SEC Form 10-Q/A filed by Vistas Media Acquisition Company Inc. (Amendment)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
(Mark One)
For
the quarterly period ended
OR
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
Not
Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Class A common stock and one redeemable warrant | VMACU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Warrants, each warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share | VMACW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As
of January 11, 2022,
Explanatory Note
.
We are filing this Amendment to address matters discussed in the SEC staff’s recent communications with certain independent registered public accounting firms regarding the classification of the stockholders’ equity of a Special Purpose Acquisition Company (“SPAC”) as permanent equity, which the Company has determined should be reclassified as temporary equity. In the SEC’s informal guidance, the SEC staff noted to certain independent registered public accounting firms that stockholders’ equity of a SPAC should be classified as temporary equity, as compared to the historical classification of SPAC stockholders’ equity as permanent equity, which has been the practice of most SPACs, including us. We had previously classified stockholders’ equity as permanent equity.
After considering the SEC staff’s recent communications with certain independent registered public accounting firms, we have concluded that there are misstatements in our previously filed financial statements. As such, our management determined that our disclosure controls and procedures as of June 30, 2021 were not effective solely as a result of its classification of stockholders’ equity as permanent equity. For more information, see Item 4 included in this Amendment.
The change in accounting for stockholders’ equity did not have any impact on our liquidity, cash flows, revenues or costs of operating our business and the other non-cash adjustments to the financial statements, in any of the Affected Periods (as defined below) or in any of the periods included in Item 1, Financial Statements in this filing. The change in accounting for stockholders’ equity does not impact the amounts previously reported for the Company’s cash and cash equivalents, investments held in trust account, operating expenses or total cash flows from operations for any of the reported periods.
Internal Control Over Financial Reporting and Disclosure Controls and Procedures
In connection with the restatement of our financial statements in this Amendment, management identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. For a discussion of management’s consideration of the material weakness identified, see Item 4. Controls and Procedures included in this Amendment.
In light of the SEC communications, our management reevaluated, with the participation of our chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based in part on the restatement of the financial statements to reclassify stockholders’ equity as described in this Explanatory Note, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of June 30, 2021.
Items Amended in This Filing
The following items have been amended as a result of this restatement:
Except as otherwise expressly stated herein, this Amendment does not reflect events occurring after the date of the Form 10-Q, nor does it modify or update the disclosure contained in the Form 10-Q in any way other than as required to reflect the amendments discussed above and reflected below. Accordingly, this Amendment should be read in conjunction with the Form 10-Q and the Company’s other filings made with the SEC on or subsequent to August 23, 2021.
Our Principal Executive Officer and Principal Financial Officer are providing currently dated certifications in connection with this Amendment. These certifications are filed as Exhibits 31.1, 31.2, 32.1 and 32.2.
i
Table of Contents
ii
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
VISTAS MEDIA ACQUISITION COMPANY INC
BALANCE
SHEET
(Unaudited)
(Restated)
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Total Current Assets | ||||||||
| Cash held in Trust Account | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Total Current Liabilities | ||||||||
| Derivative warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred Stock - $ | ||||||||
| Common Stock Class A - $ | ||||||||
| Common Stock Class B - $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited financial statements
1
VISTAS
MEDIA ACQUISITION COMPANY INC
STATEMENT OF OPERATIONS
(Unaudited)
(Restated)
| For
the Three Months Ended | For
the Six Months Ended | From Inception (March 27, 2020) through | ||||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income | ||||||||||||||||
| Interest income | - | |||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | - | |||||||||||
| Total other Income/(Loss) | ( | ) | ( | ) | - | |||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average shares outstanding of Class A common stock | - | - | ||||||||||||||
| Basic and diluted net income per stock, Class A | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average shares outstanding of Class B common stock | ||||||||||||||||
| Basic and diluted net income per stock, Class B | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
The accompanying notes are an integral part of the unaudited financial statements
2
VISTAS MEDIA ACQUISITION COMPANY INC
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(Restated)
| Common Stock | Additional Paid In | Accumulated | Total Stockholder’s | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at Inception March 27, 2020 | ||||||||||||||||||||
| Issuance of common stock to sponsor | ||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2020 | ( | ) | ||||||||||||||||||
| Sale of | ||||||||||||||||||||
| Private placement | ||||||||||||||||||||
| Issuance of shares to underwriters | ||||||||||||||||||||
| Net Income for the period | - | |||||||||||||||||||
| Shares forfeited | ( | ) | ( | ) | - | - | ||||||||||||||
| Common stock subject to redemption | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance at December 31, 2020 | - | ( | ) | ( | ) | |||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2021 | - | ( | ) | ( | ) | |||||||||||||||
The accompanying notes are an integral part of the unaudited financial statements
3
VISTAS MEDIA ACQUISITION COMPANY INC
STATEMENT OF CASH FLOWS
(Unaudited)
(Restated)
| For
the Six Months Ended June 30, 2021 | From
Inception (March 27, 2020) through June 30, 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Change in fair value of warrant liabilities | ||||||||
| Interest earned on marketable securities held in trust account | ( | ) | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Changes in operating liability: | ||||||||
| Change in accounts payable | ( | ) | ||||||
| Net Cash used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Net Cash used in Investing Activities | ||||||||
| Cash flows from Financing Activities | ||||||||
| Proceeds of loan from sponsor | ||||||||
| Proceeds from issuance of common stock to sponsor | ||||||||
| Increase in deferred offering cost | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net increase in cash | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited financial statements
4
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Description of Organization and Business Operations
Vistas Media Acquisition Company Inc. (the “Company”) was incorporated in Delaware on March 27, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search for an initial business combination on companies that are positioned to benefit directly from the growth of digitally available content. While the Company’s efforts to identify a target will not be limited to any particular media and entertainment segment or geography, it intends to focus its search on content, film, post -production and/or visual effects facilities, animation, streaming, augmented and virtual reality, music, digital media, gaming and e-sports. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
The Company’s sponsor is Vistas Media Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).
As of June 30, 2021, the Company had not yet commenced any operations. All activity for the period from March 27, 2020 (inception) through June 30, 2021 relates to the Company’s formation and the initial public offering (“Public Offering” or “IPO”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company anticipates it will generate income in the form of interest income from the proceeds derived from the IPO and placed in Trust Account (as defined below) as described below.
Public Offering
The
Company completed the sale of
Each
Unit consists of one (1) share of Class A common stock, par value $
The
Company also granted the underwriters a 30-day option to purchase up to
The Trust Account
Upon
completion of the Public Offering, $
5
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Except
with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the
proceeds from the Public Offering may not be released from the Trust Account until the earliest of: (i) the completion of
the Initial Business Combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder
vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s
obligation to redeem
Initial Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering,
although substantially all of the net proceeds of the Public Offering and the Private Placement are intended to be generally applied
toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more businesses or
assets with a fair market value equal to at least
If the Company holds a stockholder meeting to approve the Initial Business Combination, a public stockholder will have the right to redeem its public shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A common stock have been recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant
to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business
Combination by August 11, 2021, 12 months from the closing of the Public Offering (or up to 18 months from the closing of the
Public Offering if the Company extends the period of time to consummate a business combination) (see Note 8 – subsequent
events), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but no more than ten business days thereafter redeem the public shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay franchise and income taxes (less up to $
The Sponsor and the Company’s officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares and Private Placement Shares (as defined below) held by them if the Company fails to complete the Initial Business Combination within 12 months of the closing of the Public Offering (or up to 18 months from the closing of the Public Offering if the Company extends the period of time to consummate a business combination). However, if the Sponsor or any of the Company’s directors or officers acquires shares of Class A common stock in or after the Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if the Company fails to complete the Initial Business Combination within the prescribed time period.
6
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
As notified in the Note 8 Subsequent Event, on August 10, 2021, the Extension Payment was deposited by the Sponsor into the Company’s trust account to extend the August 11, 2021 deadline to November 11, 2021. On November 09, 2021, the Extension Payment was deposited by the Sponsor into the Company’s trust account to extend the deadline once more from November 11, 2021 to February 11, 2022.
In the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination the Company’s remaining stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. The Company will provide its stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, under the circumstances, and, subject to the limitations, described herein.
NOTE 2. Restatement of Previously Issued Financial Statements
In
connection with the preparation of the Company’s financial statements, as of June 30, 2021, management determined it should
revise its previously reported financial statements. The Company determined, effective with the closing of the Company’s
Initial Public Offering and shares sold pursuant to the exercise of the underwriters’ overallotment, it had improperly
allocated its Class A Common stock subject to possible redemption between temporary equity and permanent equity. The Company
previously determined the Class A Common stock subject to possible redemption classified as temporary equity, to be equal to the
redemption value of $
Therefore, management concluded that temporary equity should include all Class A Common stock subject to possible redemption, resulting in the Class A Common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification adjustment related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A Common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A Common stock.
In connection with the change in presentation for the Class A Common stock subject to redemption, the Company also revised its earnings per share calculation to allocate net income (loss) evenly to Class A and Class B Common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of Common stock share pro rata in the income (loss) of the Company. The changes to the earnings per share calculation is considered to be immaterial.
There has been no change in the Company’s total assets, liabilities or operating results.
The impact of the revision on the Company’s financial statements is reflected in the following table:
| As Previously | As | |||||||||||
| Balance Sheet as of June 30, 2021 | Reported | Adjustment | Revised | |||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | $ | |||||||||
| Class A Common Stock | $ | $ | ( | ) | ||||||||
| Class B Common Stock | $ | $ | ||||||||||
| Additional paid-in capital | $ | $ | ( | ) | ||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
7
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is 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 it 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its 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 an emerging growth 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 an election to opt out is irrevocable. The Company has 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, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Use of Estimates
The preparation of 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 financial statements.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Net Loss Per Common stock
Net loss per share is computed by dividing net loss by the weighted average number of Common stock outstanding during the period. At June 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into Common stock and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
8
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were deemed immaterial as of June 30, 2021.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of June 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
NOTE 4. Related Party Transactions
Founder Shares
On
April 30, 2020, the Sponsor purchased an aggregate of
The Founder Shares are identical to the shares of common stock included in the Units and holders of Founder Shares have the same stockholder rights as public stockholders, except that (i) the Founder Shares and the shares of common stock underlying the Private Placement Units are subject to certain transfer restrictions, and (ii) the Sponsor has entered into a letter agreement, pursuant to which it has agreed (A) to waive its redemption rights with respect to the Founder Shares, and the shares of common stock underlying the Private Placement Units and the Public Units in connection with the completion of a Business Combination and (B) to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares and the shares of common stock underlying the Private Placement Units if the Company fails to complete a Business Combination within 12 months from the closing of the Public Offering (or up to 18 months from the closing of the Public Offering if the Company extends the period of time to consummate a Business Combination) (see Note 8 - subsequent events)
With certain limited exceptions, the Founder Shares are not transferable, assignable or saleable (except to the Company’s officers and directors and other persons or entities affiliated with the Sponsor, each of whom will be subject to the same transfer restrictions) until the earlier of (A) one year after the completion of an initial Business Combination or earlier of (B) subsequent to the Company’s initial Business Combination, (i) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (ii) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all stockholders having the right to exchange their shares of common stock for cash, securities or other property.
9
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Private Placements
In
addition, the Sponsor purchased, pursuant to written agreements, an aggregate of
Administrative Service Fee
The
Company has agreed, commencing on the effective date of the Initial Public Offering through the earlier of the Company’s
consummation of a Business Combination or its liquidation, to pay the Sponsor a monthly fee of $
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor, officers and directors or their respective
affiliates may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”).
If the Company completes a Business Combination, the Company will repay the Working Capital Loans. In the event that a Business
Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital
Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Such Working Capital Loans
would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender’s discretion, or converted upon consummation of a Business Combination into additional Private
Placement Units at a price of $
Extension Loans
The
Company may extend the period of time to consummate a Business Combination up to two times, each by an additional three months
(for a total of 18 months to complete a Business Combination). In order to extend the time available for the Company to consummate
a Business Combination, the Sponsor or its affiliates or designees must deposit into the Trust Account $
Registration Rights
The holders of the Founder Shares, private placement securities (and underlying securities) and units that may be issued upon conversion of working capital loans have registration rights to require the Company to register a sale of any of the Company’s securities held by them pursuant to a registration rights agreement. These holders are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. Notwithstanding the foregoing, I-Bankers may not exercise its demand and “piggyback” registration rights after five and seven years, respectively, after the effective date of the registration statement for the Public Offering and may not exercise its demand rights on more than one occasion.
10
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Business Combination Marketing Agreement
The Company has engaged I-Bankers in connection with its business combination to assist it in holding meetings with stockholders to discuss the potential business combination and the target business’ attributes, introduce it to potential investors that are interested in purchasing its securities in connection with its initial business combination, assist it in obtaining stockholder approval for the business combination and assist it with its press releases and public filings in connection with the business combination. The scope of engagement excludes identifying and/or evaluating possible acquisition candidates. Pursuant to the Company’s agreement with I-Bankers, the marketing fee payable to I-Bankers will be 2.75% of the gross proceeds of the Public Offering. However, if the Company has not consummated its business combination within 12 months from the closing of the Public Offering and the Sponsor elects to extend such period to consummate a business combination by an additional three months and, pursuant to the trust agreement, deposits $1,000,000 (or up to $1,150,000 depending on the extent to which the underwriters’ over-allotment option is exercised) into the trust account, then the marketing fee payable to I-Bankers will be reduced to 1.75% of the gross proceeds of the Public Offering.
Representative’s Shares
On
August 11, 2020, the Company issued an aggregate of
The shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the registration statement of the Company in connection with the IPO, pursuant to FINRA Rule 5110(g)(1). Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statement except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.
Representative’s Warrants
On
August 11, 2020,
11
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
The
Representative’s Warrants and such shares purchased pursuant to the Representative’s Warrants have been deemed compensation
by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness
of the registration statement pursuant to FINRA Rule 5110(g)(1). Pursuant to FINRA Rule 5110(g)(1), these securities will not
be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of
the securities by any person for a period of 360 days immediately following the effective date of the registration statement,
nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective
date of the registration statement except to any underwriter and selected dealer participating in the IPO and their bona fide
officers or partners.
NOTE 5. Stockholder’s Equity
Class
A Common Stock—The Company is authorized to issue
Class
B Common Stock—The Company is authorized to issue
On
April 30, 2020, the Company issued
Stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as required by law.
The
Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination on a
one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and
subject to further adjustment as provided herein. In the case that additional shares of Class A common stock or equity-linked
securities are issued or deemed issued in connection with the initial Business Combination, the number of shares of Class A common
stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis,
Preferred
Stock—The Company is authorized to issue
12
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Warrants—Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Proposed Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless” basis, and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue-sky laws to the extent an exemption is not available.
The
Public Warrants will expire
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor, I-Bankers or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, I- Bankers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company may call the Public Warrants for redemption:
| A. | in whole and not in part; |
| B. | at a price of $0.01 per warrant; |
| C. | upon a minimum of 30 days’ prior written notice of redemption; and |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
If
the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection
with the closing of its initial Business Combination at an issue price or effective issue price of less than $
13
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
NOTE 6. Fair Value Instruments
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| Level 1 | Level 2 | |||||||||||
| U. S. Money Market funds | ||||||||||||
| Public Warrants | ||||||||||||
| Private Warrants | ||||||||||||
Derivative Warrant Liability
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the Company’s balance sheet. The warrant liability is measured at fair value at inception and on a recurring basis, with any subsequent changes in fair value presented within change in fair value of warrant liability in the Company’s statement of operations.
Initial Measurement and Subsequent Measurement
The Company established the initial fair value for the Warrants on August 11, 2020, the date of the closing of the Initial Public Offering. The company used a Monte Carlo simulation model to value the Public Warrants and a Black-Scholes model to value the Private Warrants.
On June 30, 2021, the Company used NASDAQ trading price of warrants for valuing the Public Warrants and used Black-Scholes model to value the Private Warrants.
14
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
The key inputs used into the Monte Carlo simulation and the Black-Scholes models used for warrant valuation from initial valuation till June 30, 2021 are detailed below:
| August 11,
2020 (Initial Measurement) | December 31,
2020 | March 31, 2021 | June 30, 2021 | |||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
| Expected term (years) | ||||||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Exercise price | $ | $ | $ | $ | ||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Dividend yield | % | % | % | % | ||||||||||||
The following table presents the changes in the fair value of derivative warrant liability:
| Private Warrants | Public Warrants | Derivative | ||||||||||
| Fair Value of Warrants as of December 31, 2020 | ||||||||||||
| Change in warrant valuation | ( | ) | ( | ) | ( | ) | ||||||
| Fair Value of Warrants as of March 31, 2021 | ||||||||||||
| Change in warrant valuation | ||||||||||||
| Fair Value of Warrants as of June 30, 2021 | ||||||||||||
NOTE 7. Merger Agreement
On March 3, 2021, Vistas Media Acquisition Company Inc. (“VMAC” or the “Company”) entered into a Business Combination Agreement (the “Business Combination Agreement”) with Anghami, a Cayman Islands exempted company (“Anghami”), Anghami Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Anghami (“Pubco”), Anghami Vista 1, a Cayman Islands exempted company and wholly-owned subsidiary of Pubco (“Vistas Merger Sub”), and Anghami Vista 2, a Cayman Islands exempted company and wholly-owned subsidiary of Pubco (“Anghami Merger Sub”), pursuant to which (i) the Company will merge with and into Vistas Merger Sub, with the Company surviving the merger and continuing as a subsidiary of Pubco, with each outstanding share of the Company converting into the right to receive one share of Pubco and each outstanding warrant of the Company converting into warrants to purchase shares of Pubco on the same terms (the “Vistas Merger”), and (ii) Anghami will merge with and into Anghami Merger Sub, with Anghami surviving the merger and continuing as a subsidiary of Pubco and Anghami’s shareholders receiving shares of Pubco (the “Anghami Merger”). Upon consummation of the transactions contemplated by the Business Combination Agreement (the “Business Combination”), Anghami and the Company will continue to exist as wholly-owned subsidiaries of Pubco.
The
Business Combination implies an initial pro-forma enterprise valuation of the combined company of approximately $
The
stock consideration payable to Anghami’s shareholders will be an amount of shares of Pubco equal to (a) $
Anghami
shareholders will receive cash consideration only if the available cash (as further described below) exceeds $
15
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Pubco’s board of directors will consist of eleven individuals allocated among three classes, and a majority of those directors will qualify as independent directors under applicable rules of the Nasdaq Capital Market (“Nasdaq”). Immediately after the Closing, the following individuals will be designated and appointed to the Pubco board of directors: (i) three directors designated by the Company prior to the Closing, including at least two who qualify as independent directors under Nasdaq rules, with none appointed to the first class, two appointed to the second class and one appointed to the third class; (ii) six directors designated by Anghami prior to the Closing, including at least three who qualify as independent directors under Nasdaq rules, with one appointed to the first class, two appointed to the second class, and three appointed to the third class; and (iii) two directors designated by Shuaa Capital psc (“Shuaa”), both appointed to the first class and at least one of whom will qualify as an independent director under Nasdaq rules. In the event the number of directors on the board changes prior to the Closing, the rights to designate directors will be adjusted such that Anghami will retain the ability to designate a majority of the directors.
The parties to the Business Combination Agreement have made customary representations, warranties and covenants in the Business Combination Agreement, including, among others, covenants with respect to the conduct of the Company and Anghami and its subsidiaries prior to the closing of the Business Combination.
The closing of the Business Combination is subject to certain customary conditions, including, among other things: (i) the approval by VMAC’s stockholders of the Business Combination Agreement, the Business Combination, and certain other actions related thereto; (ii) Anghami and the Company each receiving evidence that Pubco qualifies as a foreign private issuer pursuant to Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the Closing; (iii) VMAC having at least $40 million of cash at the closing of the Business Combination, consisting of cash held in its trust account and the aggregate amount of cash actually invested in (or contributed to) the Company pursuant to the Subscription Agreements (as defined below), after giving effect to redemptions of public shares, if any, but before giving effect to the consummation of the closing of the Business Combination and the payment of Anghami’s and VMAC’s outstanding transaction expenses as contemplated by the Business Combination Agreement; (iv) the shares of Class A common stock of Pubco to be issued in connection with the Business Combination having been approved for listing on Nasdaq subject only to official notice of issuance thereof and (v) the execution of the Sponsor Agreement Amendment and the Registration Rights Agreement.
The Business Combination Agreement may be terminated by VMAC or Anghami under certain circumstances, including, among others, (i) by written consent of VMAC and Anghami, (ii) by either VMAC or Anghami if the closing of the Business Combination has not occurred on or before December 31, 2021, and (iii) by VMAC or Anghami if VMAC has not obtained the required approval of its stockholders.
The foregoing description of the Business Combination Agreement and the Business Combination does not purport to be complete and is qualified in its entirety by the terms and conditions of the Business Combination Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The Business Combination Agreement contains representations, warranties and covenants that the parties to the Business Combination Agreement made to each other as of the date of the Business Combination Agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Combination Agreement. The Business Combination Agreement has been attached to provide investors with information regarding its terms and is not intended to provide any other factual information about VMAC, Anghami or any other party to the Business Combination Agreement. In particular, the representations, warranties, covenants and agreements contained in the Business Combination Agreement, which were made only for purposes of the Business Combination Agreement and as of specific dates, were solely for the benefit of the parties to the Business Combination Agreement, may be subject to limitations agreed upon by the contracting parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Business Combination Agreement instead of establishing these matters as facts) and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors and reports and documents filed with the U.S. Securities and Exchange Commission (the “SEC”). Investors should not rely on the representations, warranties, covenants and agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any party to the Business Combination Agreement. In addition, the representations, warranties, covenants and agreements and other terms of the Business Combination Agreement may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations and warranties and other terms may change after the date of the Business Combination Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
16
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Sponsor Agreement
In
connection with the Company’s entrance into the Business Combination Agreement, it will also enter into a Sponsor Agreement
(the “Sponsor Agreement”) with Anghami, Vistas Media Sponsor, LLC (the “Sponsor”) and certain of the Company’s
officers, the members of the Company’s board of directors and other holders of the Company’s common stock (the “SPAC
Insiders”), pursuant to which, among other things, the SPAC Insiders will agree to vote any of the Company’s shares
of common stock held by them in favor of the Business Combination and to not redeem any such shares at the special meeting of
stockholders to be held in connection with the Business Combination. In addition, the SPAC Insiders will agree to not transfer
(i) any of the Company’s shares of Class B common stock, par value $
The foregoing description of the Sponsor Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Sponsor Agreement, the form of which is filed as Exhibit 10.1 hereto and is incorporated by reference herein.
Restrictive Covenant Agreements
In connection with the Company’s entrance into the Business Combination Agreement, it also entered into Restrictive Covenant Agreements (the “Restrictive Covenant Agreements”) pursuant to which, among other things, certain executive officers of Anghami (the “Anghami Executives”) agreed that, for a period of two years, the Anghami Executives will not (i) work for or with, own, invest in, render any service or advice to or otherwise assist (in each case, whether or not for compensation) or act as an officer, director, employee, partner or independent contractor, directly or indirectly, for any competing music streaming business in several countries in the Middle East and North Africa region and (ii) solicit, hire, induce, encourage or attempt to solicit, hire, induce or encourage any employee of Pubco, Vistas, the Company or its subsidiaries to leave the employ of such entity.
The foregoing description of the Restrictive Covenant Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Restrictive Covenant Agreements, the form of which is filed as Exhibit 10.2 hereto and are incorporated by reference herein.
Subscription Agreements
The
Company and Pubco entered into subscription agreements (the “Subscription Agreements”), each dated as of March 3,
2021, with
The foregoing description of the Subscription Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Subscription Agreements, the form of which is filed as Exhibit 10.3 hereto and is incorporated by reference herein.
Amended and Restated Registration Rights Agreement
In connection with the Company’s entrance into the Business Combination Agreement, it will also enter into an Amended and Restated Registration Rights Agreement (the “A&R RRA”) with Pubco, the Sponsor, I-Bankers Securities Inc. (“I-Bankers”), the Company’s directors and officers, the SPAC Insiders and certain of Anghami’s shareholders, which, among other things, will amend and restate the registration rights agreement entered into by and among the Company, the Company’s initial directors, officers, the SPAC Insiders, I-Bankers and the Sponsor at the time of the Company’s initial public offering. Pursuant to the terms of the A&R RRA, among other things, Pubco will provide the parties to the A&R RRA certain demand, piggyback and shelf registration rights.
The foregoing description of the Registration Rights Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the form of Registration Rights Agreement, a copy of which is filed as Exhibit 10.4 hereto and is incorporated by reference herein.
17
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
Lock-Up Agreement
In connection with the Company’s entrance into the Business Combination Agreement, Pubco will also enter into a Lock-Up Agreement (the “Lock-Up Agreement”) with certain of Anghami’s shareholders, pursuant to which, among other things, such shareholders will agree to not transfer any shares of Anghami held by them prior to 6 months after the Closing, subject to certain permitted transfers and a potential early release of such restrictions as set forth therein.
The foregoing description of the Lock-Up Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the form of Lock-Up Agreement, a copy of which is filed as Exhibit 10.5 hereto and is incorporated by reference herein.
NOTE 8. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described below or in these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On
July 15, 2021,
The Sponsor loaned the Extension Payment to the Company in order to support the Extension and caused the Extension Payment to be deposited in the Company’s trust account for its public stockholders. In connection with the Extension Payment, the Company issued to Sponsor an unsecured promissory note (the “Note”) having a principal amount equal to the amount of the Extension Payment. The Note bears no interest and will be due and payable (subject to the waiver against trust provisions) on the earlier of (i) the date on which the Business Combination is consummated and (ii) the date of the liquidation of the Company.
18
VISTAS MEDIA ACQUISITION COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
The following events constitute events of default under the Note:
| 1. | Failure to make the required payments under the Note when due; |
| 2. | The voluntary liquidation of the Company; and |
| 3. | The involuntary bankruptcy of the Company |
The Note was issued pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
October 13, 2021, Anghami publicly filed a Registration Statement on Form F-4, including a preliminary proxy statement/prospectus, with the SEC.
On
November 09, 2021, an aggregate of $
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in the Risk Factors section of the Company’s registration statement and prospectus for the Company’s initial public offering filed with the SEC. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this report.
Overview
We are a blank check company incorporated on March 27, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). We consummated our Public Offering (as defined below) on August 11, 2020 and are currently in the process of locating suitable targets for our business combination. We intend to use the cash proceeds from our Public Offering and the Private Placement described below as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the Business Combination.
We expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Recent Developments
On March 3, 2021, the Company entered into the Business Combination Agreement, pursuant to which (i) the Company will merge with and into Vistas Merger Sub, with the Company surviving the merger and continuing as a subsidiary of Pubco, with each outstanding share of the Company converting into the right to receive one share of Pubco and each outstanding warrant of the Company converting into warrants to purchase shares of Pubco on the same terms (the “Vistas Merger”), and (ii) Anghami will merge with and into Anghami Merger Sub, with Anghami surviving the merger and continuing as a subsidiary of Pubco and Anghami’s shareholders receiving shares of Pubco (the “Anghami Merger”). Upon consummation of the Business Combination, Anghami and the Company will continue to exist as wholly-owned subsidiaries of Pubco.
The Business Combination implies an initial pro-forma enterprise valuation of the combined company of approximately $220 million. Upon the closing of the Business Combination (the “Closing”), Anghami’s shareholders will be entitled to receive either all stock consideration or a combination of cash and stock consideration with an aggregate value of $180 million.
The stock consideration payable to Anghami’s shareholders will be an amount of shares of Pubco equal to (a) $180 million in enterprise value minus the cash consideration paid to such shareholders (if any), divided by (b) $10.00. Anghami shareholders will receive cash consideration only if the available cash (as further described below) exceeds $50,000,000, in which case the cash consideration will be calculated as the lesser of (i)(A) such available cash minus the outstanding indebtedness of Pubco for borrowed money with a maturity date of more than one year as of the Closing multiplied by (B) 0.3, or (ii) the available cash minus such indebtedness referred to in clause (i)(A) above minus $50,000,000. The available cash at Closing will be calculated by (i) adding the amount available to be released from the Company’s trust account, after taking into account redemptions by the Company’s stockholders, in addition to any cash or cash equivalents of the Company and the net proceeds of private placements of shares of the Company’s common stock to occur immediately prior to the Closing, for which the Company currently has commitments of $40 million, and (ii) subtracting transaction expenses of the Company and Anghami related to the Business Combination. Notwithstanding the foregoing, the cash consideration payable to Anghami shareholders will be reduced, and shareholders will receive a proportional increase in stock consideration at a price of $10.00 per share, by the minimum amount necessary for Pubco to satisfy the “substantiality” test of Treasury Regulation 1.367(a)-3(c)(3)(iii), but if such “substantiality” test cannot be met if the cash consideration is reduced to zero (with the proportional increase in stock consideration) then no such reduction in cash consideration will be made.
20
On August 10, 2021, an aggregate of $1,000,000 (the “Extension Payment”) was deposited by Vistas Media Sponsor, LLC, a Delaware limited liability company (“Sponsor”), into the trust account of the Company for the Company’s public stockholders, representing $0.10 per public share, which enables the Company to extend the period of time it has to consummate its Initial Business Combination by three months to November 11, 2021 (the “Extension”). The Extension is the first of up to two three-month extensions permitted under the Company’s governing documents and provides the Company with additional time to complete its proposed Initial Business Combination with Anghami, Inc.
The Sponsor loaned the Extension Payment to the Company in order to support the Extension and caused the Extension Payment to be deposited in the Company’s trust account for its public stockholders. In connection with the Extension Payment, the Company issued to Sponsor an unsecured promissory note (the “Note”) having a principal amount equal to the amount of the Extension Payment. The Note bears no interest and will be due and payable (subject to the waiver against trust provisions) on the earlier of (i) the date on which the Business Combination is consummated and (ii) the date of the liquidation of the Company.
The following events constitute events of default under the Note:
| 1. | Failure to make the required payments under the Note when due; |
| 2. | The voluntary liquidation of the Company; and |
| 3. | The involuntary bankruptcy of the Company |
The Note was issued pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
As a result of the SEC staff’s recent communications with certain independent registered public accounting firms regarding the classification of the stockholders’ equity—and as described in Note 2 of the notes to the financial statements—we determined, effective with the closing of the Company’s Initial Public Offering and shares sold pursuant to the exercise of the underwriters’ overallotment, it had improperly allocated its Class A common stock subject to possible redemption between temporary equity and permanent equity. The Company previously determined the Class A common stock subject to possible redemption classified as temporary equity, to be equal to the redemption value of $10.00 per Class A ordinary share while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Accordingly, the Company classified a portion of its Class A common stock within permanent equity. Effective with these quarterly financial statements, Management determined that the Class A common stock issued during the Initial Public Offering and pursuant to the exercise of the underwriters’ overallotment can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that temporary equity should include all Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification adjustment related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock. In connection with the change in presentation for the Class A common stock subject to redemption, the Company also revised its earnings per share calculation to allocate net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock share pro rata in the income (loss) of the Company. The changes to the earnings per share calculation is considered to be immaterial.
Results of Operations and Known Trends or Future Events
We have neither engaged in any significant business operations nor generated any revenues to date. All activities to date relate to the Company’s formation and the Public Offering. We expect to generate non-operating income in the form of interest income on cash, cash equivalents, and marketable securities that will be held in the Trust Account (as defined below). We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses as we locate a suitable Business Combination.
For the quarter ended June 30, 2021, we had a net loss of $5,484,514.
21
Liquidity and Capital Resources
As of June 30, 2021, we had $249,095 of cash and cash equivalents.
On August 11, 2020, we consummated a $100,000,000 initial public offering (the “Public Offering”) consisting of 10,000,000 units at a price of $10.00 per unit (“Unit”). Each Unit consists of one share of the Company’s Class A common stock, $0.0001 par value (the “Class A Common Stock”), and one redeemable warrant (each, a “Public Warrant”). Simultaneously with the closing of the Public Offering, we consummated an approximately $3,450,000 private placement (“Private Placement”) of an aggregate of 295,000 private placement units (the “Private Placement Units”) and 500,000 private placement warrants (the “Private Placement Warrants”). Upon closing of the Public Offering and the Private Placement on August 11, 2020, $100,000,000 in proceeds from the Public Offering was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”).
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding the marketing fee payable to I-Bankers) to complete our initial business combination. We may withdraw interest to pay our taxes. We estimate our annual franchise tax obligations, based on the number of shares of our common stock authorized and outstanding after the completion of this offering, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from this offering held outside of the trust account or from interest earned on the funds held in the trust account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amount held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Further, the Sponsor, officers and directors or their respective affiliates may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, or converted upon consummation of a Business Combination into additional Private Placement Units at a price of $10.00 per Unit (the “Working Capital Units”). As of June 30, 2021, no Working Capital Loans have been issued.
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 a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our 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 Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangement as of June 30, 2021.
22
Contractual Obligations
As of June 30, 2021, we did not have any long-term debt, capital or operating lease obligations.
We entered into an administrative services agreement pursuant to which the Company will pay the Sponsor for office space and secretarial and administrative services provided to members of the Company’s management team, in an amount not to exceed $10,000 per month.
We have engaged I-Bankers as an advisor in connection with the Company acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar Business Combination with one or more businesses or entities. We will pay I-Bankers for such services a fee equal to 2.75% of the gross proceeds of the Public Offering.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed financial statements and accompanying notes. Actual results could differ from those estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging growth company,” whichever is earlier.
23
Item 4. Controls and Procedures.
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. In connection with this Amendment, management reevaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation and in light of the SEC Statement and SEC informed guidance, our Certifying Officers concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective, as the circumstances that led to the restatement of our financial statements described in this Amendment had not yet been identified. Due to the events that led to our restatement of our financial statements, management has made changes in internal controls related to the accounting for warrants issued in connection with our initial public offering, as described in Note 2 to the Notes to Financial Statements entitled “Restatement of Previously Issued Financial Statements.” In light of the material weaknesses that we identified, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q/A present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
24
PART II—OTHER INFORMATION
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit Index
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| VISTAS MEDIA ACQUISITION COMPANY INC. | |||
| Date: January 14, 2022 | By: | /s/ F. Jacob Cherian | |
| Name: | F. Jacob Cherian | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
| Date: January 14, 2022 | By: | /s/ Nagarajan Venkatesan | |
| Name: | Nagarajan Venkatesan | ||
| Title: | Chief Financial Officer | ||
| (Principal Financial Officer) | |||
26