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Ocelot Partners Ltd (OOUT)

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Monday 11 September, 2017

Ocelot Partners Ltd

Half-year Report

RNS Number : 4296Q
Ocelot Partners Limited
11 September 2017
 

 

 

 

 

 

Ocelot Partners Limited

 

Interim Condensed Financial Information

for the Period from Incorporation on 20 January 2017

 to 30 June 2017 (Unaudited)

 

 


Interim Management Report and Chairman's Statement

 

It is with pleasure that I write to you for the first time as Chairman of Ocelot Partners Limited (the "Company"), and would like to take this opportunity to welcome you as a shareholder of the Company.

 

I am pleased to present to the shareholders the Company's first half-yearly unaudited financial report for the period ended 30 June 2017.

 

The Company

The Company raised gross proceeds of US$418 million in its initial public offering ("IPO"), through the placing of Ordinary Shares (with matching Warrants) at a placing price of $10 per Ordinary Share and a further US$7.35 million through the subscription of Founder Preferred Shares (with Warrants being issued to subscribers of Founder Preferred Shares on the basis of one Warrant per Founder Preferred Share). The Company was admitted to trading with a standard listing on the main market of the London Stock Exchange on 13 March 2017.  As at 30 June, the Company had 41,790,000 Ordinary Shares in issue. The net proceeds from the IPO are easily accessible when required.

 

As set out in the Company's Prospectus dated 8 March 2017 (the "Prospectus"), the Company was formed to undertake an acquisition of a target company or business. There is no specific expected target value for the Acquisition and the Company expects that any funds not used for the acquisition will be used for future acquisitions, internal or external growth and expansion, purchase of outstanding debt and working capital in relation to the acquired company or business.  Following completion of the acquisition, the objective of the Company is expected to be to operate the acquired business and implement an operating strategy with a view to generating value for shareholders through operational improvements as well as potentially through additional complementary acquisitions following the acquisition.

 

The Board of Directors continues to review a number of acquisition targets and will remain disciplined in only proceeding with an acquisition that it believes it can produce attractive returns to its shareholders.

 

Financial Results

 

During the period commenced 20 January 2017 and ended 30 June 2017, the Company has incurred operating costs of $36.2 million including $1.7 million of administrative expenses, a $0.1 million non-cash charge for non-executive Directors Fees and $34.1 million of non-cash charges related to Founder Preferred Share dividend rights as outlined in the Company's Prospectus.  These expenses were partially offset by net finance income totalling $0.9 million.  Costs of Admission of $10.5 million were recorded as an offset to the gross proceeds from the IPO in the Company's balance sheet.

 

Principal Risks and Uncertainties

The Company set out in the Prospectus document from 8 March 2017 the principal risks and uncertainties that could impact its performance; these principal risks and uncertainties remain unchanged since that document was published and are expected to apply in the remaining period to 31 December 2017.  Your attention is drawn to that Prospectus document for the detailed assessment. A copy of the Company's prospectus dated 8 March 2017 is available on the Company's website (www.ocelotpartnerslimited.com) and has been submitted to the National Storage Mechanism and is available for inspection at www.morningstar.co.uk/uk/nsm.

 

Related Parties

Related party disclosures are given in note 14 to these condensed interim financial statements.

 

 

Robert D Marcus - Chairman

8 September 2017

 

Statement of Directors' Responsibility

                            

The Directors confirm that, to the best of their knowledge, these condensed interim financial statements for the period have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The interim management report includes a fair review of the information required by the Disclosure and Transparency Rules DTR 4.2.7R and DTR 4.2.8R, namely:

(a)        an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)        material related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Company during that period.

By order of the Board:

 

 

 

 

Andrew Barron - Director

8 September 2017

 


Condensed Statement of Comprehensive Loss for the period ended 30 June 2017

 








For the period




from




20 January 2017




to 30 June 2017


Notes


US $





Investment income



                917,891

Other income



                     5,686

Expenses

3


            (1,694,937)

Non-cash charge related to Founder Preferred Shares

6


         (34,104,500)

Non-cash charge related to warrant redemption liability

13


               (424,900)

Operating loss



         (35,300,760)





Loss and Total Comprehensive Loss for the Period



         (35,300,760)





Basic and diluted loss per ordinary share



                      (1.22)









 

 

 

 

The notes on pages 8 to 20 form an integral part of these financial statements.

 



Condensed Statement of Financial Position as at 30 June 2017

 




2017


Notes


US$

Assets








Current assets




Cash and cash equivalents

12


   413,853,361

Prepayments

9


           171,918





Total Assets



   414,025,279





Liabilities








Current liabilities




Payables and accrued expenses



             45,741

Total current liabilities



             45,741





Non-current liabilities




Warrant redemption liability

10, 13


           424,900

Total non-current liabilities



           424,900





Total liabilities



           470,641





Net  assets



   413,554,638





Equity








Founder Preferred Share Capital

10


       7,350,000

Ordinary Share Capital - no par value



                      -  

Ordinary Share Capital share premium

10


   407,356,906

Retained losses



      (1,152,268)





Total equity



   413,554,638





Net asset value per share

8


                 9.73





 

 

 

The notes on pages 8 to 20 form an integral part of these financial statements.



Condensed Statement of Changes in Equity for the period ended 30 June 2017

 

 



Ordinary

Ordinary




Founder

Share

Share




Preferred

Capital

Capital




Share

Nominal

Share

Retained



Capital

Value

Premium

Losses

Total


US$

US$

US$

US$

US$







Balance at inception, 20 January 2017

                -  

            -  

                    -  

                  -  

               -

Issue of shares

  7,350,000

            -  

 417,900,000

 34,104,500

459,354,500

Issue costs

                -  

            -  

  (10,543,094)

                  -  

(10,543,094)

Share-based compensation - director options

                -  

            -  

                    -  

         43,992

         43,992

Loss and total comprehensive loss for the period

                -  

            -  

                    -  

(35,300,760)

(35,300,760)







Balance as of 30 June 2017

  7,350,000

            -  

 407,356,906

  (1,152,268)

413,554,638







 

 

The notes on pages 8 to 20 form an integral part of these financial statements.

 

 

 

 

 

 

                    



Condensed Statement of Cash Flows for the period ended 30 June 2017

 




For the period from




20 January 2017


Notes


to 30 June 2017

OPERATING ACTIVITIES:




Net loss



(35,300,760)

Elimination of non-cash items:




Charge related to Founder Preferred Shares

6


34,104,500

Charge related to warrant redemption liability

13


424,900

Charge related to director options

11


43,992

Movements in working capital:




Increase in other receivables



-

Increase in prepayments



(171,918)

Increase in payables and accrued expenses



45,741

Net cash used in operating activities



(853,545)





FINANCING ACTIVITIES:




Issuance of Founder Preferred Shares and Warrants

10


7,350,000

Issuance of Ordinary Shares and Warrants

10


417,900,000

Share issue expenses

10


(10,543,094)

Net cash provided by financing activities



414,706,906





Net increase in cash and cash equivalents



413,853,361

Cash and cash equivalents at beginning of period



-

Cash and cash equivalents at end of period

12


413,853,361

 

 

The notes on pages 8 to 20 form an integral part of these financial statements.

 


Notes to the interim financial statements for the period ended 30 June 2017

 

1.         General information

The Company was incorporated with limited liability under the laws of the British Virgin Islands under the BVI Companies Act on 20 January 2017. The address of the Company's registered office is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The Ordinary Shares and Warrants were admitted for trading on the Main Market of the London Stock Exchange on 13 March 2017, after raising gross proceeds of US$425,250,000 for a potential acquisition (an Acquisition). 

This condensed interim financial information was approved and authorised for issue in accordance with a resolution of the Directors on 8 September 2017.

 

2.         Summary of significant accounting policies and basis of preparation of half year report

This is the Company's first interim financial report and there is no previous annual report, therefore a complete disclosure has been provided below of all significant accounting policies.  Statutory annual accounts of the Company for the period ended 31 December 2017 will in due course be prepared in accordance with the International Accounting Standards Board's (IASB) International Financial Reporting Standards (IFRS) as adopted by the European Union.

 

2.1        Basis of preparation

The condensed interim financial information for the half year ended 30 June 2017 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard (IAS) 34 "Interim Financial Reporting" as adopted by the European Union. This condensed interim financial information has been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss.

The preparation of interim financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement in the process of applying the Company's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. The directors believe that the underlying assumptions are appropriate and that the Company's financial statements therefore present the financial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4.

 

2.2        Going concern

The directors have a reasonable expectation and belief that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, the interim condensed financial statements are prepared on a going concern basis.

 

2.3        Foreign currency translation

Functional and presentation currency

The Company is listed on the main market of the London Stock Exchange, the capital raised in the IPO is denominated in US dollars and it is intended that any dividends and distributions to be paid to shareholders are to be denominated in US dollars. The performance of the Company is measured and reported to the shareholders in US dollars, which is the Company's functional currency. The Directors consider the US dollar as the currency of the primary economic environment in which the Company operates and the one that most faithfully represents the economic effects of the underlying transactions, events and conditions.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the balance sheet date.

Foreign exchange gains and losses arising from translation are included in the condensed statement of comprehensive loss.

2.4        Financial assets at fair value through profit or loss

Classification

The Company classifies its investment in U.S. Treasury Bills as a financial asset at fair value through profit or loss. This financial asset is designated by the Directors at fair value through profit or loss at inception.

Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Company's documented investment strategy.

The Company's policy requires the Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date. Those not expected to be realised within 12 months of the balance sheet date will be classified as non-current.

Recognition, derecognition and measurement

Regular purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment. Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed as incurred in the statement of comprehensive income.  Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the condensed statement of comprehensive loss within net changes in fair value of financial assets at fair value through profit or loss in the period in which they arise.

Dividend income or distributions of a revenue nature from financial assets at fair value through profit or loss are recognised in the condensed statement of comprehensive loss within dividend income when the Company's right to receive payments is established.

2.5        Receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables are recognised initially at fair value. They are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment.

 

A provision for impairment is established when there is objective evidence that the Company will not be able to collect all amounts to be received. Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount to be received is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the effective interest rate used to discount the future cash flows for the purpose of measuring the impairment loss.

 

The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts throughout the expected life of the financial instrument − or, when appropriate, a shorter period − to the net carrying amount of the financial asset. When calculating the effective interest rate, the Directors estimate cash flows considering all contractual terms of the financial instrument but do not consider future credit losses. The calculation includes all fees and amounts paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

2.6        Offsetting financial instruments

Financial instruments are offset and the net amount reported in the balance sheet only when there is legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.7        Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.

2.8        Payables and accrued expenses

Payables and accrued expenses are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.9        Share-based payments

The Founder Preferred Shares represent equity-settled share based arrangements under which the Company receives services as a consideration for the additional rights attached to these equity shares, over and above their nominal price. The fair value of the grant of Founder Preferred Shares in excess of any purchase price received is recognised as an expense. In addition, the Company has granted options to the non-executive directors. The fair value of the Founder Preferred Shares and the options is determined using a valuation model.

 

The total amount to be expensed as a respective share-based payment charge is determined by reference to the fair value of the awards granted:

 

·      including any market performance condition;

·      excluding the impact of any service and non-market performance vesting conditions; and

·      including the impact of any non-vesting conditions. Non-market performance and service conditions are included in assumptions about the number of awards that are expected to vest.

 

The total expense is recognised in the income statements with a corresponding credit to equity over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.  The Company does not begin to recognise expense associated with share-based awards with performance conditions until it is probable that the performance condition will be achieved.

2.10      New accounting standards

This is the first set of condensed financial statements prepared by the Company.  The Company applied all applicable standards and applicable interpretations published by the IASB and as endorsed by the European Union for the period ended 30 June 2017.  The Company did not adopt any standard or interpretation published by the IASB and endorsed by the European Union for which the mandatory application date is on or after 1 January 2017.

Based on the Company's existing activity, there are no new interpretations, amendments or full standards that have been issued but not effective or adopted for the period ended 30 June 2017 that will have a material impact on the Company.

2.11      Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors as it is the body that makes strategic decisions. The Board are of the opinion that there is only a single operational segment being the investment in US Treasury Bills as disclosed in note 5. As a result no segment information has been provided as the Company only accumulates its funds raised for investment in US Treasury Bills.

2.12      Share capital

Founder Preferred Shares, Ordinary Shares, and Warrants are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

2.13      Critical accounting judgements and key sources of estimation uncertainty

The preparation of the historical financial information requires the use of certain critical estimates. It also requires management to exercise judgement in the process of applying the Company's accounting policies. The only area involving a higher degree of judgement or complexity, and where assumptions and estimates are significant is the valuation of the Founder Preferred Shares.

 

The terms of the Founder Preferred Shares are summarised in the Prospectus and in note 8.

 

Management has also considered, at the grant date, the probability of an Acquisition being completed, and the potential range of values for the Founder Preferred Shares, based on the circumstances on the grant date.

 

The fair value of the Founder Preferred Shares and related share based payments were calculated using a Monte Carlo valuation model. The share based payment related to the Founder Preferred Shares in excess of the amount paid for the shares has been charged immediately in full to the income statement with a corresponding credit to equity as the shares vested immediately on the grant date.



 

3.         Expenses



2017



US$




Listing expenses


1,096,907

Legal and professional fees


417,035

Directors' fees


122,074

Administration fees


37,297

General expenses


21,624



1,694,937

 

 

 

4.         Taxation

The Company is not subject to income tax or corporation tax in the British Virgin Islands.

 

5.         Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company may use various methods including market, income and cost approaches.

 

Based on these approaches, the Company often utilises certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilises valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.

 

Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

 

Level 1 - Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.

 

Level 2 - Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data.

 

Level 3 - Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market data.

 

 

 

The Company has various processes and controls in place to ensure that fair value is reasonably estimated.  A model validation policy governs the use and control of valuation models used to estimate fair value.  The Company performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process.  Where market information is not available to support internal valuations, independent reviews of the valuations are performed and any material exposures are escalated through a management review process.

 

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

 

As of 30 June 2017, financial assets at fair value through profit or loss of $408,008,091 were categorized as Level 2 securities.  There were no transfers between Levels during the period.

 

6. Charge Related to Founder Preferred Shares

The Company has outstanding Founder Preferred Shares issued to its founders, which have been accounted for in accordance with IFRS 2 "Share-based payment" as equity-settled share-based payment awards. The fair value of the Founder Preferred Shares over and above their purchase price was determined as US$34,104,500 at the grant dates. The preferred share awards do not have any vesting or service conditions and vested immediately on the dates of the grants. Accordingly, the aggregate non-cash charge relating to the Founder Preferred Shares for the period ended 30 June 2017 was US$34,104,500. The fair value of the awards were determined using a Monte Carlo valuation model and was based on the following assumptions:

 



20-Jan-2017


13-Mar-2017

Number of securities issued


147,000


553,000

Vesting period


Immediate


Immediate

Ordinary share price upon initial public offering ("IPO")

US$10.00


US$10.00

Founder Preferred Share price

US$10.50


US$10.50

Probability of IPO


50.0%


100.0%

Probability of Acquisition


59.2%


59.2%

Time to Acquisition


1.5 years


1.5 years

Volatility (post-Acquisition)


35.6%


39.6%

Risk free interest rate


2.48%


2.58%

 

 

Expected volatility was estimated with reference to a representative set of listed companies taking into account the circumstances of the Company.

 

The probability and timing of an Acquisition has been estimated only for the purposes of valuing the Founder Preferred Shares issued as at 20 January 2017 and no assurance can be given that the Acquisition will occur at all or in any particular timeframe.

 

7.         Financial assets at fair value through profit or loss

The Company holds zero coupon U.S. Treasury Bills which at 30 June 2017 had a cost of US$407,859,643, a market value of US$408,008,091 and a maturity value of US$408,129,700. All mature within one month of the period end.

 

 

 

 

8.         Loss per share and net asset value per share

 

The loss per share calculation for the period from 20 January 2017 through 30 June 2017 is based on loss for the period of US$(35,300,760) and the weighted average number of Ordinary Shares and Founder Preferred Shares of 28,898,420.

 

Net asset value per share is based on net assets of US$413,554,638 divided by the 41,790,000 Ordinary Shares and 700,000 Founder Preferred Shares in issue at 30 June 2017.

 

The Warrants and Options are considered non-dilutive at 30 June 2017.

 

 

9.         Prepayments



2017



US$

Prepaid directors' fees



171,918



171,918




 

 

10.        Share capital

The authorised shares of the Company are as follows:

 

 



2017



US$

Authorised



Unlimited number of Ordinary Shares of no par value



-







Founder Preferred Shares


 Number

Balance at beginning of period


                         -

Issued during the period


              700,000

Balance at end of period


              700,000




Founder Preferred Share Capital


 US$

Balance at beginning of period


                         -

On shares and warrants issued during the period


           7,350,000

Balance at end of period


           7,350,000




Ordinary Shares


 Number

Balance at beginning of period


                         -

Issued during the period


          41,790,000

Balance at end of period


          41,790,000

 

 

 

Ordinary Share Capital


 US$

Balance at beginning of period


                         -

On shares and warrants issued during the period


        407,356,906

Balance at end of period


        407,356,906

 

 

147,000 Founder Preferred Shares were issued on 20 January 2017 at US$10.50 per share and a further 553,000 issued on 8 March 2017, also at US$10.50 per share.  There are no Founder Preferred Shares held in Treasury. Each Founder Preferred Share was issued with a Warrant as described below.

 

41,790,000 Ordinary Shares were issued on 8 March 2017 (41,765,000 were issued in the IPO at US$10.00 per share and 25,000 were issued to the non-founder directors in conjunction with the IPO).  There are no Ordinary Shares held in Treasury. Each Ordinary Share was issued with a Warrant as described below. 

 

Issue costs of US$10,543,094 were deducted from the proceeds of issue.

 

Ordinary Shares

Ordinary Shares confer upon the holders (in accordance with the Articles):

 

(a)        Subject to the BVI Companies Act, on a winding-up of the Company the assets of the Company available for distribution shall be distributed, provided there are sufficient assets available, to the holders of Ordinary Shares and Founder Preferred Shares pro rata to the number of such fully paid up shares held by each holder relative to the total number of issued and fully paid up Ordinary Shares as if such fully paid up Founder Preferred Shares had been converted into Ordinary Shares immediately prior to the winding-up;

(b)        the right, together with the holders of the Founder Preferred Shares, to receive all amounts available for distribution and from time to time to be distributed by way of dividend or otherwise at such time as the Directors shall determine, pro rata to the number of fully paid up shares held by the holder, as if the Ordinary Shares and Founder Preferred Shares constituted one class of share and as if for such purpose the Founder Preferred Shares had been converted into Ordinary Shares immediately prior to such distribution; and

(c)        the right to receive notice of, attend and vote as a member at any meeting of members except in relation to any Resolution of Members that the Directors, in their absolute discretion (acting in good faith) determine is: (i) necessary or desirable in connection with a merger or consolidation in relation to, in connection with or resulting from the Acquisition (including at any time after the Acquisition has been made); or (ii) to approve matters in relation to, in connection with or resulting from the Acquisition (whether before or after the Acquisition has been made).

 

Founder Preferred Shares

The Founder Preferred Shares have US$nil par value and carry the same rights, including the right to receive dividends, as Ordinary Shares. As at the discretion of the holder, the Founder Preferred Shares can be converted into Ordinary Shares on a one-for-one basis.

 

The Founder Preferred Shares structured to provide a dividend based on the future appreciation of market value of the Ordinary Shares, thus aligning the interests of the Founders (as defined in the Prospectus) with Ocelot investors on a long-term basis.  This dividend payment is calculated as follows: the Founder Preferred Shares are divided into eight equal tranches, pro rata to the number of Founder Preferred Shares held by each holder. On each Enhancement Date, the rights which are comprised in one such tranche (the "Enhanced Tranche") shall be enhanced by increasing the holders of the Enhanced Tranche's proportionate entitlement to: (a) any assets of the Company which are distributed to members on a winding up of the Company; and (b) any amounts which are distributed by way of dividend or otherwise if and to the extent necessary to ensure that on such Enhancement Date, the Enhanced Tranche has a market value which is at least equal to the market value of the Relevant Number of Ordinary Shares at such time (which for these purposes shall be determined in accordance with sub-section (1) of section 421 of the United Kingdom Income Tax (Earnings and Pensions) Act 2003. So far as possible, any such enhancement shall be divided between the holders of the Enhanced Tranche pro rata to the number of Founder Preferred Shares which are held by them and comprised in the Enhanced Tranche.

 

As at each Enhancement Date, the Relevant Number of Ordinary Shares means:

 

a)   a number of Ordinary Shares equal to the aggregate number of Founder Preferred Shares comprised in the Enhanced Tranche (subject to adjustment in accordance with the Articles); plus

 

b)   if the conditions for the Additional Annual Enhancement have been met, such number of Ordinary Shares as is equal to the Additional Annual Enhancement Amount divided by the Additional Annual Enhancement Price (any increase in the calculation of the Relevant Number of Ordinary Shares pursuant to this paragraph (b) being referred to as the "Additional Annual Enhancement"); plus

 

c)   if any dividend or other distribution has been made to the holders of Ordinary Shares in the relevant Enhancement Year, such number of Ordinary Shares as is equal to the Ordinary Share Dividend Enhancement Amount at the Ordinary Share Dividend Payment Price (any increase in the calculation of the Relevant Number of Ordinary Shares pursuant to this paragraph (c) being referred to as the "Ordinary Share Dividend Enhancement").

 

The conditions for the Additional Annual Enhancement referred to in paragraph (b) above are as

follows:

 

i.    no Additional Annual Enhancement will occur until such time as the Average Price per Ordinary Share for any ten consecutive Trading Days following Admission is at least $11.50;

 

ii.    following the first Additional Annual Enhancement, no subsequent Additional Annual Enhancement will occur unless the Additional Annual Enhancement Price for the relevant Enhancement Year is greater than the highest Additional Annual Enhancement Price in any preceding Enhancement Year.

 

In the first Enhancement Year in which the Additional Annual Enhancement is eligible to occur, the Additional Annual Enhancement Amount will be equal to (i) 20 per cent. of the difference between $10.00 and the Additional Annual Enhancement Price, multiplied by (ii) the number of Ordinary Shares outstanding immediately following the Acquisition including any Ordinary Shares issued pursuant to the exercise of Warrants but excluding any Ordinary Shares issued to shareholders or other beneficial owners of a company or business acquired pursuant to or in connection with the Acquisition (the "Preferred Share Enhancement Equivalent").

 

Thereafter, the Additional Annual Enhancement Amount will be equal in value to 20 per cent. of the increase in the Additional Annual Enhancement Price over the highest Additional Annual Enhancement Price in any preceding Enhancement Year multiplied by the Preferred Share Enhancement Equivalent.

 

For the purposes of determining the Additional Annual Enhancement Amount, the Additional Annual Enhancement Price is the Average Price per Ordinary Share for the last 30 consecutive Trading Days in the relevant Enhancement Year (the "Enhancement Determination Period").

 

Warrants

 

The Company has issued 42,490,000 Warrants to the purchases of both Ordinary Shares and Founder Preferred Shares (including the 25,000 Warrants that were issued to non-founder directors in connection with their appointment).  Each Warrant has a term of 3 years following an Acquisition and entitles a Warrant holder to subscribe for one-third of an Ordinary Share upon exercise. Warrants will be exercisable in multiples of three for one Ordinary Share at a price of US$11.50 per whole Ordinary Share.

 

The Warrants are also subject to mandatory redemption at US$0.01 per Warrant if at any time the Average Price per Ordinary Share equals or exceeds US$18.00 for a period of ten consecutive trading days (subject to any prior adjustment in accordance with the terms of the Warrant Instrument).

 

11.        Share-based compensation

On 8 March 2017, the Company issued 125,000 options on its Ordinary Shares to its non-executive directors that vest upon an Acquisition; continued service until that time is required for vesting.  The options expire on the 5th anniversary following an Acquisition and have an exercise price of $11.50 per share (subject to such adjustment as the Directors consider appropriate in accordance with the terms of the Option Deeds).

 

The Company estimated the grant date fair value of each option at $1.81 using a Black-Scholes model with the following assumptions:

 

Share Price                              


$10.00

Exercise Price                          


$11.50

Risk-Free Rate                  


2.34%

Dividend Yield


$0

Probability of Acquisition


59.20%

Post-Acquisition Volatility


37.40%

 

 

Share-based compensation expense of $43,992 has been recognised for these options in the accompanying condensed financial statements for the period ended 30 June 2017.  Unamortized share-based compensation expense of $182,258 will be recognised over the remaining estimated vesting period of approximately 1.2 years.

 

12.        Cash and cash equivalents



2017



US$

Cash and cash equivalents at end of the period comprise:


Cash at bank


5,845,270

0% US Treasury bills


408,008,091



413,853,361

 

 

13.        Warrant redemption liability

As a contingent obligation to redeem for cash, a separate liability of $424,900 ($0.01 per Warrant) was recognised.

 

14.        Related party and material transactions

During the period the Company issued the following shares and options to directors of the Company:

 



 Ordinary Shares


 Founder Preferred Shares


 Options



2017


2017


2017



Number


Number


Number

Andrew Barron


              345,650


                      147,000


 -

Aryeh B Bourkoff


           1,081,050


                      399,000


 -

Robert D Marcus


              110,000


 -


            50,000

Martin HP Söderstrom


                  7,500


 -


            37,500

Sangeeta Desai


                  7,500


 -


            37,500

 

 

In addition, each director holds Warrants equal to the total of Ordinary Shares and Founder Preferred Shares held.

 

The fees to directors during the period to 30 June 2017 were as follows:

 



2017



US$

Robert D Marcus


                31,232

Martin HP Söderstrom


                23,425

Sangeeta Desai


                23,425

 

 

The directors opted to have their first year's annual remuneration settled by the issue of shares at $10 per share. Robert D Marcus received 10,000 Ordinary Shares and Martin HP Söderstrom and Sangeeta Desai, 7,500 Ordinary Shares each.

 

The Company has received management services from LionTree LLC. No consideration was paid by the Company for these services.

 

The Company incurred total issuance costs of $10.5 million.  The details of these costs are as follows:

 



US$

Syndicate expenses


              134,462

Legal fees


              533,632

Placement fees


           9,875,000

Total


10,543,094




 

15.        Financial risk management

The Company's policies with regard to financial risk management are clearly defined and consistently applied. They are a fundamental part of the Company's long term strategy covering areas such as foreign exchange risk, interest rate risk, credit risk, liquidity risk and capital management.

 

Financial risk management is under the direct supervision of the Board of Directors which follows policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non derivative financial instruments and investment of excess liquidity.

 

The Company does not intend to acquire or issue derivative financial instruments for trading or speculative purposes and has yet to enter into a derivative transaction.

 

Currency risk

The majority of the Company's financial cash flows are denominated in Pounds Sterling and United States Dollars. Currently the Company does not carry out any significant operations in currencies outside the above. Foreign exchange risk arises from recognised monetary assets and liabilities. The Company does not hedge systematically its foreign exchange risk.

 

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its financing activities, including deposits with banks and financial institutions. Credit risk from balances with banks and financial institutions is managed by the Board.  Surplus funds are invested in high credit quality financial institutions and in U.S treasury bills.

 

Liquidity risk

The Company monitors liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom. Such forecasting takes into consideration the Company's debt financing plans (when applicable), compliance with internal balance sheet ratio targets and external regulatory or legal requirements if appropriate.

 

Cash flow interest rate risk

The Company has no long term borrowings and as such is not currently exposed to interest rate risk.  To mitigate against the risk of default by one or more of its counterparties, the Company currently holds its assets in instruments available from the U.S denominated money markets and/or at commercial banks that are at least AA rated or better at the time of deposit.  As of 30 June 2017, $408.0 million was held in U.S. treasury bills meeting the terms of the U.S denominated money markets as described in the Prospectus.  The Company anticipates that it will continue to hold the bulk of its assets in U.S. treasury bills until an acquisition is consummated.  The Board regularly monitors interest rates offered by, and the credit ratings of, current and potential counterparties, to ensure that the Company remains in compliance with its stated investment policy for its cash balances. The Company does not currently use financial instruments to hedge its interest rate exposure.

 

Capital risk management

The Company's objectives when managing capital (currently consisting of share capital and share premium) are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

 

 


 

Directors

Aryeh B Bourkoff

Andrew Barron

Robert D Marcus (Chairman)

Martin HP Söderstrom

Sangeeta Desai

 

Registered office

Kingston Chambers

PO Box 173

Road Town

Tortola

British Virgin Islands

 

Administrator and secretary

International Administration Group (Guernsey) Limited

Regency Court

Glategny Esplanade

St Peter Port

Guernsey

GY1 1WW

 

Registrar

Computershare Investor Services (BVI) Limited

Woodbourne Hall

PO Box 3162

Road Town

Tortola

British Virgin Islands

 

Auditors

PricewaterhouseCoopers LLP

1 Embankment Place

London

WC2N 6RH

 

Legal advisers to the Company (English and US Law)

Greenberg Traurig, LLP

8th Floor

The Shard

32 London Bridge Street

London

SE1 9SG

 

Legal advisers to the Company (BVI Law)

Maples & Calder

200 Aldesrgate Street

11th Floor

London

EC1 4HD

 

Depositary

Computershare Investor Services PLC

The Pavilions

Bridgewater Road

Bristol

BS 13 8AE

 

Principal bankers

Barclays Bank Plc

PO Box 8

Library Place

St Helier

Jersey JE4 8NE

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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