References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Tenzing Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, references to the
"Sponsor" refer to Tenzing LLC (the managing members of which are Parag Saxena,
our Chairman, and Rahul Nayar, our Chief Executive Officer). The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts, and involve risks and uncertainties that could
cause actual results (including, without limitation, the results of the
Company's search for and consummation of an initial Business Combination) to
differ materially from those expected and projected. All statements, other than
statements of historical fact included in this Form 10-Q including, without
limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the Company's financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. Words such as "may,"
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated on March 20, 2018 in the British
Virgin Islands with limited liability (meaning our shareholders have no
liability, as members of the Company, for the liabilities of the Company over
and above the amount already paid for their shares) formed for the purpose of
acquiring, engaging in a share exchange, share reconstruction and amalgamation
with, purchasing all or substantially all of the assets of, or engaging in any
other similar Business Combination with one or more businesses or entities. We
intend to effectuate our Business Combination using cash from the proceeds of
our Initial Public Offering and the sale of the Private Units that occurred
simultaneously with the completion of our Initial Public Offering, our shares,
debt or a combination of cash, shares and debt.
The issuance of additional shares in a Business Combination:
• may significantly dilute the equity interest of investors who would not
have pre-emption rights in respect of any such issue;
• may subordinate the rights of holders of ordinary shares if the rights,
preferences, designations and limitations attaching to the preferred shares
are created by amendment of our memorandum and articles of association by
resolution of the board of directors and preferred shares are issued with
rights senior to those afforded our ordinary shares;
• could cause a change in control if a substantial number of ordinary shares
are issued, which may affect, among other things, our ability to use our
net operating loss carry forwards, if any, and could result in the
resignation or removal of our present officers and directors;
• may have the effect of delaying or preventing a change of control of us by
diluting the share ownership or voting rights of a person seeking to obtain
control of us; and
• may adversely affect prevailing market prices for our ordinary shares.
Similarly, if we issue debt securities or otherwise incur significant
indebtedness, it could result in:
• default and foreclosure on our assets if our operating revenues after our
initial Business Combination are insufficient to repay our debt
obligations;
• acceleration of our obligations to repay the indebtedness even if we make
all principal and interest payments when due if we breach certain covenants
that require the maintenance of certain financial ratios or reserves
without a waiver or renegotiation of that covenant;
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• our immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand;
• our inability to obtain necessary additional financing if any document
governing such debt contains covenants restricting our ability to obtain
such financing while the debt security is outstanding;
• our inability to pay dividends on our ordinary shares;
• using a substantial portion of our cash flow to pay principal and interest
on our debt, which will reduce the funds available for dividends on our
ordinary shares if declared, expenses, capital expenditures, acquisitions
and other general corporate purposes;
• limitations on our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
• increased vulnerability to adverse changes in general economic, industry
and competitive conditions and adverse changes in government regulation;
and
• limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements, execution of
our strategy and other purposes and other disadvantages compared to our
competitors who have less debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
We are not prohibited from pursuing an initial Business Combination with a
company that is affiliated with our Sponsor, officers or directors (such
affiliates including New Silk Route Partners Ltd). In the event we seek to
complete our initial business combination with a company that is affiliated with
our Sponsor, officers or directors, we, or a committee of independent directors,
will obtain an opinion from an independent investment banking firm which is a
member of the Financial Industry Regulatory Authority or a qualified independent
accounting firm that our initial Business Combination is fair to our company
from a financial point of view.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through November 30, 2019 were organizational activities,
those necessary to prepare for and consummate the Initial Public Offering as
described below and seeking to identify a target company for a Business
Combination. Following the Initial Public Offering, we do not expect to generate
any operating revenues until after the completion of our Business Combination.
We generate non-operating income in the form of interest income on marketable
securities held after the Initial Public Offering. We are incurring expenses as
a result of being a public company (for legal, financial reporting, accounting
and auditing compliance), as well as for due diligence expenses in connection
with completing a Business Combination.
For the three months ended November 30, 2019, we had net income of $136,808,
consisting of interest income on marketable securities held in our Trust Account
of $323,704, offset by operating costs of $166,022 and an unrealized loss on
marketable securities held in our Trust Account of $20,874.
For the nine months ended November 30, 2019, we had net income of $749,554,
consisting of interest income on marketable securities held in our Trust Account
of $1,074,188 and an unrealized gain on marketable securities held in our Trust
Account of $6,633, offset by operating costs of $331,267.
For the three months ended November 30, 2018, we had a net income of $263,223,
consisting of interest income on marketable securities held in our Trust Account
of $353,261, offset by operating costs of $79,146 and an unrealized loss on
marketable securities held in our Trust Account of $10,892.
For the period from March 20, 2018 (inception) through November 30, 2018, we had
a net income of $267,569 consisting of interest income on marketable securities
held in our Trust Account of $377,331, offset by operating costs of $94,815 and
an unrealized loss on marketable securities held in our Trust Account of
$14,947.
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Liquidity and Capital Resources
On August 23, 2018, we consummated the Initial Public Offering of 5,500,000
Units at a price of $10.00 per Unit, generating gross proceeds of $55,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 323,750 Private Units to the Sponsor and the underwriter of our
Initial Public Offering at a price of $10.00 per unit, generating gross proceeds
of $3,237,500.
On August 30, 2018, in connection with the underwriters' election to fully
exercise their over-allotment option, we consummated the sale of an additional
825,000 Units and the sale of an additional 35,063 Private Placement Units,
generating total gross proceeds of $8,600,630.
Following the Initial Public Offering and the sale of the Private Units, a total
of $64,515,000 was placed in the Trust Account. We incurred $4,027,962 in
transaction costs, including $1,423,125 of underwriting fees, $2,213,750 of
deferred underwriting fees and $391,087 of other costs.
For the nine months ended November 30, 2019, cash used in operating activities
amounted to $178,741. Net income of $749,554 was offset by interest earned on
marketable securities held in the Trust Account of $1,074,188 and an unrealized
gain on securities held in the Trust Account of $6,633. Changes in our operating
assets and liabilities provided cash of $152,526.
For the period from March 20, 2018 (inception) through November 30, 2018, cash
used in operating activities amounted to $132,959. Net income of $267,569 was
affected by interest earned on marketable securities held in the Trust Account
of $377,331 and an unrealized loss on securities held in the Trust Account of
$14,947. Changes in our operating assets and liabilities used cash of $38,144.
At November 30, 2019, we had marketable securities held in the Trust Account of
$66,322,741 (including approximately $1,808,000 of interest income, net of
unrealized losses), substantially all of which is invested in U.S. treasury
bills with a maturity of 180 days or less. Interest income earned on the balance
in the Trust Account may be available to us to pay taxes. Since inception, we
have not withdrawn interest income from the Trust Account. We intend to use
substantially all of the funds held in the Trust Account (excluding deferred
underwriting fees and interest to pay taxes) to acquire a target business or
businesses and to pay our expenses relating thereto. To the extent that our
capital stock is used in whole or in part as consideration to effect our
Business Combination, the remaining proceeds held in the Trust Account as well
as any other net proceeds not expended will be used as working capital to
finance the operations of the target business or businesses.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we
would repay such loaned amounts. In the event that a Business Combination does
not close, we may use a portion of the working capital held outside the Trust
Account to repay such loaned amounts but no proceeds from our Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into Private Units, at a price of $10.00 per unit at the option of
the lender.
As of November 30, 2019, we had $134,308 in cash and working capital of $49,862.
We have not generated operating revenues, nor do we expect to generate operating
revenues until the consummation of a Business Combination. Until the
consummation of a Business Combination, we will be using the funds not held in
the Trust Account primarily to identify and evaluate prospective acquisition
candidates, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses, review corporate documents and material agreements of
prospective target businesses, select the target business to acquire and
structure, negotiate and complete a Business Combination. Our Sponsor or an
affiliate of our Sponsor or certain of our officers and directors are not under
any obligation to advance us funds, or to invest in us. Accordingly, we may not
be able to obtain additional financing. If we are unable to raise additional
capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit
of a potential transaction. We cannot provide any assurance that new financing
will be available to us on commercially acceptable terms, if at all. These
conditions raise substantial doubt about our ability to continue as a going
concern.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of November 30, 2019. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the
underwriters a deferred fee of 3.50% of the gross proceeds of the Initial Public
Offering, or $2,213,750. The deferred fee will be paid in cash only upon the
closing of a Business Combination from the amounts held in the Trust Account,
subject to the terms of the underwriting agreement.
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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Ordinary shares subject to redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and are measured at fair
value. Conditionally redeemable ordinary shares (including ordinary shares that
feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) are classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption are presented at redemption value as temporary
equity, outside of the shareholders' equity section of our balance sheet.
Net loss per ordinary share
We apply the two-class method in calculating earnings per share. Ordinary shares
subject to possible redemption which are not currently redeemable and are not
redeemable at fair value, have been excluded from the calculation of basic net
loss per ordinary share since such shares, if redeemed, only participate in
their pro rata share of the Trust Account earnings. Our net income is adjusted
for the portion of income that is attributable to ordinary shares subject to
redemption, as these shares only participate in the earnings of the Trust
Account and not our income or losses.
Recent accounting pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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