The accompanying notes are an integral part
of the unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1
– ORGANIZATION AND BUSINESS BACKGROUND
Tottenham Acquisition I Limited (“Tottenham”,
the “Company” or “we”, “us” and “our”) is a newly organized blank check company
incorporated on November 13, 2017, under the laws of the British Virgin Islands for the purpose of acquiring, engaging in a share
exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual
arrangements, or engaging in any other similar business combination with one or more businesses or entities (an “initial
business combination”).
Chelsea Worldwide Inc., (“PubCo”)
is a company incorporated on August 12, 2020, under the laws of the State of Delaware for the purpose of effecting the Business
Combination and to serve as the publicly traded parent company of Clene Nanomedicine, Inc. (“Clene”) following the
Business Combination. PubCo is wholly owned by Tottenham.
Creative Worldwide Inc. (“Merger Sub”,
or together with PubCo, “the subsidiaries”) are a company incorporated on August 12, 2020, under the laws of the State
of Delaware for the purpose of effecting the Business Combination and to serve as the vehicle for, and be subsumed by, Clene pursuant
to the Acquisition Merger. Merger Sub is wholly owned by Tottenham.
As of September 30, 2020, the Company had not
commenced any operations. All activities through September 30, 2020 relate to the Company’s formation, initial public offering
(as described below), identifying a target business for an initial business combination, and activities in connection with the
potential acquisition of Clene. The Company has selected December 31 as its fiscal year end.
Financing
The registration statement for the Company’s
initial public offering (the “Public Offering” as described in Note 3) was declared effective by the United States
Securities and Exchange Commission (“SEC”) on August 1, 2018. The Company consummated the Public Offering on August
6, 2018 of 4,600,000 units at $10.00 per unit (the “Public Units’) and sold to initial shareholders and Chardan Capital
Markets, LLC options to purchase 220,000 units at $11.50 per unit for $100. The Company received net proceeds of approximately
$46,000,000 (which includes deferred underwriting commissions of $1,840,000).
On May 7, 2020, 2,254,614 shares were redeemed
by part of shareholders at a price of approximately $10.64 per share, in an aggregate principal amount of $23,988,575.
Trust Account
Upon the closing of the Public Offering and
the private placement, $46,000,000 was placed in a trust account (the “Trust Account”) with Continental Stock Transfer
& Trust Company, LLC acting as trustee. On May 7, 2020, 2,254,614 shares were redeemed by a number of shareholders at a price
of approximately $10.64 per share, in an aggregate principal amount of $23,988,575 following the annual meeting held on April 23,
2020. The funds held in the Trust Account can be invested in United States government treasury bills, bonds or notes, having a
maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act until the earlier of (i) the consummation of the Company’s initial business combination within the required time
period and (ii) the redemption of 100% of the outstanding public shares if the Company has not completed an initial business combination
in the required time period. Placing funds in the Trust Account may not protect those funds from third party claims against the
Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities
it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there
is no guarantee that such persons will execute such agreements. The remaining net proceeds (not held in the Trust Account) may
be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative
expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to pay the Company’s
tax obligations.
Business Combination
Pursuant to Nasdaq listing rules, the Company’s
initial business combination must occur with one or more target businesses having an aggregate fair market value equal to at least
80% of the value of the funds in the Trust Account (excluding any deferred underwriter’s fees and taxes payable on the income
earned on the Trust Account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement
for our initial business combination, although the Company may structure a business combination with one or more target businesses
whose fair market value significantly exceeds 80% of the trust account balance. If the Company is no longer listed on Nasdaq, it
will not be required to satisfy the 80% test. The Company currently anticipates structuring a business combination to acquire 100%
of the equity interests or assets of the target business or businesses.
The Company may, however, structure a business
combination where the Company merges directly with the target business or where the Company acquires less than 100% of such interests
or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other
reasons, but the Company will only complete such business combination if the post-transaction company owns 50% or more of the outstanding
voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be required to
register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of a target
business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is
owned or acquired is what will be valued for purposes of the 80% test.
The Company will either seek shareholder approval
of any business combination at a meeting called for such purpose at which shareholders may seek to convert their shares into their
pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, or provide
shareholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount equal to their pro
rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. These shares
have been recorded at redemption value and are classified as temporary equity, in accordance with Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” The Company will proceed with a business combination only if it will have net tangible assets of at least
$5,000,001 upon consummation of the business combination and, solely if shareholder approval is sought, a majority of the outstanding
ordinary shares of the Company voted are voted in favor of the business combination.
In connection with any shareholder vote
required to approve any business combination, the initial shareholders have agreed (i) to vote any of their respective shares,
including the ordinary shares sold to the initial shareholders in connection with the organization of the Company (the “Initial
Shares”), ordinary shares included in the Private Units sold in the Private Placement, and any ordinary shares which were
initially issued in connection with the Public Offering, whether acquired in or after the effective date of the IPO, in favor of
the initial business combination and (ii) not to convert such respective shares into a pro rata portion of the Trust Account or
seek to sell their shares in connection with any tender offer the Company engages in.
Tottenham has entered into a merger agreement,
dated as of September 1, 2020 (the “Merger Agreement”), which provides for a Business Combination between Tottenham
and Clene. Pursuant to the Merger Agreement, the Business Combination will be effected in two steps: (i) subject to the approval
and adoption of the Merger Agreement by the shareholders of Tottenham, Tottenham will reincorporate to the state of Delaware by
merging with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Reincorporation Merger”);
(ii) immediately after the Reincorporation Merger, Merger Sub, a Delaware corporation and wholly owned subsidiary of PubCo, will
be merged with and into Clene, resulting in Clene being a wholly owned subsidiary of PubCo (the “Acquisition Merger”).
The Merger Agreement is by and among Tottenham, PubCo, Merger Sub, Clene, and Fortis Advisors LLC, a Delaware limited liability
company as the representative of Clene’s stockholders. The aggregate consideration for the Acquisition Merger is $542,540,558,
payable in the form of 54,254,055 newly issued shares of common stock of PubCo (“PubCo Common Stock”) valued at $10.00
per share.
Upon the closing of the Business Combination,
the former Tottenham shareholders will receive the consideration specified below and the former Clene stockholders will receive
an aggregate of 54,254,055 shares of PubCo Common Stock, among which 2,712,702 shares of PubCo Common Stock are to be issued and
held in escrow to satisfy any indemnification obligations incurred under the Merger Agreement. 12,000,000 shares of PubCo Common
Stock will be reserved and authorized for issuance under the 2020 Stock Plan upon closing.
Certain Clene’s stockholders may
be entitled to receive earn-out shares as follows: (1) 3,333,333 shares of PubCo Common Stock if the volume-weighted average
price (VWAP) of the shares of PubCo Common Stock equals or exceeds $15.00 (or any foreign currency equivalent) in any 20 trading-days
within a 30 trading-day period (the “Trading Period”) within the three years following the closing of the Business
Combination on any securities exchange or securities market on which the shares of PubCo Common Stock are then traded (“Milestone
1”); and (2) 2,500,000 shares of PubCo Common Stock if the VWAP of the shares of PubCo Common Stock equals or exceeds $20.00
(or any foreign currency equivalent) in the Trading Period within the five years following the closing of the Business Combination
on any securities exchange or securities market on which the shares of PubCo Common Stock are then traded (“Milestone 2”);
and (3) 2,500,000 shares of PubCo Common Stock are to be issued if Clene completes a randomized placebo-controlled study for treatment
of COVID-19 which results in a statistically significant finding of clinical efficacy within twelve months of the Closing Date
(“Milestone 3”). If Milestone 1 is not achieved but Milestone 2 is achieved, Clene’s stockholders shall receive
the shares granted under Milestone 2 as well as those under Milestone 1. In the event that within the five years following the
closing of the Business Combination, there is a change of control of the Tottenham and the change of control price meets the Milestone
1 and Millstone 2 share price thresholds described above, such Clene stockholders shall receive the applicable earn-out shares
associated with the achievement of Milestone 1 and Milestone 2.
Furthermore, immediately prior to the closing
of the Business Combination, Tottenham shall cancel and forfeit an aggregate of 750,000 insider shares collectively owned by the
initial shareholders for no additional consideration. The initial shareholders instead may be entitled to receive earn-out shares
as follows: (1) 375,000 shares of PubCo Common Stock if Milestone 1 is achieved; and (2) another 375,000 shares of PubCo Common
Stock if Milestone 2 is achieved. If Milestone 1 is not achieved but Milestone 2 is achieved, the Sponsor shall receive the shares
granted under Milestone 2 as well as those under Milestone 1.
To date, the milestones have not been
achieved; accordingly, the earn-out shares are not reflected in the unaudited condensed consolidated financial information.
Liquidation
If the Company does not complete a business
combination within 27 months from the consummation of this offering, it will trigger an automatic winding up, dissolution and liquidation
pursuant to the terms of the second amended and restated memorandum and articles of association. As a result, this has the same
effect as if the Company had formally gone through a voluntary liquidation procedure under the British Virgin Islands Law. Accordingly,
no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation. However,
if the Company anticipates that the Company may not be able to consummate its initial business combination within 12 months, the
Company may, but is not obligated to, extend the period of time to consummate a business combination five times (including two
times approved by shareholders on April 23, 2020) by an additional three months each time (for a total of up to 27 months to complete
a business combination). As of the date of this report, we have extended five times the period of time to consummate a business
combination until November 6, 2020. In the absence of shareholder approval for a further extension, if we do not complete a business
combination by November 6, 2020, it will trigger our automatic winding up, dissolution and liquidation pursuant to the terms of
our second amended and restated memorandum and articles of association.
Pursuant to the terms of the first amended
and restated memorandum and articles of association and the trust agreement entered into between the Company and Continental Stock
Transfer & Trust Company, LLC on the effective date of the Registration Statement, in order to extend the time available for
the Company to consummate our initial business combination, the Company’s insiders or their affiliates or designees, upon
five days advance notice prior to the applicable deadline, must deposit into the trust account $0.10 for each public ordinary share
that was not redeemed into the trust account for each three-month extension. On April 23, 2020, the shareholders of the Company
approved to increase the amount required to be deposited for each three-month extension to $0.135 for each public ordinary share
that has not redeemed, on or prior to the date of the applicable deadline. The insiders will receive a non-interest bearing, unsecured
promissory note equal to the amount of any such deposit that will not be repaid in the event that the Company is unable to close
a business combination unless there are funds available outside the trust account to do so. Such notes would either be paid upon
consummation of the Company’s initial business combination, or, at the lender’s discretion, converted upon consummation
of our business combination into additional private units at a price of $10.00 per unit. The Company’s shareholders have
approved the issuance of the private units upon conversion of such notes, to the extent the holder wishes to so convert such notes
at the time of the consummation of the Company’s initial business combination. In the event that the Company receives notice
from the Company’s insiders five days prior to the applicable deadline of their intent to effect an extension, the Company
intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the
Company intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely
deposited. The Company’s insiders and their affiliates or designees are not obligated to fund the trust account to extend
the time for the Company to complete our initial business combination. To the extent that some, but not all, of the Company’s
insiders, decide to extend the period of time to consummate the Company initial business combination, such insiders (or their affiliates
or designees) may deposit the entire amount required. If the Company is unable to consummate the Company’s initial business
combination within such time period, the Company will, as promptly as possible but not more than ten business days thereafter,
redeem 100% of the Company’s outstanding public shares for a pro rata portion of the funds held in the trust account, including
a pro rata portion of any interest earned on the funds held in the trust account and not necessary to pay taxes, and then seek
to liquidate and dissolve. However, the Company may not be able to distribute such amounts as a result of claims of creditors which
may take priority over the claims of the Company’s public shareholders. In the event of dissolution and liquidation, the
public rights will expire and will be worthless.
On July 23, 2019, October 25, 2019, January
21, 2020, May 6, 2020, and July 31, 2020, the Company issued unsecured promissory notes in the aggregate principal amount of $460,000,
$460,000, $460,000, $316,627, and $316,627, respectively, to Norwich Investment Limited, the Company’s initial public offering
sponsor (“Norwich”) in exchange for Norwich depositing such amounts into the Company’s trust account in order
to extend the amount of time it has available to complete a business combination until November 6, 2020. These notes do not bear
interest and mature upon closing of a business combination by the Company. In addition, the notes may be converted by the holder
into units of the Company identical to the units issued in the Company’s initial public offering at a price of $10.00 per
unit.
On October 26, 2020, the Company filed a definitive
proxy statement which provides that an extraordinary general meeting (“Meeting”) will held on November 6, 2020. The
Meeting will be devoted to proposals to amend both the Company’s amended and restated memorandum and articles of association
(the “Charter Amendment”) and investment management trust agreement, dated as of August 1, 2018, as amended (the “Trust
Amendment”), to extend the date by which the Company has to consummate a business combination four (4) times for an additional
one month each time from November 6, 2020 to March 6, 2021.
Going Concern
In connection with the Company’s assessment
of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management
has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability
to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company
be required to liquidate after November 6, 2020.
NOTE 2
– SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These accompanying unaudited condensed consolidated
financial statements have been prepared in U.S. Dollars in conformity with generally accepted accounting principles in the United
States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required
by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary to make the consolidated financial statements not misleading have been included. Operating results for the
interim period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2020. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion
and Analysis, and the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal
year ended December 31, 2019, filed with the SEC on March 24, 2020.
Principles of consolidation
The consolidated financial statements include
the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances between the
Company and its subsidiaries are eliminated upon consolidation.
Subsidiaries are those entities in which the
Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and
operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes
at the meeting of directors.
The accompanying unaudited condensed consolidated
financial statements reflect the activities of the Company and each of the following entities:
Name
|
|
Background
|
|
Ownership
|
Chelsea Worldwide Inc. (“PubCo”)
|
|
A Delaware company
Incorporated on August 12, 2020
|
|
100% Owned by Tottenham
|
|
|
|
|
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Creative Worldwide Inc. (“Merger Sub”)
|
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A Delaware company
Incorporated on August 12, 2020
|
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100% Owned by PubCo
|
Use of Estimates
The preparation of consolidated financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of September
30, 2020 and December 31, 2019.
Cash and Investments Held in Trust Account
At September 30, 2020, the assets held in the
Trust Account are held in cash and the Morgan Stanley Institutional Liquidity Funds (MSILF) Treasury securities. As of December
31, 2019, the assets held in the Trust Account are held in cash and U.S. Treasury securities.
The Company classifies marketable securities
as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All marketable
securities are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale debt securities are recorded
in other comprehensive income (loss). On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Investments in marketable debt
securities are reported at fair value with changes in fair value recognized in the Company's statements of operations and comprehensive
income (loss) in the caption of “unrealized gain on available for sale debt securities” in each reporting period.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary
shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Ordinary share subject to mandatory redemption (if any) is classified as a liability instrument and is 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 the Company’s control) are
classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. As of September
30, 2020 and December 31, 2019, the Company’s ordinary shares feature certain redemption rights that are considered to be
outside of the Company’s control. 1,496,758 and 3,859,050 ordinary shares subject to possible redemption are presented as
temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets. On May 7, 2020, 2,254,614
shares were redeemed by part of shareholders at a price of approximately $10.64 per share, in an aggregate principal amount of
$23,988,575.
Deferred Offering Costs
The Company complies with the requirements
of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A – “Expenses of Offering”.
Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related
to the Public Offering and that were charged to shareholders’ equity upon the completion of the Public Offering.
Fair Value of Financial Instruments
FASB ASC Topic 820 “Fair Value Measurements
and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value
measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the
market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value
hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs
are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing
the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s
assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best
information available in the circumstances.
The fair value hierarchy is categorized into
three levels based on the inputs as follows:
Level 1 –
|
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
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Level 2 –
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Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
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Level 3 –
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Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
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The fair value of the Company’s certain
assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, and other current
assets, accrued expenses, due to sponsor are estimated to approximate the carrying values as of September 30, 2020 and December
31, 2019 due to the short maturities of such instruments.
The following table presents information about
the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2020 and
December 31, 2019, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair
value.
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September 30, 2020
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Quoted Prices In Active Markets
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Significant Other Observable Inputs
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Significant Other Unobservable Inputs
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Description
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(Unaudited)
|
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(Level 1)
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(Level 2)
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(Level 3)
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Assets:
|
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|
|
|
|
|
|
|
|
|
|
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MSILF Treasury Securities held in Trust Account*
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$
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25,594,307
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$
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25,594,307
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$
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–
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$
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–
|
|
|
|
December 31, 2019
|
|
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Quoted Prices In Active Markets
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|
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Significant Other Observable Inputs
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Significant Other Unobservable Inputs
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Description
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|
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(Level 1)
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(Level 2)
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(Level 3)
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Assets:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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U.S. Treasury Securities held in Trust Account*
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$
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48,298,955
|
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$
|
48,298,955
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$
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–
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$
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–
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*included in cash and investments held in trust
account on the Company’s consolidated balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of cash and trust accounts in a financial institution which, at times may exceed
the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management
believes the Company is not exposed to significant risks on such accounts.
Income Taxes
The Company accounts for income taxes in accordance
with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under the asset and liability,
method as required by this accounting standard, deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements
and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply
to the period when assets are realized or liability is settled. Any effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the operation of statement in the period that includes the enactment date. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
ASC 740 prescribes a comprehensive model for
how companies should recognize, measure, present, and disclose in their consolidated financial statements uncertain tax positions
taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the consolidated financial
statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions
must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
Net Loss Per Share
The Company calculates net loss per share in
accordance with ASC Topic 260, “Earnings per Share.” Basic loss per share is computed by dividing the net loss
by the weighted-average number of ordinary shares outstanding during the period, excluding ordinary shares subject to possible
conversion. Diluted loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding,
plus to the extent dilutive, the incremental number of ordinary shares to settle rights and other ordinary share equivalents (currently
none outstanding), as calculated using the treasury stock method. Ordinary shares subject to possible conversion at September 30,
2020 and December 31, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the
calculation of basic and diluted loss per share since such shares, if redeemed, only participate in their pro rata share of the
Trust Account earnings. The Company has not considered the effect of rights that convert into 220,000 ordinary shares in the unit
purchase option sold to the underwriter, in the calculation of diluted loss per share, since the conversion of the rights into
ordinary shares would be anti-dilutive.
Related Parties
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operational decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.
Recent accounting pronouncements
The Company has considered all new accounting
pronouncements and has concluded that there are no new pronouncements that may have a material impact on the results of operations,
financial condition, or cash flows, based on the current information.
NOTE 3 – CASH AND INVESTMENT
HELD IN TRUST ACCOUNT
As of September 30, 2020, investment securities
in the Company’s Trust Account consisted of $25,594,307 in MSILF Treasury Securities and $0 in cash. As of December 31, 2019,
investment securities in the Company’s Trust Account consisted of $48,298,955 in United States Treasury Bills and $1,278
in cash. The Company classifies its United States Treasury securities as available-for-sale. Available-for-sale marketable debt
securities are recorded at their estimated fair value on the accompanying September 30, 2020 balance sheet. The carrying value,
including gross unrealized holding gain as other comprehensive income and fair value of marketable debt securities on September
30, 2020 and December 31, 2019 are as follows:
|
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Carrying Value as of September 30, 2020
(unaudited)
|
|
|
Gross Unrealized
Holding Gain
(unaudited)
|
|
|
Fair Value as of
September 30, 2020
(unaudited)
|
|
|
|
|
|
|
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|
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Available-for-sale marketable debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
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MSILF Treasury Securities
|
|
$
|
25,594,307
|
|
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$
|
–
|
|
|
$
|
25,594,307
|
|
|
|
Carrying Value as of December 31, 2019
|
|
|
Gross Unrealized
Holding Gain
|
|
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Fair Value as of
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
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Available-for-sale marketable debt securities:
|
|
|
|
|
|
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|
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U.S. Treasury Securities
|
|
$
|
48,199,016
|
|
|
$
|
179,939
|
|
|
$
|
48,298,955
|
|
NOTE 4 – PUBLIC OFFERING
On August 6, 2018, the Company sold 4,600,000
units at a price of $10.00 per Public Unit in the Public Offering. Each Public Unit consists of one ordinary share of the Company,
$0.0001 par value per share (the “Public Shares”), one warrant (the “Public Warrant”) entitling its holder
to purchase one-half of one Public Share at a price of $11.50 per whole share, and one right (the “Public Rights”).
Each Public Right entitles the holder to receive one-tenth (1/10) of an ordinary share upon consummation of an initial business
combination. In addition, the Company sold to Chardan, for $100, an option to purchase up to 220,000 units exercisable at $11.50
per unit pursuant to the Unit Purchase Option agreement, commencing on the later of the consummation of a business combination
and six months from the effective date of the Registration Statement. As of September 30, 2020, no options were exercised.
The Company accounted for the unit purchase
option, inclusive of the receipt of $100 cash payment, as an expense of the IPO resulting in a charge directly to shareholders’
equity. The Company estimated the fair value of this unit purchase option to be approximately $653,400 (or $2.97 per Unit) using
the Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriters was estimated as
of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 2.44% and
(3) expected life of five years. The option and such units purchased pursuant to the option, as well as the ordinary share underlying
such units, the rights included in such units, the ordinary share that is issuable for the rights included in such units, the warrants
included in such units, and the shares underlying such warrants, have been deemed compensation by FINRA and are therefore subject
to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not be sold,
transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date
of IPO except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners. The option
grants to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the effective
date of the registration statement with respect to the registration under the Securities Act of the securities directly and indirectly
issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities, other
than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable
upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s
recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of ordinary shares
at a price below its exercise price.
If the Company does not complete its business
combination within the applicable time period described in Note 1, the Public Warrants and Public Rights will expire and be worthless.
Since the Company is not required to net cash settle the Rights and the Rights are convertible upon the consummation of an initial
business combination, the Management determined that the Rights are classified within shareholders’ equity as “Additional
paid-in capital” upon their issuance in accordance with ASC 815-40. The proceeds from the sale are allocated to Public
Shares, Public Warrants and Public Rights based on the relative fair value of the securities in accordance with ASC 470-20-30.
The value of the Public Shares and Rights will be based on the closing price paid by investors.
The Company paid an upfront underwriting discount
of $1,150,000 (2.5%) of the per unit offering price to the underwriter at the closing of the Public Offering, with an additional
fee of $1,840,000 (the “Deferred Discount”) of 4.0% of the gross offering proceeds payable upon the Company’s
completion of the business combination. The Deferred Discount will become payable to the underwriter from the amounts held in the
Trust Account solely in the event the Company completes its business combination. In the event that the Company does not close
the business combination, the underwriter has waived its right to receive the Deferred Discount. The underwriter is not entitled
to any interest accrued on the Deferred Discount. In addition, pursuant to the agreement with the underwriters, the amount of Deferred
Discount payable to Chardan will be reduced by $0.20 (2.0%) for each unit that is redeemed by shareholders in connection with a
business combination.
On August 6, 2018, Chardan Capital Markets,
LLC acquired an option to purchase up to a total of 220,000 units at $11.50 per unit for $100.
As of September 30, 2020, no options were
exercised.
NOTE 5 – PRIVATE PLACEMENT
Simultaneously with the closing of the Public
Offering, the Company consummated a private placement of (i) 200,000 Private Units, at $10.00 per unit, purchased by the Sponsor.
Simultaneously with the sale of the Over-Allotment
Units, the Company consummated a private placement of 15,000 Private Units, at $10.00 per unit, purchased by the Sponsor.
The Private Units are identical to the units
sold in this offering except that the private warrants will be non-redeemable and may be exercised on a cashless basis.
NOTE 6 – RELATED PARTY TRANSACTIONS
Founder Shares
In November 2017, Norwich subscribed for an
aggregate of 1,000 of Ordinary Shares (“Founder Shares”) for an aggregate purchase price of $1, or approximately $0.0001
per share. In February 2018, Norwich subscribed for an aggregate of 1,150,000 of Ordinary Shares for an aggregate purchase price
of $25,000, or approximately $0.022 per share. Concurrently, in February 2018, the Company repurchased 1,000 ordinary shares at
a consideration of $1 or $0.0001 per share, from its Initial Shareholder.
Related Party Payables
At September 30, 2020 and December 31,
2019, the Company had related party payable to Initial Shareholder in the amount of $1,203,373 and $389,645, respectively. This
payable is unsecured, interest-free and has no fixed terms of repayment.
Administrative Services Agreement
The Company is obligated, commencing from August
2, 2018, to pay Norwich a monthly fee of $10,000 for general and administrative services. This agreement will terminate upon completion
of the Company’s initial business combination or the liquidation of the trust account to public shareholders.
Promissory Note Payable
At September 30, 2020 and December 31, 2019,
the Company had unsecured promissory note payable to Norwich in the aggregate principal amount of $2,013,255 and $920,000, respectively.
This payable is in exchange for Norwich depositing such amount into the Company’s trust account in order to extend the amount
of time it has made available to complete a business combination. Please refer to Note 1 for detailed information of these promissory
notes issued.
NOTE 7 – SHAREHOLDERS’ EQUITY
Preferred shares
The Company is authorized to issue 2,000,000
preferred shares at par $0.0001. There is no specific preferential right associated with this class of share at the time of this
filing.
Ordinary shares
The Company is authorized to issue 100,000,000
ordinary shares at par $0.0001. Holders of the Company’s ordinary shares are entitled to one vote for each share.
In February 2018, the Company’s Shareholder,
Norwich Investment Limited, subscribed for an aggregate of 1,150,000 of Ordinary Shares for an aggregate purchase price of $25,000,
or approximately $0.022 per share.
On August 6, 2018, the Company issued 215,000
ordinary shares under the private placement of 215,000 private units at $10 per unit, to the Sponsor.
On August 6, 2018, the Company sold 4,600,000
units at a price of $10.00 per Public Unit in the Public Offering.
On May 7, 2020, 2,254,614 shares were redeemed
by part of shareholders at a price of approximately $10.64 per share, in an aggregate principal amount of $23,988,575.
As of September 30, 2020 and December 31, 2019,
2,213,628 and 2,105,950 ordinary shares issued and outstanding excluding 1,496,758 and 3,859,050 shares are subject to possible
conversion, respectively.
Accumulated Other Comprehensive Income
The table below presents the changes in accumulated
other comprehensive income (loss) (“AOCI”), including the reclassification out of AOCI.
|
|
Available-for-sale securities
|
|
Balance as of January 1, 2020
|
|
$
|
179,939
|
|
Other comprehensive income before reclassifications
|
|
|
169,998
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(192,983
|
)
|
Balance as of March 31, 2020
|
|
$
|
156,954
|
|
|
|
|
|
|
Balance as of April 1, 2020
|
|
$
|
156,954
|
|
Other comprehensive income before reclassifications
|
|
|
14,252
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(171,206
|
)
|
Balance as of June 30, 2020
|
|
$
|
–
|
|
|
|
|
|
|
Balance as of July 1, 2020
|
|
$
|
–
|
|
Other comprehensive income before reclassifications
|
|
|
986
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(986
|
)
|
Balance as of September 30, 2020
|
|
$
|
–
|
|
|
|
Available-for-sale securities
|
|
Balance as of January 1, 2019
|
|
$
|
27,179
|
|
Other comprehensive income before reclassifications
|
|
|
277,735
|
|
Amounts reclassified from AOCI into interest income
|
|
|
–
|
|
Balance as of March 31, 2019
|
|
$
|
304,914
|
|
|
|
|
|
|
Balance as of April 1, 2019
|
|
$
|
304,914
|
|
Other comprehensive income before reclassifications
|
|
|
277,071
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(335,721
|
)
|
Balance as of June 30, 2019
|
|
$
|
246,264
|
|
|
|
|
|
|
Balance as of July 1, 2019
|
|
$
|
246,264
|
|
Other comprehensive income before reclassifications
|
|
|
253,799
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(271,148
|
)
|
Balance as of September 30, 2019
|
|
$
|
228,915
|
|
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Deferred Underwriting Compensation
As of September 30, 2020 and December 31, 2019,
the Company’s deferred underwriter compensation amounted to $1,389,077 and $1,840,000, respectively.
The Company is committed to pay the Deferred
Discount of 4.0% of the gross offering proceeds of the Public Offering, to the underwriter upon the Company’s consummation
of the business combination. The underwriter is not entitled to any interest accrued on the Deferred Discount, and has waived its
right to receive the Deferred Discount if the Company does not close a business combination. Pursuant to our agreement with the
underwriters, the amount of Deferred Discount payable to Chardan will be reduced by $0.20 (2.0%) for each unit that is redeemed
by shareholders in connection with a business combination.
On May 7, 2020, 2,254,614 shares were redeemed
by part of shareholders. As a result, the deferred underwriting compensation was reduced by $450,923, or $0.20 per unit redeemed.
Registration Rights
The holders of the Founder Shares, the private
warrants (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and
their underlying securities) will be entitled to registration rights pursuant to a registration rights agreement signed prior on
the effective date of the IPO. The holders of a majority of these securities will be entitled to make up to two demands that the
Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights
at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders
of a majority of the private warrants and warrants issued in payment of Working Capital Loans made to the Company (or underlying
securities) can elect to exercise these registration rights at any time after the Company consummates a business combination. In
addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed
subsequent to the completion of a business combination. The Company will bear the expenses incurred in connection with the filing
of any such registration statements.
Financial Advisory Fees
The Company entered into a financial advisory
agreement with Chardan on February 10, 2020, according to which Chardan is engaged to provide the Company financial advisory services
in connection with the identification of and negotiation with potential targets, assistance with due diligence, marketing, financial
analysis and investor relations. As Clene was not introduced to Tottenham by Chardan, in the event a Business Combination is consummated
and subject to the financial advisory agreement, Tottenham will only be obligated to pay Chardan a fee of $1 million at the closing
in cash. Additionally, in the event the Business Combination is consummated involving a Chardan introduced party as investor that
is not a holder of Tottenham’s securities before February 10, 2020, the post-closing company will pay to Chardan a financing
fee in cash equal to five percent (5%) of the aggregate sale price of Tottenham’s or PubCo’s securities to such investor.
NOTE 9 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent
Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after
September 30, 2020, up through November 3, 2020 the Company issued the financial statements.