Greenland Technologies Holding Corp. quarterly report, Q2 FY2019

Business context and reporting period

This is Greenland Acquisition Corporation’s unaudited Form 10-Q for the quarter and six months ended May 31, 2019. The company was a blank-check SPAC with no operating business or revenue, pursuing a business combination. The filing identifies Greenland Acquisition Corporation—not Greenland Technologies Holding Corp.; verify that this is the intended filing.

On July 12, 2019, after quarter-end, the SPAC agreed to acquire Zhongchai Holding (Hong Kong) Limited in a share exchange. The agreement calls for issuing 7.5 million ordinary shares to the target’s sole owner; 10% of those shares would be held in escrow for 18 months, subject to indemnification claims.

Financial results and position

Net loss reflected operating costs partly offset by trust-account interest income ($256,667 for the quarter; $514,684 for the six months) and net unrealized investment gains ($21,989; $7,343), with changes in the deferred underwriting fee liability also affecting results. Margins are not meaningful because the company had no revenue.

At May 31, 2019, cash outside the trust was $344,842, prepaid and other current assets were $52,808, and trust-account marketable securities were $44,829,414. Current liabilities were $294,775, including a $250,000 non-interest-bearing sponsor note due upon a business combination. Working capital was $102,875. Total liabilities were $1.29 million, including $995,676 of deferred underwriting fees. There was no long-term debt reported.

Six-month financing cash inflow of $250,000 partly offset operating cash use; cash declined by $299,858 from November 30, 2018. The trust funds were intended for a business combination or shareholder redemptions, not ordinary operating needs.

Changes versus the prior comparable period

For the three months ended May 31, 2018, the company reported an $8,368 net loss, consisting of formation and operating costs. The 2019 quarter’s operating costs rose to $363,367, while trust-account investment income and gains were also present in 2019. The six-month 2018 figure covers the period from inception on December 28, 2017 through May 31, 2018, so it is not a like-for-like six-month comparison with 2019.

Compared with November 30, 2018, cash outside the trust fell from $644,700 to $344,842, trust assets rose from $44.31 million to $44.83 million, and the company recorded the $250,000 sponsor note. Shares classified as subject to possible redemption declined from 3,875,458 to 3,821,622.

Outlook, risks and unusual items

• The company had until July 27, 2019 to complete a business combination, with up to three three-month extensions available if the sponsor or its designee deposited $440,000 per extension into the trust. The filing gives April 27, 2020 as the deadline if fully extended; extension funding was not assured.
• Management said it did not expect to need additional funding for planned expenses, but sponsor and insider loans were discretionary, not committed. It warned that additional financing could be needed for transaction costs or redemptions and might not be available on acceptable terms.
• The proposed Zhongchai transaction was not yet completed at the reporting date and remained subject to the agreement’s conditions. Issuing shares as consideration could dilute existing holders; redemptions or additional financing could further affect available cash and ownership.
• If no business combination is completed within the permitted period, public shares are generally to be redeemed from the trust, while rights and warrants may expire worthless. Trust assets could also be reduced by claims, subject to the sponsor’s limited indemnity and exceptions.
• The company incurred approximately $30,000 per month for administrative services from a sponsor affiliate and reported aggregate monthly consulting fees of approximately $30,000. It had no long-term lease or other long-term obligations reported.
• Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter. No legal proceedings or material changes to previously disclosed risk factors were reported.

Important facts for investors to verify

• Confirm the issuer’s identity: the supplied filing is for Greenland Acquisition Corporation, while the request names Greenland Technologies Holding Corp.
• Check the Zhongchai share exchange’s closing status, conditions, final share consideration, escrow provisions, and any subsequent amendments or termination.
• Confirm whether the SPAC obtained an extension beyond July 27, 2019, and whether the required $440,000 extension deposits were made.
• Review the level of public-share redemptions, trust proceeds available at closing, deferred underwriting fees, and any additional financing or sponsor loans.
• Assess the company’s limited outside-trust cash and its reliance on discretionary related-party support while completing the transaction.