| Summary of Significant Accounting Policies | Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed financial statements
of the Company are presented in U.S. dollars in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”) and pursuant to the accounting and
disclosure rules and regulations of the Securities and Exchange
Commission (“SEC”), and reflect all adjustments,
consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the
financial position as of June 30, 2018 and the results of
operations and cash flows for the periods presented. Certain
information and disclosures normally included in financial
statements prepared in accordance with GAAP have been omitted
pursuant to such rules and regulations. Interim results are not
necessarily indicative of results for a full year.
The accompanying unaudited interim condensed financial statements
should be read in conjunction with the audited financial statements
and notes thereto included in the
Form 10-K
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 and Exchange Act of 1934, as amended, or the
“Exchange Act”) are required to comply with the new or
revised financial accounting standards. The JOBS Act provides that
a company can elect to opt out of the extended transition period
and comply with the requirements that apply
to non-emerging
This may make comparison of the Company’s financial statement
with another public company which is neither an emerging growth
company nor an emerging growth company which has opted out of using
the extended transition, period difficult or impossible, because of
the potential differences in accounting standards used.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net
income (loss) applicable to common stockholders by the weighted
average number of common shares outstanding during the period,
plus, to the extent dilutive, the incremental number of shares of
common stock to settle warrants, as calculated using the treasury
stock method. An aggregate of 36,156,709 and 35,973,009 shares of
Class A common stock subject to possible redemption at
June 30, 2018 and at June 30, 2017, respectively, have
been excluded from the calculation of basic income per common
share. For all periods presented, the Company has not considered
the effect of the warrants sold in the Public Offering (including
the consummation of the over-allotment) and Private Placement
Warrants to purchase 18,941,651 shares of the Company’s
Class A common stock in the calculation of diluted income per
share, since the exercise of the warrants and the conversion of the
rights into shares of common stock is contingent upon the
occurrence of future events.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash accounts in a
financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $250,000. The Company has not
experienced losses on these accounts and management believes the
Company is not exposed to significant risks on such accounts.
Financial Instruments
The fair value of the Company’s assets and liabilities, which
qualify as financial instruments under the FASB ASC 820,
“Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheet.
Use of Estimates
The preparation of financial statements in conformity with 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 financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income Taxes
The Company follows the asset and liability method of accounting
for income taxes under FASB ASC 740, “Income Taxes.”
Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences
between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that included the
enactment date. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to
be realized.
FASB ASC 740 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For
those benefits to be recognized, a tax position must be more likely
than not to be sustained upon examination by taxing authorities. To
the extent a tax position does not meet these recognition and
measurement thresholds, the associated benefit is not recognized in
whole or in part and is reflected as an unrecognized tax benefit.
There were no unrecognized tax benefits as of June 30, 2018 or
2017. 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 June 30,
2018 or 2017. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or
material deviation from its tax position. The Company is subject to
income tax examinations by major taxing authorities since
inception.
During the three and six months ended June 30, 2018, the
Company recorded income tax expense of $300,088 and $538,357,
respectively, primarily related to investment income earned on the
Trust Account. During the three and six months ended June 30,
2017, the Company recorded income tax expense of $170,349 primarily
related to investment income earned on the Trust Account. Until the
Company completes an Initial Business Combination, its general and
administrative expenses will be deferred for tax purposes.
During the six months ended June 30, 2018, the Company made an
estimated federal income tax payment of $834,463 of which $323,000
related to 2017 and $511,463 to 2018. Upon filing the 2017 tax
return, the final tax liability was $307,683 resulting in an
overpayment of $15,317. The overpayment has been applied to 2018,
resulting in a current tax liability of $8,770.
June 30, 2018 December 31, 2017
Current Tax Liability $ (8,770 ) $ (304,876 )
Deferred Tax Asset:
Deferred general and administrative expenses $ 472,974 $ 322,965
Valuation allowance at 21% (472,974 ) (322,965 )
Deferred Tax Asset, net $
— $
—
At June 30, 2018 and December 31, 2017, the Company had
$2,252,255 and $1,537,927, respectively, of deferred general and
administrative expenses resulting in a deferred tax asset of
$472,974 and $322,965, respectively. Management has determined that
a full valuation allowance on the deferred tax asset is appropriate
at this time after consideration of all available positive and
negative evidence related to the realization of the deferred tax
asset.
On December 22, 2017, the Tax Cuts and Jobs Act (the
“Tax Reform Bill”) was signed into law. Prior to the
enactment of the Tax Reform Bill, the Company measured its deferred
tax assets at the federal rate of 34%. The Tax Reform Bill reduced
the federal tax rate to 21% resulting in
the re-measurement
The Company’s federal statutory income tax rate is 21% and
the effective tax rate for the three and six months ended
June 30, 2018 was 34% and 29%, respectively, which is a result
of the full valuation allowance against its deferred tax asset. The
total income taxes were different from the amount computed by
applying the federal statutory income tax rate of 21% to income
before income taxes as follows:
Three months Three months Six months Six months
Computed federal income tax expense at 21% (2018) and 34%
(2017) $ (185,415 ) $ 191,393 $ (385,541 ) $ 191,393
Permanent differences
—
— (2,807 )
—
Valuation allowance at 21% (2018) and 34% (2017) (114,673 ) (361,742 ) (150,009 ) (361,742 )
Total income tax expense $ (300,088 ) $ (170,349 ) $ (538,357 ) $ (170,349 )
Recent Accounting Pronouncements
The Company’s management does not believe any recently
issued, but not yet effective, accounting pronouncements, if
currently adopted, would have a material effect on the
Company’s financial statements. |
