NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
|
|
1.
|
Organization and Business Operations
|
Incorporation
Axar Acquisition Corp., formerly known as AR
Capital Acquisition Corp. (the “Company”), was incorporated in Delaware on July 25, 2014.
Sponsor
The Company’s former sponsor is AR Capital,
LLC (“ARC”), a Delaware limited liability company. Upon the approval of the proposals at the Special Meeting in October
2016 (discussed below), Axar Master Fund Ltd., a Cayman Islands exempted company, became the Company’s new sponsor (the “Sponsor”).
Effective upon the closing of the Transfer
Agreement (as defined in Note 5) between the Sponsor and ARC, (i) Andrew Axelrod was appointed as Chief Executive Officer and Executive
Chairman of the Board of Directors, Lionel Benichou was appointed as Chief Financial Officer, and (ii) Nicholas S. Schorsch, Nicholas
Radesca and William Kahane each resigned from their positions as officers and directors of the Company.
Business Purpose
The Company is a blank check company formed
for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more operating businesses (“Business Combination”). The Company has neither engaged
in any operations nor generated significant revenue to date. The Company is an "emerging growth company" as defined in
Section 2(a) of the Securities Act of 1933, as amended of the "Securities Act" as modified by the Jumpstart Our Business
Startups Act of 2012 (the "JOBS Act").
The Company’s management has broad discretion
with respect to the initial Business Combination. However, there is no assurance that the Company will be able to successfully
effect an initial Business Combination.
Financing
The registration statement for the Company’s
initial public offering (the “Public Offering”, see Note 3) was declared effective by the Securities and Exchange Commission
(the “SEC”) on October 1, 2014. On October 7, 2014, the Company consummated the Public Offering of 24,000,000 units
(“Public Units” and, with respect to the common stock and warrants to purchase common stock included in the Public
Units, the “Public Shares” and “Public Warrants”) at $10.00 per Public Unit, generated gross proceeds of
$240 million and, in connection therewith, incurred offering costs of approximately $13.3 million, inclusive of $4.8 million of
underwriting fees paid upfront, and $8.4 million of Deferred Fees (as defined in Note 3), payable upon the consummation of the
initial Business Combination.
Simultaneously with the consummation of the
Public Offering, ARC, the Company’s former sponsor, purchased 6,550,000 warrants (“Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement (“Private Placement”), generated gross proceeds
of $6.55 million (see Note 5).
Liquidation Date
On October 6, 2016, the Company held a
special meeting of stockholders (“Special Meeting”). Following the approval of the proposals at the Special Meetings,
the Company filed an amendment to its amended and restated certificate of incorporation to: (i) extend the date by which it must
complete an initial Business Combination (“Extension”) to (a) October 1, 2017 or (b) if prior to October 1, 2017, the
Company publicly discloses that an extension past October 1, 2017 will not prevent the Company from maintaining the listing of
its securities on NASDAQ, December 31, 2017 (“Liquidation Date”) and (ii) to change the Company’s name from “AR
Capital Acquisition Corp.” to “Axar Acquisition Corp.”
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
If the Company does not complete the initial
Business Combination by the Liquidation Date, it shall (i) cease all operations except for the purposes of winding up; (ii) as
promptly as reasonably possible, but not more than ten business days thereafter, redeem 100% of 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 (less up to $100,000 of
interest to pay dissolution expenses), divided by the number of then Public Shares outstanding, and (iii) as promptly as 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, the balance
of the Company’s net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. 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 price per unit in the Public Offering.
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 an initial
Business Combination within the required time period.
Trust Account
An aggregate of $240 million ($10.00 per Unit)
from the net proceeds of the sale of the Public Units in the Public Offering and the Private Placement was placed in a U.S. based
trust account (the “Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee. The funds
held in the Trust Account were invested in U.S. government treasury securities with a maturity of 180 days or less or in money
market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act of 1940, as amended, which invest only in
direct U.S. government treasury obligations.
At the Special Meeting, stockholders holding
21,493,889 Public Shares exercised their right to redeem such Public Shares for a pro rata portion of the Trust Account. As a result,
an aggregate of approximately $215 million (or approximately $10.00 per share) was removed from the Trust Account to pay such stockholders.
As of March 31, 2017, the Company had approximately $25.2 million in its Trust Account, and the conversion amount per share in
connection with a Business Combination or liquidation would have been approximately $10.06 per share. An additional amount of approximately
$125,300 was deposited into the Trust Account in January 2017 pursuant to the Transfer Agreement between the Sponsor and ARC (as
defined in Note 5), which amount will be added on a pro rata basis to the per share redemption amount in connection with an initial
Business Combination or liquidation of the Trust Account.
The Company’s amended and restated certificate
of incorporation provides that, other than the withdrawal of interest to pay franchise and income taxes, none of the funds held
in the Trust Account will be released until the earlier of: (i) the completion of the initial Business Combination; or (ii) the
redemption of 100% of the shares of common stock included in the units sold in the Public Offering if the Company is unable to
complete an initial Business Combination prior to the Liquidation Date. The Company expects to withdraw the interest earned from
the funds held in the Trust Account to pay for franchise and income taxes.
Initial Business Combination
An initial Business Combination must occur with one or more target
businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account, excluding
deferred underwriting commissions, advisory fees and taxes payable on the income earned by the Trust Account, at the time of the
agreement to enter into the initial Business Combination.
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
In connection with an initial Business Combination,
the Company will either (i) seek stockholder approval of the initial Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their Public Shares, regardless of whether they vote for or against the
initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account
as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay franchise and income taxes, or (ii) provide stockholders
with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder
vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two
business days prior to commencement of the tender offer, including interest earned on the funds held in the Trust Account and not
previously released to the Company to pay franchise and income taxes. The decision as to whether the Company will seek stockholder
approval of the initial Business Combination or will allow stockholders to sell their shares in a tender offer will be made by
the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether
the terms of the transaction would otherwise require the Company to seek stockholder approval.
If the Company seeks stockholder approval,
it will complete the initial Business Combination only if a majority of the outstanding shares of common stock voted are voted
in favor of the initial Business Combination.
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. In such case, the Company would not proceed
with the redemption of its Public Shares and the related initial Business Combination, and instead may search for an alternate
initial Business Combination.
Liquidity and Going Concern
The Company will only have until the Liquidation
Date to complete a Business Combination. This mandatory liquidation and subsequent dissolution raises substantial doubt about the
Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after the Liquidation Date.
In the event of such liquidation, it is possible
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less
than the Initial Public Offering price per Unit in the Public Offering.
|
|
2.
|
Significant Accounting Policies
|
Basis of Presentation
The accompanying unaudited interim financial
statements of the Company should be read in conjunction with the audited financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2017. The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 and Article 10 of Regulation
S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information
and notes required by U.S. GAAP for a complete financial statement presentation. In the opinion of management, the interim financial
statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of
the financial position, results of operations and cash flows for the periods presented. Interim results are not necessarily indicative
of results for a full year.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”) permits emerging growth companies to delay complying with new or revised financial
accounting standards that do not yet apply to private companies (that is, those that have not had a Securities Act of 1933, as
amended (the “Securities Act”), registration statement declared effective or do not have a class of securities registered
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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.
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
Investments Held in Trust Account
The amounts held in the Trust Account represent
substantially all of the proceeds of the Public Offering and are classified as restricted assets since such amounts can only be
used by the Company in connection with the consummation of an initial Business Combination and to pay its tax obligation. As of
March 31, 2017, there was approximately $228,000 of interest income held in the Trust Account available to be released to the Company.
Net Loss Per Common Share
Net loss per common share is computed by dividing
net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period, plus
to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock
method. As the Company reported a net loss for the three months ended March 31, 2017 and 2016, the effect of the 12,000,000 warrants
issued in the Public Offering, 6,550,000 warrants issued in connection with the private placement, and 1,253,055 warrants issued
as dividends have not been considered in the diluted loss per common share because their effect would be anti-dilutive. An aggregate
of 1,363,870 and 22,955,179 common stock subject to possible redemption at March 31, 2017 and 2016, respectively, 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 earnings
in the Trust Account. As a result, diluted loss per common share is the same as basic loss per common share for the period.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying
amounts represented on the Company’s accompanying Balance Sheets.
Offering Costs
The Company complies with the requirements
of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering
costs consist principally of professional and registration fees incurred in connection with the Public Offering and that were charged
to stockholders’ equity. Upon the consummation of the Public Offering, an aggregate of $13.3 million, inclusive of $4.8 million
of underwriting fees paid upfront, and $8.4 million of Deferred Fees (as defined in Note 3) was charged to stockholders’
equity. In January 2016, upon the consultant’s inability to provide agreed services, an aggregate of $2.64 million in Deferred
Fees were reversed from deferred underwriting commissions and advisory fees and additional paid-in capital on the Company’s
accompanying Balance Sheet at March 31, 2017 and December 31, 2016 (see Note 3).
Common Stock Subject to Possible Redemption
Under the Company’s amended and restated
certificate of incorporation, all of the Public Shares may be redeemed for cash in connection with the Company’s liquidation
or a tender offer or stockholder approval in connection with an initial Business Combination. In accordance with FASB ASC 480,
“
Distinguishing Liabilities from Equity
”, redemption provisions not solely within the control of the Company
require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company
did not specify a maximum redemption threshold, its charter provides that in no event will it redeem the common stock sold as part
of the units in the Public Offering in an amount that would cause its net tangible assets (stockholders’ equity) to be less
than $5,000,001.
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
The Company recognizes changes in redemption
value immediately as they occur and will adjust the carrying value of the security to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of redeemable common stock shall be affected by charges against
additional paid-in capital in accordance with ASC 480.
Accordingly, at March 31, 2017 and December
31, 2016, 1,363,870 and 1,386,746 Public Shares were classified outside of permanent equity at its redemption value, respectively.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet
effective, accounting standards if currently adopted would have an effect on the accompanying financial statements.
Subsequent Events
The Company evaluates subsequent events and
transactions that occur after the Balance Sheet date up to the date these financial statements were available to be issued. Based
on the evaluation, the Company did not identify any subsequent event that would have required adjustment or disclosure in the financial
statements.
On October 7, 2014, the Company completed the
Public Offering pursuant to which it sold 24,000,000 Public Units at a price of $10.00 per Unit, generated gross proceeds of $240
million. Offering costs associated with the Public Offering was approximately $13.3 million, inclusive of $4.8 million of underwriting
fees paid upfront, and $8.4 million of Deferred Fees (as defined below), payable upon the consummation of the initial Business
Combination. In January 2016, upon the consultant’s inability to provide agreed services, an aggregate of $2.64 million in
Deferred Fees were reversed from deferred underwriting commissions and advisory fees and additional paid-in capital on the Company’s
accompanying Balance Sheets. Each Public Unit consists of one share of the Company’s common stock, $0.0001 par value per
share, and one-half of one redeemable common stock purchase warrant, the Public Warrants. On October 7, 2016, following approval
of the proposals at the Special Meeting, the Company amended the warrant agreements for all of the 12,000,000 outstanding Public
Warrants to convert all outstanding Public Warrants into right to receive $0.15 per Public Warrant upon the consummation of a Business
Combination, for an aggregate amount of $1.8 million, payable in cash or shares of the Company’s common stock at the discretion
of the Company.
In addition to the underwriting discount paid
upfront of $0.20 per Public Unit ($4.8 million in the aggregate) to the underwriters at the closing of the Public Offering, the
Company agreed to pay additional fees (the “Deferred Fees”) of $8.4 million ($0.35 per Public Unit sold), comprised
of (a) $5.76 million payable to the underwriters for deferred underwriting commissions and (b) $2.64 million payable to RCS Capital
(“RCS”), a division of Realty Capital Securities, LLC, an entity then under common control with ARC, for financial
advisory services in connection with the identification, evaluation, negotiation and completion of the initial Business Combination.
The Deferred Fees are payable to the underwriters and RCS solely in the event the Company completes an initial Business Combination.
The underwriters and RCS are not entitled to any interest accrued on the Deferred Fees. In January 2016, both parties agreed to
terminate the administrative services agreement thereafter due to RCS’s inability to provide the services. As a result, as
of and December 31, 2016, the Deferred Fees in the amount of $2.64 million are no longer be payable to RCS and were reversed from
deferred underwriting commissions and advisory fees and additional paid-in capital on the Company’s accompanying Balance
Sheet.
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
On October 7, 2016, following approval of the
proposals at the Special Meeting, the Company’s Board of Directors declared a dividend on the Company’s common stock
consisting of one-half of one warrant per share of common stock, with each whole warrant exercisable to purchase one share of common
stock at $12.50 per share (each a “New Warrant”). The New Warrants will not be exercisable until the later of (i) the
date that is 30 days after the first date on which the Company completes an initial Business Combination and (ii) October 17, 2017.
The Company’s independent directors agreed to waive their right to receive the dividend. As a result, the Company has issued
an aggregate of 1,253,055 New Warrants in October 2016.
|
|
5.
|
Related Party Transactions
|
Founder Shares
On August 1, 2014, ARC purchased 8,625,000
shares of the Company’s common stock (the “Founder Shares”) for $25,000, or approximately $0.003 per share. The
Founder Shares are identical to the common stock included in the Public Units except that the Founder Shares are subject to certain
transfer restrictions, as described in more detail below. On October 1, 2014, in connection with a reduction in the size of the
Public Offering, ARC contributed to the Company 1,725,000 Founder Shares, which the Company canceled. Thereafter, ARC sold 20,000
Founder Shares at their original price to each of the Company’s independent directors. On December 4, 2014, as a result of
the underwriters’ election not to exercise the overallotment option in connection with the Public Offering, the initial stockholders
(as defined below) forfeited an aggregate of 900,000 Founder Shares, consisting of a forfeiture of 2,609 Founder Shares by each
of David Gong, P. Sue Perrotty and Dr. Robert J. Froehlich, and a forfeiture of 892,173 Founder Shares by ARC. As a result of the
forfeiture, ARC held 5,947,827 Founder Shares, and each of David Gong, P. Sue Perrotty and Dr. Robert J. Froehlich held 17,391
Founder Shares, so that there were 6,000,000 Founder Shares outstanding. The number of Founder Shares represented 20% of the outstanding
shares. In October 2016, pursuant to the Transfer Agreement (as defined below), ARC transferred all of its Founder Shares and Private
Placement Warrants to the Company’s Sponsor.
The Founder Shares are identical to the
common stock included in the Public Units sold in the Public Offering except that the Founder Shares are subject to certain transfer
restrictions. The Company’s stockholder prior to the Public Offering, including their subsequent transferees (collectively,
the “initial stockholders”) have agreed, subject to certain exceptions, not to transfer, assign or sell any of their
Founder Shares until the earlier of (a) one year after the completion of the initial Business Combination, or earlier if, subsequent
to the initial Business Combination, the last sale price of the Company’s common stock 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 the consummation of the initial Business Combination or (b) the Company consummates
a subsequent 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 “Lock Up Period”).
Private Placement Warrants
On October 7, 2014, ARC purchased from the
Company an aggregate of 6,550,000 Private Placement Warrants at a price of $1.00 per Warrant (for an aggregate purchase price of
$6.55 million) in a Private Placement that occurred simultaneously with the completion of the Public Offering. Each Private Placement
Warrant entitles the holder to purchase one share of common stock at $12.50 per share, as amended upon approval of the proposals
at the Special Meeting in October 2016. Of the $6.55 million purchase price of the Private Placement Warrants, $4.3 million of
the purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering to be held in the Trust
Account pending completion of the initial Business Combination.
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
The Private Placement Warrants (including the
common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30
days after the completion of the initial Business Combination and they will be non-redeemable so long as they are held by the initial
purchasers of the Private Placement Warrants or their permitted transferees. In addition, the Private Placement Warrants are exercisable
on a cashless basis so long as they are held by their initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers of the Private Placement Warrants or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants
included in the Public Units. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of
the warrants included in the Public Units and have no net cash settlement provisions.
If the Company does not complete an initial
Business Combination, then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution
to the public stockholders and the Private Placement Warrants will expire worthless.
Agreements with Sponsor
Pursuant to the agreement by and among
the Company, ARC and the Company’s Sponsor in October 2016 (“Transfer Agreement”), ARC transferred all of its
Founder Shares and Private Placement Warrants to the Company’s Sponsor, Axar Master Fund Ltd. Upon consummation of the initial
Business Combination, the Sponsor agreed to automatically forfeit, for no consideration, a number of Founder Shares equal to the
excess of (if positive) of (a) 6,000,000 over (b) 25% of the sum of (i) total Public Shares outstanding plus (ii) the excess of
(x) the total number of shares of common stock issued or deemed issued, or issuable upon the conversion of exercise of any equity-linked
securities or rights issued or deemed issued, by the Company in connection with the consummation of the initial Business Combination,
excluding any shares of common stock or equity-linked securities exercisable for or convertible into shares of common stock issued,
or to be issued, to any seller in the initial Business Combination or the Sponsor and its affiliates, over (y) the total number
of Public Shares redeemed in connection with the Business Combination. No Founder Shares will be forfeited if sum of the forgoing
(a) and (b) is equal to or less than zero.
Loans from Related Parties
ARC agreed to loan the Company up to an
aggregate of $200,000 by the issuance of an unsecured promissory note (the “Note”) on August 1, 2014 to cover expenses
related to the Public Offering. The Note was payable without interest upon the consummation of the Public Offering. From inception
through October 7, 2014, ARC loaned $79,702 to the Company. The Note was repaid in full on October 8, 2014. Additionally, the Company
had a due to affiliate of $88,800 to ARC for costs incurred by the Company, which was repaid on October 8, 2014. Pursuant to the
Transfer Agreement, in October 2016, ARC also contributed approximately $770,000 to the Company for general working capital purposes.
Pursuant to the Transfer Agreement, the
Sponsor agreed to lend the Company on January 1, 2017 and on the first business day of each of the following three fiscal quarters
commencing thereafter (or, if the Extension date is October 1, 2017, the following two fiscal quarters commencing thereafter) approximately
$125,300, which amounts will be deposited in the Trust Account (“Trust Loan”). The Sponsor has also agreed to provide
a loan to the Company for up to $2 million for working capital and other expenses (together with Trust Loan, “Loan”).
The Loan will be non-interest bearing and repayable by the Company to the Sponsor upon consummation of an initial Business Combination.
If a Business Combination is not consummated, the note will not be repaid by the Company and all amounts owed thereunder by the
Company will be forgiven, except to the extent that the Company has funds available outside of the Trust Account. As of March 31,
2017, the Company had an outstanding amount of $950,000 under the Loan from the Sponsor, of which approximately $125,300 was deposited
in the Trust Account in January 2017.
Compensation Reimbursement Agreement
On October 1, 2014, the Company entered into
an agreement to pay ARC an amount not to exceed $15,000 per month as reimbursement for a portion of the compensation paid to its
personnel, including certain of the Company’s officers who work on the Company’s behalf, commencing on the date the
Company’s securities are first listed on NASDAQ (the “Compensation Reimbursement Agreement”). During the three
months ended March 31, 2016, the Company incurred $45,000 related to services under this agreement.
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
On October 7, 2016, this arrangement was terminated,
and ARC agreed that all amounts owed under such arrangement as of such date, or approximately $50,000, were contributed to capital.
Registration Rights Agreement
The holders of the Founder Shares, Private
Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any shares of common stock issuable
upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans) will
be entitled to registration rights pursuant to a registration rights agreement signed on October 1, 2014 (the “Registration
Rights Agreement”). 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 under the Securities Act. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial 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, which occurs (a) in the case of the
Founder Shares, one year after the date of the consummation of the initial Business Combination or earlier if, subsequent to the
initial Business Combination, (i) the last sale price of the Company’s common stock 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 the initial Business Combination, or (ii) the Company consummates a subsequent liquidation,
merger, stock exchange or other similar transaction which results in all of its stockholders having the right to exchange their
shares of common stock for cash, securities or other property and (b) in the case of the Private Placement Warrants and the respective
common stock underlying such Private Placement Warrants, 30 days after the completion of the Initial Business Combination. The
Company will bear the expenses incurred in connection with the filing of any such registration statements.
|
|
6.
|
Deferred Underwriting Commissions
|
The Company is committed to pay a portion of
the Deferred Fees totaling $5.76 million, or 2.4% of gross offering proceeds of the Public Offering, to the underwriters upon the
Company’s consummation of an initial Business Combination. The underwriters will not be entitled to any interest accrued
on their portion of the Deferred Fees, and no portion of the Deferred Fee is payable to the underwriters if there is no initial
Business Combination.
|
|
7.
|
Fair Value Measurements
|
The Company complies with ASC 820, “Fair
Value Measurement”, 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 following table presents information about
the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, and
indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value. In general,
fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.
Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield
curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations
where there is little, if any, market activity for the asset or liability:
|
Description
|
|
March 31, 2017
|
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
|
Significant Other
Unobservable
Inputs (Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds held in Trust Account
|
|
$
|
25,223,630
|
|
|
$
|
25,223,630
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
December 31, 2016
|
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
|
Significant Other
Unobservable
Inputs (Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds held in Trust Account
|
|
$
|
25,072,751
|
|
|
$
|
25,072,751
|
|
|
$
|
-
|
|
|
$
|
-
|
|
AXAR ACQUISITION CORP.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
Common Stock
- On
December 14, 2016, at the Company’s 2016 annual meeting of stockholders (the “Annual Meeting”), the Company’s
stockholders approved an amendment to the amended and restated certificate of incorporation to decrease the number of authorized
shares of the Company’s common stock from 400,000,000 to 19,000,000 shares (the “Amendment”). On December 14,
2016, the Company filed the Amendment with the Secretary of State of the State of Delaware. Holders of the Company’s common
stock are entitled to one vote for each share of common stock.
At March 31, 2017 and December 31, 2016, there
were 8,506,111 shares of common stock outstanding, including 1,363,870 and 1,386,746 shares that were subject to possible redemption,
respectively.
Preferred Stock
-
The authorized preferred stock of the Company includes up to 1,000,000 shares. At March 31, 2017 and December 31, 2016, there were
no shares of preferred stock issued and outstanding.