Business Context and Reporting Period
National Energy Services Reunited Corp. is a British Virgin Islands blank-check company formed on January 23, 2017 to pursue a business combination. It intended to focus on global energy services, particularly oil and gas services. The unaudited reporting period covers inception through March 31, 2017; the company had not commenced operations, and there is no prior comparable operating period.
Financial Results and Liquidity
- Revenue and profit: No revenue. Formation and operating costs and net loss were each $5,744; basic and diluted loss per share was reported as $0.00.
- Cash flow: Operating cash use was $5,744. Financing activities provided $34,623, resulting in a $28,879 increase in cash; period-end cash was $28,879.
- Balance sheet: Total assets were $235,351, including $206,472 in deferred offering costs. Current liabilities were $216,095: $78,280 in related-party advances and $137,815 under a related-party promissory note. Shareholders’ equity was $19,256.
- Debt and liquidity: No long-term debt or other long-term liabilities were reported. The related-party advances and note were non-interest-bearing and were repaid after the period, upon the May 17, 2017 IPO closing. Margins are not meaningful because the company had no revenue.
Material Changes and Subsequent Events
After quarter-end, the company completed an IPO of 22,921,700 units at $10 each, including a partial over-allotment, for gross proceeds of $229.2 million. It also sold 12,618,680 private warrants for approximately $6.3 million. At May 30, $229.217 million was held in trust and $1.415 million remained outside the trust for working capital. IPO-related costs totaled approximately $15.5 million, including $10.8 million of deferred underwriting fees payable upon a business combination. As of June 23, 2017, 28,652,125 ordinary shares were outstanding.
Outlook, Risks, and Unusual Items
- The company had no operating business and expected no operating revenue until after a business combination. It expected to incur public-company compliance and acquisition-search expenses.
- It had 24 months from the IPO closing to complete a business combination. A target or targets must generally have fair market value of at least 80% of the trust balance, subject to the filing’s stated exclusions. If no combination is completed, the company must wind up and redeem public shares under the stated terms; warrants may expire worthless.
- Public shareholders may redeem shares in connection with a business combination, subject to the filing’s conditions and a restriction on a holder or group redeeming 20% or more of IPO shares. Completion also requires at least $5,000,001 in net tangible assets.
- Management warned that additional equity could dilute shareholders and debt could create repayment, covenant, and financing risks. Additional financing might be needed, and its availability on acceptable terms was not assured. Sponsor or affiliate working-capital loans were permitted but not committed.
- The sponsor was entitled to a $10,000 monthly administrative-services fee beginning after the IPO, continuing until a business combination or liquidation. Sponsor trust-account indemnification is limited and may not cover all claims.
- The company reported no legal proceedings, defaults on senior securities, off-balance-sheet arrangements, or material changes to previously disclosed risk factors. Management concluded disclosure controls were effective as of March 31, 2017.
Important Facts for Investors to Verify
- Confirm the IPO, partial over-allotment, trust-account balance, outside-trust cash, and post-IPO share count against subsequent filings.
- Review the business-combination deadline, redemption conditions, 80% target-value test, and liquidation terms.
- Check the deferred underwriting fee, related-party arrangements, sponsor indemnity limitations, and any later working-capital loans.
- Assess the risks of a blank-check company with no operations or revenue, including the possibility of failing to complete a business combination and losing warrant value.
- Verify the filing’s reporting-status checkboxes and the company’s subsequent SEC filing history; this report marked “No” for having filed all required reports during the preceding 12 months.