Utilico Insights - Jacqueline Broers assesses why Vietnam could be the darling of Asia for investors. Watch the full video here.

Less Ads, More Data, More Tools Register for FREE

Pin to quick picksJTOW.L Regulatory News (JTOW)

  • There is currently no data for JTOW

Watchlists are a member only feature

Login to your account

Alerts are a premium feature

Login to your account

Annual Financial Report

13 Nov 2018 13:50

RNS Number : 2195H
J2 Acquisition Limited
13 November 2018
 

13 November 2018

 

J2 ACQUISITION LIMITED (THE "COMPANY")

Audited Financial Information

for the Period from Incorporation on 18 September 2017 to 31 August 2018

J2 Acquisition Limited (the "Company") has today published its report and audited financial statements from incorporation on 18 September 2017 to 31 August 2018 ("Audited Financials").

The Audited Financials will shortly be available at www.j2acquisitionlimited.com.

 

 

 

 

 

 

J2 Acquisition Limited

 

Report and financial statements

from Incorporation on 18 September 2017 to 31 August 2018

 

Contents

 

 

Director's Statement

Report of the Directors

Principal Risks and Uncertainties

Report of independent auditor

Statement of comprehensive income

Statement of financial position

Statement of changes in equity

Statement of cash flows

Notes to financial statements

Corporate information

 

Director's Statement

 

It is with pleasure that I present to you the shareholders the report and audited financial statements of J2 Acquisition Limited (the "Company") for the period from 18 September 2017 to 31 August 2018.

 

The Company

On 10 October 2017, the Company completed its initial public offering. The offering raised gross proceeds of US$1.25 billion, consisting of US$1.21 billion through the placement of ordinary shares ("Ordinary Shares") with matching warrants ("Warrants") at a placing price of US$10.00 per Ordinary Share and a further US$40 million through the subscription of 4,000,000 preferred shares ("Founder Preferred Shares") (with Warrants being issued to the subscriber of Founder Preferred Shares on the basis of one Warrant per Founder Preferred Share) also at US$10 per Founder Preferred Share. The Company was admitted to trading with a standard listing on the main market of the London Stock Exchange on 10 October 2017 ("Admission"). As at 31 August 2018, the Company had 121,032,500 Ordinary Shares in issue. The net proceeds from the IPO are easily accessible when required.

 

As set out in the Company's prospectus dated 5 October 2017 (the "Prospectus"), the Company was formed to undertake an acquisition of a target company or business. There is no specific expected target value for the acquisition and the Company expects that any funds not used for the acquisition will be used for future acquisitions, internal or external growth and expansion, purchase of outstanding debt and working capital in relation to the acquired company or business. Following completion of the acquisition, the objective of the Company is expected to be to operate the acquired business and implement an operating strategy with a view to generating value for shareholders through operational improvements as well as potentially through additional complementary acquisitions following the acquisition.

 

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

 

Financial Results

 

During the period commenced 18 September 2017 and ended 31 August 2018, the Company has incurred operating costs of US$166.3 million, including US$163.0 million of non-cash charges related to Founder Preferred Share dividend rights and US$1.2 million of non-cash charges related to warrant redemption liability as outlined in the Company's Prospectus. These expenses were partially offset by net investment income totalling approximately US$16.2 million. Costs of Admission of US$22.8 million were recorded as an offset to the gross proceeds from the IPO in the Company's Statement of Financial Position.

 

Principal Risks and Uncertainties

The Company set out in the Prospectus the principal risks and uncertainties that could impact its performance; these principal risks and uncertainties remain unchanged since that document was published and apply in the period to 31 August 2018. Your attention is drawn to the Prospectus for the detailed assessment. A copy of the Prospectus is available on the Company's website (www.j2acquisitionlimited.com) and was submitted to the National Storage Mechanism and is available for inspection at www.morningstar.co.uk/uk/nsm.

 

Related Parties

Related party disclosures are given in note 12 to these financial statements.

 

 

 

 

Martin E. Franklin

Director

8 November 2018

 

 

Report of the Directors

 

The financial statements on pages 17 to 32 were approved by the Board of Directors on 8 November 2018 and signed on its behalf by Martin E. Franklin, Director.

 

The Directors have pleasure in submitting their report and the audited financial statements for the period from 18 September 2017 through 31 August 2018.

 

Status and activities

The Company was incorporated with limited liability under the laws of the British Virgin Islands under the BVI Business Companies Act 2004 (as amended) (the "BVI Companies Act") on 18 September 2017. The address of the Company's registered office is Ritter House, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands. The Ordinary Shares and Warrants were admitted for trading on the Main Market of the London Stock Exchange on 10 October 2017, after raising gross proceeds of US$1.25 billion for a potential acquisition (an "Acquisition").

The Company was formed to undertake an acquisition of a target company or business. There is no specific expected target value for the Acquisition and the Company expects that any funds not used for the Acquisition will be used for future acquisitions, internal or external growth and expansion, purchase of outstanding debt and working capital in relation to the acquired company or business. Following completion of the Acquisition, the objective of the Company is expected to be to operate the acquired business and implement an operating strategy with a view to generating value for its shareholders through operational improvements as well as potentially through additional complementary acquisitions following the Acquisition. Following the Acquisition, the Company intends to seek re-admission of the enlarged group to listing on the Official List and to trading on the London Stock Exchange or admission to an alternative stock exchange. The Company expects to acquire a controlling interest in a target company or business. The Company (or its successor) may consider acquiring a controlling interest constituting less than the whole voting control or less than the entire equity interest in a target company or business if such opportunity is attractive; provided, the Company (or its successor) would acquire a sufficient portion of the target entity such that it could consolidate the operations of such entity for applicable financial reporting purposes. In connection with an Acquisition, the Company may issue additional Ordinary Shares which could result in the Company's then existing Shareholders owning a minority interest in the Company following the Acquisition.

The Company's efforts in identifying a prospective target company or business will not be limited to a particular industry or geographic region. The Company may subsequently seek to raise further capital for the purposes of the Acquisition.

Unless required by applicable law or other regulatory process, no Shareholder approval will be sought by the Company in relation to the Acquisition. The Acquisition will be subject to Board approval, including by a majority of the Company's Non-Founder Directors (as defined in the Prospectus).

The determination of the Company's post-Acquisition strategy and whether any of the Directors will remain with the combined company and on what terms will be made at or prior to the time of the Acquisition.

If the Acquisition has not been announced by the second anniversary of Admission, the Board will recommend to shareholders either that the Company be wound up (in order to return capital to shareholders and holders of the Founder Preferred Shares, to the extent assets are available) or that the Company continue to pursue the Acquisition for a further 12 months from the second anniversary of Admission. The Board's recommendation will then be put to a shareholder vote (from which the Directors and Mariposa Acquisition IV, LLC (the "Founder Entity") will abstain).

The Company has identified the following criteria and guidelines that it believes are important in evaluating potential acquisition opportunities. It will generally use these criteria and guidelines in evaluating acquisition opportunities. However, it may also decide to enter into the Acquisition of a target company or business that does not meet these criteria and guidelines:

• financial condition and results of operations;

• growth potential;

• brand recognition and potential;

· experience and skill of management and availability of additional personnel;

· capital requirements;

· stage of development of the business and its products or services;

· existing distribution or other sales arrangements and the potential for expansion;

· degree of current or potential market acceptance of the products or services;

· proprietary aspects of products and the extent of intellectual property or other

protection for products or formulas;

· impact of regulation and potential future regulation on the business;

· regulatory environment of the industry;

· seasonal sales fluctuations and the ability to offset these fluctuations through

other acquisitions, introduction of new products, or product line extensions; and

· the amount of working capital available.

 

Results and dividends

For the period from 18 September 2017 to 31 August 2018, the Company's loss was US$150.0 million.

 

It is the Board's policy that prior to making the first Acquisition, no dividends will be paid. Following the first Acquisition, subject to availability of distributable reserves, dividends will be paid to shareholders if and when the Directors believe it is appropriate and prudent to do so.

 

Share capital

 

General:

 

As at 31 August 2018, the Company had in issue 121,032,500 Ordinary Shares and 4,000,000 Founder Preferred Shares.

 

4,000,000 Founder Preferred Shares were in issue on 10 October 2017. There are no Founder Preferred Shares held in Treasury. Each Founder Preferred Share was issued at US$10.00 per share with a Warrant as described in note 10.

 

121,032,500 Ordinary Shares were issued on 10 October 2017 (121,000,000 were issued in the IPO at US$10.00 per share and 32,500 were issued to the Non-Founder Directors in conjunction with the IPO). There are no Ordinary Shares held in Treasury. Each Ordinary Share was issued with a Warrant as described in note 10.

 

Founder Preferred Shares:

Details of the Founder Preferred Shares can be found in note 10 to the financial statements, and are incorporated into this Report by reference.

 

Securities carrying special rights:

Save as disclosed above in relation to the Founder Preferred Shares, no person holds securities in the Company carrying special rights with regard to control of the Company.

 

Voting rights:

Holders of Ordinary Shares and Founder Preferred Shares have the right to receive notice of and to attend and vote at any meetings of members except, in the case of the holders of Ordinary Shares, in relation to any Resolution of Members that the Directors, in their absolute discretion (acting in good faith) determine is necessary or desirable: (i) in connection with a merger or consolidation in relation to, in connection with or resulting from the Acquisition (including at any time after the Acquisition has been made); or (ii) to approve matters in relation to, in connection with or resulting from the Acquisition (whether before or after the Acquisition has been made). Each holder of shares being present in person or by proxy at a meeting will, upon a show of hands, have one vote and upon a poll each such holder of shares present in person or by proxy will have one vote for each share held by him.

 

In the case of joint holders of a share, if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member, and if one or more joint holders are present at a meeting of persons, in person or by proxy, they must vote as one.

 

Restrictions on voting:

No member shall, if the Directors so determine, be entitled in respect of any share held by him to attend or vote (either personally or by proxy) at any meeting of members or separate class meeting of the Company or to exercise any other right conferred by membership in relation to any such meeting if he or any other person appearing to be interested in such shares has failed to comply with a notice requiring the disclosure of shareholder interests and given in accordance with the Company's articles of association (the "Articles") within 14 calendar days, in a case where the shares in question represent at least 0.25% of their class, or within seven days, in any other case, from the date of such notice. These restrictions will continue until the information required by the notice is supplied to the Company or until the shares in question are transferred or sold in circumstances specified for this purpose in the Articles.

 

Transfer of shares:

Subject to the BVI Business Companies Act and the terms of the Articles, any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Directors may approve. The Directors may accept such evidence of title of the transfer of shares (or interests in shares) held in uncertificated form (including in the form of depositary interests or similar interests, instruments or securities) as they shall in their discretion determine. The Directors may permit such shares or interests in shares held in uncertificated form to be transferred by means of a relevant system of holding and transferring shares (or interests in shares) in uncertificated form.

 

No transfer of shares will be registered if, in the reasonable determination of the Directors, the transferee is or may be a Prohibited Person (as defined in the Articles), or is or may be holding such shares on behalf of a beneficial owner who is or may be a Prohibited Person. The Directors shall have power to implement and/or approve any arrangements they may, in their absolute discretion, think fit in relation to the evidencing of title to and transfer of interests in shares in the Company in uncertificated form (including in the form of depositary interests or similar interests, instruments or securities).

 

Rights to appoint and remove Directors

Subject to the BVI Companies Act and the Articles, the Directors shall have power at any time, and from time to time, without sanction of the members, to appoint any person to be a Director, either to fill a casual vacancy or as an additional Director. Subject to the BVI Companies Act and the Articles, the members may by a Resolution of Members appoint any person as a Director and remove any person from office as a Director.

 

For so long as an initial holder of Founder Preferred Shares (being a Founding Entity together with its affiliates) holds 20% or more of the Founder Preferred Shares in issue, such holder shall be entitled to nominate up to three persons as Directors of the Company and the Directors shall appoint such persons. In the event such holder notifies the Company to remove any Director nominated by him the other Directors shall remove such Director, and in the event of such a removal the relevant holder shall have the right to nominate a Director to fill such vacancy.

 

No Director has a service contract with the Company, nor are any such contracts proposed. There are no pension, retirement or other similar arrangements in place with the Directors nor are any such arrangements proposed.

 

Powers of the Directors

Subject to the provisions of the BVI Companies Act and the Articles, the business and affairs of the Company shall be managed by, or under the direction or supervision of, the Directors. The Directors have all the powers necessary for managing, and for directing and supervising, the business and affairs of the Company. The Directors may exercise all the powers of the Company to borrow or raise money (including the power to borrow for the purpose of redeeming shares) and secure any debt or obligation of or binding on the Company in any manner including by the issue of debentures (perpetual or otherwise) and to secure the repayment of any money borrowed, raised, or owing by mortgage, charge, pledge, or lien upon the whole or any part of the Company's undertaking property or assets (whether present or future) and also by a similar mortgage, charge, pledge, or lien to secure and guarantee the performance of any obligation or liability undertaken by the Company or any third party.

 

Directors and their interests

The Directors of the Company who served during the period and subsequent to the date of this Report are:

 

 

Name

 

Position

Date of appointment

James E. Lillie

Founder and Non-Executive Director

19 September 2017

Martin E. Franklin

Founder and Non-Executive Director

19 September 2017

Rory Cullinan

Independent Non-Executive Director

19 September 2017

Jean-Marc Huët

Independent Non-Executive Director

19 September 2017

Brian Kaufmann

Non-Executive Director

19 September 2017

Thomas V. Milroy

Independent Non-Executive Director

19 September 2017

Lord Myners of Truro CBE

Chairman

19 September 2017

 

As of 8 November 2018, all of the Directors listed above continue to serve as Directors of the Company. As at 8 November 2018, the Directors have the following interests in the Company's securities:

 

 

 

Director

No. of Ordinary Shares

Percentage of issued Ordinary Shares

No. of Founder Preferred Shares

James E. Lillie[1]

--------

--------

-------------

Martin E. Franklin

6,000,000[2]

4.96

4,000,000

Rory Cullinan

7,500

0.001

-------------

Jean-Marc Huët

7,500

0.001

-------------

Brian Kaufmann[3]

--------

--------

-------------

Thomas V. Milroy

7,500

0.001

-------------

Lord Myners of Truro CBE

10,000

0.001

--------------

[1]Mr. Lillie holds an indirect pecuniary interest of approximately 20 per cent. in the Founder Entity.

[2]Represents the interests held by the Founder Entity. Mr. Franklin is a beneficial owner and the manager of the Founder Entity and, as such, may be considered to have beneficial ownership of all the Founder Entity's interests in the Company

[3]Mr. Kaufmann, who was invited by the Founders to join the Board, is a Portfolio Manager at Viking Global Investor LP. Viking Global Opportunities Liquid Portfolio Sub-Master LP, an affiliate of Viking Global Investor LP, has an interest in 25,000,000 Ordinary Shares and 25,000,000 Warrants (being 20.66 per cent of the Ordinary Shares and Warrants in issue).

 

Directors' remuneration

Each of the Directors entered into a Director's letter of appointment with the Company dated 5 October 2017. Under the letters of appointment, Rory Cullinan, Thomas V. Milroy and Jean-Marc Huët are entitled to a fee of $75,000 per annum and Lord Myners, as Chairman, is entitled to receive a fee of $100,000 per annum. Fees are payable quarterly in arrears. During the period from 18 September 2017 to 31 August 2018, the Company issued 32,500 Ordinary Shares and Warrants in aggregate to independent Non-Founder Directors in lieu of their first year's annual cash remuneration. The shares were valued at US$10.00 per share and are being expensed over the one-year service period. Martin E. Franklin, James E. Lillie and Brian Kaufmann do not receive a fee in connection with their appointment as Non-Executive Directors of the Company. In addition, all of the Directors are entitled to be reimbursed by the Company for travel, hotel and other expenses incurred by them in the course of their directors' duties relating to the Company.

 

Substantial shareholdings

As at 8 November 2018 (the latest practicable date prior to the publication of this Report), the following had disclosed an interest in the issued Ordinary Share capital of the Company (being 5% or more of the voting rights in the Company) in accordance with the requirements of the Disclosure and Transparency Rules (the "DTRs"):

 

 

 

 

Shareholder

Number of Ordinary Shares

Date of disclosure to Company

Notified

 percentage of voting rights[4]

Viking Global Opportunities Liquid Portfolio Sub-Master LP

25,000,000

12 October 2017

20.66%

Senator Investment Group LP

10,000,000

12 October 2017

8%

[4]Since the date of disclosures to the Company, the interest of any person listed above in Ordinary Shares may have increased or decreased without any obligation on the relevant person to make further notification to the Company pursuant to the DTRs.

Change of control

The Company is not party to any significant contracts that are subject to change of control provisions in the event of a takeover bid. There are no agreements between the Company and its Directors or employees providing compensation for loss of office or employment that occurs because of a takeover bid.

 

The Directors have reason to believe that PricewaterhouseCoopers LLP conducted an effective audit. The Directors have provided the auditors with full access to all of the books and records of the Company.

 

Corporate Governance Statement

The Company is a British Virgin Islands registered company with a standard listing on the London Stock Exchange. For as long as the Company has a standard listing it is not required to comply or explain non-compliance with the UK Corporate Governance Code (the "Code") issued by the Financial Reporting Council ("FRC") in April 2016. However, the Company is firmly committed to high standards of corporate governance and maintaining a sound framework through which the strategy and objectives of the Company are set and the means of attaining these objectives and monitoring performance are determined. At Admission, the Company therefore stated its intention to voluntarily comply with the Code. The Code is available on the FRC's website, www.frc.co.uk. The Company also complies with the corporate governance regime applicable to the Company pursuant to the laws of the British Virgin Islands.

 

As at the date of this Report, the Company is in compliance with the Code with the exception of the following:

 

· Given the wholly non-executive composition of the Board, certain provisions of the Code (in particular the provisions relating to the division of responsibilities between the Chairman and chief executive and executive compensation) are considered by the Board to be inapplicable to the Company. In addition, the Company does not comply with the requirements of the Code in relation to the requirement to have a senior independent director.

 

· The Code also recommends the submission of all directors for re-election at annual intervals. No Director will be required to submit for re-election until the first annual general meeting of the Company following the Company's first acquisition.

 

· Until completion of the Company's first acquisition, the Company will not have nomination, remuneration, audit or risk committees. The Board as a whole instead reviews its size, structure and composition, the scale and structure of the Directors' fees (taking into account the interests of Shareholders and the performance of the Company), takes responsibility for the appointment of independent auditors and payment of their audit fee, monitors and reviews the integrity of the Company's financial statements, including the Company's internal control and risk management arrangements in relation to its financial reporting process, and takes responsibility for any formal announcements on the Company's financial performance. Following the Company's first acquisition, the Board intends to put in place nomination, remuneration, audit and risk committees.

 

Share dealing

As at the date of this Report, the Board has voluntarily adopted a share dealing code which is consistent with the rules of the Market Abuse Regulation 596/2014 (the "Market Abuse Regulation"). The Board is responsible for taking all proper and reasonable steps to ensure compliance with the Market Abuse Regulation by the Directors.

 

Relations with Shareholders

The Directors are available for communication with shareholders and all shareholders will have the opportunity, and are encouraged, to attend and vote at any future Annual General Meeting of the Company, the first of which will take place within 18 months following completion of the Acquisition, during which the Board will be available to discuss issues affecting the Company.

 

 

Statement of going concern

The Directors have considered the financial position of the Company and have concluded that it is appropriate to prepare the financial statements on a going concern basis.

 

Internal control

The Board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The Board maintains sound risk management and internal control systems. The Board has reviewed the Company's risk management and control systems and believes that the controls are satisfactory given the nature and size of the Company. Controls will be reviewed following completion of its first acquisition.

Financial Risk Profile

The Company's financial instruments comprise mainly of cash and cash equivalents, and various items such as payables and receivables that arise directly from the Company's operations. Details of the risks relevant to the Company are included in the notes to the financial statements and on page 12 of this report.

 

Branches

At the date of this Report, the Company does not have any branches.

 

Management Report

For the purposes of compliance with DTR 4.1.5R(2), DTR 4.1.8R and DTR4.1.11R, the required content of the "Management Report" can be found in this Report of Directors and the Principal Risks and Uncertainties section on page 12 of this report.

 

 

Directors' Responsibilities

The Directors are responsible for preparing the Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the International Accounting Standards Board. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:

 

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether applicable IFRSs as adopted by the International Accounting Standards Board have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and, as regards the Company financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Directors are responsible for the maintenance and integrity of the Company's website. A copy of the financial statements is placed on our website www.j2acquisitionlimited.com. The Directors consider that the annual report and accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess a Company's performance, business model and strategy.

 

Each of the Directors, who are in office and whose names and functions are listed under "Corporate Information", confirms that, to the best of his knowledge:

 

· the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the International Accounting Standards Board, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

· the management report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

 

Disclosure of information to Auditors

Each of the persons who is a Director at the date of approval of this Report confirms that:

· so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

· each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

 

 

Directors' indemnities

As at the date of this Report, indemnities granted by the Company to the Directors are in force to the extent permitted under BVI law. The Company also maintains Directors' and Officers' liability insurance, the level of which is reviewed annually.

 

By order of the Board

 

___________________________

Martin E. Franklin

Director

 

8 November 2018

 

Principal Risks and Uncertainties

 

 

The Board has identified the following principal risks and uncertainties facing the Company which remain unchanged from the principal risks and uncertainties set out in the Company's prospectus dated 5 October 2017. The risks referred to below do not purport to be exhaustive and are not set out in any particular order of priority. Additional risks and uncertainties not currently known to the Board or which the Board currently deems immaterial may also have an adverse effect on the Company's business. In particular, the Company's performance may be affected by changes in the market and/or economic conditions and in legal, regulatory and tax requirements.

 

Key information on the key risks that are specific to the issuer or its industry

 

Business Strategy

 

• The Company is a newly formed entity with no operating history and has not yet identified any potential target company or business for the Acquisition.

• The Company may acquire either less than whole voting control of, or less than a controlling equity interest in, a target, which may limit its operational strategies.

• The Company may be unable to complete the Acquisition in a timely manner or at all or to fund the operations of the target business if it does not obtain additional funding.

 

 

The Company's relationship with the Directors, the Founders and the Founder Entity and conflicts of interest

 

• The Company is dependent on James. E Lillie, Martin E. Franklin and Ian G.H. Ashken (collectively, the "Founders") to identify potential acquisition opportunities and to execute the Acquisition and the loss of the services of any of them could materially adversely affect it.

• The Founders and Directors are currently affiliated and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by the Company and may have conflicts of interest in allocating their time and business opportunities.

• The Directors will allocate a portion of their time to other businesses leading to the potential for conflicts of interest in their determination as to how much time to devote to the Company's affairs.

• The Company may be required to issue additional Ordinary Shares pursuant to the terms of the Founder Preferred Shares, which would dilute existing Ordinary Shareholders.

 

Taxation

 

• The Company may be a "passive foreign investment company" for U.S. federal income tax purposes and adverse tax consequences could apply to U.S. investors.

 

Key information on the key risks that are specific to the securities

 

The Ordinary Shares and Warrants

 

• The Standard Listing of the Ordinary Shares and Warrants will not afford Shareholders the opportunity to vote to approve the Acquisition.

• The Warrants can only be exercised during the Subscription Period and to the extent a Warrantholder has not exercised its Warrants before the end of the Subscription Period, those Warrants will lapse, resulting in the loss of a holder's entire investment in those Warrants.

• The Warrants are subject to mandatory redemption and therefore the Company may redeem a Warrantholder's unexpired Warrants prior to their exercise at a time that is disadvantageous to a Warrantholder, thereby making those Warrants worthless.

• The issuance of Ordinary Shares pursuant to the exercise of the Warrants will dilute the value of a Shareholder's Ordinary Shares.

Independent auditors' report to the directors of J2 Acquisition Limited

Report on the audit of the financial statements

Opinion

In our opinion, J2 Acquisition Limited's financial statements:

· give a true and fair view of the state of the Company's affairs as at 31 August 2018 and of its loss and cash flows for the 11 ½ month period (the "period") then ended; and

· have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

We have audited the financial statements, included within the Annual Report, which comprise: the statement of financial position as at 31 August 2018, the statement of comprehensive income, the statement of cash flows, the statement of changes in equity for the 11 ½ month period then ended, the accounting policies, and the notes to the financial statements.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 

Our audit approach

Overview

  

Overall materiality: $12.4 million, based on 1% of net assets.

 

Single audit location to cover the Company's complete operations, transactions and balances. 

  

Fair value measurement of Founder Preferred Shares and associated share-based payment charge.

 

 

 
 

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.

We did not identify any key audit matters relating to any irregularities, including fraud. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Key audit matters

Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

Key audit matter

How our audit addressed the key audit matter

Fair value measurement of Founder Preferred Shares and associated share-based payment charge

Refer to Note 2.8 (accounting policies), Note 6 and Note 10 to the financial statements.

The Company has issued 4,000,000 Founder Preferred Shares in connection with its IPO to its Founder Entity as set out in Note 10 to the financial statements. 

The Founder Preferred Shares provide a right to receive an Annual Dividend Amount which is payable based on the future growth in share price and in line with a calculation specified by the terms of the Founder Preferred Shares set forth in the Company's Articles of Association. 

Management appointed a third party expert to perform the valuation of the share-based payments award at the date of each issue of Founder Preferred Shares.

We focused on the fair value of the Founder Preferred Shares IFRS 2 share-based payment charge component due to the following reasons:

· The Founder Preferred Share equity charge for the period ended 31 August 2018 of $161.7 million is material to the financial statements;

· A number of key assumptions as set out in Note 6 to the financial statements used in the valuation are judgemental and not solely based on market observable data; and

· The fair valuation model is bespoke and complex.

We assessed compliance of the accounting policy adopted with IFRS 2 'Share-based payment'.

In order to test management's valuation model, we utilised a valuations expert to assess the bespoke valuation methodology applied and the related assumptions.

We performed an assessment of the valuation using a Monte Carlo valuation method to independently test the valuation model and its outcome as determined by management's expert.

Our work has consisted of considering the reasonableness of the following assumptions made by the independent expert on behalf of management:

 o Volatility post-acquisition;

o Probability of IPO;

o Probability of acquisition; and

o Risk free interest rate.

In each of the above areas, we have considered the impact of management's assumption, in the form of a sensitivity. We have also considered the reasonableness of the above assumptions against publicly available market data and the IFRS 2 requirements for fair market value. 

Based on our testing, we found that the Founder Preferred Share equity charge of $161.7 million was determined using an acceptable valuation methodology.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which it operates.

The audit was an initial audit and required obtaining an understanding of the entity, its environment and life-cycle stage of the business including the progression to initial public offering.

The Company operates as a single business and within one geography, and we therefore performed an audit of the complete financial information of the single business. In establishing our overall approach we assessed the risks of material misstatement, taking into account the nature, likelihood and potential magnitude of any misstatement. Following this assessment, we applied professional judgement to determine the extent of testing required over each balance in the financial statements.

The risk of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, relate to the fair value measurement of Founder Preferred Shares and associated share-based payment charge. This has been identified as a "key audit matter" in the table above.

 

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality

$12.4 million.

How we determined it

1% of net assets.

Rationale for benchmark applied

We applied this benchmark given the stage of development of the Company activities since incorporation and funds raised as a special purpose acquisition company, which meant that an asset benchmark was more appropriate than an income statement benchmark such as profit before tax or revenue.

We agreed with the Board of Directors that we would report to them misstatements identified during our audit above $620,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:

· the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

· the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company's ability to continue as a going concern.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors' report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Report of the Directors set out on page 10, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.

Use of this report

This report, including the opinion, has been prepared for and only for the Company's directors as a body for fulfilling their obligation under the Listing Rules 14.3.23R and 4.1.7R of the FCA's Disclosure Guidance and Transparency Rules sourcebook ("DTR") in accordance with our engagement letter dated 27 November 2017 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come, including without limitation under any contractual obligations of the Company, save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

London

8 November 2018

 

Statement of Comprehensive Income for the period ended 31 August 2018

 

 

 

 

For the period

 

 

 

from

 

 

 

18 September 2017

 

 

 

to 31 August 2018

 

Note

 

US $

 

 

 

 

Investment income

7

 

16,155,277

Other income

 

 

135,675

Expenses

3

 

(2,001,199)

Non-cash charge related to Founder Preferred Shares and warrants

6

 

(163,043,551)

Non-cash charge related to warrant redemption liability

10

 

(1,210,325)

Operating loss

 

 

(149,964,123)

 

 

 

 

Loss and Total Comprehensive Expense for the Period

 

 

(149,964,123)

 

 

 

 

Basic and diluted loss per ordinary share

8

 

(1.28)

 

 

 

 

 

 

 

 

The notes form an integral part of these financial statements.

 

 

Statement of Financial Position as at 31 August 2018

 

 

 

 

31 August 2018

 

Note

 

US$

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

 

11,672,995

Short-term investments

7

 

1,230,357,747

Prepayments and other assets

9

 

117,595

 

 

 

 

Total Assets

 

 

1,242,148,337

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

Accruals

 

 

139,377

Total current liabilities

 

 

139,377

 

 

 

 

Non-current liabilities

 

 

 

Warrant redemption liability

10

 

1,210,325

Total non-current liabilities

 

 

1,210,325

 

 

 

 

Total liabilities

 

 

1,349,702

Net assets

 

 

1,240,798,635

 

 

 

 

Equity

 

 

 

 

 

 

 

Founder Preferred Share Capital

10

 

40,000,000

Ordinary Share Capital - nominal value

 

 

-

Ordinary Share Capital share premium

10

 

1,187,547,637

Retained earnings

 

 

13,250,998

 

 

 

 

Total equity

 

 

1,240,798,635

 

 

 

 

Net asset value per share

8

 

9.92

 

 

 

 

 

The notes form an integral part of these financial statements.

 

The financial statements were approved and authorised for issue by the board of directors on 8 November 2018 and signed on its behalf by:

 

 

Martin E. Franklin

Director

8 November 2018

 

Statement of Changes in Equity for the period ended 31 August 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary

 

Ordinary

 

 

 

 

 

 

 

Founder

 

Share

 

Share

 

 

 

 

 

 

 

Preferred

 

Capital

 

Capital

 

 

 

 

 

 

 

Share

 

Nominal

 

Share

 

Retained

 

Total

 

 

 

Capital

 

Value

 

Premium

 

Earnings

 

Equity

 

Note

 

US$

 

US$

 

US$

 

US$

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

Balance at inception, 18 September 2017

 

 

-

 

-

 

-

 

-

 

-

Issue of shares

10

 

40,000,000

 

-

 

1,210,325,000

 

163,043,551

 

1,413,368,551

Issue costs

10

 

-

 

-

 

(22,777,363)

 

-

 

(22,777,363)

Share-based compensation - directors

11

 

-

 

-

 

-

 

171,570

 

171,570

Loss and total comprehensive expense for the period

 

 

-

 

-

 

-

 

(149,964,123)

 

(149,964,123)

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 31 August 2018

 

 

40,000,000

 

-

 

1,187,547,637

 

13,250,998

 

1,240,798,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notes form an integral part of these financial statements.

 

 

 

 

 

 

 

Statement of Cash Flows for the period ended 31 August 2018

 

 

 

For the period from

 

 

18 September 2017

 

 

to 31 August 2018

 

Note

US$

OPERATING ACTIVITIES:

 

 

Net loss

 

(149,964,123)

Elimination of non-cash items:

 

 

Charge related to Founder Preferred Shares

6

163,043,551

Charge related to warrant redemption liability

10

1,210,325

Unrealized gain on short-term investments

7

(4,575,742)

Charge related to directors' remuneration settled in shares

11

284,372

Charge related to director options

11

171,570

Movements in working capital:

 

 

Increase in prepaids and other assets

 

(76,967)

Increase in accruals

 

139,377

Net cash provided by operating activities

 

10,232,363

 

 

 

INVESTING ACTIVITIES:

 

 

Purchase of short-term investments

 

(3,057,472,771)

Sale of short-term investments

 

1,831,690,766

Net cash used in investing activities

 

(1,225,782,005)

 

 

 

FINANCING ACTIVITIES:

 

 

Issuance of Founder Preferred Shares and Associated Warrants

10

40,000,000

Issuance of Ordinary Shares and Associated Warrants

10

1,210,000,000

Share issue expenses

10

(22,777,363)

Net cash provided by financing activities

 

1,227,222,637

 

 

 

Net increase in cash and cash equivalents

 

11,672,995

Cash and cash equivalents at beginning of period

 

-

Cash and cash equivalents at end of period

 

11,672,995

 

 

 

NON-CASH FINANCING ACTIVITY:

 

 

Issuance of Ordinary Shares for directors' remuneration

11

325,000

 

 

 

 

 

 

The notes form an integral part of these financial statements.

1. General information

The Company was incorporated with limited liability under the laws of the British Virgin Islands under the BVI Business Companies Act 2004 (as amended) (the "BVI Companies Act") on 18 September 2017. The address of the Company's registered office is Ritter House, Wickhams Cay II, Tortola, VG 1110, British Virgin Islands. The Ordinary Shares and Warrants were admitted for trading on the Main Market of the London Stock Exchange on 10 October 2017, after raising gross proceeds of US$1.21 billion for a potential acquisition (the "Acquisition").

2. Principal accounting policies

The principal accounting policies applied in these financial statements are set out below.

 

2.1 Basis of preparation

These financial statements are prepared under the historical cost convention and are in accordance with International Financial Reporting Standards and its interpretations as issued by the International Accounting Standards Board ("IASB") and those parts of the BVI Companies Act applicable under IFRS. As the Company was incorporated on 18 September 2017, there is no comparative information.

 

The financial statements and notes thereto are presented in U.S. Dollars, which is the Company's presentational and functional currency and are rounded to the nearest dollar, except when otherwise indicated.

 

The financial statements are prepared on the historical cost basis with the exception of financial instruments and share-based payments, and Founder Preferred Shares which are stated at fair value.

 

Accounting policies have been consistently applied.

 

There are no new accounting standards adopted which have a material impact on these financial statements. Refer to 2.10 for more information on new IFRSs not yet adopted.

 

2.2 Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future given the cash funds available and the current forecast cash outflows. Thus, the Company continues to adopt the going concern basis of accounting in preparing the financial statements.

 

2.3 Foreign currency translation

Functional and presentation currency

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

 

Transactions and balances

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

2.4 Short-term investments

Classification

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

Short-term investments at inception are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Company's documented investment strategy.

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

Recognition, derecognition and measurement

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

Subsequent to initial recognition, all short-term investments are measured at fair value. Gains and losses arising from changes in the fair value of the short-term investments category is presented in the statement of comprehensive income as investment income in the period in which they arise.

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

2.5 Offsetting financial instruments

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

2.6 Cash

Cash represents cash at banks. There were no cash equivalents at 31 August 2018.

2.7 Payables and accrued expenses

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

2.8 Share-based payments

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

 

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

 

· including any market performance condition;

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

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

 

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

 

2.9 Fair Value of Warrants

Warrants not subject to IFRS2 are valued at the redemption value of $0.01 as financial instruments. The Warrants are compound financial instruments with a liability recognised and the remainder in equity.

 

2.10 New accounting standards

This is the first set of annual audited financial statements prepared by the Company. The Company applied all applicable standards and applicable interpretations published by the IASB for the period ended 31 August 2018. The Company did not adopt any standard or interpretation published by the IASB for which the mandatory application date is on or after 1 September 2018.

IFRS 9 Financial Instruments is effective from 1 January 2018 and has been early adopted.

Based on the Company's existing activity, there are no other new interpretations, amendments or full standards that have been issued but not effective or adopted for the period ended 31 August 2018 that will have a material impact on the Company.

2.11 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors as it is the body that makes strategic decisions. The Board is of the opinion that there is only a single operational segment being the investment in US Treasury Bills as disclosed in note 7. As a result no segment information has been provided as the Company only accumulates its funds raised for investment in US Treasury Bills.

2.12 Share capital

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

2.13 Auditor remuneration

During the period ended 31 August 2018, the Company obtained the following services from the independent auditors:

Fees payable to the Company's auditor for Capital Markets Services in relations to the Company's IPO.

Fees payable to the Company's auditor for the audit of the Company's financial statements for the period from inception through 31 August 2018

 

US$125,000

 

US$36,000

 

2.14 Critical accounting judgements and key sources of estimation uncertainty

There were no critical estimates or judgements in the period.

 

3. Expenses

 

 

2018

 

 

US$

 

 

 

Directors' remuneration (including share-based compensation charge)

455,942

Legal and professional fees

 

436,688

Listing fees

 

346,102

Management fees

 

267,762

General and administrative expenses

 

494,705

 

 

2,001,199

 

4. Taxation

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

 

5. Fair value

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

As of 31 August 2018, short-term investments of US$1,230,357,747 were categorized as Level 2 securities. There were no transfers between Levels during the period.

 

6. Charge Related to Founder Preferred Shares and Warrants

 

The total charge related to Founder Preferred Shares and warrants for the period ended 31 August 2018 was US$163,043,551.

 

Founder Preferred Shares

The Company has outstanding Founder Preferred Shares issued to its Founder Entity which have been accounted for in accordance with IFRS 2 "Share-based payment" as equity-settled share-based payment awards. The fair value of the Founder Preferred Shares over and above their purchase price was determined as US$161,678,265 at the grant date. The preferred share awards do not have any vesting or service conditions and vested immediately on the date of the grant. Accordingly, the aggregate non-cash charge relating to the Founder Preferred Shares for the period ended 31 August 2018 was US$161,678,265. The fair value of the awards was determined using a Monte Carlo valuation model and was based on the following assumptions:

 

Number of securities issued

 

4,000,000

Vesting period

 

Immediate

Assumed price upon acquisition

 

US$10.00

Probability of winding-up

 

34.5%

Probability of acquisition

 

65.5%

Time to acquisition

 

1.5 years

Volatility (post-acquisition)

 

35.1%

Risk free interest rate

 

2.33%

 

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

 

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

 

Warrants

Additionally, the Company has outstanding warrants issued to its Founder Entity. The warrants do not have any vesting or service conditions and vested immediately on the date of the grant. Accordingly, the aggregate non-cash charge relating to the warrants for the period ended 31 August 2018 was US$1,365,286. The fair value of the awards was determined using a Monte Carlo valuation model and was based on the following assumptions:

 

Share Price

 

US$10.00

Exercise Price

 

US$11.50

Risk-Free Rate

 

1.62%

Dividend Yield

 

-

Probability of Acquisition

 

65.50%

Post-Acquisition Volatility

 

33.42%

 

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

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

7. Short-term investments

The Company holds zero coupon U.S. Treasury Bills which at 31 August 2018 had a cost of US$1,225,782,005, and a market value of US$1,230,357,747. The increase in value of US$4,575,742 was recorded as investment income during the period ended 31 August 2018. The original maturities of the zero coupon U.S. Treasury Bills were greater than three months, but as of 31 August 2018 their remaining maturities were all within five months of the period end. The Company also realized $11,579,535 of investment income during the period ended 31 August 2018.

 

8. Loss per share and net asset value per share

The loss per share calculation for the period from 18 September 2017 through 31 August 2018 is based on loss for the period of US$(149,964,123) and the weighted average number of Ordinary Shares and Founder Preferred Shares of 116,768,858.

 

Net asset value per share is based on net assets of US$1,240,798,635 divided by the 121,032,500 Ordinary Shares and 4,000,000 Founder Preferred Shares in issue at 31 August 2018.

 

The 121,032,500 Warrants and 162,500 Options are considered non-dilutive at 31 August 2018.

 

9. Prepayments and other assets

 

 

2018

 

 

US$

Prepaid insurance and administrative fees

 

68,256

Prepaid directors' remuneration

 

40,628

Accrued interest receivable

 

8,711

 

 

117,595

 

 

 

10. Share capital

The authorised shares of the Company are as follows:

 

 

 

2018

 

 

 

 

US$

 

 

Authorised

 

 

 

 

Unlimited number of Ordinary Shares of no par value

 

-

 

 

 

 

 

 

 

Founder Preferred Shares

 

 Number

 

 US$

Balance at beginning of period

 

-

 

-

Issued during the period

 

4,000,000

 

40,000,000

Balance at end of period

 

4,000,000

 

40,000,000

 

 

 

 

 

Ordinary Shares

 

 Number

 

 US$

Balance at beginning of period

 

-

 

-

Issued during the period

 

121,032,500

 

1,187,547,637

Balance at end of period

 

121,032,500

 

1,187,547,637

 

 

4,000,000 Founder Preferred Shares were issued on 10 October 2017 at US$10.00 per share. There are no Founder Preferred Shares held in Treasury. Each ordinary share and Founder Preferred Share was issued with a Warrant as described below.

 

121,032,500 Ordinary Shares were issued on 10 October 2017 (121,000,000 were issued in the IPO at US$10.00 per share and 32,500 were issued to the Non-Founder Directors in conjunction with the IPO in lieu of cash directors' remuneration for one year). There are no Ordinary Shares held in Treasury. Each Ordinary Share was issued with a Warrant as described below.

 

Issue costs of US$22,777,363 were deducted from the proceeds of issue.

 

Ordinary Shares

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

 

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

 

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

 

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

 

 

Founder Preferred Shares

The Founder Entity has also committed US$40,000,000 of capital for 4,000,000 Founder Preferred Shares (with Warrants being issued on the basis of one Warrant per Founder Preferred Share). The Founder Preferred Shares are intended to have the effect of incentivising the Founders to achieve the Company's objectives.

 

Commencing from consummation of the Acquisition, and only once the Average Price (as defined in the Prospectus) per Ordinary Share for any ten consecutive Trading Days (as defined in the Prospectus) following Admission is at least US$11.50, a holder of Founder Preferred Shares will be entitled to receive an "Annual Dividend Amount", payable in Ordinary Shares or cash, at the sole option of the Company.  

 

In the first Dividend Year (as defined in the Prospectus) in which such dividend becomes payable, such dividend will be equal in value to (a) 20 per cent. of the increase in the market value of one Ordinary Share, being the difference between $10.00 and the Dividend Price (as defined in the Prospectus), multiplied by (b) such number of Ordinary Shares equal to the Preferred Share Dividend Equivalent (as defined in the Prospectus).

 

Thereafter, the Annual Dividend Amount will only become payable if the Dividend Price during any subsequent Dividend Year is greater than the highest Dividend Price in any preceding Dividend Year in which a dividend was paid in respect of the Founder Preferred Shares. Such Annual Dividend Amount will be equal in value to 20 per cent. of the increase in the Dividend Price over the highest Dividend Price in any preceding Dividend Year multiplied by the Preferred Share Dividend Equivalent.

 

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

 

The amounts used for the purposes of calculating an Annual Dividend Amount and the relevant numbers of Ordinary Shares are subject to such adjustments as the Directors in their absolute discretion determine to be fair and reasonable in the event of a consolidation or sub-division of the Ordinary Shares in issue after the date of Admission or otherwise as determined in accordance with the Articles.

 

If there is more than one holder of Founder Preferred Shares, each Annual Dividend Amount shall be divided between the holders of Founder Preferred Shares pro rata to the number of Founder Preferred Shares held by them on the relevant Dividend Date. The Annual Dividend Amount will be paid on the relevant Payment Date by the issue to each holder of Founder Preferred Shares of such number of Ordinary Shares as is equal to the pro rata amount of the Annual Dividend Amount to which they are entitled divided by the Dividend Price.

 

The Founder Preferred Shares will participate in any dividends on the Ordinary Shares on an as converted basis. In addition, commencing on and after consummation of the Acquisition, where the Company pays a dividend on its Ordinary Shares the Founder Preferred Shares will also receive an amount equal to 20 per cent of the dividend which would be distributable on such number of Ordinary Shares equal to the Preferred Share Dividend Equivalent. All such dividends on the Founder Preferred Shares will be paid contemporaneously with the dividends on the Ordinary Shares. For so long as an initial holder of Founder Preferred Shares (being the Founder Entity together with its affiliates and permitted transferees) holds 20 per cent. or more of the Founder Preferred Shares in issue, such holder shall be entitled to nominate up to three persons as directors of the Company and the Directors shall appoint such persons. On Admission, the Directors so nominated and appointed were James E. Lillie and Martin E. Franklin.

 

The Founder Preferred Shares will automatically convert into Ordinary Shares on a one for one basis (subject to such adjustments as the Directors in their absolute discretion determine to be fair and reasonable in the event of a consolidation or sub-division of the Ordinary Shares in issue after the date of Admission or otherwise as determined in accordance with the Articles) on the last day of the seventh full financial year of the Company following completion of the Acquisition (or if any such date is not a Trading Day, the first Trading Day immediately following such date).

 

A holder of Founder Preferred Shares may require some or all of his Founder Preferred Shares to be converted into an equal number of Ordinary Shares (subject to such adjustments as the Directors in their absolute discretion determine to be fair and reasonable in the event of a consolidation or subdivision of the Ordinary Shares in issue after the date of Admission or otherwise as determined in accordance with the Articles) by notice in writing to the Company, and in such circumstances those Founder Preferred Shares the subject of such conversion request shall be converted into Ordinary Shares five Trading Days after receipt by the Company of the written notice. In the event of a conversion at the request of the holder, no Annual Dividend Amount shall be payable in respect of the converted Founder Preferred Shares for the Dividend Year in which the date of conversion occurs.

 

If there is more than one holder of Founder Preferred Shares, a holder of Founder Preferred Shares may exercise its rights independently of any other holder of Founder Preferred Shares.

 

On the liquidation of the Company, an Annual Dividend Amount shall be payable in respect of a shortened Dividend Year which shall end on the Trading Day immediately prior to the date of commencement of liquidation, following which the holders of Founder Preferred Shares shall have the right to a pro rata share (together with Shareholders) in the distribution of the surplus assets of the Company.

 

The Founder Preferred Shares carry the same voting rights as are attached to the Ordinary Shares being one vote per Founder Preferred Share. Additionally, the Founder Preferred Shares alone carry the right to vote on any Resolution of Members required, pursuant to BVI law, to approve any matter in connection with an Acquisition, or a merger or consolidation in connection with an Acquisition.

 

Warrants

 

The Company has issued 125,032,500 Warrants to the purchasers of both Ordinary Shares and Founder Preferred Shares (including the 32,500 Warrants that were issued to Non-Founder Directors in connection with their appointment). Each Warrant has a term of 3 years following an Acquisition and entitles a Warrant holder to subscribe for one-third of an Ordinary Share upon exercise. Warrants will be exercisable in multiples of three for one Ordinary Share at a price of US$11.50 per whole Ordinary Share.

 

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

 

As a contingent obligation to redeem for cash, a separate liability of US$1,210,325 (US$0.01 per non-founder Warrant), which represents the fair value, was recognized in the period ended 31 August 2018.

 

11. Share-based compensation

On 10 October 2017, the Company issued 162,500 options on its Ordinary Shares to its non-executive directors that vest upon an Acquisition; continued service until that time is required for vesting. The options expire on the 5th anniversary following an Acquisition and have an exercise price of $11.50 per share (subject to such adjustment as the Directors consider appropriate in accordance with the terms of the Option Deeds).

 

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

 

Share Price

 

US$10.00

Exercise Price

 

US$11.50

Risk-Free Rate

 

2.15%

Dividend Yield

 

-

Probability of Acquisition

 

65.50%

Post-Acquisition Volatility

 

32.99%

 

Share-based compensation expense of US$171,570 has been recognised for these options in the accompanying financial statements for the period ended 31 August 2018. Unamortized share-based compensation expense of US$122,553 will be recognised over the remaining estimated vesting period of approximately 0.6 years.

 

Also, during the period from 18 September 2017 to 31 August 2018, the Company issued 32,500 Ordinary Shares and Warrants in aggregate to independent Non-Founder Directors for their first year's annual remuneration. The shares were valued at US$10.00 per share and are being expensed over the one year service period.

 

12. Related party and material transactions

 

On 10 October 2017, the Company completed its initial public offering. The offering raised gross proceeds of US$1.25 billion, consisting of US$1.21 billion through the placement of Ordinary Shares (with matching Warrants) at a placing price of US$10.00 per Ordinary Share and a further US$40 million through the subscription of 4,000,000 Founder Preferred Shares (with Warrants being issued to the subscriber of Founder Preferred Shares on the basis on one Warrant per Founder Preferred Share) by the Founder and Mariposa Acquisition IV, LLC.

See discussion of Founder Preferred Shares in Note 10.

 

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

 

Director

No. of Ordinary Shares

No. of Founder Preferred Shares

No. of Warrants

No. of Stock Options

James E. Lillie1

--------

-------------

--------

---------

Martin E. Franklin2

6,000,000

4,000,000

10,000,000

---------

Rory Cullinan

7,500

-------------

7,500

37,500

Jean-Marc Huët

7,500

-------------

7,500

37,500

Brian Kaufmann

--------

-------------

--------

---------

Thomas V. Milroy

7,500

-------------

7,500

37,500

Lord Myners of Truro CBE

10,000

-------------

10,000

50,000

_____________________________________

[1] Mr. Lillie holds an indirect pecuniary interest of approximately 20 per cent in the Founder Entity.

[2] Represents the interests held by the Founder Entity. Mr. Franklin is a beneficial owner and the manager of the Founder Entity and, as such, may be considered to have beneficial ownership of all the Founder Entity's interests in the Company.

 

In addition, each director holds Warrants equal to the total of Ordinary Shares and Founder Preferred Shares held. Refer to Note 6 and Note 11 for further details on the value of the Founder Preferred Shares and Options.

 

Additionally Mariposa Capital, LLC received $267,742 in management fees during the period from 18 September 2017 through 31 August 2018.

 

32,500 Ordinary Shares and Warrants in aggregate were issued to independent Non-Founder Directors. Messrs Lillie, Franklin and Kaufmann have elected not to receive director remuneration. The other directors opted to have their first year's annual remuneration settled by the issue of shares at US$10.00 per share, which are being expensed over the one-year service period. The associated expense recorded for each director during the period from 18 September 2017 through 31 August 2018 was as follows:

 

 

 

Amount

 

Amount

 

received

 

recorded as

 

up front

 

expense

 

US$

 

US$

Rory Cullinan

75,000

 

65,625

Jean-Marc Huët

75,000

 

65,625

Thomas V. Milroy

75,000

 

65,625

Lord Myners of Truro CBE (Chairman)

100,000

 

87,497

 

325,000

 

284,372

 

 

 

 

The Company incurred total issuance costs of US$22.8 million. The details of these costs are as follows:

 

 

US$

Placement fees

 

20,500,000

Legal fees

 

1,872,865

Other expenses

 

325,819

Syndicate expenses

 

78,679

Total

 

22,777,363

 

 

 

 

 

13. Financial risk management

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

 

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

 

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

 

Currency risk

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

 

Credit risk

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

 

Liquidity risk

The Company monitors liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom. Such forecasting takes into consideration the Company's debt financing plans (when applicable), compliance with internal balance sheet ratio targets and external regulatory or legal requirements if appropriate. The Company's accruals of $139,377 are administrative in nature and due within three months and the timing of the warrant redemption liability is uncertain according to its terms as described in Note 10.

 

Cash flow interest rate risk

The Company has no long-term borrowings and as such is not currently exposed to interest rate risk. To mitigate against the risk of default by one or more of its counterparties, the Company currently holds its assets in instruments available from the U.S denominated money markets and/or at commercial banks that are at least AA rated or better at the time of deposit. As of 31 August 2018, US$1.2 billion was held in U.S. treasury bills meeting the terms of the U.S denominated money markets as described in the Prospectus. The Board regularly monitors interest rates offered by, and the credit ratings of, current and potential counterparties, to ensure that the Company remains in compliance with its stated investment policy for its cash balances. The Company does not currently use financial instruments to hedge its interest rate exposure.

 

Capital risk management

 

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

 

 

 

Directors

James E. Lillie

Martin E. Franklin

Rory Cullinan

Jean-Marc Huët

Brian Kaufmann

Thomas V. Milroy

Lord Myners of Truro CBE (Chairman)

 

 

Registered office

Ritter House

Wickhams Cay II

Road Town, Tortola

VG1 110

British Virgin Islands

 

Administrator and secretary

International Administration Group (Guernsey) Limited

Regency Court

Glategny Esplanade

St Peter Port

Guernsey

GY1 1WW

 

Registrar

Computershare Investor Services (BVI) Limited

Woodbourne Hall

PO Box 3162

Road Town

Tortola

British Virgin Islands

 

Independent auditors

PricewaterhouseCoopers LLP

1 Embankment Place

London

WC2N 6RH

 

Legal advisers to the Company (English and US Law)

Greenberg Traurig, LLP

8th Floor

The Shard

32 London Bridge Street

London

SE1 9SG

 

Legal advisers to the Company (BVI Law)

Carey Olsen

Carey House

Les Banques

St Peter Port

Guernsey GY1 4BZ

 

Depositary

Computershare Investor Services PLC

The Pavilions

Bridgewater Road

Bristol

BS 13 8AE

 

Principal bankers

Citigroup Global Markets Limited

33 Canada Square

London E14 5GL

 

UBS Limited

5 Broadgate

London EC2M 2QS

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR FKNDBNBDDNDD
Date   Source Headline
29th May 20203:55 pmRNSAPi Announces Cancellation of Listing from LSE
30th Apr 20207:00 amRNSTR-1 - Notification of major holdings
30th Apr 20207:00 amRNSTR-1 - Notification of major holdings
29th Apr 202012:00 pmRNSAPi Announces Commencement of Trading on NYSE
27th Apr 20207:00 amRNSAPi Announces Anticipated Listing Date on NYSE
9th Apr 20207:00 amRNSAPi Group Reports 4Q and FY 2019 Financial Results
24th Dec 201912:30 pmRNSAPi Group Announces Confidential Submission of S-4
20th Nov 20192:15 pmRNSAPi Group Announces DTC Settlement Eligibility
20th Nov 201912:30 pmRNSAPi Reports Third Quarter and Nine Month Results
16th Oct 20197:00 amRNSAPi Announces Anticipated Settlement Eligibility
9th Oct 20197:00 amRNSChange of ISINs and SEDOLs
4th Oct 201911:30 amRNSTR-1 - Notification of major holdings
3rd Oct 20192:00 pmRNSTR-1 - Notification of major holdings
3rd Oct 20192:00 pmRNSTR-1 - Notification of major holdings
3rd Oct 20192:00 pmRNSAPi Group Corporation - PDMR Notification
2nd Oct 20197:00 amRNSTotal Voting Rights and Share Capital Information
1st Oct 20194:57 pmRNSJ2 Acquisition Completes Acquisition of APi Group
1st Oct 20197:00 amRNSSecured Debt Credit Facilities Successful Results
24th Sep 20197:00 amRNSClosing Notice Announcement
17th Sep 20194:26 pmRNSWarrant Financing Consent Solicitation Update
3rd Sep 201911:25 amRNSLaunch of Warrant Financing / Consent Solicitation
3rd Sep 20197:00 amRNSJ2 Acquisition Limited to Acquire APi Group, Inc.
16th Aug 201912:07 pmRNSSecond Price Monitoring Extn
16th Aug 201912:02 pmRNSPrice Monitoring Extension
14th May 20194:30 pmRNSHalf-year Report
28th Feb 20194:42 pmRNSSecond Price Monitoring Extn
28th Feb 20194:36 pmRNSPrice Monitoring Extension
2nd Jan 20194:46 pmRNSSecond Price Monitoring Extn
2nd Jan 20194:36 pmRNSPrice Monitoring Extension
13th Nov 20181:50 pmRNSAnnual Financial Report
16th May 20182:30 pmRNSHalf-year Report
9th Feb 20184:41 pmRNSSecond Price Monitoring Extn
9th Feb 20184:36 pmRNSPrice Monitoring Extension
28th Dec 20174:40 pmRNSSecond Price Monitoring Extn
28th Dec 20174:35 pmRNSPrice Monitoring Extension
16th Oct 20173:31 pmRNSNotification of major holding TR1
12th Oct 20171:15 pmRNSHolding(s) in Company
10th Oct 20177:00 amRNSAdmission to Trading on the London Stock Exchange
5th Oct 20174:02 pmRNSPublication of a Prospectus
5th Oct 20177:00 amRNSResults of IPO of J2 Acquisition Limited

Due to London Stock Exchange licensing terms, we stipulate that you must be a private investor. We apologise for the inconvenience.

To access our Live RNS you must confirm you are a private investor by using the button below.

Login to your account

Don't have an account? Click here to register.

Quickpicks are a member only feature

Login to your account

Don't have an account? Click here to register.