NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
1.
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Pensare
Acquisition Corp. (the “Company”), is a blank check company incorporated in Delaware on April 7, 2016. The Company
was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization,
recapitalization, exchangeable share transaction or other similar business transaction, one or more operating businesses or assets
that the Company has not yet identified (a “Business Combination”). Although the Company is not limited to a particular
industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on businesses
in the wireless telecommunications industry in the United States.
At
June 30, 2018, the Company had not yet commenced operations. All activity through June 30, 2018 relates to the Company’s
formation, its initial public offering (“Initial Public Offering” or “Offering”), which is described below,
identifying a target company for a Business Combination, and performing due diligence thereon.
The
registration statements for the Company’s Initial Public Offering were declared effective on July 27, 2017. On August 1,
2017, the Company consummated the Initial Public Offering of 27,000,000 units (“Units” and with respect to the common
stock included in the Units, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $270,000,000, which
is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 9,500,000 private placement warrants (“Private
Placement Warrants”) at a price of $1.00 per warrant in a private placement to the Company’s sponsor, Pensare Sponsor
Group, LLC (the “Sponsor”), MasTec, Inc. (“MasTec”) and EarlyBirdCapital, Inc. (“EBC”), generating
gross proceeds of $9,500,000, which is described in Note 5.
Following
the closing of the Initial Public Offering on August 1, 2017, an amount of $270,000,000 ($10.00 per Unit) from the net proceeds
of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (the
“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “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 paragraphs (d)(2), (d)(3) and (d)(4) 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, except that
interest earned on the Trust Account can be released to pay the Company’s tax obligations.
On
August 4, 2017, the underwriters exercised their over-allotment option in full resulting in an additional 4,050,000 Units being
issued for $40,500,000, less the underwriters’ discount of $1,012,500, netting $39,487,500, which was deposited into the
Trust Account. In connection with the underwriters’ exercise of their over-allotment option in full, the Company also consummated
the sale of an additional 1,012,500 Private Placement Warrants at $1.00 resulting in a total of $310,500,000 held in the Trust
Account.
Transaction
costs amounted to $8,646,303, consisting of $7,762,500 of underwriting fees, and $883,803 of other costs. In addition, as of June
30, 2018, $898,925 of cash was held outside of the Trust Account, available for working capital purposes.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public
Offering and Private Placement Warrants (subject to terms and conditions set forth in the certain trust agreement), 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 successfully effect a Business Combination.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
1.
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (continued)
The
Company will provide its 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 stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then on deposit in the Trust Account, net of taxes payable (initially $10.00
per 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 or rights. The common stock subject to redemption has been recorded at redemption value and classified
as temporary equity upon the completion of the Offering, in accordance with Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if the Company
has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, in the case of a stockholder
vote, a majority of the outstanding 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, conduct the redemptions pursuant to the tender offer rules
of the Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, a stockholder approval of the transaction is required by law, or the Company decides to obtain
stockholder approval for business or other legal reasons, the Company will offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval
in connection with a Business Combination, the Initial Stockholders (as defined below) have agreed to vote their Founder Shares
(as defined in Note 6), and any Public Shares held by them in favor of approving a Business Combination and not to redeem any
public shares. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote
for or against the proposed transaction.
The
Company will have until February 1, 2019 (18 months from the closing of the Initial Public Offering) to consummate 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 no more than ten business days thereafter, redeem 100% of the outstanding 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 (net of taxes payable), 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 liquidation distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s
board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each
case to its obligations to provide for claims of creditors and the requirements of applicable law.
The
Sponsor and other holders of Founder Shares prior to the Initial Public Offering (the “Initial Stockholders”) have
agreed to (i) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the consummation
of a Business Combination, (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their
Founder Shares if the Company fails to consummate a Business Combination within the Combination Period and (iii) not to propose
an amendment to the Company’s Amended and Restated Certificate of Incorporation that would 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 Combination Period, unless the Company provides the public stockholders with the opportunity to redeem their Public
Shares in conjunction with any such amendment. However, the Initial Stockholders will be entitled to liquidating distributions
with respect to any Public Shares acquired if the Company fails to consummate a Business Combination and liquidates within the
Combination Period. In the event of such distribution, it is possible that the per share value of all the assets available for
distribution (including Trust Account assets) will be less than the $10.00 per Unit in the Offering.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
1.
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (continued)
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 vendor for services rendered or products sold to the Company, or a prospective target business with which the
Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will
not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind
in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the
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 (other than the Company’s independent auditors), 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.
2.
LIQUIDITY
As
of June 30, 2018, the Company had $898,925 in its operating bank accounts, $313,164,955 in cash and marketable securities held
in the Trust Account to be used for a Business Combination or to repurchase or convert stock in connection therewith and a working
capital deficit of $1,999,599. As of June 30, 2018, $2,664,955 of the amount on deposit in the Trust Account represented interest
income, which is available to pay the Company’s tax obligations. To date the Company has not withdrawn any interest from
the Trust Account in order to fund tax requirements.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying
and evaluation of prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel
expenditures, selecting target businesses to acquire, and structuring, negotiating and consummating the Business Combination.
On
June 8, 2018, the Sponsor advanced the Company one million dollars ($1,000,000) for working capital purposes. The Working Capital
Loan was evidenced by a $1,000,000 promissory note, which shall be payable without interest upon consummation of a Business Combination
or, at the holder’s discretion, the note may be converted into warrants (“Warrants”) at a conversion price of
$1.00 per Warrant. Each Warrant will contain terms identical to those of the warrants issued in the private placement, entitling
the holder thereof to purchase one share of common stock, par value $0.001, at an exercise price of $11.50 per share as more fully
described in the prospectus for the IPO dated July 27, 2017.
In
addition, the Company holds a Commitment Letter from its Chief Executive Officer and managing member of the Sponsor, whereby the
managing member of the Sponsor commits to funding any working capital shortfalls through the earlier of an initial business combination
or the Company’s liquidation. The loans would be issued as required and each loan would be evidenced by a promissory note,
up to an aggregate of $750,000. The loans will be non-interest bearing, unsecured and payable upon the consummation of the Company’s
initial business combination or at the holder’s discretion, convertible into warrants of the Company at a price of $1.00
per warrant, up to a maximum of $500,000. If the Company does not complete a business combination, any such loans will be forgiven.
The
Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors,
or third parties. The Company’s officers and directors and the Sponsor may, but, except as described above, are not obligated
to, loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s
working capital needs.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
2.
LIQUIDITY (continued)
None
of the Sponsor, stockholders, officers or directors, or third parties is under any obligation to advance funds to, or invest in,
the Company, except for the $750,000 commitment discussed above. Accordingly, the Company may not be able to obtain additional
financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to curtailing operations, suspending the pursuit of a potential transaction,
and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all. Even if the Company can obtain sufficient financing or raise additional capital, it only has until
February 1, 2019 (18 months from the closing of the Initial Public Offering) to consummate an acquisition. There is no assurance
that the Company will be able to do so prior to February 1, 2019.
3.
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”) for interim financial information and in accordance with the instructions to Form 10-Q and Article
8 of Regulation S-X of the Securities and Exchange Commissions (“SEC”). Certain information or footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules
and regulations of the SEC for interim financial reporting.
Accordingly,
they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results
of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position,
operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on
Form 10-K for the year ended March 31, 2018 as filed with the SEC on June 28, 2018, which contains the audited financial statements
and notes thereto. The financial information as of March 31, 2018 is derived from the audited financial statements presented in
the Company’s Annual Report on Form 10-K for the year ended March 31, 2018. The interim results for the three months ended
June 30, 2018 are not necessarily indicative of the results expected for the year ending March 31, 2018 or any future interim
periods.
Emerging
growth company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the
“Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and
it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in 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.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 June 30, 2018 and 2017.
Cash
and marketable securities held in Trust Account
At
June 30, 2018, the assets held in the Trust Account were held in cash and U.S. Treasury Bills and are classified as trading securities.
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
(if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including
common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within the Company’s control) 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, at June 30, 2018, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheets.
Income
taxes
The
Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future
taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of June 30, 2018 and June 30, 2017, there were no unrecognized tax benefits and no amounts
accrued for interest and penalties.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation
from its position.
The
Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal, state and city tax laws. The Company has identified its Federal tax return and its State tax returns
in Delaware, Georgia, Louisiana, New York, and North Carolina as “major” tax jurisdictions. The Company’s management
does not expect that the total amount of unrecognized tax benefits will materially change over the next year.
Net
loss per common share
The
Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net loss per common
share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Shares of common
stock subject to possible redemption at June 30, 2018 and June 30, 2017 have been excluded from the calculation of basic income
(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 (1) warrants sold in the Initial Public Offering and private placement to purchase 15,525,000
and 10,512,500 shares of common stock, respectively, (2) rights sold in the Initial Public Offering that convert into 3,105,000
shares of common stock, (3) the unit purchase option of up to 1,350,000 Units sold to the underwriters, exercisable at $10.00
per Unit, which consists of 1,350,000 shares of common stock, 675,000 warrants (convertible into 675,000 shares of common stock),
and 1,350,000 rights (convertible into 135,000 shares of common stock) and, 4) the $1,000,000 promissory note, which is payable
without interest upon consummation of a Business Combination or, at the holder’s discretion, may be converted into warrants
(“Warrants”) at a conversion price of $1.00 per Warrant, entitling the holder thereof to purchase one share of common
stock, par value $0.001, at an exercise price of $11.50 per share, in the calculation of diluted loss per share, since the exercise
of the warrants and the conversion of the rights into shares of common stock is contingent upon the occurrence of a future event.
As a result, diluted loss per common share is the same as basic loss per common share for the periods.
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 redemption, as
these shares only participate in the income of the Trust Account and not the losses of the Company. Accordingly, basic and diluted
loss per common share is calculated as follows:
|
|
For the Three Months Ended June 30, 2018
|
|
|
For the Three Months Ended June 30, 2017
|
|
Net income (loss)
|
|
$
|
178,939
|
|
|
$
|
(26,320
|
)
|
Less: Income attributable to ordinary shares subject to redemption
|
|
|
(988,126
|
)
|
|
|
—
|
|
Adjusted loss
|
|
$
|
(809,187
|
)
|
|
$
|
(26,320
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
8,469,986
|
|
|
|
3,811,605
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per ordinary share
|
|
$
|
(0.10
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
(a) Interest Income
|
|
$
|
1,061,704
|
|
|
$
|
—
|
|
Less: Taxes
|
|
|
47,847
|
|
|
|
—
|
|
|
|
$
|
1,013,857
|
|
|
$
|
—
|
|
Percentage of ordinary shares subject to redemption
to total ordinary shares
|
|
|
97.46
|
%
|
|
|
0.00
|
%
|
Income attributable to ordinary shares subject to redemption
|
|
$
|
988,126
|
|
|
$
|
—
|
|
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution
which, at times may exceed the Federal depository insurance coverage of $250,000. At June 30, 2018 and 2017, the Company had not
experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair
value of financial instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily
due to their short-term nature.
Recently
issued accounting pronouncements
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 consolidated financial statements.
4.
INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 27,000,000 units at a purchase price of $10.00 per Unit. Each Unit consists of
one share of common stock, par value $0.001, of the Company (“Common Stock”) one right (“Public Right”)
and one-half of one redeemable warrant (“Public Warrant”). Each Public Right will convert into one-tenth (1/10) of
one share of Common Stock upon consummation of a Business Combination (see Note 8). Each whole Public Warrant entitles the holder
to purchase one share of Common Stock at an exercise price of $11.50 (see Note 8).
On
August 4, 2017, the over-allotment option was exercised in full and the underwriters purchased 4,050,000 additional Units at $10.00
per Unit, generating gross proceeds of $40,500,000.
Proceeds
of $310,500,000 from the Initial Public Offering and Private Placement Warrants are held in the trust account, along with any
additional interest earned thereon not used to pay for taxes.
5.
PRIVATE PLACEMENT
Simultaneously
with the Initial Public Offering, the Sponsor, MasTec and EBC purchased 9,500,000 Private Placement Warrants at $1.00 per warrant
in a private placement generating gross proceeds of $9,500,000. Simultaneously with the sale of the over-allotment Units, the
Company consummated the sale of an additional 1,012,500 warrants at $1.00 per warrant, generating gross proceeds of $1,012,500.
The proceeds from the sale of the Private Placement Warrants were added to the net 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
of the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants are identical to the
Warrants sold in the Offering except that the Private Placement Warrants (i) will not be redeemable by the Company and (ii) may
be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees.
In addition, the Private Placement Warrants and their component securities may not be transferable, assignable or salable until
30 days after the consummation of a Business Combination, subject to certain limited exceptions.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
5.
PRIVATE PLACEMENT (continued)
On
August 7, 2017, the Company announced that the holders of the Company’s units may elect to separately trade the Common
Stock, warrants and rights underlying the units commencing on August 8, 2017. No fractional warrants will be issued upon
separation of the units only whole warrants will trade. Those units that are not separated will continue to trade on the
NASDAQ Capital Market under the symbol “WRLSU” and the Common Stock, warrants and rights are expected to trade
under the symbols “WRLS,” “WRLSW” and “WRLSR”, respectively.
6.
RELATED PARTY TRANSACTIONS
Founder
Shares
In
May 2016, the Company issued 10,000 shares of Common Stock to the Sponsor for $10.
In
May 2017, the Company issued an additional 7,177,500 shares of Common Stock to the Sponsor and certain other persons (collectively,
the “Founder Shares”) for an aggregate purchase price of $24,990, or approximately $0.0035 per share. In June 2017,
the Sponsor transferred 1,575,000 of such shares to MasTec for the same purchase price originally paid for such shares. In July
2017, the company effected a stock dividend with respect to the Common Stock of 575,000 shares, resulting in the Initial Stockholders
holding an aggregate of 7,762,500 shares. All share and per share, amounts have been retroactively restated to reflect the stock
dividend. The Founder Shares included an aggregate of up to 1,012,500 shares that were subject to forfeiture by the Initial Stockholders
to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Initial Stockholders
would own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Offering. As a result
of the underwriters’ election to exercise their over-allotment option in full on August 4, 2017, 1,012,500 Founder shares
are no longer subject to forfeiture.
The
Initial Stockholders have agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned
or sold until one year after the date of the consummation of a Business Combination or earlier if, subsequent to a Business Combination,
the last sales price of the Company’s Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period.
Related
Party Loans
Prior
to the closing of the Initial Public Offering, the Sponsor loaned the Company $600,000, a portion of which was used for the payment
of costs associated with the Initial Public Offering. The loan was non-interest bearing, unsecured and due on the earlier of December
31, 2017 or the closing of the Initial Public Offering. The loan was repaid shortly after the closing of the Initial Public Offering.
On
June 8, 2018, the Sponsor advanced the Company one million dollars ($1,000,000) for working capital purposes. The Working Capital
Loan was evidenced by a $1,000,000 promissory note, which shall be payable without interest upon consummation of a Business Combination
or, at the holder’s discretion, the note may be converted into warrants (“Warrants”) at a conversion price of
$1.00 per Warrant. Each Warrant will contain terms identical to those of the warrants issued in the private placement, entitling
the holder thereof to purchase one share of common stock, par value $0.001, at an exercise price of $11.50 per share as more fully
described in the prospectus for the IPO dated July 27, 2017.
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, the Company’s officers and directors
may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (“Working Capital
Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either be paid
upon consummation of a Business Combination, without interest, or, at the holder’s discretion, up to $1,500,000 of the Working
Capital Loans may be converted into Warrants at a price of $1.00 per Warrant. The Warrants would be identical to the Private Placement
Warrants.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
6.
RELATED PARTY TRANSACTIONS (continued)
Related
Party Fees
The
Company has incurred related party administrative fees of $20,000 per month beginning August 2017. These costs have been included
in the operating costs in the Company’s Statements of Operations. The administrative fees incurred and paid by the Company
were $60,000 and $0 for the three months ending June 30, 2018 and 2017, respectively.
7.
COMMITMENTS
Registration
Rights
The
holders of the Founder Shares, Private Placement Warrants (and their underlying securities) and any warrants that may be issued
upon conversion of the Working Capital Loans (and their underlying securities) will be entitled to registration rights pursuant
to a registration rights agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders
of a majority of these securities will be entitled to make up to three demands, excluding short form demands, that the Company
register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register
for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement will provide
that the Company will not permit any registration statement filed under the Securities Act to become effective until termination
of the applicable lock up period. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Business
Combination Marketing Agreement
The
Company has engaged EBC as an advisor in connection with a Business Combination to assist the Company in holding meetings with
its stockholders to discuss a potential Business Combination and the target business’ attributes, introduce the Company
to potential investors that are interested in purchasing securities, assist the Company in obtaining stockholder approval for
the Business Combination and assist the Company with its press releases and public filings in connection with a Business Combination.
The Company will pay EBC a cash fee for such services upon the consummation of an initial Business Combination in an amount equal
to 3.5% of the gross proceeds of the offering (exclusive of any applicable finders’ fees which might become payable); provided
that the Company has the right to allocate up to 30% of the fee to any of the underwriters in the offering or other FINRA member
firms the Company retains to assist it in connection with its initial Business Combination.
Unit
Purchase Option
The
Company sold to EBC and its co-underwriters, for $100, an option to purchase up to 1,350,000 units exercisable at $10.00 per Unit
(or an aggregate exercise price of $13,500,000) commencing on the later of the first anniversary of the effective date of the
registration statement related to the Offering (July 27, 2018) or the consummation of a Business Combination. The unit purchase
option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the effective
date of the registration statement related to the Offering. The Units issuable upon exercise of this option are identical to those
offered in the Offering. The Company has accounted for the unit purchase option, inclusive of the receipt of $100 cash payment,
as an expense of the Offering resulting in a charge directly to stockholders’ equity.
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
7.
COMMITMENTS & CONTINGENCIES (continued)
The
Company estimated that the fair value of this unit purchase option was approximately $4,547,505 (or $3.37 per Unit) using a Black-Scholes
option-pricing model. The fair value of the unit purchase option granted to the underwriters was estimated as of the date of grant
using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.80% and (3) expected life of
five years. The option and the 1,350,000 Units have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up
pursuant to Rule 5110(g)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not be sold, transferred, assigned,
pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date of Offering except to
any underwriter and selected dealer participating in the Offering and their bona fide officers or partners. The option grants
to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the effective date
of the registration statement with respect to the registration under the Securities Act of the securities directly and indirectly
issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities, other
than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable
upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s
recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of Common Stock
at a price below its exercise price.
Related
Party Loans
The
Company received a Commitment Letter from the managing member of the Sponsor, Pensare Sponsor Group, LLC (“PSG”) whereby
the managing member of PSG commits to funding any working capital shortfalls through the earlier of an initial business combination
or the Company’s liquidation. The loans would be issued as required and a promissory note, up to an aggregate of Seven Hundred
and Fifty Thousand Dollars ($750,000), would evidence each loan. The loans will be non-interest bearing, unsecured and payable
upon the consummation of the Company’s initial business combination or at the holder’s discretion, up to $500,000
of the commitment may be convertible into warrants of the Company at a price of $1.00 per warrant. If the Company does not complete
a business combination, any such loans will be forgiven. As of June 30, 2018, the Company had no promissory notes outstanding
related to this commitment.
8.
STOCKHOLDERS’ EQUITY
Preferred
Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.001. At June 30, 2018
and 2017, there were no shares of preferred stock issued or outstanding.
Common
Stock
— The Company is authorized to issue 100,000,000 shares of Common Stock with a par value of $0.001 per share.
Holders of the Company’s Common Stock are entitled to one vote for each share. As of June 30, 2018 and March 31, 2018 there
were 8,550,536 and 8,469,986, respectively, shares of Common Stock issued and outstanding, (excluding 30,261,964 and 30,342,514
shares of common stock subject to possible redemption).
Rights
— Each holder of a right will receive one-tenth (1/10) of one share of Common Stock upon consummation of a Business
Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional
shares will be issued upon exchange of the rights. No additional consideration will be required to be paid by a holder of rights
in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has
been included in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive
agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide
for the holders of rights to receive the same per share consideration the holders of the Common Stock will receive in the transaction
on an as-converted into Common Stock basis and each holder of a right will be required to affirmatively covert its rights in order
to receive 1/10 share underlying each right (without paying additional consideration). The shares issuable upon exchange of the
rights will be freely tradable (except to the extent held by affiliates of the Company).
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
8.
STOCKHOLDERS’ EQUITY (continued)
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 rights will not receive any of such funds with respect to their rights, nor will they receive
any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights
will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights
upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights.
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) 12 months from the closing of the Offering; provided in each case that the Company has an
effective registration statement under the Securities Act covering the shares of Common
Stock issuable upon exercise
of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as
practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company will use
its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares
of Common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to
become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto,
until the expiration of the Public 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 5 years immediately following the consummation of 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.
The
Private Placement Warrants are identical to the Public Warrants underlying the Units being sold in the Offering, except that the
Private Placement Warrants and the Common Stock issuable upon the exercise of the Private Placement 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 Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial
purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers
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 Public Warrants.
The
Company may redeem the Public Warrants (except with respect to the Placement Warrants):
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
at
any time during the exercise period;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption;
|
|
●
|
if,
and only if, the last sale price of the Company’s Common Stock equals or exceeds
$18.00 per share for any 20 trading days within a 30-trading day period ending on the
third trading day prior to the date on which the Company sends the notice of redemption
to the warrant holders; and
|
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
8.
STOCKHOLDERS’ EQUITY (continued)
|
●
|
if,
and only if, there is a current registration statement in effect with respect to the
shares of Common Stock underlying such 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.
9.
FAIR VALUE MEASUREMENTS
The
Company follows guidance in ASC 820 for its financial assets and liabilities that are re-measured at fair value at each reporting
period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company
would have received in connection with the sale of the assets paid in connection with the transfer of the liabilities in an orderly
transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable
inputs used in order to value the assets and liabilities:
Level
1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market
in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on
an ongoing basis.
Level
2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar
assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level
3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
June 30, 2018 and June 30, 2017, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine
such fair value:
Description
|
|
Level
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
313,164,955
|
|
|
$
|
—
|
|
PENSARE
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2018
10.
SUBSEQUENT EVENTS
The
Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial
statements were issued. Based upon this review, the Company did not identify subsequent events that would have required adjustment
or disclosure in the financial statements.