Filing identity and reporting period
Important entity mismatch: The supplied filing is Atlantic Acquisition Corp.’s Form 10-Q for the quarter ended September 30, 2017; it does not identify HF Foods Group Inc. as the registrant. The summary below covers Atlantic Acquisition Corp. The filing describes it as a blank-check company and shell company formed to pursue a business combination, with an intended focus on businesses serving ethnic-minority communities, especially Asian-American communities.
Financial results and liquidity
- Revenue and operations: No operating revenue; the company had not commenced operations beyond seeking a business-combination target.
- Net loss: $1,037 for the third quarter and $1,119 for the nine months ended September 30, 2017. The quarter’s general and administrative expense of $30,478 and state franchise taxes of $21,021 were offset by $50,462 of trust-account interest income.
- Comparison: Net loss was $100 for the three months ended September 30, 2016, and $625 from inception on May 19, 2016 through September 30, 2016. The company cautions that the periods are not directly comparable.
- Cash flow: Nine-month operating cash use was $6,360; investing cash use was $45.135 million, primarily the trust-account deposit; financing provided $45.791 million. Cash outside the trust account was $694,798 at quarter-end.
- Assets and obligations: Total assets were $45.891 million, including $45.185 million held in the trust account. Total liabilities were $1.162 million, including $1.106 million of deferred underwriting compensation payable only if a business combination is completed. No conventional borrowings remained at quarter-end.
- Equity and redemption: 3,894,933 shares, valued at $39.728 million, were classified as subject to possible conversion and presented as temporary equity. Stockholders’ equity was $5.0 million.
Material changes and transaction activity
In August 2017, Atlantic completed its initial public offering of 4.0 million units at $10 each and sold 425,000 additional units through a partial over-allotment. Private placements accompanied both sales. The company placed $45.135 million in trust; the balance, including interest, was $45.185 million at September 30. The remaining over-allotment option was canceled, and 43,753 insider shares were canceled. Compared with December 31, 2016, cash rose from $44,955 to $694,798, while total assets rose from $199,775 to $45.891 million, primarily reflecting the offering and trust funding.
Outlook, risks, and unusual terms
- The company expected to incur increasing public-company, legal, accounting, and due-diligence costs and reported that it would generate no operating revenue before completing a business combination.
- Management estimated that cash outside the trust would fund operations for 12 months from the filing date, assuming no business combination; it warned that higher-than-expected transaction costs could leave insufficient funds and that additional financing might be needed.
- The company generally must complete a business combination within 18 months of the August 2017 offering—by February 14, 2019—or redeem public shares and liquidate. It may extend the deadline twice by three months, subject to insider funding of $800,000 per extension (or $920,000 if the over-allotment had been exercised in full); insiders were not obligated to fund an extension.
- A proposed transaction generally must meet the Nasdaq 80% fair-market-value test, and the company must retain at least $5,000,001 in net tangible assets after the transaction. Public shareholders may have conversion or tender-offer rights, subject to stated limitations.
- Trust funds may be exposed to third-party claims despite the company’s effort to obtain claim waivers. Deferred underwriting compensation of $1,106,250 is contingent on completing a business combination and is waived if none is completed.
- Management reported no off-balance-sheet arrangements, no material market or interest-rate exposure, effective disclosure controls, and no material change in internal control over financial reporting. No material subsequent events were identified through issuance.
Key facts for investors to verify
- Whether this Atlantic Acquisition Corp. filing is the intended document for the HF Foods Group Inc. request.
- The trust balance, restrictions on its use, shareholder conversion rights, and potential exposure to third-party claims.
- The applicable business-combination deadline and whether any extension funding was deposited.
- The actual amount of cash available outside the trust and whether it proved sufficient for transaction and public-company expenses.
- The terms and potential dilution associated with public and private units, rights, insider shares, and the underwriter’s unit purchase option.