UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2018
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
CommissionFile Number 001-37878
SABAN CAPITAL ACQUISITION CORP.
(Exact name of Registrant as specified in its Charter)
| Cayman Islands | 98-1296434 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
10100 Santa Monica Boulevard, 26th Floor Los Angeles, California | 90067 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including areacode: (310) 557-5100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Units, each consisting of one Class A ordinary share, $0.0001 par value, and one-half of one Warrant to purchase one Class A ordinary share | NASDAQ Capital Market | |
| Class A ordinary shares, par value $0.0001 per share | NASDAQ Capital Market | |
| Warrants to purchase Class A ordinary shares | NASDAQ Capital Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment tothis Form 10-K. ☒
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, a smaller reporting company or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
| Non-accelerated filer | ☐ | Small reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act). YES ☒ NO ☐
The aggregate market value of the Registrant’s Class A ordinary shares outstanding, other than shares held by persons who may be deemed affiliates of the Registrant, at June 30, 2018 was $213,905,115.
At March 25, 2019, there were 21,157,776 Class A ordinary shares, $0.0001 par value, and 6,243,480 Class F ordinary shares, $0.0001 par value, issued and outstanding.
Documents Incorporated by Reference: None.
CERTAIN TERMS
References to the “Company,” “our,” “us” or “we” refer to Saban Capital Acquisition Corp., a blank check company incorporated on March 15, 2016 as a Cayman Islands exempted company. References to our “Sponsor” refer to Saban Sponsor LLC, a Delaware limited liability company. References to Saban Capital refer to Saban Capital Group LLC, a Delaware limited liability company. References to our “Public Offering” refer to the initial public offering of Saban Capital Acquisition Corp. which closed on September 21, 2016 (the “Close Date”).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report onForm 10-K contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of performance. They involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by these statements. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Annual Report onForm 10-K, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When the Company discusses its strategies or plans, it is making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, the Company’s management. Actual results and shareholders’ value will be affected by a variety of risks and factors, including, without limitation, those risk factors described under “Item 1A. Risk Factors” and other reports the Company files with the United States Securities and Exchange Commission (the “SEC”). Many of the risks and factors that will determine these results and shareholders’ value are beyond the Company’s ability to control or predict.
All such forward-looking statements speak only as of the date of this Annual Report onForm 10-K. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this Special Note Regarding Forward-Looking Statements.
| Item 1. | Business. |
Introduction
We are a blank check company incorporated on March 15, 2016 as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). We have neither engaged in any operations nor generated any revenue to date. Based on our business activities, the Company is a “shell company” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because we have no operations and nominal assets consisting almost entirely of cash.
Our Public Offering closed on September 21, 2016. Prior to our Public Offering, on April 11, 2016, our Sponsor purchased an aggregate of 5,750,000 Class F ordinary shares (“Founder Shares”) for an aggregate
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purchase price of $25,000, or approximately $0.004 per share. In August 2016, the Company repurchased 99,000 Founder Shares from our Sponsor at their original per share issuance price and subsequently issued such number of Founder Shares pursuant to The 2016 Share Award Plan of the Company (the “Plan”) for the same per share price to certain individuals who would be assisting us in the evaluation of investment opportunities. In September 2016, our Sponsor transferred 30,000 Founder Shares to each of the Company’s independent directors at their original per share issue price. On September 15, 2016, we effected a pro rata share capitalization resulting in an increase in the total number of Founder Shares outstanding from 5,750,000 to 6,250,000 in order to maintain the ownership of Founder Shares by our initial shareholders, including our Sponsor, independent directors and individuals assisting us with the evaluation of investment opportunities who were granted Founder Shares under the Plan (collectively, the “Initial Shareholders”), at 20% of our issued and outstanding shares upon consummation of the Public Offering. Following the pro rata share capitalization and the closing of the Public Offering, our Sponsor held 6,044,570 Founder Shares, each of our three independent directors held 32,610 Founder Shares and the individuals assisting us with the evaluation of investment opportunities, including our executive officers, who were originally granted Founder Shares under the Plan, held 107,600 Founder Shares. On March 16, 2017, concurrent with Mr. Bruce Rosenblum’s resignation from our board of directors, the Company acquired 25,100 Founders Shares from Mr. Rosenblum and concurrent therewith, in connection with Mr. Casey Wasserman’s appointment to the board of directors, theCompany re-issued such 25,100 Founders Shares to Mr. Casey Wasserman, and our Sponsor sold to Mr. Wasserman an additional 7,500 Founders Shares and thereafter our Sponsor held 6,037,070 Founders Shares. On June 26, 2017, the Company entered into agreements to repurchase 6,520 Founder Shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Founder Shares to 6,243,480, and reducing the number of Founder Shares held collectively by individuals previously awarded Founder Shares under the Plan from 107,600 to 101,080.
On the Close Date, we consummated our Public Offering of 25,000,000 units (which included the purchase of 1,500,000 units subject to the underwriters’ 1,500,000 unit over-allotment option) at a price of $10.00 per unit generating gross proceeds of $250,000,000 before underwriting discounts and expenses. Each unit (“Unit”) consists of one Class A ordinary share, par value $0.0001 per share,and one-half of one warrant of the Company (“Warrant”). Each whole Warrant entitles the holder thereof to purchase one Class A ordinary share for $11.50 per share. Simultaneously with the closing of the Public Offering, we completed the private sale of an aggregate of 7,000,000 warrants to our Sponsor (the “Private Placement Warrants”), each exercisable to purchase one Class A ordinary share for $11.50 per share at a price of $1.00 per Private Placement Warrant.
We received gross proceeds from the Public Offering and the sale of the Private Placement Warrants of $250,000,000 and $7,000,000, respectively, for an aggregate of $257,000,000. $250,000,000 of the gross proceeds were deposited in a trust account at JP Morgan Chase Bank, N.A. maintained by Continental Stock Transfer and Trust Company (“Trustee”) acting as trustee (the “Trust Account”). At the Close Date, $5,000,000 of the remaining amount was used to pay underwriting discounts and $250,000 of the remaining amount was used to repay notes payable to our Sponsor, with the balance reserved to pay accrued offering and formation costs, business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. In the future, a portion of interest income on the funds held in the Trust Account may be released to us to pay tax obligations. At December 31, 2018, funds held in the Trust Account consisted solely of money market funds. On November 4, 2016, we announced that, commencing November 7, 2016, holders of the Units sold in our Public Offering may elect to separately trade the Class A ordinary shares and Warrants included in the Units. Those Units not separated continued to trade on the NASDAQ Capital Market under the symbol “SCACU,” and the Class A ordinary shares and Warrants that were separated traded on the NASDAQ Capital Market under the symbols “SCAC” and “SCACW,” respectively. We did not issue fractional warrants upon separation of the Units and only whole Warrants traded.
On March 12, 2018, we issued an unsecured convertible promissory note (as amended on September 21, 2018, the “Sponsor Convertible Note”), pursuant to which we may borrow up to $1,000,000 from our Sponsor
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from time to time. The Sponsor Convertible Note bears interest at a rate of 1.96% per annum and all unpaid principal under the Sponsor Convertible Note including accrued interest thereon will be due and payable in full on the earliest of (i) March 31, 2019, (ii) the effective date of an initial Business Combination, and (iii) the termination, for any reason, of the Business Combination Agreement (as defined below) (such earliest date, the “Maturity Date”). Our Sponsor will have the option to convert any amounts outstanding under the Sponsor Convertible Note, up to $1,000,000 in the aggregate, into warrants to purchase Class A ordinary shares at a conversion price of $1.00 per warrant. The terms of such warrants will be identical to the Private Placement Warrants, including that each such warrant will entitle the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to the same adjustments applicable to the Private Placement Warrants. Under the Sponsor Convertible Note, our Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the trust account, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Convertible Note was approved by our board of directors and our audit committee on March 12, 2018. On March 12, 2018, we borrowed $500,000 under the Sponsor Convertible Note and on August 2, 2018, we borrowed the remaining $500,000 under the Sponsor Convertible Note.
On September 26, 2018, we issued an unsecured promissory note (as amended, the “Sponsor Note”) pursuant to which we may borrow up to $1.5 million from Sponsor. The Sponsor Note bears interest at a rate of 2.51% per annum and all unpaid principal under the Sponsor Note including accrued interest thereon will be due and payable in full on the Maturity Date, unless accelerated upon the occurrence of customary events of default. Under the Sponsor Note, our Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the trust account established in connection with our initial public offering, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Note was approved by our board of directors and our audit committee on September 13, 2018. Executed on September 26, 2018, $500,000 was drawn under the Sponsor Note on October 5, 2018, $500,000 was also drawn under the Sponsor Note on November 12, 2018.
We and our Sponsor are currently evaluating the treatment of the Sponsor Convertible Note and Sponsor Note given our planned dissolution described below.
On September 18, 2018, we held an extraordinary general meeting at which our shareholders approved (1) an amendment to our amended and restated memorandum and articles of association to extend the date by which we must (a) consummate a business combination, (b) cease our operations except for the purpose of winding up if we fail to complete such Business Combination, and (c) redeem all of our Class A ordinary shares included as part of the units sold in the initial public offering from September 21, 2018 to December 31, 2018 (or March 31, 2019 if we executed a definitive agreement for an initial Business Combination by December 31, 2018 and all closing conditions contained in such definitive agreement (other than regulatory conditions, including, without limitation, those related to antitrust approval and the effectiveness of any related registration statement, and conditions that by their nature are to be satisfied at the closing of such Business Combination) had been satisfied or waived by December 31, 2018) (such date, the “Extension Date”); and (2) a related amendment to the investment management trust agreement governing the Trust Account to extend the date before which we must complete a Business Combination to the Extension Date and extend the date on which the trustee must liquidate the trust account from September 21, 2018 to the Extension Date. In connection with the Extension Amendment on September 18, 2018, $39.15 million was released from the trust account to satisfy the Extension Amendment Redemptions.
On September 13, 2018, we entered into the Business Combination Agreement with Panavision Acquisition Sub, Inc., a Delaware corporation and our direct wholly owned subsidiary (“Panavision Acquisition Sub”), Sim Acquisition Sub, Inc., an Ontario corporation and our direct wholly owned subsidiary (“Sim Acquisition Sub”), Panavision Inc., a Delaware corporation (“Panavision”), Sim Video International Inc., an Ontario corporation (“Sim”), and the other parties thereto, as amended on December 11, 2018 (as amended, the “Business Combination Agreement”). Pursuant to the Business Combination Agreement, among other things, it was
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proposed that Panavision and SIM would become our direct or indirect wholly-owned subsidiaries (the “Panavision/SIM Business Combination”).
Due to market conditions, delays resulting from the recent partial U.S. government shutdown and our March 31, 2019 termination date, we, Panavision, Sim, the Panavision Holder Representative (as defined in the Business Combination Agreement) and the Sim Holder Representative (as defined in the Business Combination Agreement) jointly determined to terminate the Business Combination Agreement pursuant to a Termination Agreement, dated as of February 28, 2019, by and among such parties, effective as of such date. We did not pay any costs or fees in connection with the Termination Agreement.
As a result of the termination of the Business Combination Agreement, effective as of February 28, 2019, the Business Combination Agreement was of no further force or effect, and each of the following agreements entered into in connection with the Business Combination Agreement was automatically terminated with no further force or effect: (1) the subscription agreements we entered into with certain investors, pursuant to which, among other things, such investors committed to subscribe for our shares for an aggregate amount of $55.0 million, $30.0 million of which was to be funded by Saban Sponsor II LLC (the “Sponsor PIPE Entity”), an affiliate of our Sponsor, (2) the Debt Commitment Letter we entered into with Bank of America, N.A., Bank of Montreal and ING Capital LLC, pursuant to which, among other things, such potential lenders committed to provide a $250.0 million ABL revolving credit facility, (3) the Debt Commitment Letter we entered into with Solus Alternative Asset Management LP, pursuant to which, among other things, such lender committed to provide a $100.0 million second lien term loan credit facility, (4) the Director Composition and Standstill Agreement we entered into with our Sponsor, the Sponsor PIPE Entity, the Principal Panavision Holders (as defined in the Business Combination Agreement) and the Panavision Holder Representative, pursuant to which, among other things, certain post-closing governance rights for the combined company were agreed upon and the parties agreed to take certain actions in connection with, or to facilitate, the Business Combination, and (5) the employment agreements we entered into with Kimberly Snyder and Bill Roberts.
As a result of the termination of the Business Combination Agreement and the March 31, 2019 deadline for the Company to consummate a Business Combination, pursuant to our Amended and Restated Memorandum and Articles of Association, we (1) have ceased all operations except for the purpose of winding up, (2) intend to redeem all of our issued and outstanding Class A ordinary shares (the “Public Shares”), at aper-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less $50,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, on April 1, 2019, and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, expect to liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
There will be no redemption rights or liquidating distributions with respect to our Warrants and Private Placement Warrants, which will expire worthless upon the liquidation of the Company.
Our Initial Shareholders have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares. However, if our Initial Shareholders own Public Shares, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares.
Our Initial Shareholders have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association that would affect the substance or timing of our obligation to redeem 100% of our Public Shares.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the proceeds held outside the Trust
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Account, although such funds will likely not be sufficient for such purpose. We have requested that the Trustee release to us an additional amount of $50,000 of accrued interest to pay a portion of such costs and expenses. We are in the process of negotiating the payment of costs and expenses owed to third parties.
If we were to expend all of the net proceeds of our Public Offering, other than the proceeds deposited in the Trust Account, and without taking into account interest, if any, earned on the Trust Account,the per-share redemption amount received by public shareholders upon our dissolution would be approximately $10.00. The proceeds deposited in the Trust Account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public shareholders. We cannot assure you that theactual per-share redemption amount received by public shareholders will not be substantially less than $10.00. See “Item 1A. Risk Factors – If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by shareholders may be less than $10.00 per share” and other risk factors described below. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we sought to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we did business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public shareholders, there is no guarantee that even if they execute such agreements that they would be prevented from bringing claims against the Trust Account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. In order to protect the amounts held in the Trust Account, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of our Public Offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then our Sponsor will not be responsible to the extent of any liability for such third-party claims. We cannot assure you, however, that our Sponsor would be able to satisfy those obligations. None of our directors or officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to
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take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value ofthe per-share redemption price will not be substantially less than $10.00 per share. See “Item 1A. Risk Factors — If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by shareholders may be less than $10.00 per share” and other risk factors described below.
We will seek to reduce the possibility that our Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Our Sponsor will also not be liable as to any claims under our indemnity of the underwriters of the Public Offering against certain liabilities, including liabilities under the Securities Act. At December 31, 2018, we had access to up to $46,229 from the proceeds of the Public Offering, the sale of the Private Placement Warrants, and loans from our Sponsor, with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $50,000).
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the Trust Account, we cannot assure you we will be able to return $10.00 per share to our public shareholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our shareholders. Furthermore, our board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our Company to claims of punitive damages, by paying public shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. See “Item 1A. Risk Factors — If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.”
Our public shareholders will be entitled to receive funds from the Trust Account as a result of the proposed redemption of our Public Shares commencing on April 1, 2019.
Amended and Restated Memorandum and Articles of Association
Our amended and restated memorandum and articles of association provide, among other things, that:
| • | if our Business Combination is not consummated on or prior to the Extension Date, then our existence will terminate and we will distribute all amounts in the Trust Account; and |
| • | prior to our Business Combination, we may not issue additional ordinary shares that would entitle the holders thereof to (i) receive funds from the Trust Account or (ii) vote on any Business Combination. |
These provisions cannot be amended without the approval of holders of at least two thirds of our ordinary shares who attend and vote at a general meeting of the Company.
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Competition
In identifying, evaluating and selecting a target business for our Business Combination, we encountered intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions.
Indemnity
Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below: (i) $10.00 per Public Share; or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case, net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not asked our Sponsor to reserve for its indemnification obligations. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations.
Employees
We currently have four officers. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until our liquidation.
Periodic Reporting and Financial Information
Our Units, Class A ordinary shares and Warrants are registered under the Exchange Act and as a result we have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at: http://www.sec.gov.
We previously filed a Registration Statement onForm 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We expect to file a Form 15 to suspend our reporting or other obligations under the Exchange Act shortly after the Extension Date. In accordance with the requirements of the Exchange Act, this Annual Report onForm 10-K contains consolidated financial statements audited and reported on by our independent registered public accountants.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with this Annual Report onForm 10-K. Only in the event we are deemed to be a large accelerated filer or an accelerated filer that no longer qualifies as an emerging growth company will we be required to have our internal control procedures audited.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
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statements, and exemptions from the requirements of holdinga non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the Close Date, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is heldby non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billionin non-convertible debt during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of RegulationS-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited consolidated financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held bynon-affiliates exceeds $250 million as of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held bynon-affiliates exceeds $700 million as of the prior June 30th.
| Item 1A. | Risk Factors. |
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report on Form10-K, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Because we have net tangible assets in excess of $5,000,000 and timely filed a Current Report onForm 8-K after the Close Date, including an audited balance sheet demonstrating this fact, we are exempt from certain rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of such rules.
Our public shareholders may receive only $10.00 per share, or possibly less than $10.00 per share, on our redemption, and our Warrants will expire worthless.
Our public shareholders may receive $10.00 per share, or possibly less than $10.00 per share, on the liquidation of our Trust Account and our Warrants will expire worthless. In certain circumstances, our public shareholders may receive less than $10.00 per share on the redemption of their shares where a third party brings a claim against us that our Sponsor is unable to indemnify and our Warrants will expire worthless.
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by shareholders may be less than $10.00 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent auditors), prospective
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target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.
Examples of possible instances where we may have engaged a third party that refused to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received by public shareholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below: (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of our Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to reserve for its indemnification obligations. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, although we are not currently aware of any such claims, if any such claims were successfully made against the Trust Account, the funds available for redemptions could be reduced to less than $10.00 per Public Share. In such event you would receive such lesser amount per share in connection with any redemption of your Public Shares.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public shareholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of: (i) $10.00 per share; or (ii) other than due to the failure to obtain such waiver such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public shareholders may be reduced below $10.00 per share.
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If, after we distribute the proceeds in the Trust Account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our shareholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith by paying public shareholders from the Trust Account prior to addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.
If, before distributing the proceeds in the Trust Account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public shareholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the Trust Account, the per share amount that would otherwise be received by our shareholders in connection with our liquidation would be reduced.
Our public shareholders may be forced to wait beyond the Extension Date before redemption from our Trust Account.
We intend to distribute the aggregate amount then on deposit in the Trust Account (less $50,000 of the net interest earned thereon to pay dissolution expenses), pro rata to our public shareholders by way of redemption and cease all operations except for the purposes of winding up of our affairs, as further described herein. Any redemption of public shareholders from the Trust Account shall be effected automatically by function of our amended and restated memorandum and articles of association prior to any voluntary winding up. Such winding up, liquidation and distribution must comply with the applicable provisions of the Companies Law (2016 Revision) of the Cayman Islands as the same may be amended from time to time (“Companies Law”). As such, investors may be forced to wait beyond the Extension Date before the redemption proceeds of our Trust Account become available to them and they receive the return of their pro rata portion of the proceeds from our Trust Account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation. Only upon our redemption or any liquidation will public shareholders be entitled to distributions.
Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
If we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by our shareholders. Furthermore, our directors
may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, and thereby exposing themselves and our Company to claims, by paying public shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. We and our directors and officers who knowingly and willfully authorized or permitted any
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distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable to a fine of approximately $18,300 and to imprisonment for five years in the Cayman Islands.
We may be a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. investors.
If we are a PFIC for any taxable year (or portion thereof) that is included in the holding period of a beneficial owner of our Class A ordinary shares or Warrants who or that is for U.S. federal income tax purposes (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof or the District of Columbia or (iii) an estate or trust the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) it has in effect a valid election to be treated as a U.S. person (a “U.S. holder”) , such U.S. holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Our PFIC status for our current and subsequent taxable years may depend on whether we qualify for thePFIC start-up exception, depending on the particular circumstances, the application ofthe start-up exception may be subject to uncertainty, and there can be no assurance that we will qualify forthe start-up exception. Accordingly, there can be no assurance with respect to our status as a PFIC for our current taxable year or any subsequent taxable year. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. If we determine we are a PFIC for any taxable year, we will endeavor to provide to a U.S. Holder such information as the Internal Revenue Service, or IRS, may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a “qualified electing fund” election, but there can be no assurance that we will timely provide such required information, and such election would be unavailable with respect to our warrants in all cases. We urge U.S. Holders to consult their tax advisors regarding the possible application of the PFIC rules to holders of our Class A ordinary shares and Warrants.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act and have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, which could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our ordinary shares heldby non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
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
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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 tonon-emerging growth companies but any such an election to opt out is irrevocable. We have 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, we, 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 our consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of RegulationS-K and have taken advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited consolidated financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held bynon-affiliates exceeds $250 million as of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held bynon-affiliates exceeds $700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.
We are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers.
Our corporate affairs will be governed by our amended and restated memorandum and articles of association, the Companies Law (as the same may be supplemented or amended from time to time) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a Federal court of the United States.
We have been advised by our Cayman Islands legal counsel that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect
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of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a United States company.
Provisions in our amended and restated memorandum and articles of association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A ordinary shares and could entrench management.
Our amended and restated memorandum and articles of association contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
| Item 1B. | Unresolved Staff Comments. |
None.
| Item 2. | Properties. |
We currently maintain our offices at 10100 Santa Monica Blvd., Suite 2600, Los Angeles, California 90067. The cost for this space is included in the $10,000 per month fee that we pay an affiliate of our Sponsor for office space, utilities and secretarial and administrative services. We consider our current office space, adequate for our current operations.
| Item 3. | Legal Proceedings. |
There is no material litigation, arbitration or governmental proceeding currently pending or to our knowledge, threatened against us or any members of our management team in their capacity as such.
| Item 4. | Mine Safety Disclosures. |
None.
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| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
(a)
Market Information
Our Units began trading on NASDAQ under the symbol “SCACU” on September 16, 2016. On November 4, 2016, we announced that holders of our Units could elect to separately trade the Class A ordinary shares and Warrants included in the Units. On November 7, 2016, our Class A ordinary shares and Warrants became available for separate trading on NASDAQ under the symbols “SCAC” and “SCACW,” respectively. Our Warrants will expire upon the liquidation of the Company.
Holders
At March 25, 2019, there was one holder of record of our Units, one holder of record of our separately traded Class A ordinary shares, 21 holders of record of our Class F ordinary shares, and two holders of record of our separately traded Warrants.
Securities Authorized for Issuance Under Equity Compensation Plans
On August 19, 2016, we adopted the Plan. The purpose of the Plan is to provide incentive to our independent directors, employees and consultants to further our growth, development and financial success through the ownership of our shares by them. The Plan provides that we may grant employees, consultants and/or independent directors Founder Shares and may require the grantees to pay a price for such shares. The aggregate number of shares available for grant under the Plan is 150,000 Founder Shares. Unless otherwise provided in an applicable award agreement, all Founder Shares issued pursuant to the Plan are subject to repurchase by us, at our option, at fair market value on the termination of employment, directorship or consultancy, as applicable. If such termination was for cause, as such term is defined in the Plan, the holder resigns for any reason or the holder breaches restrictive covenants to which the holder is subject, the repurchase price paid by us will be the lesser of the cost and fair market value of such shares. In addition, the form of the award agreement used for the initial awards described below provides that in case of a termination for cause, all Founder Shares granted to the grantee will be forfeited. Under the Plan, our board of directors (or a committee or a subcommittee designated by the board of directors) shall administer and make all determinations with respect to the Plan. The Plan provides that the shares issued thereunder will be subject to certain transfer restrictions.
In August 2016, the Company purchased from the Sponsor 99,000 Founder Shares for $0.004 per share, and has issued the 99,000 Founder Shares for the same per share price to individuals assisting the Company with the evaluation of investment opportunities. On September 15, 2016, as a result of a pro rata share capitalization, such shares were increased from 99,000 to 107,600 Founder Shares. On June 26, 2017, the Company entered into agreements to repurchase 6,520 Founder Shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July, 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Founder Shares to 6,243,480, and reducing the number of Founder Shares held collectively by individuals previously awarded Founder Shares under the Plan from 107,600 to 101,080. As of December 31, 2018, there were 51,000 additional Founder Shares available for grant under the Plan. No additional shares are expected to be issued under the Plan and the Founder Shares will be extinguished upon the liquidation of the Company.
Performance Graph
We have elected not to provide the information required under this item pursuant to the rules applicable to smaller reporting companies.
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(b) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
Unregistered Sales
On April 11, 2016, our Sponsor purchased 5,750,000 Class F ordinary shares for an aggregate purchase price of $25,000, or approximately $0.004 per share. In September 2016, our Sponsor transferred 30,000 Class F ordinary shares to each of our three independent directors at their original purchase price. On September 15, 2016, our board of directors effected a capitalization of 500,000 Class F ordinary shares to the Initial Shareholders, resulting in an aggregate issuance of 6,250,000 Founder Shares of which 375,000 shares were subject to forfeiture by our Sponsor if the underwriters’ over-allotment option was not exercised in full by a specified date. The Founder Shares represent 20% of the total ordinary shares outstanding. Following the pro rata share capitalization and the closing of the Public Offering, our Sponsor held 6,044,570 Founder Shares, each of our three independent directors held 32,610 Founder Shares and the individuals assisting us with the evaluation of investment opportunities, including our executive officers, who were granted Founder Shares under the Plan held 107,600 Founder Shares. On March 16, 2017, concurrent with Mr. Bruce Rosenblum’s resignation from our board of directors, the Company acquired 25,100 Founders Shares from Mr. Rosenblum and concurrent therewith, in connection with Mr. Casey Wasserman’s appointment to the board of directors, theCompany re-issued such 25,100 Founders Shares to Mr. Casey Wasserman, and our Sponsor sold to Mr. Wasserman an additional 7,500 Founders Shares and thereafter held 6,037,070 Founders Shares. On June 26, 2017, the Company entered into agreements to repurchase 6,520 Founder Shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July, 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Founder Shares to 6,243,480, and reducing the number of Founder Shares held collectively by individuals previously awarded Founder Shares under the Plan from 107,600 to 101,080. In connection with the Close Date, we completed the private sale of an aggregate of 7,000,000 Private Placement Warrants, each exercisable to purchase one Class A ordinary share for $11.50 per share, to our Sponsor, at a price of $1.00 per Private Placement Warrant, generating proceeds, before expenses, of $7,000,000. The Private Placement Warrants are substantially similar to the Warrants underlying the Units issued in the Public Offering, except that if held by our Sponsor or its permitted transferees, they (i) may be exercised for cash or on a cashless basis and (ii) are not subject to being called for redemption. If the Private Placement Warrants are held by holders other than our Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Warrants.
On March 12, 2018, we issued the Sponsor Convertible Note, pursuant to which we may borrow up to $1,000,000 from our Sponsor from time to time. The Sponsor Convertible Note bears interest at a rate of 1.96% per annum and all unpaid principal under the Sponsor Convertible Note including accrued interest thereon will be due and payable in full on the earlier of September 21, 2018 and the consummation of our initial Business Combination. Our Sponsor will have the option to convert any amounts outstanding under the Sponsor Convertible Note, up to $1,000,000 in the aggregate, into warrants to purchase Class A ordinary shares at a conversion price of $1.00 per warrant. The terms of such warrants will be identical to the Private Placement Warrants, including that each such warrant will entitle the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to the same adjustments applicable to the Private Placement Warrants. Under the Sponsor Convertible Note, our Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the Trust Account, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Convertible Note was approved by our board of directors and our audit committee on March 12, 2018.
On September 26, 2018, we issued the Sponsor Note pursuant to which we may borrow up to $1.5 million from Sponsor. The Sponsor Note bears interest at a rate of 2.51% per annum and all unpaid principal under the Sponsor Note including accrued interest thereon will be due and payable in full on the Maturity Date, unless accelerated upon the occurrence of customary events of default. Under the Sponsor Note, our Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the trust account established in connection with our initial public offering, including any right to seek recourse, reimbursement,
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payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Note was approved by our board of directors and our audit committee on September 13, 2018. Executed on September 26, 2018, $500,000 was drawn under the Sponsor Note on October 5, 2018, $500,000 was also drawn under the Sponsor Note on November 12, 2018.
We and our Sponsor are currently evaluating the treatment of the Sponsor Convertible Note and Sponsor Note given our planned dissolution.
Concurrently with the execution of the Business Combination Agreement, we entered into subscription agreements with certain investors pursuant to which such investors collectively subscribed for 5.5 million shares of our common stock (after giving effect to the Domestication) for an aggregate purchase price equal to $55.0 million (the “PIPE Investment”), $30.0 million of which was proposed to be funded by an affiliate of the Sponsor. The PIPE Investment was proposed to be consummated substantially concurrently with the closing of the Panavision/SIM Business Combination and proceeds therefrom were proposed to be used to fund a portion of the cash consideration required to effect the Panavision/SIM Business Combination and up to $25.0 million of redemptions of Public Shares. The PIPE Investment was conditioned upon the satisfaction or waiver of conditions precedent to the closing of the Panavision/SIM Business Combination and other customary conditions. As a result of the termination of the Business Combination Agreement, effective as of February 28, 2019, each of the subscription agreements entered into in connection with the PIPE Investment was automatically terminated with no further force or effect.
The sales of the above securities by the Company were deemed to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
Use of Proceeds
On September 15, 2016, our registration statements onForm S-1 (RegistrationNos. 333-213259and 333-213652) were declared effective by the SEC for the Public Offering pursuant to which we sold an aggregate of 25,000,000 Units at an offering price to the public of $10.00 per Unit for an aggregate offering price of $250,000,000, with each Unit consisting of one Class A ordinary shareand one-half Warrant. Each Warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share. Deutsche Bank Securities Inc., and Goldman, Sachs & Co. acted as underwriters (the “Underwriters”). Our Public Offering did not terminate before all of the securities registered in our registration statement were sold. The Public Offering was consummated on September 21, 2016.
Net proceeds of $250,000,000 from the Public Offering together with $5,631,737 accrued interest, less $39,151,329 used to redeem 3,842,224 shares of Class A stock on September 21, 2018 were held in the Trust Account at December 31, 2018. The sale of the Private Placement Warrants, including deferred underwriting discounts of $8,750,000 were held outside of the Trust Account. We paid $5,000,000 in underwriting discounts and incurred offering costs of $802,818 related to the Public Offering. In addition, the Underwriters agreed to defer $8,750,000 in underwriting discounts, which amount would have been payable only upon the consummation of a Business Combination. We also repaid $250,000in non-interest bearing loans made to us by our Sponsor to cover expenses related to the Public Offering. No payments were made by us to directors, officers or persons owning ten percent or more of our ordinary shares or to their associates, or to our affiliates though certain officers were issued Founder Shares pursuant to the Plan. It is anticipated that the proceeds from the Public Offering will be used primarily to redeem our Class A ordinary shares.
(c) Issuer Purchases of Equity Securities
No purchases of our equity securities have been made by us or affiliated purchasers within the fourth quarter of
the fiscal year ended December 31, 2018.
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| Item 6. | Selected Financial Data. |
We have elected not to provide the information required under this item pursuant to the rules applicable to smaller reporting companies.
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the notes related thereto which are included in “Item 8. Consolidated Financial Statements and Supplementary Data” of this Annual Report onForm 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report onForm 10-K.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on March 15, 2016 and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We have reviewed a number of opportunities to enter into a Business Combination with an operating business, but we do not intend to complete a Business Combination, and instead, we intend to redeem our Class A ordinary shares and the Company will be liquidated and dissolved.
At December 31, 2018, we held cash of $46,229, current liabilities of $7,605,666 and deferred underwriting compensation of $8,750,000.
Results of Operations
For the years ended December 31, 2018 and 2017, we had net (loss)/income attributed to ordinary shares of ($3,803,187) and $914,982, respectively. Our business activities consisted solely of identifying and evaluating prospective acquisition targets for a Business Combination and interest income of $3,909,940 for the year ended December 31, 2018 and $1,625,844 for the year ended December 31, 2017 earned on the amounts held in the Trust Account.
Liquidity and Capital Resources
On April 11, 2016, our Sponsor purchased 5,750,000 Class F ordinary shares for an aggregate purchase price of $25,000, or approximately $0.004 per share. In September 2016, our Sponsor transferred 30,000 Class F ordinary shares to each of our three independent directors at their original purchase price. Immediately prior to the pricing of the Public Offering, on September 15, 2016, we effected a capitalization of 500,000 Class F ordinary shares to the Initial Shareholders, resulting in an aggregate issuance of 6,250,000 Founder Shares of which up to 375,000 shares were subject to forfeiture by our Sponsor if the Underwriters’ over-allotment option was not exercised in full by a specified date. The Founder Shares represent 20% of the total ordinary shares outstanding. Following the capitalization, our Sponsor held 6,044,570 Founder Shares and each of our three independent directors held 32,610 Founder Shares and the other individuals, including our executive officers, who were originally issued 99,000 Founder Shares under the Plan held 107,600 Founder Shares after we effected the pro rata share capitalization. On March 16, 2017, concurrent with Mr. Bruce Rosenblum’s resignation from our board of directors, we acquired 25,110 Founders Shares from Mr. Rosenblum and concurrent therewith, in connection with Mr. Casey Wasserman’s appointment to the board of directors,we re-issued such 25,110 Founders Shares to Mr. Casey Wasserman, and our Sponsor sold to Mr. Wasserman an additional 7,500 Founders Shares and our Sponsor thereafter held 6,037,070 Founders Shares. On June 26, 2017, the Company
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entered into agreements to repurchase 6,520 Founder Shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July, 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Founder Shares to 6,243,480, and reducing the number of Founder Shares held collectively by individuals previously awarded Founder Shares under the Plan from 107,600 to 101,080.
On September 21, 2016, we consummated the Public Offering of 25,000,000 Units (which included the purchase of 1,500,000 Units subject to the Underwriters’ 1,500,000 Unit over-allotment option) at a price of $10.00 per Unit generating gross proceeds of $250,000,000 before underwriting discounts and expenses. Prior to the Close Date, we completed the private sale of an aggregate of 7,000,000 Private Placement Warrants, each exercisable to purchase one Class A ordinary share for $11.50 per share, to our Sponsor, at a price of $1.00 per Private Placement Warrant.
We received gross proceeds from the Public Offering and the sale of the Private Placement Warrants of $250,000,000 and $7,000,000, respectively, for an aggregate of $257,000,000. $250,000,000 of the gross proceeds were deposited in the Trust Account. At the Close Date, the remaining $7,000,000 was held outside of the Trust Account, of which $5,000,000 was used to pay underwriting discounts and $250,000 was used to repay notes payable to our Sponsor, with the balance reserved to pay accrued offering and formation costs, business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. In the future, a portion of interest income on the funds held in the Trust Account may be released to us to pay tax obligations.
At December 31, 2018, funds held in the Trust Account consisted solely of cash and investments. On September 21, 2016 we invested the funds held in the Trust Account in money market funds meeting certain conditionsunder Rule 2a-7 under the Investment Company Act, which invest solely in United States Treasuries. Due to the short-term nature of the money market fund’s investments, we do not believe that we are subject to material interest rate risk.
At December 31, 2018, we had cash held outside of the Trust Account of $46,229, which is available to fund our working capital requirements.
At December 31, 2018, we had current liabilities of $7,605,666, largely due to amounts owed to professionals, consultants, advisors and others who performed services related to our Public Offering and the sale of the Private Placement Warrants or are working on identifying and evaluating a Business Combination. The identification and evaluation of a potential Business Combination continued after December 31, 2018 and additional expenses were incurred and will be incurred in connection with our liquidation. Such expenses may be significant. On March 12, 2018, we issued an unsecured convertible promissory note to our Sponsor, pursuant to which we may borrow up to $1,000,000 from our Sponsor from time to time, and on September 26, 2018, we issued an unsecured promissory note, pursuant to which we may borrow up to $1.5 million from Sponsor from time to time. See “Related Party Transactions” below. Our Sponsor, affiliates of our Sponsor, executive officers and directors are not obligated to make additional loans to us, and we may not be able to raise additional funds from unaffiliated parties.
We had until the Extension Date to complete a Business Combination. As we were unable to complete a Business Combination on or prior to the Extension Date, we (i) ceased all operations except for the purpose of winding up on March 31, 2019, (ii) intend to redeem the Public Shares, ata per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less $50,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, on April 1, 2019, and (iii) intend to, as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and the board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating
18
distributions with respect to our Warrants and Private Placement Warrants, which will expire worthless upon our liquidation.
Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the interest earned on the amount in the trust account will be sufficient to pay our taxes.
We are currently discussing the payment of outstanding expenses and costs of the Company with third party vendors.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would beconsidered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose offacilitating off-balance sheet arrangements.
We have not entered intoany off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered intoany non-financial agreements involving assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an administrative agreement to pay monthly recurring expenses of $10,000 for office space, utilities and secretarial and administrative services to an affiliate of our Sponsor and the deferred underwriting compensation as further described above. The agreement terminates upon the liquidation of the Company and the deferred underwriting compensation is not payable if a Business Combination is not consummated.
Related Party Transactions
Between Inception and the Close Date, our Sponsor loaned the Company $250,000 in unsecured promissory notes. The funds were used topay up-front expenses associated with our Public Offering. These noteswere non-interest bearing and were repaid in full to our Sponsor at the Close Date.
Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed forany out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations.
Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursementof out-of-pocket expenses incurred by such persons in connection with activities on our behalf, although no such reimbursements will be made from the funds held in the Trust Account.
On March 12, 2018, we issued the Sponsor Convertible Note, pursuant to which we may borrow up to $1,000,000 from our Sponsor from time to time. The Sponsor Convertible Note bears interest at a rate of 1.96% per annum and all unpaid principal under the Sponsor Convertible Note including accrued interest thereon will be due and payable in full on the earliest of (i) March 31, 2019, (ii) the effective date of an initial business combination, and (iii) the termination, for any reason, of the Business Combination Agreement (such earliest date, the “Maturity Date”). Our Sponsor will have the option to convert any amounts outstanding under the Sponsor Convertible Note, up to $1,000,000 in the aggregate, into warrants to purchase Class A ordinary shares
19
at a conversion price of $1.00 per warrant. The terms of such warrants will be identical to the Private Placement Warrants, including that each such warrant will entitle the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to the same adjustments applicable to the Private Placement Warrants. Under the Sponsor Convertible Note, our Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the Trust Account, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Convertible Note was approved by our board of directors and our audit committee on March 12, 2018.
On September 26, 2018, we issued an unsecured promissory note (as amended, the “Sponsor Note”) pursuant to which we may borrow up to $1.5 million from Sponsor. The Sponsor Note bears interest at a rate of 2.51% per annum and all unpaid principal under the Sponsor Note including accrued interest thereon will be due and payable in full on the Maturity Date, unless accelerated upon the occurrence of customary events of default. Under the Sponsor Note, Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the trust account established in connection with our initial public offering, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the trust account. The issuance of the Sponsor Note was approved by our board of directors and our audit committee on September 13, 2018.
We and our Sponsor are currently evaluating the treatment of the Sponsor Convertible Note and Sponsor Note given our planned dissolution.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Redeemable Ordinary Shares
The 25,000,000 Class A ordinary shares sold as part of the Units in the Public Offering contain a redemption feature under which holders of the Class A ordinary shares may redeem all or a portion of their Public Shares upon completion of our Business Combination for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination including interest (which interest shall be net of taxes payable). In accordance with ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), redemption provisions not solely within an entity’s control require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of an entity’s equity instruments, are excluded from the provisions of ASC 480. Although we did not specify a maximum redemption threshold, our amended and restated memorandum and articles of association provide that in no event will we redeem our Public Shares in an amount that would cause our net tangible assets to fall below $5,000,001. Accordingly, at December 31, 2018, 19,517,097 of our 25,000,000 Class A ordinary shares were classified outside of permanent equity.
Net Income/(Loss) per Ordinary Share
Net Income/(loss) per ordinary share is computed by dividing net income/(loss) attributable to ordinary shares by the weighted average number of ordinary shares outstanding during the period, plus to the extent dilutive the incremental number of ordinary shares to settle warrants, as calculated using the treasury stock method. At December 31, 2018, we had outstanding warrants for the purchase of up to 19,500,000 Class A ordinary shares. For the periods presented, the weighted average of these shares was excluded from the calculation of diluted net income/(loss) per ordinary share because its inclusion would have been anti-dilutive. As a result, diluted net income/(loss) per ordinary share is equal to basic net income/(loss) per ordinary share.
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The Company has two classes of ordinary shares, which are referred to as Class A ordinary shares and Class F ordinary shares. The Company’s public shareholders have the opportunity to redeem their shares upon the completion of the Business Combination at a per share price that is equal to the aggregate amount then on deposit in the Trust Account including interest, divided by the number of then outstanding Public Shares, subject to certain limitations. Accordingly, the Company usesthe two-class method to compute the earnings per ordinary share.The two-class method is an earnings allocation formula that determines earnings per share separately for each class of ordinary shares based on an allocation of undistributed earnings per the rights of each class. At December 31, 2018, the Company had outstanding warrants for the purchase of up to 19,500,000 Class A ordinary shares. For all periods presented, the weighted average of these shares was excluded from the calculation of diluted net income/(loss) per ordinary share because its inclusion would have been anti-dilutive. As a result, diluted net income/(loss) per ordinary share is equal to basic net income/(loss) per ordinary share and allocated amongst the two classes of ordinary shares based on the number of weighted average of outstanding shares in each class as a percentage of total basic shares outstanding for both classes.
Recent 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 our consolidated financial statements.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
To date, our efforts have been limited to organizational activities and activities relating to the Public Offering and the identification and evaluation of prospective acquisition targets for a Business Combination. We have neither engaged in any operations nor generated any revenues. At December 31, 2018, the net proceeds from our Public Offering and the sale of the Private Placement Warrants held in the Trust Account were comprised entirely of money market funds meeting certain conditionsunder Rule 2a-7 under the Investment Company Act, which invest solely in United States Treasuries. Due to the short-term nature of the money market fund’s investments, we do not believe that there will be an associated material exposure to interest rate risk.
At December 31, 2018, $216,480,408 (including accrued interest) was held in the Trust Account for the purposes of consummating a Business Combination. As we plan to liquidate and dissolve the Company, funds in the Trust Account will be used primarily to pay for redemptions of Class A ordinary shares.
We have not engaged in any hedging activities since our Inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
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| Item 8. | Consolidated Financial Statements and Supplementary Data. |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Saban Capital Acquisition Corp.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Saban Capital Acquisition Corp. (the Company) as of December 31, 2018 and 2017, the related consolidated statements of operations, shareholders’ equity, and cash flows for the years ended December 31, 2018 and 2017 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years ended December 31, 2018 and 2017, in conformity with U.S. generally accepted accounting principles.
Termination of the Business Combination Agreement
As discussed in note 1 to the consolidated financial statements, the Company terminated the Business Combination Agreement dated September 13, 2018, on February 28, 2019. As a result of the termination, the Company intends to cease all operations starting on March 31, 2019, except for the purpose of winding up, and, within ten business days thereafter, redeem its issued and outstanding Class A ordinary shares and, following the redemption, liquidate and dissolve its business, subject to any required approvals of its remaining shareholders and its board of directors. Our opinion has not been modified as a result of the termination.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2016.
Los Angeles, California
April 1, 2019
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Saban Capital Acquisition Corp.
| December 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 46,229 | $ | 201,002 | ||||
Prepaid expenses | — | 62,947 | ||||||
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Total current assets | 46,229 | 263,949 | ||||||
Investments held in Trust Account | 216,480,408 | 251,721,796 | ||||||
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Total Assets | $ | 216,526,637 | $ | 251,985,745 | ||||
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LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||
Current Liabilities: | ||||||||
Accrued expenses | $ | 5,365,758 | $ | 106,756 | ||||
Accrued interest | 16,968 | — | ||||||
Loan payable to Sponsor | 2,000,000 | — | ||||||
Due to related party | 222,940 | 3,502 | ||||||
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Total current liabilities | 7,605,666 | 110,258 | ||||||
Deferred underwriting compensation | 8,750,000 | 8,750,000 | ||||||
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Total Liabilities | 16,355,666 | 8,860,258 | ||||||
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Class A ordinary shares subject to possible redemptions; 19,517,097 shares and 23,812,549 shares at December 31, 2018 and December 31, 2017 respectively | $ | 195,170,970 | $ | 238,125,486 | ||||
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Shareholders’ equity: | ||||||||
Preferred shares, $0.0001 par value; 5,000,000 shares authorized, none issued or outstanding | — | — | ||||||
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized, 1,640,679 shares and 1,187,451 Class A shares issued and outstanding excluding 19,517,097 and 23,812,549 shares subject to redemption at December 31, 2018 and December 31, 2017, respectively | 164 | 119 | ||||||
Class F ordinary shares, $0.0001 par value; 20,000,000 shares authorized, 6,243,480 outstanding at December 31, 2018 and December 31, 2017 | 624 | 624 | ||||||
Additionalpaid-in capital | 8,149,071 | 4,345,929 | ||||||
(Accumulated deficit)/retained earnings | (3,149,858 | ) | 653,329 | |||||
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Total Shareholders’ equity | 5,000,001 | 5,000,001 | ||||||
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Total liabilities and shareholders’ equity | $ | 216,526,637 | $ | 251,985,745 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
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Saban Capital Acquisition Corp.
Consolidated Statements of Operations
| Years Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
Interest income | $ | 3,909,940 | $ | 1,625,844 | ||||
Expenses | ||||||||
Professional fees and other expenses | 7,696,160 | 710,862 | ||||||
Interest expense | 16,967 | — | ||||||
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| 7,713,127 | 710,862 | |||||||
Net (loss)/income attributable to ordinary shares | $ | (3,803,187 | ) | $ | 914,982 | |||
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Net (loss)/income per ordinary share: | ||||||||
Class A ordinary shares - basic and diluted | $ | (0.09 | ) | $ | 0.04 | |||
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Class F ordinary shares - basic and diluted | $ | (0.25 | ) | $ | (0.02 | ) | ||
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The accompanying notes are an integral part of these consolidated financial statements.
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Saban Capital Acquisition Corp.
Consolidated Statements of Shareholders’ Equity
| Preferred Shares | Class A Ordinary Shares | Class F Ordinary Shares | Additional Paid-In Capital | (Accumulated Deficit)/Retained Earnings | Shareholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
Balance at December 31, 2016 | 1,278,947 | $ | 128 | 6,250,000 | $ | 625 | $ | 5,260,901 | $ | (261,653 | ) | $ | 5,000,001 | |||||||||||||||||||||||
Repurchase of 6,520 Class F Shares | (6,520 | ) | (1 | ) | (23 | ) | (24 | ) | ||||||||||||||||||||||||||||
Change in Shares Subject to Possible Redemption 23,812,549 shares at redemption value of $10.00 per share | (91,496 | ) | (9 | ) | (914,949 | ) | (914,958 | ) | ||||||||||||||||||||||||||||
Net income/(loss) attributable to ordinary shares | — | — | — | — | — | — | 914,982 | 914,982 | ||||||||||||||||||||||||||||
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Balance at December 31, 2017 | — | $ | — | 1,187,451 | $ | 119 | 6,243,480 | $ | 624 | $ | 4,345,929 | $ | 653,329 | $ | 5,000,001 | |||||||||||||||||||||
Change in Shares Subject to Possible Redemption 19,517,097 shares at redemption value of $10.00 per share | 453,228 | 45 | 3,803,142 | 3,803,187 | ||||||||||||||||||||||||||||||||
Net income/(loss) attributable to ordinary shares | — | — | — | — | — | — | (3,803,187 | ) | (3,803,187 | ) | ||||||||||||||||||||||||||
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Balance at December 31, 2018 | — | $ | — | 1,640,679 | $ | 164 | 6,243,480 | $ | 624 | $ | 8,149,071 | $ | (3,149,858 | ) | $ | 5,000,001 | ||||||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
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Saban Capital Acquisition Corp.
Consolidated Statements of Cash Flows
| Years Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss)/income attributable to ordinary shares | $ | (3,803,187 | ) | $ | 914,982 | |||
Interest accrued on Investments Held in Trust Account | (3,909,940 | ) | (1,625,844 | ) | ||||
Changes in operating assets and liabilities | ||||||||
Prepaid expenses | 62,947 | 100,328 | ||||||
Accrued expenses | 5,259,002 | 25,018 | ||||||
Accrued interest | 16,968 | — | ||||||
Due to related party | 219,437 | (1,347 | ) | |||||
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Net cash used in by operating activities | (2,154,773 | ) | (586,863 | ) | ||||
Cash flows used in investing activities: | ||||||||
Withdrawal from Trust Account upon redemptions | 39,151,329 | — | ||||||
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Net cash used in by investing activities | 39,151,329 | — | ||||||
Cash flows from financing activities: | ||||||||
Loan from Sponsor | 2,000,000 | — | ||||||
Redemption of ordinary shares | (39,151,329 | ) | — | |||||
Payment for purchase of Class F ordinary shares | — | (24 | ) | |||||
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Net cash used in financing activities | (37,151,329 | ) | (24 | ) | ||||
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Net decrease in cash | (154,773 | ) | (586,887 | ) | ||||
Cash at beginning of year | 201,002 | 787,889 | ||||||
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Cash at end of year | $ | 46,229 | $ | 201,002 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
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Saban Capital Acquisition Corp.
Notes to Consolidated Financial Statements
1. Organization and Business Operations
Organization and General
Saban Capital Acquisition Corp. (the “Company”) was incorporated in the Cayman Islands on March 15, 2016. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). 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”). The Company’s sponsor is Saban Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
At December 31, 2018, the Company had not commenced any significant operations. All activity for the period from March 15, 2016 (“Inception”) through December 31, 2018 relates to the Company’s formation and activities related to the initial public offering of Units (as defined below), each consisting of one of the Company’s Class A ordinary shares and one half of one warrant where each whole warrant entitles the holder to purchase one Class A ordinary share (the “Public Offering”), and activities related to the identification, evaluation and negotiation of Business Combination opportunities. The Company will not generate any operating revenues until after completion of the Business Combination, at the earliest. The Company willgenerate non-operating income in the form of interest income on cash and investments from the proceeds derived from the Public Offering and the Private Placement (as defined below). The Company has selected December 31st as its fiscal year end.
The Company announced on March 28, 2019, that it has ceased all operations except for the purpose of winding up and intends to redeem all of its issued and outstanding Public Shares (as defined below).
Cash
Cash consisted of cash held at one U.S. financial institution, and is subject to credit risk to the extent the balance exceeds federal deposit insurance limits.
Financing
The registration statement for the Company’s Public Offering was declared effective by the United States Securities and Exchange Commission (the “SEC”) on September 15, 2016. The Public Offering closed on September 21, 2016 (the “Close Date”). The Company’s Sponsor purchased an aggregate of 7,000,000 warrants at a purchase price of $1.00 per warrant, or $7,000,000 in the aggregate, in a private placement at the Close Date (the “Private Placement”). The warrants are included inadditional paid-in capital at the balance sheet.
The Company intended to finance a Business Combination with a portion of proceeds from its $250,000,000 Public Offering and $7,000,000 Private Placement (see Note 3). At the Close Date, proceeds from the Public Offering of $250,000,000, net of underwriting discounts of $5,000,000, and $5,000,000 of the Private Placement proceeds, were deposited in a trust account with Continental Stock Transfer and Trust Company acting as trustee (the “Trust Account”) as described below.
The Trust Account
The Trust Account may be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions underRule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment
28
Company Act”), which invest only in direct U.S. government obligations. Because the investment of the proceeds will be restricted to these instruments, the Company expects to meet the requirements for the exemption provided inRule 3a-1 promulgated under the Investment Company Act. At December 31, 2018, the funds were invested only in money market funds meeting those certain conditions underRule 2a-7.
Funds will remain in the Trust Account except for the withdrawal of interest to pay taxes, if any, until the redemption of all of the Company’s Public Shares, which is expected to commence on April 1, 2019
Business Combination
On September 13, 2018, the Company entered into the Business Combination Agreement with Panavision Acquisition Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of the Company (“Panavision Acquisition Sub”), Sim Acquisition Sub, Inc., an Ontario corporation and direct wholly owned subsidiary of the Company (“Sim Acquisition Sub”), Panavision Inc., a Delaware corporation (“Panavision”), Sim Video International Inc., an Ontario corporation (“Sim”), and the other parties thereto, as amended on December 11, 2018 (as amended, the “Business Combination Agreement”), pursuant to which, among other things, it was proposed that Panavision and SIM would become direct or indirect wholly owned subsidiaries of the Company (the “Panavision/SIM Business Combination”).
Due to market conditions, delays resulting from the recent partial U.S. government shutdown and the March 31, 2019 termination date of the Company, the Company, Panavision, Sim, the Panavision Holder Representative (as defined in the Business Combination Agreement) and the Sim Holder Representative (as defined in the Business Combination Agreement) jointly determined to terminate the Business Combination Agreement pursuant to a Termination Agreement, dated as of February 28, 2019, by and among such parties, effective as of such date.
As a result of, among other things, the termination of the Panavision/SIM Business Combination (as described above) and the March 31, 2019 deadline to consummate a Business Combination, the Company (i) has ceased all operations except for the purposes of winding up, (ii) intends to, effective, April 1, 2019, redeem the Public Shares, at aper-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less $50,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish the public shareholders’ rights as owners of Class A ordinary shares (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) intends to, as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. The Initial Shareholders (as defined below) have entered into a letter agreement with the Company, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares. However, if the Initial Shareholders acquired Public Shares after the Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares.
The resulting redemption of the Company’s Class A ordinary shares will reduce the book value per share for the Founder Shares held by the Initial Shareholders, who would be the only remaining shareholders after such a redemption.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring
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adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position at December 31, 2018 and the results of operations and cash flows for the years presented.
Emerging Growth Company
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 Securities Exchange Act, as amended (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 applyto non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions which, at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts.
Financial Instruments
The fair values of the Company’s assets and liabilities which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximate the carrying amounts represented on the balance sheet.
Redeemable Ordinary Shares
All 25,000,000 Class A ordinary shares sold as part of the Units in the Public Offering contain a redemption feature as discussed in Note 1. In accordance with ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its Class A ordinary shares in an amount that would cause its net tangible assets to fall below $5,000,001. Accordingly, at December 31, 2018 and 2017, 19,517,097 and 23,812,549, respectively, of the Company’s 25,000,000 Class A ordinary shares were classified outside of permanent equity at their redemption value.
Net Income/(Loss) per Ordinary Share
The Company has two classes of ordinary shares, which are referred to as Class A ordinary shares and Class F ordinary shares. The Company’s public shareholders have the opportunity to redeem their shares upon the completion of the Business Combination at a per share price that is equal to the aggregate amount then on deposit in the Trust Account including interest, divided by the number of then outstanding Public Shares, subject to certain limitations. Accordingly, the Company usesthe two-class method to compute the earnings per ordinary share.The two-class method is an earnings allocation formula that determines earnings per share separately for each class of ordinary shares based on an allocation of undistributed earnings per the rights of each class. At December 31, 2018, the Company had outstanding warrants for the purchase of up to 19,500,000 Class A ordinary shares. For all periods presented, the weighted average of these shares was excluded from the calculation of diluted net income per ordinary share because its inclusion would have been anti-dilutive. As a
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result, diluted net income/(loss) per ordinary share is equal to basic net income/(loss) per ordinary share. The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net loss per share for each class of our ordinary shares:
| Years Ended December 31 | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Class A | Class F | Class A | Class F | |||||||||||||
Basic and diluted net loss per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income/(loss) | $ | (2,224,664 | ) | $ | (1,578,523 | ) | $ | 1,057,100 | $ | (142,118 | ) | |||||
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Denominator: | ||||||||||||||||
Weighted average ordinary shares outstanding | 23,968,363 | 6,243,480 | 25,000,000 | 6,247,006 | ||||||||||||
Basic and diluted net income/(loss) per share | $ | (0.09 | ) | $ | (0.25 | ) | $ | 0.04 | $ | (0.02 | ) | |||||
Use of Estimates
The preparation of the Company’s consolidated balance sheet in conformity with U.S. GAAP requires the Company’s 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 balance sheet. Actual results could differ from those estimates.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the consolidated 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 mustbe 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. No amounts were accrued for the payment of interest and penalties at December 31, 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
Exempted companies are Cayman Islands companies wishing to conduct business outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Law. As an exempted company, the Company has applied for and received a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares or other obligations of the Company or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by the Company to its shareholders or a payment of principal or interest or
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other sums due under a debenture or other obligation of the Company. Consequently, income taxes have not been reflected in the consolidated Financial Statements.
Recent 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.
3. Public Offering
In its Public Offering, the Company sold 25,000,000 Units at a price of $10.00 per Unit (the “Units”). Each Unit consists of one of the Company’s Class A ordinary shares, $0.0001 par value per share (each, a “Public Share”), and one half of one warrant (“Warrant”). Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share. The Warrants will expire worthless upon the liquidation of the Company.
The Company paid an underwriting discount of 2.00% of the gross proceeds of the Public Offering, or $5,000,000, to the underwriters at the Close Date, with an additional fee (the “Deferred Discount”) of 3.50% of the gross proceeds of the Public Offering, or $8,750,000, payable upon the Company’s completion of a Business Combination. The Deferred Discount was only payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completed a Business Combination. The underwriters are not entitled to receive any of the interest earned on Trust Account funds that would be used to pay the Deferred Discount. The Deferred Discount is recorded as deferred underwriting compensation on the Company’s balance sheet.
4. Related Party Transactions
Founder Shares
On April 11, 2016, the Company’s Sponsor purchased 5,750,000 Class F ordinary shares (“Founder Shares”) for $25,000, or approximately $0.004 per share. In August 2016, the Company repurchased 99,000 Founder Shares from the Sponsor at their original per share issuance price and subsequently issued such number of Founder Shares pursuant to The 2016 Share Award Plan of the Company for the same per share price to certain individuals who will assist in the evaluation of investment opportunities, including 10,000 Founder Shares to Adam Chesnoff, the Company’s Director, President and Chief Executive Officer, 8,000 Founder Shares to Niveen Tadros, the Company’s Executive Vice President and General Counsel, 6,000 Founder Shares to Fred Gluckman, the Company’s former Executive Vice President and Chief Financial Officer, and 4,000 Founder Shares to Philip Han, the Company’s Executive Vice President and Chief Investment Officer. In September 2016, the Company’s Sponsor transferred 30,000 Founder Shares to each of the Company’s independent director nominees at their original per share issue price. On September 15, 2016, we effected a pro rata share capitalization resulting in an increase in the total number of Founder Shares outstanding from 5,750,000 to 6,250,000 in order to maintain the ownership of Founder Shares by our Initial Shareholders at 20% of our issued and outstanding shares upon consummation of the Public Offering. Following the Public Offering and the pro rata share capitalization, our Sponsor held 6,044,570 Founder Shares, each of our three independent directors owned 32,610 Founder Shares, and the other individuals, including our executive officers, held 107,600 Founder Shares. On March 16, 2017, concurrent with Mr. Bruce Rosenblum’s resignation from our board of directors, the Company acquired 25,100 Founders Shares from Mr. Rosenblum and concurrent therewith, in connection with Mr. Casey Wasserman’s appointment to the board of directors, theCompany re-issued such 25,100 Founders Shares to Mr. Casey Wasserman, and our Sponsor sold to Mr. Wasserman an additional 7,500 Founders Shares and thereafter held 6,037,070 Founders Shares. On June 26, 2017, the Company entered into agreements to repurchase 6,520 Founder Shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July, 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Founder Shares to 6,243,480,
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and reducing the number of Founder Shares held collectively by individuals previously awarded Founder Shares under the Plan from 107,600 to 101,080. The Sponsor, executive officers, former and current independent directors, and individuals assisting the Company with the evaluation of investment opportunities who have been granted Founder Shares under the Plan, collectively are referred to herein as the “Initial Shareholders”).
The Founder Shares are identical to the Public Shares, and holders of Founder Shares have the same shareholder rights as public shareholders, except that: (i) the Founder Shares are subject to certain transfer restrictions; (ii) the Initial Shareholders have entered into a letter agreement with the Company, pursuant to which they have agreed (a) to waive their redemption rights with respect to their Founder Shares and the Public Shares in connection with the completion of a Business Combination and (b) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete a Business Combination on or prior to the Extension Date, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete a Business Combination within such time period; (iii) the Founder Shares are automatically convertible into Class A ordinary shares at the time of a Business Combination on aone-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described in the Company’s Articles; and (iv) the Founder Shares are subject to registration rights. Permitted transferees of the Initial Shareholders will be subject to the same obligations of the Initial Shareholders.
Private Placement Warrants
Simultaneously with the consummation of the Public Offering, the Sponsor purchased 7,000,000 warrants at a price of $1.00 per warrant, or $7,000,000 in the aggregate, in a Private Placement (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one Class A ordinary share for $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants were placed in the Trust Account. The proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Company’s Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless upon the liquidation of the Company.
Registration Rights
The Company agreed to provide the holders of the Founder Shares and Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the working capital loans), with certain registration rights pursuant to a registration rights agreement signed on the Close Date requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares).
PIPE Investment
Concurrently with the execution of the Business Combination Agreement, the Company entered into subscription agreements with certain investors, pursuant to which such investors have collectively subscribed for 5.5 million shares of common stock of the Company (following the Domestication) for an aggregate purchase price equal to $55.0 million (the “PIPE Investment”), $30.0 million of which was proposed to be funded by the Sponsor PIPE Entity, an affiliate of the Sponsor. The PIPE Investment was terminated as a result of the termination of the Panavision/SIM Business Combination.
Related Party Notes
Between Inception and the Close Date, the Sponsor loaned the Company $250,000 in unsecured promissory notes. The funds were used to pay up front expenses associated with the Public Offering. These notes werenon-interest bearing and were repaid by netting against proceeds received from the Sponsor at the Close Date.
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On March 12, 2018, the Company issued an unsecured convertible promissory note (the “Sponsor Convertible Note”), pursuant to which the Company may borrow up to $1,000,000 from the Sponsor from time to time. The Sponsor Convertible Note bears interest at a rate of 1.96% per annum and all unpaid principal under the Sponsor Convertible Note including accrued interest thereon will be due and payable in full on the Maturity Date (as defined below). The Sponsor will have the option to convert any amounts outstanding under the Sponsor Convertible Note, up to $1,000,000 in the aggregate, into warrants to purchase Class A ordinary shares at a conversion price of $1.00 per warrant. The terms of such warrants will be identical to the Private Placement Warrants, including that each such warrant will entitle the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to the same adjustments applicable to the Private Placement Warrants. In connection with the Business Combination Agreement, the Sponsor has agreed to forfeit for no consideration any other rights to obtain the warrants issuable upon conversion of the Sponsor Convertible Note. Under the Sponsor Convertible Note, the Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the Trust Account, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Convertible Note was approved by the Company’s board of directors and its audit committee on March 12, 2018. Executed on March 12, 2018, $500,000 was drawn under the Sponsor Convertible Note on March 20, 2018 and the remaining $500,000 was drawn under the Sponsor Convertible Note on August 2, 2018.
On September 26, 2018, the Company issued an unsecured promissory note (the “Sponsor Note”) pursuant to which the Company may borrow up to $1.5 million from Sponsor. The Sponsor Note bears interest at a rate of 2.51% per annum and all unpaid principal under the Sponsor Note including accrued interest thereon will be due and payable in full on the earliest of (i) March 31, 2019, (ii) the effective date of an initial business combination, and (iii) the termination, for any reason, of the Business Combination Agreement (such earliest date, the “Maturity Date”), unless accelerated upon the occurrence of customary events of default. Under the Sponsor Note, Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the trust account established in connection with the Public Offering, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the trust account. The issuance of the Sponsor Note was approved by the Company’s board of directors and its audit committee on September 13, 2018. Executed on September 26, 2018, $500,000 was drawn under the Sponsor Note on October 5, 2018. Additionally, $500,000 was drawn under the Sponsor Note on November 13, 2018.
The Company and the Sponsor are currently evaluating the treatment of the Sponsor Convertible Note and Sponsor Note given the Company’s planned dissolution.
Additionally, on September 21, 2018, the Company and the Sponsor amended the maturity date of the Sponsor Convertible Note. Pursuant to such amendment, all unpaid principal under the Sponsor Convertible Note including accrued interest thereon will be due and payable in full on the Maturity Date, unless accelerated upon the occurrence of customary events of default.
Due to Related Party
Saban Capital Group LLC is an affiliate of the Sponsor which advanced various costs on behalf of the Company. Total related party advances amounted to $24,918 for the year ended December 31, 2018 and were reported as general and administrative expenses. As of December 31, 2018, the amount due to related party was $222,940. Total related party advances amounted to $32,239 and the amount due were $3,502 for the year ended December 31, 2017 and were reported as general administrative expenses.
Administrative Service Agreement
Effective September 15, 2016, the Company entered into an agreement to pay monthly expenses of $10,000 for office space, administrative services and support services to an affiliate of the Company’s Sponsor. The agreement terminates upon the earlier of the completion of a Business Combination or the liquidation of the
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Company. For the year ended December 31, 2018, the Company incurred expenses of $120,000 under this agreement. For the year ended December 31, 2017, the Company incurred expenses of $120,000.
5. Investments Held in Trust Account
At December 31, 2018 and 2017, funds in the Trust Account totaled $216,480,408 and $251,721,796 respectively, and were held in money market funds. The Company used $39,151,329 of the funds to redeem 3,842,224 shares of Class A stock on September 21, 2018.
6. Deferred Underwriting Compensation
The Company was committed to pay the Deferred Discount of 3.50% of the gross proceeds of the Public Offering, or $8,750,000, to the underwriters upon the Company’s completion of a Business Combination. The underwriters are not entitled to receive any of the interest earned on Trust Account that would be used to pay the Deferred Discount, and no Deferred Discount is payable to the underwriters since the Business Combination will not be completed.
7. Shareholders’ Equity
Class A Ordinary Shares
The Company is authorized to issue 500,000,000 Class A ordinary shares. Holders of Class A ordinary shares are entitled to one vote for each held on all matters to be voted on by shareholders.
On September 18, 2018, we held an Extraordinary General Meeting, pursuant to which, among other things, our shareholders approved the Extension Amendment. In connection with vote to approve the Extension Amendment, the holders of 3,842,224 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of $10.19 per share, for an aggregate redemption amount of $39.15 million.
At December 31, 2018, there were 25,000,000 Class A ordinary shares issued and outstanding (Public Shares), of which 19,517,097 shares were subject to possible redemption and are classified outside of shareholders’ equity on the balance sheet.
Class F Ordinary Shares
The Company is authorized to issue 20,000,000 Class F ordinary shares. Holders of the Company’s Class F ordinary shares are entitled to one vote for each ordinary share. Class F ordinary shares are automatically converted to Class A common shares ona one-for-one basis at the time of a Business Combination, subject to certain adjustments. The Initial Shareholders, the sole holders of Class F ordinary shares (“Founder Shares”) have agreed not to transfer, assign or sell any Class F ordinary shares during the lock up period, subject to certain exceptions.
On June 26, 2017, the Company entered into agreements to repurchase 6,520 Class F ordinary shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July, 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Class F ordinary shares to 6,243,480. At December 31, 2018, there were 6,243,480 Class F ordinary shares issued and outstanding.
Preferred Shares
The Company is authorized to issue 5,000,000 preferred shares. The Company’s board of directors has the authority to determine the voting rights, if any, designations, powers, preferences, and the relative, participating,
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optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the preferred shares of each series. The board of directors may, without shareholder approval, issue preferred shares with voting and other rights that could adversely affect the voting power and other rights of the holders of Public Shares, and which could have anti-takeover effects. At December 31, 2018, there were no preferred shares issued or outstanding.
8. Quarterly Financial Information (Unaudited)
Following are the Company’s unaudited quarterly statements of operations for the period ended March 31, 2018, June 30, 2018, September 30, 2018, December 31, 2018, March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. The Company has prepared the quarterly data on a consistent basis with the audited consolidated financial statements included elsewhere in this Annual Report on Form10-K and, in the opinion of management, the financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations for these periods. This information should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form10-K. These quarterly operating results are not necessarily indicative of the Company’s operating results for any future period.
For the Three Months Ended | For the Three Months Ended June 30, 2018 | For the Three Months Ended | For the Three Months Ended | |||||||||||||||||||||||||||||
| Class A | Class F | Class A | Class F | Class A | Class F | Class A | Class F | |||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||
Interest Income | $ | 721,956 | $ | — | $ | 957,034 | $ | — | $ | 1,121,940 | $ | — | $ | 1,109,010 | $ | — | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Professional fees and other expenses | $ | 352,493 | $ | 88,031 | $ | 1,198,674 | $ | 299,356 | $ | 3,763,134 | $ | 949,317 | $ | 807,012 | $ | 238,143 | ||||||||||||||||
Interest expense | $ | 408 | $ | 102 | $ | 1,955 | $ | 488 | $ | 3,237 | $ | 817 | $ | 7,691 | $ | 2,269 | ||||||||||||||||
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Allocation of net income/(loss) | $ | 369,055 | $ | (88,133 | ) | $ | (243,595 | ) | $ | (299,844 | ) | $ | (2,644,431 | ) | $ | (950,134 | ) | $ | 294,307 | $ | (240,412 | ) | ||||||||||
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Denominator: | ||||||||||||||||||||||||||||||||
Weighted average ordinary shares outstanding: | 25,000,000 | 6,243,480 | 25,000,000 | 6,243,480 | 24,749,422 | 6,243,480 | 21,157,776 | 6,243,480 | ||||||||||||||||||||||||
Basic and diluted net income/(loss) | $ | 0.01 | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | (0.11 | ) | $ | (0.15 | ) | $ | 0.01 | $ | (0.04 | ) | ||||||||||
For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | |||||||||||||||||||||||||||||
| Class A | Class F | Class A | Class F | Class A | Class F | Class A | Class F | |||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||
Interest Income | $ | 210,968 | $ | — | $ | 335,299 | $ | — | $ | 510,478 | $ | — | $ | 569,099 | $ | — | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Professional fees and other expenses | $ | 178,010 | $ | 44,502 | $ | 100,175 | $ | 25,043 | $ | 138,285 | $ | 34,542 | $ | 152,274 | $ | 38,029 | ||||||||||||||||
Organizational costs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
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Allocation of net income/(loss) | $ | 32,958 | $ | (44,502 | ) | $ | 235,124 | $ | (25,043 | ) | $ | 372,193 | $ | (34,542 | ) | $ | 416,825 | $ | (38,029 | ) | ||||||||||||
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Denominator: | ||||||||||||||||||||||||||||||||
Weighted average ordinary shares outstanding: | 25,000,000 | 6,250,000 | 25,000,000 | 6,250,000 | 25,000,000 | 6,244,756 | 25,000,000 | 6,243,480 | ||||||||||||||||||||||||
Basic and diluted net income/(loss) | $ | 0.00 | $ | (0.01 | ) | $ | 0.01 | $ | (0.00 | ) | $ | 0.01 | $ | (0.01 | ) | $ | 0.02 | $ | (0.01 | ) | ||||||||||||
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9. Subsequent Events
On January 28, 2019, $250,000 of the $500,000 available under the Sponsor Note executed on September 26, 2018 was drawn.
On February 28, 2019, the Company entered into a Termination Agreement, pursuant to which, among other things, the Business Combination Agreement was terminated. As a result of the termination of the Business Combination Agreement and the March 31, 2019 deadline for the Company to consummate a Business Combination, pursuant to its Amended and Restated Memorandum and Articles of Association, the Company (1) has ceased all operations except for the purpose of winding up, (2) we intend to redeem all of its issued and outstanding Public Shares at aper-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less $50,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, on April 1, 2019, and (3) we intend to, as promptly as reasonably possible following such redemption, subject to the approval of its remaining shareholders and its board of directors, liquidate and dissolve, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the proceeds held outside the Trust Account, although such funds will likely not be sufficient for such purpose. We have requested that the Trustee release to us an additional amount of $50,000 of the accrued interest to pay a portion of such costs and expenses. We are in the process of negotiating the payment of all remaining costs and expenses owed to third parties. The proceeds deposited in the Trust Account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public shareholders. We cannot assure you that the actualper-share redemption amount received by public shareholders will not be substantially less than $10.00.
Management has performed an evaluation of subsequent events through the date of issuance of the consolidated financial statements, noting no other items which require adjustments or disclosure as of December 31, 2018.
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| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
None.
| Item 9A. | Controls and Procedures. |
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As of December 31, 2018, as required byRules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e)under the Exchange Act) were effective.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inRule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting U.S. principles generally accepted. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with policies or procedures may deteriorate.
Management conducted, under the supervision of our President and Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on the assessment performed, management concluded that our internal control over financial reporting was effective as of December 31, 2018.
This Annual Report onForm 10-K does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting, as defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| Item 9B. | Other Information. |
None.
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| Item 10. | Directors, Executive Officers and Corporate Governance. |
Our current directors and executive officers are as follows:
Name | Age | Title | ||
| Haim Saban | 74 | Chairman | ||
| Adam Chesnoff | 53 | Director, President and Chief Executive Officer | ||
| James A. Rasulo | 62 | Director | ||
| Chase Carey | 65 | Director | ||
| Casey Wasserman | 44 | Director | ||
| Greg Ivancich | 50 | Chief Financial Officer | ||
| Philip Han | 49 | Executive Vice President and Chief Investment Officer | ||
| Niveen Tadros | 45 | Executive Vice President and General Counsel |
Our directors, director nominees and executive officers are as follows:
Mr. Haim Saban has served as Chairman of the board of directors of the Company since September 15, 2016. Mr. Saban has served as Chairman and Chief Executive Officer of Saban Capital, the general partner of the controlling equity owner of Sponsor (“Saban Capital”), since 2002 and as a member of the board of certain Saban Capital affiliatednon-public entities, including Sponsor. Mr. Saban also has served as Chairman of the Board of Directors of Univision Communications since 2007. Mr. Saban also serves on boards of certain Saban Capital affiliated entities. From June 1997 to October 2001, Mr. Saban served as Chairman and Chief Executive Officer of Fox Family Worldwide. Mr. Saban’s qualifications to serve as our Chairman include over forty years of experience investing and operating publicly listed and privately held companies around the world. In addition, Mr. Saban previously served on the Board of Directors of ProSiebenSat.1 Media AG as chairman of the supervisory board, Television Francaise 1, the largest commercial broadcaster in France and DirecTV, Inc. Since April 29, 2016, Mr. Saban has been a member of the Board of Directors of LA2028 (formerly LA 2024), a 501(c)(3) originally working to secure the City of Los Angeles’ to host the 2024 Olympic and Paralympic Games, and currently working to support the 2028 games to be hosted in Los Angeles. Mr. Saban also serves on the national and regional board of Friends of the Israel Defense Forces. Mr. Saban is an officer and a member of the board of directors of the Saban Family Foundation and is an officer of the Cheryl Saban Self-Worth Foundation for Women and Children. Mr. Saban is well-qualified to serve as a director because of his business expertise, including in the media and entertainment industries.
Mr. Adam Chesnoff has served as President and Chief Executive Officer and a director of the Company since March 2016. Mr. Chesnoff also has served as the President and Chief Operating Officer of Saban Capital since 2002, and as a member of the boards of several of Saban Capital’s affiliatednon-public companies, including Sponsor. Mr. Chesnoff has served as a member of board of directors of Partner Communications (Chairman) since 2013, a member of the board of directors of Celestial Tiger Entertainment Ltd. since 2012, as a member of the board of directors of Univision Communications from 2007 through January, 2018, and since May 2018. From February 1997 to October 2001, Mr. Chesnoff served as Vice President of Fox Family Worldwide. Mr. Chesnoff’s qualifications to serve as a director include serving on boards of directors of public and private companies around the world. Mr. Chesnoff previously served on the boards of directors of ProSiebenSat.1 Media AG, Bezeq The Israeli Telecommunication Corp Ltd. and Media Nusantara Cinta Tbk. Mr. Chesnoff holds a B.A. in Economics and Management from Tel Aviv University and an M.B.A. from the University of California, Los Angeles. Mr. Chesnoff is an officer and a member of the board of directors of the Saban Family Foundation and is an officer of the Cheryl Saban Self-Worth Foundation for Women and Girls. Mr. Chesnoff is well-qualified to serve as one of the Company’s directors because of his business experience in the entertainment industry.
Mr. Chase Carey has served as a director of the Company since September 15, 2016. Mr. Carey has served as Chairman of the Board of Directors of Delta Topco Limited and Formula One Management Limited since
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September 2016 and as Chief Executive Officer of Formula One Management Limited since January 2017. Mr. Carey has also served as a Director of Sky, Plc. since January 2013. Mr. Carey has served as Vice Chairman of 21st Century Fox since July 2016. Mr. Carey served as the President and Chief Operating Officer of 21st Century Fox. Mr. Carey also served as Deputy Chairman of the Board of Directors of 21st Century Fox from 2009 to 2015 and as Executive Vice Chairman from July 2015 to June 2016. Previously, Mr. Carey was President and Chief Executive Officer of DIRECTV, Inc., where he led the operations and strategic direction of the DIRECTV, Inc. companies—which include DIRECTV in the United States and DIRECTV Latin America. Mr. Carey was elected to the position in 2003 by the company’s Board of Directors. Mr. Carey also served on The DIRECTV, Inc. Group Board of Directors. Prior to joining DIRECTV, Inc., Mr. Carey wasco-Chief Operating Officer of News Corporation (now known as 21st Century Fox) and Chairman and Chief Executive Officer of the Fox Television Group. Mr. Carey holds a BS in Math and Economics from Colgate University and an MBA from Harvard Business School. Mr. Carey is also a Trustee Emeritus at Colgate University. Mr. Carey is well-qualified to serve as a director because of his business expertise, including in the media, entertainment and sports industries.
Mr. James Rasulo has served as a director of the Company since September 15, 2016. Mr. Rasulo has served as a member of the board of directors of the Los Angeles Philharmonic since 2006 and as Chairman since September 20, 2016. Since June 2008, Mr. Rasulo has served as an Executive Committee Member of the Los Angeles Philharmonic. Mr. Rasulo also serves on the National Board of Governors of the Boys and Girls Club of America, where he chairs the marketing committee. Mr. Rasulo was previously employed by The Walt Disney Company and its affiliates commencing in 1986. He served as Chief Financial Officer and Senior Executive Vice President of The Walt Disney Company from 2010 to 2015. From 2002 to 2010, Mr. Rasulo served as Chairman of Walt Disney Parks and Resorts, and as Chairman/CEO of Euro Disney SCA from 1998 to 2002. He was senior vice president of Corporate Alliances from 1993 to 1995, organizing the sponsorship activities into a company-wide strategic business unit. Mr. Rasulo first joined The Walt Disney Company in 1986 as director and later became senior vice president of Corporate Strategic Planning where he led strategy development for all real estate-based businesses in The Walt Disney Company portfolio. Mr. Rasulo also spent three years with Disney Regional Entertainment where he was part of the development of ESPN Zone. Prior to joining The Walt Disney Company, Mr. Rasulo worked for Chase Manhattan Bank in 1978 as an exchange rate/interest rate forecaster, and then in 1984 became a manager of corporate planning for the Marriott Corporation. Mr. Rasulo holds a degree in Economics from Columbia University and an MA in Economics and MBA from the University of Chicago. Mr. Rasulo is well-qualified to serve as a director because of his business experience in the entertainment industry.
Mr. Casey Wasserman has served as a director of the Company since March 16, 2017. Casey Wasserman is the Chairman and Chief Executive Officer of Wasserman, a leading sports, entertainment and lifestyle marketing and management agency that represents brands, properties and talent on a global basis. Mr. Wasserman is the Chairman of the 2028 Los Angeles Games, a position held since 2014 when Los Angeles Mayor Eric Garcetti appointed Mr. Wasserman to head the city’s now successful Olympic and Paralympic host efforts. Mr. Wasserman also serves as President and CEO of the Wasserman Foundation, a private family foundation founded in 1952 by his grandparents Lew and Edie Wasserman. The foundation currently funds in the areas of education, arts and culture, service and global initiatives. Mr. Wasserman is a Trustee of the Los Angeles County Museum of Art, and a board member of several renowned philanthropic organizations including The Jules Stein Eye Institute, The LBJ Presidential Library and The Motion Picture Television Fund. Wasserman serves on the boards of directors of Activision Blizzard, Inc. and the digital media company, Vox Media, Inc. He holds a B.A. in Political Science from UCLA and resides in Los Angeles. Mr. Wasserman is well-qualified to serve as a director because of his expertise in the entertainment, sports and lifestyle marketing and business related experience.
Mr. Greg Ivancich has served as Chief Financial Officer of the Company since May 2018. Mr. Ivancich has served as CFO of Saban Capital since March 2018. Mr. Ivancich joined Saban Capital from Exeter Property Group, a Pennsylvania-based real estate private equity firm (“Exeter”), where he served as Principal and a
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founding partner of Exeter’s international business from April 2013 to March 2018 and held roles overseeing financial reporting, capital raising, operations and acquisitions in the US and Europe. Prior to Exeter, Mr. Ivancich spent his career as an investment banker to the real estate industry where he advised public and private companies on initial public offerings, mergers and acquisitions, and public capital markets transactions. Mr. Ivancich’s roles included Director of Real Estate Investment Banking at Barclays, Executive Director of Real Estate Investment Banking at Morgan Stanley, and COO/Director of Real Estate Investment Banking at Credit Suisse.
Mr. Philip Han has served as Executive Vice President and Chief Investment Officer of the Company since March 2016. Mr. Han has been employed by Saban Capital since 2003 and has served as Senior Vice President and Chief Investment Officer from 2010 to 2016 and Executive Vice President and Chief Investment Officer since 2016 and Mr. Han serves as a member of the boards of several Saban Capital affiliatednon-public companies. Prior to joining Saban Capital, Mr. Han served as VP of finance and business development for EYM Technologies, a venture-backed email infrastructure and development company and Senior Manager with PricewaterhouseCoopers in the entertainment, media and technology tax consulting group. Mr. Han holds a BA in Economics/Business from the University of California, Los Angeles and an MBA in Finance from the Anderson School at University of California, Los Angeles.
Ms. Niveen Tadros has served as Executive Vice President and General Counsel of the Company since March 2016. Ms. Tadros has served as General Counsel from 2002-2003 and as Executive Vice President and General Counsel of Saban Capital since 2003 and Ms. Tadros serves as a member of the boards of Saban Capital affiliatednon-public companies. Ms. Tadros also has served as a member of the Board of Directors of Celestial Tiger Entertainment Ltd. since 2012. Prior to joining Saban Capital, Ms. Tadros was an associate at Latham & Watkins where Ms. Tadros specialized in mergers and acquisitions, finance, public offerings, joint ventures and strategic alliances. Ms. Tadros holds a BS, in Civil Engineering from University of California Irvine and a JD from Northwestern University School of Law. Ms. Tadros is an officer and a member of the board of directors of the Saban Family Foundation and the Cheryl Saban Self-Worth Foundation for Women and Children.
Number and Terms of Office of Officers and Directors
Our board of directors consists of five members. Our board of directors is divided into two classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of shareholders) servinga two-year term. The first class of directors, consisting of Chase Carey, James Rasulo, and Casey Wasserman,were re-appointed at our first annual meeting of shareholders, with their current term to expire at the 2021 annual meeting of shareholders. The term of office of the second class of directors, consisting of Haim Saban and Adam Chesnoff, will expire at the 2020 annual meeting of shareholders.
Holders of our Public Shares and our Founder Shares have the right to elect all of our directors prior to the consummation of our Business Combination. Any vacancies on our board of directors may be filled by the affirmative vote of a majority of the directors present and voting at the meeting of our board.
Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate. Our amended and restated memorandum and articles of association will provide that our officers may consist of a Chief Executive Officer, a President, a Chief Financial Officer, Vice Presidents, Secretaries, Assistant Secretaries, a Treasurer and other such offices as may be determined by the board of directors.
Committees of the Board of Directors
Our board of directors has two standing committees: an audit committee and a compensation committee. Both our audit committee and our compensation committee are composed solely of independent directors.
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Audit Committee
Our board has established an audit committee of the board of directors. Audit committee members are Messrs. Rasulo, Carey, and Wasserman. Mr. Rasulo serves as chairman of the audit committee.
Each member of the audit committee is financially literate and our board of directors has determined that Messrs. Rasulo and Carey each qualify as an “audit committee financial expert” as defined in applicable SEC rules, and each of Messrs. Rasulo, Carey and Wasserman is an independent director under the NASDAQ listing standards. In addition, we must certify to NASDAQ that the Committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting or other comparable experience or background that results in the individual’s financial sophistication.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
| • | the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us; |
| • | pre-approving all auditand non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, andestablishing pre-approval policies and procedures; |
| • | reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence; |
| • | setting clear hiring policies for employees or former employees of the independent auditors; |
| • | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| • | obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| • | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 ofRegulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| • | reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our consolidated financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Compensation Committee
Our board has established a compensation committee of the board of directors. Compensation committee members include Messrs. Rasulo and Wasserman. Mr. Wasserman serves as chairman of the compensation committee.
We have adopted a compensation committee charter which details the principal functions of the compensation committee, including:
| • | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
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| • | reviewing and approving the compensation of all of our other executive officers; |
| • | reviewing our executive compensation policies and plans; |
| • | implementing and administering our incentive compensation equity-based remuneration plans; |
| • | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| • | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
| • | producing a report on executive compensation to be included in our annual proxy statement; and |
| • | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.
Director nominations
We do not have a standing nominating committee, though we intend to form a corporate governance and nominating committee as and when required to do so by law or NASDAQ rules. In accordance with Rule 5605(e)(2) of the NASDAQ rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who shall participate in the consideration and recommendation of director nominees are Chase Carey, James Rasulo and Casey Wasserman. In accordance with Rule 5605(e)(1)(A) of the NASDAQ rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The board of directors will also consider director candidates recommended for nomination by holders of our Founder Shares during such times as they are seeking proposed nominees to stand for election at an annual meeting of shareholders (or, if applicable, a special meeting of shareholders). Our shareholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our amended and restated memorandum and articles of association.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business and potential industries in which we may seek a target, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.
Compensation committee interlocks and insider participation
We have elected not to provide the information required under this item pursuant to the rules applicable to smaller reporting companies.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own more than ten percent of our ordinary shares to file reports of ownership and
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changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of such Forms, we believe that during the year ended December 31, 2018 there were no delinquent filers.
Code of Ethics
We have adopted a Code of Ethics applicable to our directors, officers and employees We previously have filed a copy of our Code of Ethics as Exhibit 14 to our registration statement onForm S-1 filed with the SEC on August 23, 2016, associated with the Public Offering, which closed on September 21, 2016. You may review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request to us in writing at 10100 Santa Monica Blvd, Suite 2600, Los Angeles, California 90067 or by telephoneat (310) 557-5100. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report onForm 8-K.
Conflicts of interest
Under Cayman Islands law, directors and officers owe the following fiduciary duties:
| • | duty to act in good faith in what the director or officer believes to be the best interests of the company as a whole; |
| • | duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; |
| • | directors should not improperly fetter the exercise of future discretion; |
| • | duty to exercise powers fairly as between different sections of shareholders; |
| • | duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and |
| • | duty to exercise independent judgment. |
In addition to the above, directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience which that director has. As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by way of permission granted in the amended and restated memorandum and articles of association or alternatively by shareholder approval at general meetings. Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Cayman Islands law. We do not believe, however, that the fiduciary duties or contractual obligations of our officers and directors materially affected our ability to complete a Business Combination.
The conflicts described above may not be resolved in our favor.
Limitation on Liability and Indemnification of Officers and Directors
Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by
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the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against willful default, fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association will provide for indemnification of our officers and directors to the maximum extent permitted by law, including for any liability incurred in their capacities as such, except through their own actual fraud, willful default or willful neglect.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated memorandum and articles of association. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
These provisions may discourage shareholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
| Item 11. | Executive Compensation. |
None of our executive officers or directors have received any cash compensation for services rendered to us, except with respect to grants under the Plan described below. Commencing on September 15, 2016, through our liquidation, we pay an affiliate of our Sponsor a total of $10,000 per month for office space, utilities and secretarial support. Our Sponsor, officers, directors and any of their respective affiliates are reimbursed forany out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or any of their respective affiliates.
On August 19, 2016, we adopted the Plan. The purpose of the Plan is to provide incentive to our independent directors, employees and consultants to further our growth, development and financial success through the ownership of our shares by them. The Plan provides that we may grant employees, consultants and/or independent directors Founder Shares and may require the grantees to pay a price for such shares. The aggregate number of shares available for grant under the Plan is 150,000 Founder Shares. Unless otherwise provided in an applicable award agreement, all Founder Shares issued pursuant to the Plan are subject to repurchase by us, at our option, at fair market value on the termination of employment, directorship or consultancy, as applicable, on or before a Business Combination. If such termination was for cause, as such term is defined in the Plan, the holder resigns for any reason on or before a Business Combination or the holder breaches restrictive covenants to which the holder is subject, the repurchase price paid by us will be the lesser of the cost and fair market value of such shares. In addition, the form of the award agreement used for the initial awards described below provides that in case of a termination for cause, all Founder Shares granted to the grantee will be forfeited. Under the Plan, our board of directors (or a committee or a subcommittee designated by the board of directors) shall administer and make all determinations with respect to the Plan. The Plan provides that the shares issued thereunder will be subject to certain transfer restrictions, including restrictions on transfers prior to a Business Combination.
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On April 11, 2016, the Company’s Sponsor purchased 5,750,000 Founder Shares for $25,000, or approximately $0.004 per share. In August 2016, our board of directors granted an aggregate of 99,000 Founder Shares under the Plan, including 10,000 shares to Adam Chesnoff, our Director, President and Chief Executive Officer, 8,000 shares to Niveen Tadros, our Executive Vice President and General Counsel, 6,000 shares to Fred Gluckman, our former Executive Vice President and Chief Financial Officer, and 4,000 shares to Philip Han, our Executive Vice President and Chief Investment Officer. The remaining Founder Shares granted under the Plan in August 2016 were granted to other individuals that are not our directors or executive officers. In exchange for such grants, the grantees paid $0.004 per Founder Share received under the Plan. On September 15, 2016, we effected a pro rata share capitalization resulting in an increase in the total number of Founder Shares outstanding from 5,750,000 to 6,250,000 in order to maintain the ownership of Founder Shares by our Initial Shareholders at 20% of our issued and outstanding shares upon the closing of the Public Offering. Following our Public Offering and the pro rata share capitalization, our Sponsor held 6,044,570 Founder Shares and each of our three independent directors held 32,610 Founder Shares and the other individuals, including our executive officers, who were originally issued 99,000 Founder Shares under The 2016 Share Award Plan held 107,600 Founder Shares. As of December 31, 2018 there were 51,000 additional Founder Shares available for grant under the Plan.
On March 16, 2017, concurrent with Mr. Bruce Rosenblum’s resignation from the Company’s board of directors, the Company acquired 25,110 Founders Shares from Mr. Rosenblum and concurrent therewith, in connection with Mr. Casey Wasserman’s appointment to the board of directors, theCompany re-issued such 25,110 Founders Shares to Mr. Casey Wasserman, and the Sponsor sold to Mr. Wasserman an additional 7,500 Founders Shares and the Sponsor thereafter held 6,037,070 Founders Shares. On June 26, 2017, the Company entered into agreements to repurchase 6,520 Founders Shares at the initial purchase price, for the total sum of $24, from two individuals no longer providing services to the Company. The repurchase was consummated in July, 2017, at which time such shares were treated as cancelled, reducing the number of issued and outstanding Founders Shares to 6,243,480, and reducing the number of Founders Shares held collectively by individuals previously awarded Founders Shares under the Plan from 107,600 to 101,080.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management |
On August 19, 2016, we adopted the Plan. The purpose of the Plan is to provide incentive to our independent directors, employees and consultants to further our growth, development and financial success through the ownership of our shares by them. The Plan provides that we may grant employees, consultants and/or independent directors Founder Shares and may require the grantees to pay a price for such shares. The aggregate number of shares available for grant under the Plan is 150,000 Class F ordinary shares. Unless otherwise provided in an applicable award agreement, all Founder Shares issued pursuant to the Plan are subject to repurchase by us, at our option, at fair market value on the termination of employment, directorship or consultancy, as applicable, on or before a Business Combination. If such termination was for cause, as such term is defined in the Plan, the holder resigns for any reason on or before a Business Combination or the holder breaches restrictive covenants to which the holder is subject, the repurchase price paid by us will be the lesser of the cost and fair market value of such shares. In addition, the form of the award agreement used for the initial awards described below provides that in case of a termination for cause, all Founder Shares granted to the grantee will be forfeited. Under the Plan, our board of directors (or a committee or a subcommittee designated by the board of directors) shall administer and make all determinations with respect to the Plan. The Plan provides that the shares issued thereunder will be subject to certain transfer restrictions, including restrictions on transfers prior to a Business Combination.
In August 2016, our board of directors granted an aggregate of 99,000 Founder Shares under the Plan, including 10,000 shares to Adam Chesnoff, our Director, President and Chief Executive Officer, 8,000 shares to Niveen Tadros, our Executive Vice President and General Counsel, 6,000 shares to Fred Gluckman, our former Executive Vice President and Chief Financial Officer, and 4,000 shares to Philip Han, our Executive Vice President and Chief Investment Officer. The remaining Founder Shares granted under the Plan in August 2016 were granted to other employees and consultants that are not our directors or executive officers. In exchange for
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such grants, the grantees paid $0.004 per Founder Share received under the Plan. On September 15, 2016, we effected a pro rata share capitalization resulting in an increase in the total number of Founder Shares outstanding from 5,750,000 to 6,250,000 in order to maintain the ownership of Founder Shares by our Initial Shareholders at 20% of our issued and outstanding shares upon the closing of the Public Offering. As of December 31, 2018 there were 51,000 additional Founder Shares available for grant under the Plan.
The following table sets forth information available to us as at March 25, 2019 with respect to our ordinary shares held by:
| • | each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares; |
| • | each of our executive officers and directors that beneficially own ordinary shares; and |
| • | all our executive officers and directors as a group. |
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them. The following table does not reflect record or beneficial ownership of the Private Placement Warrants as these are not exercisable within 60 days of March 25, 2019.
Name and Address of Beneficial Owner(1) | Number of Ordinary Shares Beneficially Owned(2) | Approximate Percentage of Class A Ordinary Shares | Approximate Percentage of Class F Ordinary Shares | Approximate Percentage of Ordinary Shares(2) | ||||||||||||
Saban Sponsor LLC (our sponsor)(3)(4) | 6,037,070 | (2) | — | 96.7 | % | 22.0 | % | |||||||||
Haim Saban(3)(4) | 6,037,070 | (2) | — | 96.7 | % | 22.0 | % | |||||||||
Governors Lane LP(6) | 2,000,000 | 9.5 | % | — | 7.3 | % | ||||||||||
Weiss Asset Management LP(11) | 1,874,000 | 8.9 | % | — | 6.8 | % | ||||||||||
Polar Asset Management Partners Inc.(7) | 1,500,000 | 7.1 | % | — | 5.5 | % | ||||||||||
Moore Capital Management, LP(8) | 1,500,000 | 6.0 | % | — | 5.5 | % | ||||||||||
Hudson Bay Capital Management LP(5) | 1,137,500 | 5.3 | % | — | 4.2 | % | ||||||||||
Adam Chesnoff(4)(9) | 10,870 | — | — | * | ||||||||||||
James Rasulo(4)(10) | 32,610 | — | — | * | ||||||||||||
Chase Carey(4) | 32,610 | — | * | * | ||||||||||||
Casey Wasserman(4) | 32,610 | (2) | — | * | * | |||||||||||
Greg Ivancich(4)(13) | — | (2) | — | * | * | |||||||||||
Philip Han(4) | 4,350 | (2) | — | * | * | |||||||||||
Niveen Tadros(4) | 8,700 | — | * | * | ||||||||||||
All directors and executive officers as a group (8 individuals)(4) | 6,158,820 | — | 98.6 | % | 22.5 | % | ||||||||||
| * | Less than one percent. |
| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is 10100 Santa Monica Boulevard, 26th Floor, Los Angeles, California 90067. |
| (2) | Class A ordinary shareholders and Class F ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders and vote together as a single class, except as required by law. |
| (3) | Interests shown consist solely of Founder Shares, classified as Class F ordinary shares. Such ordinary shares will automatically convert into Class A ordinary shares at the time of our initial business combination ona one-for-one basis, subject to adjustment, as described in the subsection entitled “Shareholder Equity” in Section 7 “Class F Ordinary Shares.” |
| (4) | Haim Saban is the Chairman of our board of directors. Mr. Saban and his spouse, Cheryl Saban, share voting and dispositive power over the Founder Shares held by our Sponsor. |
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| (5) | According to the Schedule 13G filed on February 5, 2019, Hudson Bay Capital Management LP and Sander Gerber share voting and dispositive power over the 1,137,500 shares reported (including 969,392 Class A Ordinary Shares issuable upon exercise of warrants). The business address for this shareholder is 777 Third Avenue, 30th Floor, New York, NY 10017. |
| (6) | According to the Schedule 13G/A filed on February 14, 2019, Governors Lane Master Fund LP, Governors Lane LP, Governors Lane Fund General Partner LLC and Isaac Corre share voting and dispositive power over the 1,735,997 shares reported, and Governors Lane LP, Governors Lane Fund General Partner LLC and Isaac Corre share voting and dispositive power over 2,000,000 shares reported. The business address for Governors Lane LP is 510 Madison Avenue, 11th Floor, New York, NY 10022. The business address for each of the other shareholders is c/o Governors Lane LP 510 Madison Avenue, 11th Floor, New York, New York 10022. |
| (7) | According to the Schedule 13G/A filed on February 14, 2019 filed by Polar Asset Management Partners Inc. The business address for this shareholder is 401 Bay Street, Suite 1900, PO Box 19, Toronto, Ontario M5H 2Y4, Canada. |
| (8) | According to the Schedule 13G filed on September 26, 2016, each of Moore Capital Management, LP (“MCM”), MMF Moore ET Investments, LP (“MMFET”), Moore Advisors, Ltd. (“MAL”), Moore Capital Advisors, L.L.C. (“MCA”) and Louis M. Bacon have sole voting and dispositive power over the shares reported. The business address of each of MCM, MCA and Mr. Bacon is Eleven Times Square, New York, New York 10036. The business address of each of MMFET and MAL is located at Citco Fund Services (Bahamas) Limited, One Montague Place, 1st Floor, East Bay Street, P.O.Box N-4906, Nassau, Bahamas. |
| (9) | Mr. Chesnoff is our President and Chief Executive Officer and one of our directors. |
| (10) | The Founders Shares are owned by The Rasulo Family Trust dated 12/15/10, for which James Rasulo is the trustee, and for which voting and investment control are exercised by Mr. Rasulo. |
| (11) | According to the Schedule 13G/A filed on February 14, 2019, BIP GP LLC, Weiss Asset Management LP, WAM GP LLC and Andrew M. Weiss share voting and dispositive power over 1,255,580 shares reported and Weiss Asset Management LP, WAM GP LLC and Andrew M. Weiss share voting and dispositive power over 1,874,000 shares reported. The business address for each of these shareholders is 222 Berkeley St., 16th floor, Boston, Massachusetts 02116. |
Other individuals who will assist in the evaluation of the investment opportunities, not including our directors or executive officers listed above, beneficially own in the aggregate 70,640 Founder Shares. Our former director, Bruce Rosenblum, beneficially owns the remaining 7,500 Founder Shares.
Our Initial Shareholders beneficially own approximately 20.0% of our issued and outstanding ordinary shares. In addition, because of its ownership block, our Sponsor may be able to effectively influence the outcome of all other matters requiring approval by our shareholders, including, amendments to our Articles and approval of significant corporate transactions.
Our Sponsor is deemed to be our “promoter” as such term is defined under the federal securities laws.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Founder Shares
Prior to our Public Offering, in April 2016, our Sponsor purchased 5,750,000 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.004 per share.
In August 2016, we repurchased 99,000 Founder Shares from our Sponsor at their original per share issuance price and subsequently issued such number of Founder Shares for the same per share price to certain individuals who will assist in the evaluation of investment opportunities pursuant to the Plan. In September 2016, our Sponsor transferred 30,000 Founder Shares to each of our three independent directors at their original purchase price. On September 15, 2016, we effected a pro rata share capitalization resulting in an increase in the
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total number of Founder Shares outstanding from 5,750,000 to 6,250,000 in order to maintain the ownership of Founder Shares by our Initial Shareholders at 20% of our issued and outstanding shares upon consummation of the Public Offering.
Following the pro rata share capitalization and the closing of the Public Offering, our Sponsor held 6,044,570 Founder Shares, each of the independent directors held 32,610 Founder Shares, and the other individuals, including our executive officers, held 107,600 Founder Shares. On March 16, 2017, concurrent with Mr. Bruce Rosenblum’s resignation from our board of directors, the Company acquired 25,100 Founders Shares from Mr. Rosenblum and concurrent therewith, in connection with Mr. Casey Wasserman’s appointment to the board of directors, theCompany re-issued such 25,100 Founders Shares to Mr. Casey Wasserman, and our Sponsor sold to Mr. Wasserman an additional 7,500 Founders Shares and thereafter held 6,037,070 Founders Shares.
The Founder Shares are identical to the Class A ordinary Shares included in the Units sold in the Public Offering, and holders of Founder Shares have the same shareholder rights as public shareholders, except that: (i) the Founder Shares are subject to certain transfer restrictions; (ii) our Initial Shareholders have entered into a letter agreement with us, pursuant to which they have agreed (a) to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination and (b) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete a Business Combination on or prior to the Extension Date, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if we fail to complete a Business Combination within such time period; (iii) the Founder Shares are automatically convertible into Class A ordinary shares at the time of a Business Combination ona one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described in the Company’s amended and restated memorandum and articles of association; and (iv) the Founder Shares are subject to registration rights. Permitted transferees of our Initial Shareholders will be subject to the same obligations of our Initial Shareholders.
Private Placement Warrants
Simultaneously with the consummation of the Public Offering, the Sponsor purchased 7,000,000 Private Placement Warrants at a price of $1.00 per warrant, or $7,000,000 in the aggregate, in a private placement. Each Private Placement Warrant entitles the holder to purchase one Class A ordinary share for $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants was placed in the Trust Account. The Private Placement Warrants may not be redeemed by the Company so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by holders other than our Sponsor or its permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the Units being sold as part of the Public Offering. Our Sponsor, or its permitted transferees, has the option to exercise the private placement warrants on a cashless basis.
The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold The proceeds of the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Company’s Class A ordinary shares, subject to the requirements of applicable law, and the Private Placement Warrants will expire worthless upon the liquidation of the Company.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants, and Warrants that may be issued upon conversion of working capital loans (and any ordinary shares issuable upon the exercise of the private placement warrants or warrants issued upon conversion of the working capital loans) are entitled to registration rights pursuant to a registration rights agreement signed on the Close Date requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A ordinary shares). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such
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securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act.
Related Party Notes
Between Inception and the Close Date, our Sponsor loaned the Company $250,000 in unsecured promissory notes. The funds were used topay up-front expenses associated with our Public Offering. These noteswere non-interest bearing and were repaid in full to our Sponsor at the Close Date.
Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed forany out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations.
Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursementof out-of-pocket expenses incurred by such persons in connection with activities on our behalf, although no such reimbursements will be made from the proceeds of the Public Offering held in the Trust Account.
On March 12, 2018, we issued the Sponsor Convertible Note, pursuant to which we may borrow up to $1,000,000 from our Sponsor from time to time. The Sponsor Convertible Note bears interest at a rate of 1.96% per annum and all unpaid principal under the Sponsor Convertible Note including accrued interest thereon will be due and payable in full on the Maturity Date (pursuant to an amendment entered into on September 21, 2018). Our Sponsor will have the option to convert any amounts outstanding under the Sponsor Convertible Note, up to $1,000,000 in the aggregate, into warrants to purchase Class A ordinary shares at a conversion price of $1.00 per warrant. The terms of such warrants will be identical to the Private Placement Warrants, including that each such warrant will entitle the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to the same adjustments applicable to the Private Placement Warrants. Under the Sponsor Convertible Note, our Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the Trust Account, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the Trust Account. The issuance of the Sponsor Convertible Note was approved by our board of directors and our audit committee on March 12, 2018.
On September 26, 2018, the Company issued the Sponsor Note pursuant to which the Company may borrow up to $1.5 million from Sponsor. The Sponsor Note bears interest at a rate of 2.51% per annum and all unpaid principal under the Sponsor Note including accrued interest thereon will be due and payable in full on the Maturity Date, unless accelerated upon the occurrence of customary events of default. Under the Sponsor Note, Sponsor has waived any and all right, title, interest or claim of any kind in or to any distribution of or from the trust account established in connection with our initial public offering, including any right to seek recourse, reimbursement, payment or satisfaction for any claim against the trust account.
We and our Sponsor are currently evaluating the treatment of the Sponsor Convertible Note and Sponsor Note given our planned dissolution.
We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
Administrative Services Agreement
Effective September 15, 2016, the Company entered into an agreement to pay monthly expenses of $10,000 for office space, administrative services and support services to an affiliate of the Company’s Sponsor. The
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agreement terminates upon the liquidation of the Company. For the year ended December 31, 2018 and for the year ended December 31, 2017, the Company incurred expenses of $120,000 and $120,000, respectively under this agreement.
Director Independence
NASDAQ listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Carey, Rasulo and Wasserman are “independent directors” as defined inRule 10A-3 of the Exchange Act and the rules of the NASDAQ. Our independent directors have regularly scheduled meetings at which only independent directors are present.
Director Composition and Standstill Agreement
On September 13, 2018, concurrently with the execution of the Business Combination Agreement, the Company, Sponsor and certain other parties thereto entered into the Director Composition and Standstill Agreement, pursuant to which, among other things, (i) a representative of the Panavision shareholders and Sponsor were proposed to each have certain rights to designate directors to the board of directors of the Company following the consummation of the Panavision/SIM Business Combination, (ii) certain Panavision shareholders and Sponsor agreed not to take certain actions in respect of the members of the board of directors of the Company designated by Sponsor or the such Panavision shareholders, as applicable, following the consummation of the Panavision/SIM Business Combination, (iii) the representative of the Panavision shareholders and Sponsor each were provided certain negative consent rights with respect to certain future actions taken by the Company and its subsidiaries following the proposed consummation of the Panavision/SIM Business Combination, and (iv) each of the Company and Sponsor agreed to take certain actions in connection with, or to facilitate, the Panavision/SIM Business Combination. As a result of the termination of the Business Combination Agreement, effective as of February 28, 2019, this agreement was automatically terminated with no further force or effect.
PIPE Investment
On September 13, 2018, concurrently with the execution of the Business Combination Agreement, we entered into subscription agreements with certain investors pursuant to which such investors collectively subscribed for 5.5 million shares of our common stock (after giving effect to the Domestication) for an aggregate purchase price equal to $55.0 million (the “PIPE Investment”), $30.0 million of which was proposed to be funded by an affiliate of the Sponsor. As a result of the termination of the Business Combination Agreement, effective as of February 28, 2019, each of the subscription agreements entered into in connection with the PIPE Investment was automatically terminated with no further force or effect.
Termination Agreement
Due to market conditions, delays resulting from the recent partial U.S. government shutdown and the March 31, 2019 termination date of the Company, the Company, Panavision, Sim, the Panavision Holder Representative (as defined in the Business Combination Agreement) and the Sim Holder Representative (as defined in the Business Combination Agreement) jointly determined to terminate the Business Combination Agreement pursuant to a Termination Agreement, dated as of February 28, 2019, by and among such parties, effective as of such date.
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| Item 14. | Principal Accounting Fees and Services. |
Fees for professional services provided by our independent registered public accounting firm since inception include:
| For the Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||
Audit Fees(1) | $ | 140,786 | $ | 89,250 | ||||
Audit-Related Fees(2) | 825,500 | — | ||||||
Tax Fees(3) | — | — | ||||||
All Other Fees(4) | — | — | ||||||
|
|
|
| |||||
Total | $ | 966,286 | $ | 89,250 | ||||
| (1) | Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit ofour year-end consolidated financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings. |
| (2) | Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review ofour year-end consolidated financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. The audit-related fees for 2018 represent advisory services related to due diligence pertaining to the business combination that was terminated on February 28, 2019. |
| (3) | Tax Fees. Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice. |
| (4) | All Other Fees. All other fees consist of fees billed for all other services. |
Policy onBoard Pre-Approval of Audit andPermissible Non-Audit Services of the Independent Auditors
The audit committee is responsible for appointing, setting compensation and overseeing the work of the independent auditors. In recognition of this responsibility, the audit committee shall review and, in its solediscretion, pre-approve all audit andpermitted non-audit services to be provided by the independent auditors as provided under the audit committee charter.
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| Item 15. | Exhibits, Financial Statement Schedules. |
| (a) | The following documents are filed as part of this Annual Report onForm 10-K: |
Financial Statements: See “Index to Consolidated Financial Statements” at “Item 8. Financial Statements and Supplementary Data” herein.
| (b) | Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report onForm 10-K. |
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| * | Filed herewith. |
| ITEM 16. | Form 10K Summary |
None
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SABAN CAPITAL ACQUISITION CORP. | ||||||
| Date: April 1, 2019 | By: | /s/ Adam Chesnoff | ||||
| Adam Chesnoff | ||||||
President and Chief Executive Officer (Principal Executive Officer) | ||||||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Adam Chesnoff and Greg Ivancich and each or any one of them, his true andlawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report onForm 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting untosaid attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all thatsaid attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report onForm 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name | Title | Date | ||||
/s/ Haim Saban | Chairman | April 1, 2019 | ||||
| Haim Saban | ||||||
/s/ Adam Chesnoff | Chief Executive Officer, President, and Director (Principal Executive Officer) | April 1, 2019 | ||||
| Adam Chesnoff | ||||||
/s/ Greg Ivancich | Chief Financial Officer (Principal Financial and Accounting Officer) | April 1, 2019 | ||||
| Greg Ivancich | ||||||
/s/ Casey Wasserman | Director | April 1, 2019 | ||||
| Casey Wasserman | ||||||
/s/ Chase Carey | Director | April 1, 2019 | ||||
| Chase Carey | ||||||
/s/ Jay Rasulo | Director | April 1, 2019 | ||||
| Jay Rasulo | ||||||
