THE MUSIC ACQUISITION CORPORATION Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form
10-K including, without limitation, statements under "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. When used in
this Form 10-K, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors detailed in our filings with the
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated on
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
? may significantly dilute the equity interest of investors, which
dilution would increase if the anti-dilution provisions in the Class B
common stock resulted in the issuance of Class A common stock on a
greater than one-to-one basis upon conversion of the Class B common
stock;
? may subordinate the rights of holders of Class A common stock if shares
of preferred stock are issued with rights senior to those afforded our
Class A common stock;
? could cause a change in control if a substantial number of shares of
our Class A common stock 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 Class A common
stock and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
? default and foreclosure on our assets if our operating revenues after
an 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;
? our immediate payment of all principal and accrued interest, if any, if
the debt is payable on demand;
? our inability to obtain necessary additional financing if the debt
contains covenants restricting our ability to obtain such financing
while the debt is outstanding;
? our inability to pay dividends on our Class A common stock;
? 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 Class A common stock if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
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? 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 initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from
For the period ended
Liquidity and Capital Resources
On
Transaction costs amounted to
Following the closing of our Initial Public Offering on
As of
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In order to fund working capital deficiencies or finance transaction costs in
connection with an initial business combination, our Sponsor or an affiliate of
our Sponsor or certain officers and directors or their respective affiliates
may, but are not obligated to, loan us funds as may be required on a
non-interest basis. If we complete an initial business combination, we would
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that an initial 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 to repay
such loaned amounts. Up to
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amounts necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
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 reimburse an
affiliate of our Sponsor for office space, secretarial and administrative
services provided to members of our management team in an amount not to exceed
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in
Derivative Warrant Liabilities
We account for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the warrants was estimated using a Monte Carlo simulation approach.
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Common stock subject to possible redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
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,
shares of Class A common stock are classified as stockholders' equity. Our Class
A common stock features certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, at
Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which, resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Net loss per share of common stock
We comply with accounting and disclosure requirements of Financial Accounting Standards Board Accounting Standard Codification, or FASB ASC Topic 260, "Earnings Per Share." Net loss per share of common stock is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from EPS as the redemption value approximates fair value.
Recent accounting pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.
Emerging Growth Company Status
We are an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the "JOBS Act"), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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