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten
business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to
the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of
then outstanding Public Shares, which redemption will completely extinguish public shareholders’ rights as shareholders
(including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board
of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case
to its obligations to provide for claims of creditors and the requirements of the laws of the British Virgin Islands and other
applicable law.
The
initial shareholder has agreed to waive its rights to liquidating distributions from the Trust Account with respect to its founder
shares and Private Placement Shares if the Company fails to complete a Business Combination during the Combination Period. However,
if the initial shareholder acquires Public Shares in or after the Initial Public Offering, it will be entitled to liquidating
distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination
within the Combination Period. The underwriters have agreed to waive their rights to the deferred underwriting commission held
in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of
the Company’s Public Shares. 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 $10.50 per Public Share initially
held in the Trust Account. In order to protect the amounts held in the trust account, Messrs. Jonathan Goodwin, Mark Klein, Waheed
Alli and Jonathan Mitchell, the Company’s management team, have agreed that they will be jointly and severally liable to
the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective
target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the
Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all
rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters
of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third
party, then Messrs. Goodwin, Klein, Alli and Mitchell will not be responsible to the extent of any liability for such third party
claims.
NOTE
2. LIQUIDITY AND GOING CONCERN
As
of June 30, 2016, the Company had $78,826 in its operating bank accounts, $80,843,848 in cash and securities held in the Trust
Account to be used for a Business Combination or to repurchase or redeem its ordinary shares in connection therewith and a working
deficit of $565,848. As of June 30, 2016, approximately $115,000 of the amount on deposit in the Trust Account represented interest
income, which is available to pay the Company’s tax obligations. Since inception, the Company has not withdrawn any interest
income from the Trust Account.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying
and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The
Company may need to raise additional capital through loans or additional investments from AAPC Sponsor, its stockholders, officers,
directors, or third parties. As of June 30, 2016, the Company received an aggregate of $500,000 in advances from certain of the
Company’s directors. The advances are non-interest bearing, unsecured and will only be repaid upon the completion of a Business
Combination. Additionally, the Company’s officers and directors and AAPC Sponsor may, but are not obligated to, loan the
Company additional funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion,
to meet the Company’s working capital needs (“Working Capital Loans”). Up to $1,000,000 of Working Capital Loans
may be convertible into shares of the post business combination entity at a price of $10.00 per share at the option of the lender.
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
Other
than as described above, none of the stockholders, officers or directors, AAPC Sponsor or third parties is under any obligation
to advance funds to, or to invest in, the Company. Accordingly, the Company may not be able to obtain additional financing. If
the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which
could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and
reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions
to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited
condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair
presentation of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company's Annual Report on Form 10-K
for the period from January 14, 2015 (inception) through December 31, 2015 as filed with the SEC on March 23, 2016, which contains
the audited financial statements and notes thereto, together with Management’s Discussion and Analysis. The financial information
as of December 31, 2015 is derived from the audited financial statements presented in the Company’s Annual Report on Form
10-K for the period from January 14, 2015 (inception) through December 31, 2015. The interim results for the six months ended
June 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any future
interim periods.
Emerging
growth company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the
“Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and
it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
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. 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. This may make comparison of the Company’s
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.
Use
of estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could
differ significantly from those estimates.
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
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.
The Company did not have any cash equivalents as of June 30, 2016 and December 31, 2015.
Cash
and marketable securities held in Trust Account
At June 30, 2016 and December 31, 2015,
the assets held in the Trust Account were held in cash and U.S. Treasury Bills, which are classified as trading securities.
Ordinary
shares subject to possible redemption
The
Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory
redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary
shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within 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
feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of
uncertain future events. Accordingly, at June 30, 2016 and December 31, 2015, ordinary shares subject to possible redemption are
presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
Net
loss per share
The
Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per
share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. Ordinary
shares subject to possible redemption at June 30, 2016 and 2015 have been excluded from the calculation of basic loss per share
since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. At June 30, 2016 and 2015,
the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share
for the periods presented.
Income
taxes
The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined that the British Virgin Islands
is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of June 30, 2016, there were no amounts accrued for interest and penalties. There were
no unrecognized tax benefits as of June 30, 2016. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The
Company may be subject to potential examination by U.S. federal, U.S. states or foreign taxing authorities in the areas of income
taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various
tax jurisdictions and compliance with U.S. federal, U.S. state and foreign tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
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 June 30, 2016, 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.
Recent
Accounting Pronouncements
In
August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on management’s responsibility in evaluating
whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures.
For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial
doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are
issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual
and interim periods thereafter. Early adoption is permitted. The Company adopted the methodologies prescribed by ASU 2014-15 as
of January 1, 2016. The adoption of ASU 2014-15 did not have a material effect on the Company’s financial position or results
of operations.
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the Initial Public Offering, AAP Sponsor purchased an aggregate of 778,438 Private Placement Shares at a purchase price of
$10.00 per share from the Company in a private placement. The proceeds from the Private Placement Shares were added to the net
proceeds from the Initial Public Offering held in the Trust Account.
If
the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement
Shares will be used to fund the redemption of the Company’s Public Shares (subject to the requirements of applicable law).
The Private Placement Shares are identical to the founder shares, except that AAP Sponsor has agreed not to transfer, assign or
sell any of the Private Placement Shares until the date that is 30 days after the date the Company completes a Business Combination.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
On
January 15, 2015, the Company issued 2,156,250 ordinary shares to the AAP Sponsor (the “founder shares”) for an aggregate
purchase price of $25,000. The 2,156,250 founder shares included an aggregate of up to 281,250 shares subject to forfeiture by
the initial shareholder (or its permitted transferees) on a pro rata basis depending on the extent to which the underwriters’
over-allotment option was exercised. As a result of the underwriters’ election to exercise their over-allotment option to
purchase 187,500 ordinary shares on May 4, 2015 (see Note 6), 46,875 founder shares were no longer subject to forfeiture.
The
remaining portion of the underwriters’ over-allotment was extinguished; accordingly, 234,375 founder shares were forfeited.
The founder shares are identical to the Public Shares sold in the Initial Public Offering, except that (1) the founder shares
are subject to certain transfer restrictions, as described in more detail below, and (2) the initial shareholder has agreed (i)
to waive its redemption rights with respect to its founder shares, Private Placement Shares and Public Shares purchased during
or after the Initial Public Offering in connection with the completion of a Business Combination and (ii) to waive its rights
to liquidating distributions from the Trust Account with respect to its founder shares and Private Placement Shares if the Company
fails to complete a Business Combination within the Combination Period.
The
founder shares may not be transferred, assigned or sold until one year after the date of the consummation of a Business Combination
or earlier if, subsequent to a Business Combination, (i) the last sale price of the Company’s ordinary shares equals or
exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading
days within any 30-trading day period commencing at least 150 days after a Business Combination or (ii) the Company consummates
a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the shareholders having
the right to exchange their ordinary shares for cash, securities or other property (the “Lock-Up Period”).
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
Related
Party Advances and Loans
In
April and May 2016, the Company received an aggregate of $500,000 in advances from certain directors. The advances are non-interest
bearing, unsecured and will only be repaid upon the completion of a Business Combination.
Other
than as described above, AAP Sponsor or an affiliate of AAP Sponsor or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required. If the Company completes a Business Combination, the Company
would repay the Working Capital Loans out of the proceeds held in the Trust Account released to the Company. Otherwise, the Working
Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does
not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans
but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Up to $1,000,000 of Working Capital
Loans may be convertible into shares of the post business combination entity at a price of $10.00 per share at the option of the
lender. Such shares would be identical to the Private Placement Shares. The terms of such Working Capital Loans, if any, have
not been determined and no written agreements exist with respect to the Working Capital Loans.
Related
Party Business Combination Expenses
Certain
of the Company’s directors have incurred expenses in connection with a potential Business Combination. In the event of a
successful Business Combination, the amount of such expenses to be reimbursed will be determined in light of all the facts and
circumstances at that point in time. Management is unable to determine the amount of the expenses to be reimbursed at this time.
NOTE
6. COMMITMENTS & CONTINGENCIES
Transaction
Fee Arrangement
On
January 8, 2016, the Company entered into an arrangement with a law firm for legal services to be provided in connection with
preliminary work on a proposed Business Combination. In the event of a completed Business Combination, the Company’s liability
will be approximately $1,000,000. If the proposed Business Combination does not occur, the Company would be required to pay 65%
of incurred time. As of June 30, 2016, the Company incurred approximately $1,432,000 of fees, of which approximately $931,000
is included in accounts payable and accrued expenses in the accompanying condensed balance sheet and $501,000 has not been accrued
since it is contingent upon the closing of the proposed Business Combination.
Registration
Rights
Pursuant
to a registration rights agreement entered into on April 28, 2015 with the holders of the founder shares and Private Placement
Shares, the holders of the majority of these securities are entitled to make up to three demands, excluding short form demands,
that the Company register such securities and shares that may be issued upon conversion of Working Capital Loans. In addition,
the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent
to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant
to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any
registration statement filed under the Securities Act to become effective until termination of the applicable Lock-Up Period.
The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option to purchase up to 1,125,000 additional ordinary shares to cover over-allotments,
if any, at the Initial Public Offering price. On May 4, 2015, simultaneously with the consummation of the Initial Public Offering,
the underwriters elected to exercise their over-allotment option to purchase 187,500 ordinary shares at a purchase price of $10.00
per share. The remaining option to purchase up to 937,500 ordinary shares was extinguished and unexercised by the underwriters.
The
underwriters are entitled to an underwriting discount of 7.0%, or $5,381,250, of which three and one-half percent (3.5%), or $2,690,625,
was paid in cash at the closing of the Initial Public Offering on May 4, 2015, and up to three and one-half percent (3.5%), or
$2,690,625, has been deferred. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
NOTE
7. TLA BUSINESS COMBINATION AND CREDIT AGREEMENT
TLA
Business Combination
On
May 3, 2016, the Company issued an announcement stating that the Board of Directors of the Company and TLA Worldwide plc, a public
limited company registered in England and Wales (“TLA”), have reached agreement on the terms of a recommended offer
by the Company for the entire issued and to be issued ordinary share capital of TLA (the “TLA Business Combination”).
In connection with the TLA Business Combination, the Company intends to acquire all outstanding shares of TLA in a cash and stock
transaction.
Pursuant
to the terms of the TLA Business Combination, TLA shareholders will be entitled to receive 10 ordinary shares of the Company for
each 107 TLA shares held. A partial cash alternative up to a maximum aggregate amount of $60 million will be made available to
TLA shareholders pursuant to which TLA shareholders may elect to receive 61.5 pence in cash per TLA share (subject to scale-back
in accordance with the terms of the partial cash alternative) instead of some or all of the Company’s ordinary shares to
which they would otherwise be entitled to receive.
The
TLA Business Combination will be conditioned upon, among other things, (i) approval of the TLA Business Combination and the issuance
of the Company’s ordinary shares to the shareholders of TLA in connection with the TLA Business Combination by holders of
at least a majority of the votes of the Company’s ordinary shares entitled to vote thereon which are voted at the Company’s
special meeting, (ii) approval of the Company’s proposed Amended & Restated Articles of Association (the “Amendment”)
by holders of at least 65% of the Company’s ordinary shares which are voted at the Company’s special meeting, (iii)
the Company receiving redemption requests in respect of not more than 3,635,735 ordinary shares of the Company (or such higher
number of ordinary shares as the Company’s board of directors may determine having regard to elections made for the partial
cash alternative) in connection with the Amendment and the TLA Business Combination, (iv) approval of the transaction by
a majority in number of TLA shareholders who vote at the TLA shareholder meeting and who represent at least 75% of the shares
voted, (v) approval of special resolutions related to the TLA Business Combination by TLA shareholders representing at least 75%
of the shares voted at a further general meeting of TLA shareholders, and (vi) the sanction of the transaction by the High Court
of Justice in England and Wales. It is expected that, subject to the satisfaction or waiver of all relevant conditions, the TLA
Business Combination will be completed in 2016.
Credit
Agreement
On
May 2, 2016, the Company, as borrower, the lenders from time to time party thereto and SunTrust Bank, as administrative agent,
entered into a Credit Agreement (the “Credit Agreement”), which provides for senior secured credit facilities comprised
of delayed draw term loans in an aggregate principal amount equal to $24,500,000. Borrowings under the Credit Agreement
will be used to pay cash amounts due to TLA shareholders in connection with the TLA Business Combination and to pay the Company’s
fees and expenses incurred in connection therewith, and no amounts will be drawn by the Company under the Credit Agreement until
completion of the proposed TLA Business Combination.
Borrowings under the Credit Agreement bear
interest at a rate per annum equal to, at the Company’s option, (i) the LIBOR rate plus a margin or (ii) a base
rate plus a margin. The Credit Agreement contains customary representations and warranties, events of default and covenants for
a transaction of this type, including, among other things, covenants that restrict the ability of the Company and its subsidiaries
to incur certain additional indebtedness, create or permit certain liens on assets, engage in certain mergers or consolidations,
engage in asset dispositions, declare or pay dividends and make equity redemptions, enter into certain restrictive agreements,
make investments, loans, advances or guarantees, enter into transactions with affiliates, enter into hedging transactions, enter
into sale-leaseback transactions or make voluntary payments of subordinated indebtedness.
Borrowings under the Credit Agreement
are conditioned on, among other things, the completion of the TLA Business Combination, the accuracy of certain specified representations
and warranties and the absence of certain specified defaults. The Credit Agreement matures on the earlier of November 28,
2016 and the date that is 60 days following the funding of the term loans. The description of the Credit Agreement is qualified
in its entirety by reference to the Credit Agreement which was attached as Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed with the SEC on May 3, 2016.
ATLANTIC ALLIANCE PARTNERSHIP CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2016
(Unaudited)
NOTE
8. SHAREHOLDERS’ EQUITY
Preferred
Shares -
The Company is authorized to issue an unlimited number of no par value preferred shares, divided into five classes,
Class A through Class E each with such designation, rights and preferences as may be determined by a resolution of the Company’s
board of directors to amend the Amended Memorandum and Articles of Association to create such designations, rights and preferences.
The Company has five classes of preferred shares to give the Company flexibility as to the terms on which each Class is issued.
All shares of a single class must be issued with the same rights and obligations. Accordingly, starting with five classes of preferred
shares will allow the Company to issue shares at different times on different terms. At June 30, 2016, there are no preferred
shares designated, issued or outstanding.
Ordinary
Shares -
The Company is authorized to issue an unlimited number of no par value ordinary shares. Holders of the Company’s
ordinary shares are entitled to one vote for each share. At June 30, 2016 there were 3,532,972 ordinary shares issued and outstanding
(excluding 6,854,841 ordinary shares subject to possible redemption).
NOTE
9. FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value
at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an
orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets
and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and
to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing
basis.
|
|
|
|
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
June 30, 2016 and December 31, 2015, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine
such fair value:
Description
|
|
Level
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
1
|
|
$
|
80,843,848
|
|
|
$
|
80,764,435
|
|
NOTE
10. SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial
statements were issued. The Company did not identify subsequent events that would have required adjustment or disclosure in the
financial statements.