PART
III
ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
and Executive Officers
Our
officers and directors are as follows:
Name
|
|
Age
|
|
Position
|
Executive
Officers
|
|
|
|
|
Marc
Gabelli
|
|
51
|
|
Chairman
and Chief Executive Officer
|
John
Mega
|
|
66
|
|
President
|
Robert
“Rob” LaPenta
|
|
50
|
|
Executive
Vice President and Chief Financial Officer
|
Non-Executive Officers
|
|
|
|
|
Timothy
Foufas
|
|
51
|
|
Vice
President and Chief Operating Officer
|
George
Anthony Bancroft II
|
|
44
|
|
Vice
President
|
Hendi
Susanto
|
|
46
|
|
Vice
President
|
Patrick
Huvane
|
|
52
|
|
Vice
President, Finance and Accounting
|
Independent
Directors
|
|
|
|
|
Mary
Gallagher
|
|
54
|
|
Director
|
Michael
Ferrantino
|
|
48
|
|
Director
|
Michael
Martin
|
|
46
|
|
Director
|
Marc
Gabelli has served as a member of our Board of Directors since our inception and Chairman of the Board of
Directors and Chief Executive Officer since September 2019. Mr. Gabelli has served as President and Director of GGCP,
Inc., the parent company of GAMCO Investors, Inc. (GBL:NYSE) since 1999, and director of Associated Capital Group, Inc.
(AC:NYSE) at its formation through to 2017. He is the Chairman of Teton Advisors, Inc. (TETA:OTC) since 2018, and The LGL
Group (LGL: NYSE American) since 2017, Chairman of Gabelli Merger Plus Trust PLC (GMP:LSE) since 2017. Mr. Gabelli has
been Co-Chief Executive Officer of Gabelli Securities International Ltd. since 1994, Managing Partner of Horizon
Research of New Delhi India since 2012 and Director and Managing Partner of Swiss based GGCP since 2012 and GAMA Funds
Holdings GmbH since 2010. He is also Chairman and Chief Executive of Gabelli & Partners Italia Srl. and Gabelli Value for
Italy SPA (VALU: IM), a Milan stock exchange listed corporation since 2018, and a director of Gabelli Merger Plus+ Trust, PLC
(GMP: LSE), a London Stock Exchange listed company. As a fund manager since 1990, Mr. Gabelli’s focus is global
value investments with portfolio assignments including alternative and traditional asset management. He manages alternative
investment portfolios and the group’s investment companies trading on the London Stock Exchange. He has managed several
Morningstar five star mutual funds, and a Lipper #1 ranked global equity mutual fund. In corporate matters, he assisted on
group restructurings, including GAMCO’s initial public offering and the subsequent formation of AC. He built the hedge
fund platform of the group’s indirect wholly-owned subsidiary, Gabelli & Partners, LLC, and expanded the
business internationally, opening the GAMCO London and Tokyo offices. In 2001, he also formed and served as General Partner
of OpNet Partners, a Gabelli venture capital fund focused on optical networking technologies. He is also a Director of LICT
Corporation (LICT: OTC). Mr. Gabelli is active in a variety of charitable educational efforts in the United States,
Europe and the United Kingdom.
He
began his career in equity research and arbitrage for Lehman Brothers International. He is a member of the New York Society of
Security Analysts. He received a MBA from the Massachusetts Institute of Technology and is a graduate of Harvard University with
a Master’s degree in Government, and from Boston College with a Bachelor’s degree in economics. We believe Mr. Gabelli
is qualified to serve on our board of directors due to his business experience and contacts and relationships.
John
Mega has served as our President since September 2019. Mr. Mega was an original founding member of L3. Mr Mega
built and managed several divisions at L3 since its formation in 1997 after spinning off from Lockheed Martin. Prior to his retirement
in 2018, he was a corporate Senior Vice President and President of L3’s Communication Systems, one of the four L3 major
business segments. Earlier in his career, he had been President of L3’s Microwave Group, President of Narda Microwave, President
of Logimetrics, Inc, Chief Financial Officer and Vice President of at Lockheed Martin Corp’s Tactical Defense Systems, Group
Controller at Loral Corp and a principal at Raytheon Company (RTN:NYSE). He received a Bachelor’s degree from Boston College
and is a member of American Mensa Ltd.
Robert “Rob”
LaPenta has served as our Executive Vice President and Chief Financial Officer since September 2019. Mr. LaPenta
has an extensive career spanning over 25 years in finance, accounting, consulting, capital markets origination, equity trading,
asset allocation and mergers and acquisitions and will be active in transaction sourcing, processing and execution. Mr. LaPenta
began his career as a Senior Associate at Coopers & Lybrand as a CPA responsible for managing audits, consulting, M&A
due diligence and special project engagements for multiple clients in various industries. Mr. LaPenta transitioned full time
into the investment banking sector spending the next 13 years focused on trading and capital market activities culminating in
the role of Managing Director and Co-head of Equity Trading at Bank of America Securities, LLC where he managed the firm’s
equity capital commitment, proprietary trading, secondary offerings and risk management within cash trading. In 2007, Mr. LaPenta
joined L-1 Identity Solutions, Inc. as Vice President of Mergers and Acquisitions and Corporate Strategy. Mr. LaPenta
managed the firms M&A processes from sourcing, structuring, valuation, diligence and financing of multiple transactions with
the most notable being the negotiation of the $1.6b sale of L-1 to Safran and BAE Systems. Following the sale of L-1, Mr. LaPenta
became a Partner of Aston Capital an alternative asset management firm of the LaPenta family office. and co-founded the Boundary
Group, an investment firm focused on private investments in the aerospace, defense, and intelligence markets. Mr. LaPenta
has previously served on the Board of Directors at Revolution Lighting Technologies, Inc. (RVLT: OTC), AFIX Technologies and The
Radiant Group and currently presides over the Audit Committee for TherapeuticsMD (TXMD: Nasdaq) (Audit Committee Chair), is a
Board observer for Amergint Technologies and sits as an Audit Committee member for St. David’s School New York City. Mr. LaPenta
graduated from Boston College with a Bachelor’s degree in Accounting and Finance and has been a registered CPA (inactive)
in the State of New York.
Timothy
Foufas has served as our Vice President and Chief Operating Officer since September 2019 and previously served as
our Chief Executive Officer from our inception until September 2019. Mr. Foufas has had a longstanding relationship with
the Gabelli organization since 1997 when he served as an analyst at Gabelli & Company Inc. covering multiple industries and
reporting directly to Mario Gabelli. He has also been a member of the Board of The LGL Group, Inc. (LGL:NYSE American) since 2007
and former board member of certain affiliates of the Gabelli organization. Mr. Foufas has a diverse background, including
experiences in industries such as technology, real estate, gaming, consumer products, and financial services. Since 2005, he has
served as Managing Partner of Plato Foufas & Company LLC, a financial services company, where he oversees all investment and
management activities of the firm. Prior to the successful divestiture of its investment portfolio, Mr. Foufas also served
as President of Levalon Properties LLC, a real estate property management company and as Senior Vice President of Bayshore Management
Company LLC. Prior to joining Bayshore, he was the Director of Investments at Liam Ventures Inc., a private equity investment
firm, where he was responsible for its venture capital and buyout investments. Mr. Foufas holds a MBA from Northwestern University’s
Kellogg Graduate School of Management and a Bachelor’s degree from Boston College. Mr. Foufas is active in various
civic institutions in Chicago having been a founding board member of Auxiliary Board of the John G. Shedd Aquarium and is currently
a Sustaining Guild Board Member of Boys & Girls Clubs of Chicago.
George
Anthony Bancroft II has served as our Vice President since our inception. He is the Aerospace & Defense
team leader in research for GAMCO Investors. Mr. Bancroft and his team run the Gabelli Aerospace & Defense annual institutional
investment conference, now entering its 25th year. He has been an analyst as part of the Gabelli group industrial team since 2009.
Prior to Gabelli, Mr. Bancroft was in the United States Marine Corp., where he remains currently active, serving as a Lieutenant
Colonel in the Marine Corps Reserve. Mr. Bancroft was an F/A-18 Fighter Pilot in the Marine Corps from May 1998 to July
2009, during which time he had extensive leadership experience in aviation operations, logistics, and maintenance. Mr. Bancroft
received a Bachelor’s degree in Systems Engineering from the United States Naval Academy and an MBA in Finance and Economics
from Columbia Business School.
Hendi
Susanto has served as our Vice President since our inception. He has been Vice President, Equity Research, at Gabelli
since August 2007 and has also been a Portfolio Manager at GAMCO Investors, Inc. since December 2015. Mr. Susanto joined
the Board of Directors of The LGL Group, Inc. (LGL: NYSE American) in June 2016. Prior to 2007, Mr. Susanto worked as an
Analyst at Silicon Laboratories (SLAB:NASD) and a supply chain management consultant in the technology sector at JDA Software.
Mr. Susanto received a Bachelor’s degree summa cum laude in Chemical Engineering from the University of Minnesota,
an MS in Chemical Engineering from MIT, with a minor in Quantitative Finance from MIT Sloan, and an MBA in Finance from the Wharton
school.
Patrick
Huvane has served as our Vice President, Finance and Accounting since September 2019, and previously served as our
Chief Financial Officer from our inception until September 2019. Mr. Huvane has served as the Chief Financial Officer of
Teton Advisors, Inc. (TETA:OTC) since 2019. Mr. Huvane has also served as Senior Vice President, Business Development of
The LGL Group, Inc. (LGL: NYSE American) since April 2019. Mr. Huvane has a broad background in finance working in publicly
traded companies including due diligence for acquisitions. He was Vice President, Finance of Standard Diversified Inc. (NYSE American:
SDI) from December 2018 to April 2019. From November 2007 to December 2018, Mr. Huvane was employed by Tiptree Inc. (NASD:
TIPT), a diversified holding company that operates across multiple industry sectors with a focus on financial services such as
insurance, real estate, asset management, and specialty finance. Mr. Huvane served in various capacities including Chief
Accounting Officer. Prior to joining Tiptree in 2007, Mr. Huvane was Controller at Axon Financial Services, Inc. from 2006
to 2007. For the five years prior to joining Axon, Mr. Huvane was employed at Fletcher Asset Management, Inc. and held positions
of increasing responsibility, including as Chief Financial Officer and Chief Compliance Officer. Prior to joining Fletcher, Mr. Huvane
held positions of increasing responsibility at large financial institutions such as Credit Suisse and Sumitomo Bank. He began
his career as an auditor at Ernst & Young in 1990. Mr. Huvane received a Bachelor’s degree from Manhattan College
where he was a part-time adjunct faculty member of its Department of Economics & Finance from 2008 to 2009. He received
his MBA from New York University. Mr. Huvane is a Certified Public Accountant in New York and is also a CFA charterholder.
Mary
E Gallagher has served as a member of our board of directors since September 2019. Ms. Gallagher served as Chief
Financial Officer for Wheels Up from 2016 to 2018. Wheels Up is a membership-based private aviation company. Prior to joining
Wheels Up, Ms. Gallagher spent 12 years with United Technologies Corporation (NYSE: UTX), a global leader in aerospace and building
technologies. Ms. Gallagher held a variety of top financial roles at UTX, most recently as CFO of Sikorsky Aircraft from November
of 2013 through June of 2016. From 1996 to 2004 Ms. Gallagher served as the VP Controller and Chief Accounting Officer of Olin
Corporation (NYSE: OLN), a global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition.
Prior to joining Olin, Ms. Gallagher spent 9 years with KPMG in various positions in the audit, mergers/acquisitions, consulting
and training groups. Ms. Gallagher graduated from the University of Vermont in 1987 with a Bachelor’s degree in Accounting
and earned her MBA from the Massachusetts Institute of Technology in 2008 as a UTC sponsored participant in the Sloan Fellows
Program. Ms. Gallagher is a Certified Public Accountant in New York. We believe Ms. Gallagher is qualified to serve on our board
of directors due to her business experience and contacts and relationships as well as her background as a CPA.
Michael J. Ferrantino has
served as a member of our Board of Directors since September 2019. Mr. Ferrantino has served on the board of directors of
The LGL Group (LGL: NYSE American) since 2019. Since 2015, Mr. Ferrantino has served as Chief Executive Officer for InterEx
Inc., a full-service company specializing in the design, fabrication, management and service of custom exhibit spaces for
the trade show retail and museum markets. From 2012 to 2014, Mr. Ferrantino was a Vice President at CTS Corporation (NYSE:
CTS), a leading designer and manufacturer of electronic components and sensors, as well as a provider of electronics manufacturing
services to manufacturers in the automotive, communications, medical, defense and aerospace industries. Prior to this, Mr. Ferrantino
spent 11 years at Valpey-Fisher Corporation (NASDAQ:VPF); a company specializing in the marketing, design, and manufacture
of high-accuracy frequency control subsystems used in digital and optical telecommunications systems. Mr. Ferrantino
served in several leadership roles at VPF; most recently as the President and Chief Executive Officer. Previously, Mr. Ferrantino
served as Vice President at Performax, Inc. from 2001to 2003. Performax is a company that specialized in the design, administration,
and management of fully customized health and benefit plans. From 2000 to 2001, Mr. Ferrantino was a Vice President at Bicycle
Health Benefits, Inc. after beginning his career at Eaton Corporation as a Product Marketing Manager. Mr. Ferrantino currently
serves on the board of directors of The Gabelli Equity Trust Inc. and Gabelli Utility Trust. Mr. Ferrantino graduated from
Rensselaer Polytechnic Institute in 1994 with a Bachelor’s degree in Materials Engineering and earned his MBA from Loyola
College in 2003. We believe Mr. Ferrantino is qualified to serve on our board of directors due to his business experience
and contacts and relationships.
Michael
C. Martin has served as a member of our Board of Directors since September 2019. Mr. Martin is a cofounder and
Managing Partner of Herndon Capital, a Washington, D.C. based private equity firm founded in 2019 and focused on companies within
the national security and defense sectors. Prior to founding Herndon Capital, Mr. Martin was a portfolio manager with UBS
O’Connor, a $6 billion multi strategy global hedge fund, where he managed a long short equity portfolio and led the
investment team through 600 initial public offerings and private placements, from 2012 to 2018. Prior to O’Connor, Mr. Martin
was a Director on the convertible securities team at Bank of America Merrill Lynch. Mr. Martin served as the co-leader of
the Bank of America Metro New York Veterans Group and was part of the leadership team that brought together five of the nation’s
largest banks to create VOWS (Veterans on Wall Street) with the mission of supporting transitioning military veterans into the
private sector. As a Navy SEAL officer, Mr. Martin served worldwide in several leadership roles as the operations officer
of two SEAL Teams and as a deployed task unit commander. Mr. Martin conducted several deployments to include Afghanistan
and Iraq and was awarded numerous combat awards and medals including the Bronze Star with Valor. Mr. Martin received a Bachelor’s
degree in Mathematics with merit from the United States Naval Academy and currently serves as Vice Chairman of the Board of Directors
on the Navy SEAL Foundation. We believe Mr. Martin is qualified to serve on our board of directors due to his business and
board experience, contacts and relationships.
Number
and terms of office of officers and directors
Our
board of directors consists of four members and is divided into three classes, with only one class of directors being elected
in each year, and with each class (except for those directors appointed prior to our first annual meeting of stockholders) serving
a three-year term. In accordance with NYSE corporate governance requirements, we are not required to hold an annual meeting
until one year after our first fiscal year end following our listing on the NYSE. The term of office of the first class of directors,
consisting of Michael Martin, will expire at our first annual meeting of stockholders. The term of office of the second class
of directors, consisting of Mary Gallagher and Michael Ferrantino, will expire at our second annual meeting of stockholders. The
term of office of the third class of directors, consisting of Marc J. Gabelli, will expire at our third annual meeting of stockholders.
Our
officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific
terms of office. Our board of directors is authorized to appoint such officers as it deems appropriate pursuant to our amended
and restated certificate of incorporation.
Director
Independence
NYSE
rules require that a majority of the board of directors of a company listed on NYSE must be composed of “independent directors.”
An “independent director” 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. We have
determined that Mary Gallagher, Michael Ferrantino and Michael Martin are independent directors under the NYSE listing rules.
Our independent directors hold regularly scheduled meetings at which only independent directors are present.
Any
affiliated transactions will be on terms no less favorable to us than could be obtained from independent parties. Our board of
directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.
Committees
of the Board of Directors
We
have three standing committees: an audit committee, a nominating committee, and a compensation committee. Each such committee
is composed of solely independent directors.
Audit
Committee
Effective
November 6, 2019, we established an audit committee of the board of directors, which consists of Mary Gallagher, Michael Ferrantino
and Michael Martin, each of whom is an independent director under the NYSE’s listing standards. The audit committee’s
duties, which are specified in our Audit Committee Charter, include, but are not limited to:
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reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
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discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
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discussing with management major risk assessment and risk management policies;
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monitoring the independence of the independent auditor;
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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;
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reviewing and approving all related-party transactions;
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inquiring and discussing with management our compliance with applicable laws and regulations;
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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;
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appointing or replacing the independent auditor;
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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;
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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
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|
approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
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During
the fiscal year ended December 31, 2019, our audit committee held one meeting. Each of our audit committee members attended such
meeting.
Financial
Experts on Audit Committee
The
board of directors has determined that Ms. Gallagher qualifies as an “audit committee financial expert,” as defined
under rules and regulations of the SEC.
Nominating
Committee
Effective
November 6, 2019, we established a nominating committee of the board of directors, which consists of Mary Gallagher, Michael Ferrantino
and Michael Martin, each of whom is an independent director under the NYSE’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.
During
the fiscal year ended December 31, 2019, our nominating committee did not hold any meetings.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that persons to
be nominated:
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should
have demonstrated notable or significant achievements in business, education or public
service;
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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
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should
have the highest ethical standards, a strong sense of professionalism and intense dedication
to serving the interests of the stockholders.
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The
Nominating Committee will consider a number of qualifications relating to management and leadership experience, background and
integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating
committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that
arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse
mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
There
have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
Compensation
Committee
Effective
November 6, 2019, we established a compensation committee of the board of directors, which consists of Mary Gallagher, Michael
Ferrantino and Michael Martin, each of whom is an independent director under the NYSE’s listing standards. The compensation
committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
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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 based on such evaluation;
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reviewing
and approving the compensation of all of our other Section 16 executive officers;
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reviewing
our executive compensation policies and plans;
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implementing
and administering our incentive compensation equity-based remuneration plans;
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assisting
management in complying with our proxy statement and annual report disclosure requirements;
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approving
all special perquisites, special cash payments and other special compensation and benefit
arrangements for our executive officers and employees;
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producing
a report on executive compensation to be included in our annual proxy statement; and
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reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors.
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Notwithstanding
the foregoing, as indicated below, other than the $10,000 per month administrative fee, no compensation of any kind, including
finders, consulting or other similar fees, will be paid to any of our existing stockholders, including 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.
During
the fiscal year ended December 31, 2019, our compensation committee did not hold any meetings.
Advisory
Committee
In
December 2019, our board of directors approved the formation of an advisory committee to be comprised of individuals who will
assist management and the board in all aspects of our operations including activities aimed at effecting an initial business combination.
Code
of Ethics
Effective
November 6, 2019, we adopted a code of ethics that applies to all of our executive officers, directors, and employees. The code
of ethics codifies the business and ethical principles that govern all aspects of our business. We will provide, without charge,
upon request, copies of our code of ethics. Requests for copies of our code of ethics should be sent in writing to our executive
office.
ITEM
11. EXECUTIVE COMPENSATION
Executive
Compensation
No
executive officer has received any cash compensation for services rendered to us. We pay LGL Systems Nevada Management Partners
LLC, an affiliate of our Sponsor, an aggregate fee of $10,000 per month for providing us with office space and certain office
and secretarial services. However, this arrangement is solely for our benefit and is not intended to provide our officers or directors
compensation in lieu of a salary.
Other
than the $10,000 per month administrative fee, the payment of consulting, success or finder fees to our Sponsor, officers, directors,
initial stockholders or their affiliates in connection with the consummation of our initial business combination and the repayment
of loans that may be made by our Sponsor to us, no compensation or fees of any kind, including finder’s, consulting fees
and other similar fees, will be paid to our Sponsor, initial stockholders, special advisors, members of our management team or
their respective affiliates, for services rendered prior to or in connection with the consummation of our initial business combination
(regardless of the type of transaction that it is). However, they will receive reimbursement for any out-of-pocket expenses
incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business
due diligence on suitable target businesses and business combinations as well as traveling to and from the offices, plants or
similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses
reimbursable by us.
After
our initial business combination, members of our management team who remain with us may be paid consulting, management or other
fees from the combined company with any and all amounts being fully disclosed to stockholders, to the extent then known, in the
proxy solicitation materials furnished to our stockholders. However, the amount of such compensation may not be known at the time
of the stockholder meeting held to consider our initial business combination, as it will be up to the directors of the post-combination business
to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its
determination in a Current Report on Form 8-K or a periodic report, as required by the SEC.
Since
our formation, we have not granted any stock options or stock appreciation rights or any other awards under long-term incentive
plans to any of our executive officers or directors.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The
following table sets forth information regarding the beneficial ownership of our common stock by:
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each
person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
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each
of our officers and directors; and
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all
of our officers and directors as a group.
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Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. The following table does not reflect record of beneficial ownership of the
warrants included in the units offered in the IPO or the Private Warrants as they are not exercisable within 60 days of the date
hereof.
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Amount and
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Approximate
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Nature of
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Percentage of
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Beneficial
|
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Outstanding
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Name and Address of Beneficial Owner(1)
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Ownership
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Shares
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Marc Gabelli(3)
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3,440,808
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(2)
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20
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%
|
Timothy Foufas(3)
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3,440,808
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(2)
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20
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%
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Mary Gallagher
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0
|
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0
|
%
|
Michael Ferrantino
|
|
|
0
|
|
|
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0
|
%
|
Rob LaPenta(3)
|
|
|
3,440,808
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(2)
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|
|
20
|
%
|
Michael Martin
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|
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0
|
|
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0
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%
|
John Mega
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0
|
|
|
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0
|
%
|
LGL Systems Acquisition Holding Company, LLC(4)
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|
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3,440,808
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(2)
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|
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20
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%
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LGL Systems Nevada Management Partners LLC(4)
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3,440,808
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(2)
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|
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20
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%
|
All directors and executive officers as a group (seven individuals)
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3,440,808
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(2)
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|
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20
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%
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UBS O’Connor LLC(5)
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1,445,000
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8.3
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%
|
RP Investment Advisors LP(6)
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|
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1,244,400
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7.2
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%
|
Linden Advisors LP(7)
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|
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863,863
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5
|
%
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*
|
Less
than 1%.
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(1)
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Unless
otherwise indicated, the business address of each of the individuals is 165 W. Liberty St., Suite 220, Reno, NV 89501.
|
(2)
|
Interests
shown consist solely of founder shares, classified as Class B common stock. Such shares will automatically convert into Class
A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment.
|
(3)
|
LGL
Systems Nevada Management Partners LLC will appoint Bob LaPenta, Rob LaPenta, Timothy Foufas, Marc Gabelli and another person
appointed by Mr. Gabelli as managers to approve actions of our sponsor. Each manager has one vote, and the approval of
three of the five managers is required for approval of an action of the sponsor. Under the so-called “rule of three”,
if voting and dispositive decisions regarding an entity’s securities are made by three or more individuals, and a voting
or dispositive decision requires the approval of a majority of those individuals, then none of the individuals is deemed a
beneficial owner of the entity’s securities. Based on the foregoing, no individual manager exercises voting or dipositive
control over any of the securities held by our sponsor, even those in which he directly owns a pecuniary interest. Accordingly,
none of them will be deemed to have or share beneficial ownership of such securities. However, we have included the full amount
of the shares for each individual for presentation purposes.
|
(4)
|
Represents
shares held by our sponsor, of which LGL Systems Nevada Management Partners LLC is the managing member.
|
(5)
|
Represents
shares beneficially held by UBS O’Connor LLC. UBS O’Connor LLC serves as investment manager to (i) Nineteen77
Global Multi-Strategy Alpha Master Limited and (ii) Nineteen77 Global Merger Arbitrage Master Limited. Based on
information contained in a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2020.
|
(6)
|
Represents
shares held by RP Investment Advisors LP, RP Select Opportunities Master Fund Ltd., RP Debt Opportunities Fund Ltd. and RP
Alternative Global Bond Fund. RP Select Opportunities Master Fund Ltd., RP Debt Opportunities Fund Ltd. and RP Alternative
Global Bond Fund. RP Investment Advisors LP is the investment advisor of, and may be deemed to beneficially own securities
owned by, RP Select Opportunities Master Fund Ltd., RP Debt Opportunities Fund Ltd. and RP Alternative Global Bond Fund. Based
on information contained in a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2020.
|
(7)
|
Represents
shares beneficially held by Linden Advisors LP and Siu Min (Joe) Wong. This amount consists of 774,182 Shares held
by Linden Capital and 89,681 Shares held by separately managed accounts. Based on information contained in a Schedule 13G/A
filed with the Securities and Exchange Commission on January 14, 2020.
|
All
of the founders’ shares outstanding prior to the IPO have been placed in escrow with Continental Stock Transfer & Trust
Company, as escrow agent, until (i) with respect to 50% of such 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 common stock equals or exceeds $12.00 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 (ii) with respect to the remaining 50% of such shares, one year
after the date of the consummation of our initial business combination, or earlier if, subsequent to our initial business combination,
we consummate a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having
the right to exchange their shares of common stock 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 for transfers, assignments
or sales (i) among our initial stockholders or to our initial stockholders’ members, officers, directors, consultants or
their affiliates, (ii) to a holder’s stockholders or members upon its liquidation, (iii) by bona fide gift to a member of
the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate
family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified
domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial business
combination, or (vii) in connection with the consummation of a business combination at prices no greater than the price at which
the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees
to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our stockholders,
including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared.
If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable
to effect a business combination and liquidate, there will be no liquidation distribution with respect to the founders’
shares.
Our
executive officers and our Sponsor are our “promoters,” as that term is defined under the federal securities laws.
Equity
Compensation Plans
As
of December 31, 2019, we had no compensation plans (including individual compensation arrangements) under which equity securities
of the registrant were authorized for issuance.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
For
a complete discussion regarding certain relationships and related transactions, see the section titled “Certain Transactions”
contained in our prospectus dated November 4, 2019, incorporated by reference herein.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The
following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, for services rendered.
Audit
Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements
and services that are normally provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for
professional services rendered for the audit of our annual financial statements, review of the financial information included
in our Forms 10-Q for the respective periods and other required filings with the SEC for the period from April 30, 2019 (inception)
through December 31, 2019 totaled $61,800. The above amounts include interim procedures and audit fees, as well as attendance
at audit committee meetings.
Audit-Related
Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance
of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include
attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting
standards. We did not pay Marcum for consultations concerning financial accounting and reporting standards for the period from
April 30, 2019 (inception) through December 31, 2019.
Tax
Fees. We did not pay Marcum for tax planning and tax advice for the period from April 30, 2019 (inception) through December
31, 2019.
All
Other Fees. We did not pay Marcum for other services for the period from April 30, 2019 (inception) through December 31, 2019.
Pre-Approval
Policy
Our
audit committee was formed upon the consummation of our IPO. As a result, the audit committee did not pre-approve all of the foregoing
services, although any services rendered prior to the formation of our audit committee were approved by our board of directors.
Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing
services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject
to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior
to the completion of the audit).
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
LGL Systems Acquisition
Corp. (the “Company”) was incorporated in Delaware on April 30, 2019. The Company was formed for the purpose of entering
into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination
with one or more businesses or entities (the “Business Combination”). The Company was originally formed in Delaware
under the name MTRON Systems Acquisition Corp. On August 19, 2019, the Company changed its name to LGL Systems Acquisition Corp.
Although the Company
is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to
focus its search on companies in the defense, aerospace and communications industries. 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.
As of December 31,
2019, the Company had not commenced any operations. All activity for the period from April 30, 2019 (inception) through December
31, 2019 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which
is described below, and identifying a target for a Business Combination. The Company will not generate any operating revenues
until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form
of interest income from the proceeds derived from the Initial Public Offering.
The registration
statements for the Company’s Initial Public Offering were declared effective on November 6, 2019. On November 12, 2019,
the Company consummated the Initial Public Offering of 17,250,000 units (the “Units” and, with respect to the shares
of common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, which includes the full exercise
by the underwriters of the over-allotment option to purchase an additional 2,250,000 Units, generating gross proceeds of $172,500,000,
which is described in Note 3.
Simultaneously with
the closing of the Initial Public Offering, the Company consummated the sale of 5,200,000 warrants (the “Private Warrants”)
at a price of $1.00 per Private Warrant in a private placement to LGL Systems Acquisition Holding Company, LLC (the “Sponsor”),
generating gross proceeds of $5,200,000, which is described in Note 4.
Transaction costs
amounted to $9,971,662, consisting of $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees and $484,162 of
other offering costs. In addition, $1,549,302 of cash was held outside of the Trust Account (as defined below) and is available
for working capital purposes.
Following the closing
of the Initial Public Offering on November 12, 2019, an amount of $172,500,000 ($10.00 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Private Warrants was placed in a trust account (the “Trust
Account”) located in the United States, which was 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 “Investment Company 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 Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (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 the sale of the Units in the Initial
Public Offering and the sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied
generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business
Combination successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80%
of the assets held in the Trust Account (excluding taxes payable on income earned on the Trust Account and deferred underwriting
commissions) at the time of the agreement to enter into an initial Business Combination. The Company will only complete a 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.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
The Company will
provide its holders of the outstanding Public Shares (the “public stockholders”) 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 stockholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company
will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its
discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in
the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants, including the Private Warrants. The Company will proceed
with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and, solely if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business
Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business
or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended
and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities
and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval
for business or 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 stockholder approval in connection with a Business
Combination, the Company’s Sponsor has agreed to vote the Founder Shares (as defined in Note 5) and any Public Shares purchased
after the Initial Public Offering in favor of approving a Business Combination and not to convert any shares in connection with
a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer in connection with a
Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they
vote for or against the proposed transaction or do not vote at all.
Notwithstanding the
foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to
the tender offer rules, the Amended and Restated Certificate of Incorporation will provide that a public stockholder, together
with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”,
will be restricted from redeeming its shares with respect to more than an aggregate of 20% or more of the Public Shares, without
the prior consent of the Company.
The Sponsor has agreed
(a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion
of a Business Combination or an amendment to the Company’s Certificate of Incorporation described below, (b) to waive its
rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to consummate
a Business Combination, and (c) not to propose an amendment to the Company’s Certificate of Incorporation to modify a public
stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or affect
the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete
a Business Combination within the required time period, unless the Company provides the public stockholders with the opportunity
to redeem their Public Shares in conjunction with any such amendment.
The Company will have
until November 12, 2021 (or such later date as may be approved by stockholders in an amendment to the Amended and Restated Certificate
of Incorporation) to complete a Business Combination (the “Combination Period”). If the Company is unable to complete
a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not 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 franchise and income taxes and net of up to $50,000
of interest available to be used for liquidation expenses, divided by the number of then outstanding Public Shares, which redemption
will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating
distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate,
subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants,
which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
In order to protect
the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a
third party 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 to below (i) $10.00 per Public
Share and (ii) the actual amount per Public Share held in the trust account as of the date of the liquidation of the trust account,
if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, except as to any claims
by a third party who executed an agreement with the Company waiving any right, title, interest or claim of any kind they may have
in or to any monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters
of 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,
the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce
the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Nasdaq Notification and Transfer of
Listing
On December 20, 2019,
the Company received a notice from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”)
indicating that, based upon the Staff’s determination, the Class A common stock contained in the Company’s units did
not satisfy the minimum 300 round lot holders requirement for the listing of its units on The Nasdaq Capital Market, as set forth
in the initial listing requirements of Nasdaq Listing Rule 5505(a)(3), or the minimum 300 public holders required for continued
listing, as set forth in the continued listing requirements of Rule 5550(a)(3).
The Company appealed the delisting letter
to the Nasdaq Hearings Panel (“Panel”) and on February 12, 2020, the Panel issued its decision (“Decision”)
to grant the Company’s request for continued listing, based on its finding that the Company has met the requirements for
listing on Nasdaq. The Nasdaq Listing and Hearing Review Council may, on its own motion, determine to review the Decision until
March 28, 2020.
Notwithstanding the foregoing, effective
March 13, 2020, the Company transferred the listing of its securities to the New York Stock Exchange (“NYSE”). The
units, Class A common stock and warrants are now listed on the NYSE under the symbols “DFNS.U,” “DFNS”
and “DFNS WS,” respectively.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying
financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging growth company
The Company is an
“emerging growth company,” as defined in Section 2(a) of 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its 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 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 accounting 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 confirming events. Accordingly, the actual
results could differ significantly from those estimates.
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 December 31, 2019.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Marketable securities held in Trust Account
At December 31, 2019,
the assets were held in shares of a money market fund that invests primarily in U.S. Treasury Bills.
Common stock subject to possible redemption
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as
a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside
of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible
redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s
balance sheet.
Income taxes
The Company follows
the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.
ASC 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 recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties
as of December 31, 2019. 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 is subject to income tax examinations by major taxing authorities
since inception.
Net loss per common share
Net loss per common
share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. The
Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption
at December 31, 2019, which are not currently redeemable and are not redeemable at fair value, 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.
The Company has not considered the effect of warrants to purchase 13,825,000 shares of common stock that were sold in the Initial
Public Offering and the private placement in the calculation of diluted loss per share, since the exercise of the warrants is
contingent upon the occurrence of future events. As a result, diluted loss per share is the same as basic loss per share for the
period presented.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Reconciliation of net loss per common
share
The Company’s
net loss is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares
only participate in the earnings of the Trust Account and not the income and losses of the Company. Accordingly, basic and diluted
loss per common share is calculated as follows:
|
|
For the Period from April 30,
2019 (inception) through
|
|
|
|
December 31, 2019
|
|
Net loss
|
|
$
|
(102,604
|
)
|
Less: Income attributable to shares subject to redemption
|
|
|
(18,026
|
)
|
Adjusted net loss
|
|
$
|
(120,630
|
)
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
4,057,455
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.03
|
)
|
Concentration of credit risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which,
at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has 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 820, “Fair Value Measurements
and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their
short-term nature.
Recently issued accounting standards
Management does not
believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material
effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 17,250,000 Units, at $10.00 per Unit, which includes the full exercise by the underwriter of
its option to purchase an additional 2,250,000 Units. Each Unit consists of one share of Class A common stock and one-half of
one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of
Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with
the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 5,200,000 Private Warrants at a price of $1.00
per Private Warrant, for an aggregate purchase price of $5,200,000. Each Private Warrant is exercisable to purchase one share
of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the Private
Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not
complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Warrants will be used
to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Warrants will expire
worthless.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On April 30, 2019,
the Sponsor purchased 3,593,750 shares of Class B common stock (the “Founder Shares”) for an aggregate purchase price
of $25,000, or approximately $0.007 per share. As used herein, unless the context otherwise requires, “Founder Shares”
shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. On November 6, 2019, the Company
effected a stock dividend of 0.2 shares for each share outstanding, resulting in an aggregate of 4,312,500 Founder Shares being
outstanding, of which an aggregate of up to 562,500 shares were subject to forfeiture by the Sponsor to the extent that the underwriters’
over-allotment option was not exercised in full or in part so that the Sponsor would own, on an as-converted basis, 20% of the
Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public
Shares in the Initial Public Offering). All share and per-share amounts have been retroactively restated to reflect the stock
dividend. As a result of the underwriters’ election to fully exercise the over-allotment option, 562,500 Founder Shares are
no longer subject to forfeiture.
The Founder Shares
are identical to the Class A common stock included in the Units sold in the Initial Public Offering except as described below
and that the Founder Shares automatically convert into shares of Class A common stock at the time of the Company’s Initial
Business Combination and are subject to certain transfer restrictions, as described in more detail below. Holders of Founder Shares
may also elect to convert their shares of Class B convertible common stock into an equal number of shares of Class A common stock,
subject to adjustment as provided above, at any time.
The Sponsor has agreed
(a) to waive its redemption rights with respect to its Founder Shares in connection with the completion of a Business Combination
or an amendment to the Company’s Certificate of Incorporation described below, (b) to waive its rights to liquidating distributions
from the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not
to propose an amendment to the Company’s Certificate of Incorporation to modify a public stockholders’ ability to
convert or sell their shares to the Company in connection with a Business Combination or affect the substance or timing of the
Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within
the required time period, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares
in conjunction with any such amendment.
The Sponsor has agreed,
subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares following the consummation of the Initial
Public Offering until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent
to the Initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds
$12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading
days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, or (y) the date on
which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property.
The Sponsor has agreed,
subject to limited exceptions, not to transfer, assign or sell any of the Private Warrants until 30 days after the completion
of the Initial Business Combination. The Sponsor and the Company’s officers and directors have also agreed to vote any Founder
Shares held by them and any Public Shares purchased after the Initial Public Offering (including in open market and privately
negotiated transactions) in favor of a Business Combination.
Promissory Note — Related Party
On May 2, 2019, the
Sponsor agreed to loan the Company an aggregate of up to $150,000 to cover expenses related to the Initial Public Offering pursuant
to a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of (i) April 30,
2020, (ii) the completion of the Initial Public Offering or (iii) the date on which the Company determines not to proceed with
the Initial Public Offering. The Note was repaid on December 19, 2019.
Administrative Support Agreement
The Company entered
into an agreement whereby, commencing on the November 5, 2019 through the earlier of the Company’s consummation of a Business
Combination and its liquidation, the Company will pay an affiliate of the Sponsor a total of $10,000 per month for office space,
utilities and secretarial and administrative support. For the period from April 30, 2019 (inception) through December 31, 2019,
the Company incurred $18,333 in fees for these services, of which such amount is included in accrued expenses in the accompanying
balance sheet.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Sponsor, the Company’s officers or directors or their affiliates
may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital
Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon consummation of a Business
Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Warrants. In the event
that a Business Combination does not close, the Company may use a portion of the proceeds 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.
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on November 6, 2019, the holders of the Founder Shares, Private Warrants (and their underlying securities)
and any warrants that may be issued upon conversion of working capital loans (“Working Capital Warrants”), if any,
will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of
Class A common stock). These holders will be entitled to certain demand and “piggyback” registration rights.
The holders of Founder
Shares, Private Warrants and Working Capital Warrants will not be able to sell these securities until the termination of the applicable
lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing
of any such registration statements.
Underwriting Agreement
The underwriters
are entitled to a deferred fee of $0.35 per Unit, or $6,037,500. The deferred fee will be forfeited by the underwriters solely
in the event that the Company fails to complete a Business Combination within the Combination Period, subject to the terms of
the underwriting agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock 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. At
December 31, 2019, there were no shares of preferred stock issued or outstanding.
Common Stock
— The authorized common stock of the Company includes up to 75,000,000 shares of Class A common stock and 10,000,000 shares
of Class B convertible common stock. The shares of Class B convertible common stock will automatically convert into shares of
Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock
dividends, reorganizations, recapitalizations and the like. In the case that additional shares of Class A common stock, or equity-linked
securities convertible or exercisable for shares of Class A common stock, are issued or deemed issued in excess of the amounts
sold in the Initial Public Offering and related to the closing of an initial Business Combination, the ratio at which the Class
B common stock will convert into shares of Class A common stock will be adjusted so that the number of shares of Class A common
stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate 20% of the sum of the shares
outstanding upon the completion of the Initial Public Offering plus the number of shares of Class A common stock and equity-linked
shares issued or deemed issued in connection with the initial Business Combination (net of conversions), excluding any shares
of Class A common stock or equity-linked securities issued to any seller in the initial Business Combination and any Private Warrants
or warrants issued to the Sponsor, any of the Company’s officers or directors, or any of their affiliates upon conversion
of Working Capital Loans. If the Company enters into a Business Combination, it may (depending on the terms of such Business Combination)
be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time
as the Company’s stockholders vote on the Business Combination, to the extent the Company seeks stockholder approval in
connection with the Business Combination. Holders of the Company’s common stock are entitled to one vote for each share
of common stock.
At December 31, 2019,
there were 984,927 shares of Class A common stock issued and outstanding, excluding 16,265,073 shares of common stock subject
to possible redemption and 4,312,500 shares of Class B common stock issued and outstanding.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Warrants —
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public
Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) November 12, 2020. No warrants will be exercisable for cash unless the Company has an effective and current registration
statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such
shares of common stock. Under the terms of the warrant agreement, the Company has agreed that as soon as practicable, but in no
event later than 15 business days after the closing of the initial Business Combination, the Company will use its best efforts
to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the
shares of Class A common stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with
the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration statement covering the shares of common
stock issuable upon exercise of the public warrants is not effective within 60 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 the exemption provided
by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption,
is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five
years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the warrants
become exercisable, the Company may redeem the Public Warrants:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption;
|
|
●
|
if,
and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted
for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to adjustment as described
below) for any 20 trading days within a 30-trading day period ending on the third business day prior to the notice of redemption
to the warrant holders; and
|
|
●
|
If,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the
warrants.
|
If the Company calls
the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants
to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price
and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not
be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect
to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with
the respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants
and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they
are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the
initial purchaser or its permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such
holders on the same basis as the Public Warrants.
In addition, if (x)
the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with
the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per share of common
stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors,
and in the case of any such issuance to our sponsor, initial stockholders or their affiliates, without taking into account any
founders’ shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more
than 50% of the total equity proceeds, and interest thereon, available for the funding of an initial Business Combination on the
date of the consummation of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummated
an initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the
warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at
which we issue the additional shares of common stock or equity-linked securities, and the $18.00 per share redemption trigger
price of the warrants will be adjusted (to the nearest cent) to be equal to 180% of the greater of (i) the Market Value or (ii)
the price at which we issue the additional shares of common stock or equity-linked securities.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 8. INCOME TAX
The Company’s net deferred tax asset
at December 31, 2019 is as follows:
Deferred tax asset
|
|
|
|
Net operating loss carryforward
|
|
$
|
27,275
|
|
Valuation allowance
|
|
|
—
|
|
Deferred tax asset
|
|
$
|
27,275
|
|
The income tax benefit for the period from
April 30, 2019 (inception) through ended December 31, 2019 consists of the following:
Federal
|
|
|
|
Current
|
|
$
|
—
|
|
Deferred
|
|
|
(27,275
|
)
|
|
|
|
|
|
State
|
|
|
|
|
Current
|
|
$
|
—
|
|
Deferred
|
|
|
—
|
|
Change in valuation allowance
|
|
|
—
|
|
Income tax benefit
|
|
$
|
(27,275
|
)
|
As of December 31,
2019, the Company had U.S. federal and state net operating loss carryovers (“NOLs”) of $129,879 available to offset
future taxable income. These NOLs carryforward indefinitely. In accordance with Section 382 of the Internal Revenue Code, deductibility
of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined under the regulations
In assessing the realization of the deferred
tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After
consideration of all of the information available, management determined that a valuation allowance was not required.
A reconciliation
of the federal income tax rate to the Company’s effective tax rate at December 31, 2019 is as follows:
Statutory federal income tax rate
|
|
|
21.0
|
%
|
State taxes, net of federal tax benefit
|
|
|
0.0
|
%
|
Income tax provision
|
|
|
21.0
|
%
|
The Company files
income tax returns in the U.S. federal jurisdiction in various state and local jurisdictions and is subject to examination by
the various taxing authorities. The Company’s tax returns since inception remain open and subject to examination. The Company
considers Nevada to be a significant state tax jurisdiction.
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.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
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 December 31, 2019,
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
172,626,688
|
|
NOTE 10. SUBSEQUENT EVENTS
The Company
evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial
statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent
events that would have required adjustment or disclosure in the financial statements.
On January 2, 2020, the Company entered
into an agreement with Jefferies LLC (“Jefferies”), whereby Jefferies agrees to reimburse the Company for certain
fees and expenses incurred by the Company, related to the NASDAQ notification.
F-16