The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
The accompanying notes are
an integral part of the unaudited condensed financial statements.
The accompanying notes are an integral part
of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Note 1 — Description of Organization
and Business Operations
LGL Systems Acquisition Corp. (the “Company”)
was incorporated in Delaware on April 30, 2019. The Company was formed for the purpose of entering into a merger, share exchange,
asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses
or entities (the “Business Combination”). The Company was originally formed in Delaware under the name MTRON Systems
Acquisition Corp. On August 19, 2019, the Company changed its name to LGL Systems Acquisition Corp.
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 on
companies in the defense, aerospace and communication industries. The Company is an early stage and emerging growth company and,
as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2019, the Company had
not commenced any operations. All activity for the period from April 30, 2019 (inception) through September 30, 2019 relates to
the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below.
The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statements for the Company’s
Initial Public Offering were declared effective on November 6, 2019. On November 12, 2019, the Company consummated the Initial
Public Offering of 17,250,000 units (the “Units” and, with respect to the shares of common stock included in the Units
sold, the “Public Shares”), at $10.00 per Unit, which includes the full exercise by the underwriters of the over-allotment option to purchase
an additional 2,250,000 Units, generating gross proceeds of $172,500,000, which is described in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 5,200,000 warrants (the “Private Warrants”) at a price
of $1.00 per Private Warrant in a private placement to LGL Systems Acquisition Holdings Company, LLC (the “Sponsor”),
generating gross proceeds of $5,200,000, which is described in Note 4.
Transaction costs amounted to $9,971,662,
consisting of $3,450,000 of underwriting fees, $6,037,500 of deferred underwriting fees and $484,162 of other offering costs. In
addition, $1,549,302 of cash was held outside of the Trust Account (as defined below) and is available for working capital purposes.
Following the closing of the Initial Public
Offering on November 12, 2019, an amount of $172,500,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Private Warrants was placed in a trust account (the “Trust Account”) located
in the United States, which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in
any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of
Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account, as described below.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the sale of the Units in the Initial Public Offering
and the sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the
Trust Account (excluding taxes payable on income earned on the Trust Account and deferred underwriting commissions) at the time
of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide its holders of
the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval
of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released
to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with
respect to the Company’s warrants, including the Private Warrants. The Company will proceed with a Business Combination only
if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, solely if the
Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder
vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the
Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate
of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission
(“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder
approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to
the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s
Sponsor has agreed to vote the Founder Shares (as defined in Note 5) and any Public Shares purchased after the Initial Public Offering
in favor of approving a Business Combination and not to convert any shares in connection with a stockholder vote to approve a Business
Combination or sell any shares to the Company in a tender offer in connection with a Business Combination. Additionally, each public
stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or
do not vote at all.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Notwithstanding the foregoing, if the Company
seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the
Amended and Restated Certificate of Incorporation will provide that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group”, will be restricted from redeeming
its shares with respect to more than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its
redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business
Combination or an amendment to the Company’s Certificate of Incorporation described below, (b) to waive its rights to liquidating
distributions from the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination,
and (c) not to propose an amendment to the Company’s Certificate of Incorporation to modify a public stockholders’
ability to convert or sell their shares to the Company in connection with a Business Combination or affect the substance or timing
of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within
the required time period, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares
in conjunction with any such amendment.
The Company will have until November 12,
2021 (or such later date as may be approved by stockholders in an amendment to the Amended and Restated Certificate of Incorporation)
to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not 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 and net of up to $50,000 of interest
available to be used for liquidation expenses, divided by the number of then outstanding Public Shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each
case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire
worthless if the Company fails to complete a Business Combination within the Combination Period.
In order to protect the amounts held in
the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a
transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share and (ii) the actual
amount per Public Share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per
share due to reductions in the value of the trust assets, less taxes payable, except as to any claims by a third party who executed
an agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any monies held in
the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of Initial Public Offering
against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will
have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right,
title, interest or claim of any kind in or to monies held in the Trust Account.
Nasdaq Notification
On December 20, 2019, the Company received a notice from
the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) indicating that, based
upon the Staff’s determination, the Class A common stock contained in the Company’s units did not satisfy the minimum
300 round lot holders requirement for the listing of its units on The Nasdaq Capital Market, as set forth in the initial listing
requirements of Nasdaq Listing Rule 5505(a)(3), or the minimum 300 public holders required for continued listing, as set forth
in the continued listing requirements of Rule 5550(a)(3). Therefore, the Company’s units will be delisted from Nasdaq unless
the Company timely requests a hearing before a Nasdaq Hearings Panel (the “Panel”).
The Company intends to appeal the Staff’s determination
to a Panel, although there can be no assurance that it will be successful. Pending the decision to be rendered by the Panel, the
Company’s units will continue to trade on Nasdaq under the trading symbol “DFNSU.” Because Nasdaq will be unable
to list the Company’s common stock, rights or warrants if the units separate, the Company does not expect to separate the
Units until after it receives a decision from the Panel.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Note 2 — Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC.
Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been
condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not
include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or
cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting
of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash
flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the
SEC on November 12, 2019, as well as the Company’s Current Reports on Form 8-K, as filed with the SEC on November 12, 2019
and November 18, 2019. The interim results for the period from April 30, 2019 (inception) through September 30, 2019 are not necessarily
indicative of the results to be expected for the period from April 30, 2019 (inception) through December 31, 2019 or for any future
periods.
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 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. 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. This may make comparison of the Company’s 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.
Use of Estimates
The preparation of the financial statements
in conformity with GAAP requires the Company’s 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 and the reported
amounts of revenues and expenses during the reporting period.
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.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of September 30, 2019.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Deferred Offering Costs
Offering costs consist of legal, accounting,
underwriting fees and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering.
Offering costs amounting to $9,971,662 were charged to stockholders’ equity upon the completion of the Initial Public Offering.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under 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.
ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statements 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax
expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2019. 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.
The provision for income taxes was deemed
to be immaterial for the period from April 30, 2019 (inception) through September 30, 2019.
Net Loss Per Common Share
Net loss per share is computed by dividing
net loss by the weighted average number of shares of common stock outstanding during the period, excluding shares of common stock
subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 562,500 shares of common stock that
were subject to forfeiture if the over-allotment option was not exercised by the underwriters (see Note 7). At September 30,
2019, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into
shares of 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.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may
exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management
believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
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 the Company’s
condensed financial statements.
Note 3 — Initial Public Offering
Pursuant to the Initial Public
Offering, the Company sold 17,250,000 Units, at $10.00 per Unit, which includes the full exercise by the underwriter of its
option to purchase an additional 2,250,000 Units. Each Unit consists of one share of Class A common stock and one-half of one
redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of
Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Note 4 — Private Placement
Simultaneously with the closing of the
Initial Public Offering, the Sponsor purchased an aggregate of 5,200,000 Private Warrants at a price of $1.00 per Private Warrant,
for an aggregate purchase price of $5,200,000. Each Private Warrant is exercisable to purchase one share of Class A common stock
at an exercise price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the Private Warrants were added
to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination
within the Combination Period, the proceeds from the sale of the Private Warrants will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law), and the Private Warrants will expire worthless.
Note 5 — Related Party Transactions
Founder Shares
On April 30, 2019, the Sponsor purchased
3,593,750 shares of Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000, or approximately
$0.007 per share. As used herein, unless the context otherwise requires, “Founder Shares” shall be deemed to include
the shares of Class A common stock issuable upon conversion thereof. On November 6, 2019, the Company effected a stock dividend
of 0.2 shares for each share outstanding, resulting in an aggregate of 4,312,500 Founder Shares being outstanding, of which an
aggregate of up to 562,500 shares were subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment
option was not exercised in full or in part so that the Sponsor would own, on an as-converted basis, 20% of the Company’s
issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the
Initial Public Offering). All share and per-share amounts have been retroactively restated to reflect the stock dividend. As a
result of the underwriters’ election to fully exercise the over-allotment option, 562,500 Founder Shares are no longer subject
to forfeiture.
The Founder Shares are identical to the
Class A common stock included in the Units sold in the Initial Public Offering except as described below and that the Founder Shares
automatically convert into shares of Class A common stock at the time of the Company’s Initial Business Combination and are
subject to certain transfer restrictions, as described in more detail below. Holders of Founder Shares may also elect to convert
their shares of Class B convertible common stock into an equal number of shares of Class A common stock, subject to adjustment
as provided above, at any time.
The Sponsor has agreed (a) to waive its
redemption rights with respect to its Founder Shares in connection with the completion of a Business Combination or an amendment
to the Company’s Certificate of Incorporation described below, (b) to waive its rights to liquidating distributions from
the Trust Account with respect to the Founder Shares if the Company fails to consummate a Business Combination, and (c) not to
propose an amendment to the Company’s Certificate of Incorporation to modify a public stockholders’ ability to convert
or sell their shares to the Company in connection with a Business Combination or affect the substance or timing of the Company’s
obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the required time
period, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with
any such amendment.
The Sponsor has agreed, subject to limited
exceptions, not to transfer, assign or sell any of its Founder Shares following the consummation of the Initial Public Offering
until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial
Business Combination, (x) if the last sale price of the Company’s 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 (y) the date on which the Company
completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders
having the right to exchange their shares of common stock for cash, securities or other property.
The Sponsor has agreed, subject to
limited exceptions, not to transfer, assign or sell any of the Private Warrants until 30 days after the completion of the
Initial Business Combination. The Sponsor and the Company’s officers and directors have also agreed to vote any Founder
Shares held by them and any Public Shares purchased after the Initial Public Offering (including in open market and privately
negotiated transactions) in favor of a Business Combination.
Promissory Note — Related Party
On May 2, 2019, the Sponsor agreed
to loan the Company an aggregate of up to $150,000 to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the “Note”). This loan was non-interest bearing and payable on the earlier of (i) April
30, 2020, (ii) the completion of the Initial Public Offering or (iii) the date on which the Company determines not to
proceed with the Initial Public Offering. At September 30, 2019, the Company had $86,806 outstanding under the Note. The Note
was repaid on December 19, 2019.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Administrative Support Agreement
The Company entered into an agreement whereby,
commencing on the November 5, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation,
the Company will pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative
support.
Related Party Loans
In order to finance transaction costs in
connection with a Business Combination, the Sponsor, the Company’s officers or directors or their affiliates may, but are
not obligated to, loan the Company funds as may be required (“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, up to $1,500,000 of the notes may be converted upon consummation of a Business Combination
into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Warrants. In the event that a Business
Combination does not close, the Company may use a portion of the 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.
Note 6 — Commitments
Registration Rights
Pursuant to a registration rights agreement
entered into on November 6, 2019, the holders of the Founder Shares, Private Warrants (and their underlying securities) and any
warrants that may be issued upon conversion of working capital loans (“Working Capital Warrants”), if any, will be
entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common
stock). These holders will be entitled to certain demand and “piggyback” registration rights.
The holders of Founder Shares, Private
Warrants and Working Capital Warrants will not be able to sell these securities until the termination of the applicable lock-up
period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred
fee of $0.35 per Unit, or $6,037,500. The deferred fee will be forfeited by the underwriters solely in the event that the Company
fails to complete a Business Combination within the Combination Period, subject to the terms of the underwriting agreement.
Note 7 — Stockholder’s Equity
Preferred Stock — The Company
is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights
and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2019, there
were no shares of preferred stock issued or outstanding.
Common Stock — The
authorized common stock of the Company includes up to 75,000,000 shares of Class A common stock and 10,000,000 shares of
Class B convertible common stock. The shares of Class B convertible common stock will automatically convert into shares of
Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment for stock splits,
stock dividends, reorganizations, recapitalizations and the like. In the case that additional shares of Class A common stock,
or equity-linked securities convertible or exercisable for shares of Class A common stock, are issued or deemed issued in
excess of the amounts sold in the Initial Public Offering and related to the closing of an initial Business Combination, the
ratio at which the Class B common stock will convert into shares of Class A common stock will be adjusted so that the number
of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate
20% of the sum of the shares outstanding upon the completion of the Initial Public Offering plus the number of shares of
Class A common stock and equity-linked shares issued or deemed issued in connection with the initial Business Combination
(net of conversions), excluding any shares of Class A common stock or equity-linked securities issued to any seller in the
initial Business Combination and any Private Warrants or warrants issued to the Sponsor, any of the Company’s officers
or directors, or any of their affiliates upon conversion of Working Capital Loans. If the Company enters into a Business
Combination, it may (depending on the terms of such Business Combination) be required to increase the number of shares of
Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on
the Business Combination, to the extent the Company seeks stockholder approval in connection with the Business
Combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
At September 30, 2019, there were no shares
of Class A common stock issued and outstanding and there were 4,312,500 shares of Class B common stock issued and outstanding.
Warrants — Public Warrants
may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The
Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) November
12, 2020. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering
the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock.
Under the terms of the warrant agreement, the Company has agreed that as soon as practicable, but in no event later than 15 business
days after the closing of the initial Business Combination, the Company will use its best efforts to file a registration statement
under the Securities Act covering such shares and maintain a current prospectus relating to the shares of Class A common stock
issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement.
Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public
warrants is not effective within 60 days following the consummation of a Business Combination, warrant holders may, until such
time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective
registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities
Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be
able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation.
Once the warrants become exercisable, the
Company may redeem the Public Warrants:
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon not less than 30 days’ prior written notice of redemption;
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if, and only if, the reported last sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to adjustment as described below) for any 20 trading days within a 30-trading day period ending on the third business day prior to the notice of redemption to the warrant holders; and
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If, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the warrants.
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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.
The exercise price and number of shares
of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock
dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance
of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the warrants. 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.
The Private Warrants are identical to the
Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the shares of common
stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until 30 days after the
completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable
for cash or on a cashless basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers
or their permitted transferees. If the Private Warrants are held by someone other than the initial purchaser or its permitted transferees,
the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
LGL SYSTEMS ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
In addition, if (x) the Company issues
additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of an
initial Business Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case
of any such issuance to our sponsor, initial stockholders or their affiliates, without taking into account any founders’
shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 50% of the
total equity proceeds, and interest thereon, available for the funding of an initial Business Combination on the date of the consummation
of an initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the common stock
during the 20 trading day period starting on the trading day prior to the day on which the Company consummated an initial Business
Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted
(to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which we issue the additional
shares of common stock or equity-linked securities, and the $18.00 per share redemption trigger price of the warrants will be adjusted
(to the nearest cent) to be equal to 180% of the greater of (i) the Market Value or (ii) the price at which we issue the additional
shares of common stock or equity-linked securities.
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. Other than as
described in these financial statements, the Company did not identify any subsequent events that would have required adjustment
or disclosure in the financial statements.