UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No.1)
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 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 | ☐ |
| Non-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 May 21, 2021, ordinary shares, par value $0.0001 per share, were issued and outstanding.
ANDINA ACQUISITION CORP. III
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021
TABLE OF CONTENTS
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EXPLANATORY NOTE
This Amendment No. 1 (this “Report”) to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Andina Acquisition Corp. III (the “Company,” “we” or similar terminology) for the fiscal quarter ended March 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on May 21, 2021 (the “Original Report”).
Subsequent to the Company’s filing of the Original Report, the Company became aware that the application of guidance associated with the accounting of private investment in public equity transactions that are the subject of the Subscription Agreements entered into by the Company and Stryve Foods, LLC (“Stryve”) with certain investors on January 28, 2021 (the “PIPE Investment”) in connection with the Company’s proposed business combination with Stryve, as previously disclosed in, among other reports, the Company’s Current Report on Form 8-K filed on February 3, 2021, may require the Company’s ordinary shares to be reclassified between temporary and permanent equity.
We are filing this Report to include an additional Risk Factor under Part II, Item 1A, a revised Management’s Discussion and Analysis of Financial Condition and Results of Operation described in Part I, Item 2, revised disclosure regarding the Company’s Controls and Procedures in Part I, Item 4, and to incorporate the restatement of the Interim Financial Statements in the Financial Statements included in Part I, Item 1.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Part II, Item 1A, Risk Factors, of the Original Report is hereby amended to add additional risk factors, and Part I, Item 1, Financial Statements, Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operation and Part I, Item 4, Controls and Procedures of the Original Report are hereby amended and restated in their entirety. In addition, as required by Rule 12b-15 under the Exchange Act, new certifications by the Company’s principal executive officer and principal financial officer are filed as exhibits (in Exhibits 31.1 to 32.2) to this Report under Item 15 of Part IV hereof.
This Report should be read in conjunction with the Original Report and with our filings with the SEC subsequent to the Original Report.
This Report does not reflect events occurring after the filing of the Original Report, and, except as described above, does not modify
or update any other disclosures in the Original Report.
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ANDINA ACQUISITION CORP. III
CONDENSED BALANCE SHEETS
(unaudited)
March 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | - | |||||||
| Total Current Assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Total Current Liabilities | ||||||||
| Warrant Liability | - | |||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and Contingencies (Note 7) | - | - | ||||||
| Ordinary shares subject to possible redemption, and shares at redemption value at March 31, 2021 and December 31, 2020, respectively | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred shares, $ par value; shares authorized; issued and outstanding | ||||||||
| Ordinary shares, $ par value; shares authorized; and shares issued and outstanding (excluding and shares subject to possible redemption) at March 31, 2021 and December 31, 2020 respectively | ||||||||
| Additional paid-in capital | ||||||||
| (Accumulated Deficit) Retained earnings | ( | ) | ||||||
| Total Shareholders’ Equity | ( | ) | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
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ANDINA ACQUISITION CORP. III
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Interest income | ||||||||
| Unrealized (loss) gain on marketable securities held in Trust Account | - | |||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Other income, net | ( | ) | ||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding, Ordinary shares subject to possible redemption | ||||||||
| Basic and diluted net loss per share, Ordinary shares subject to possible redemption | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable ordinary shares | ||||||||
| Basic and diluted net loss per share, Non-redeemable ordinary shares | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these condensed financial statements.
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ANDINA ACQUISITION CORP. III
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
THREE MONTHS ENDED MARCH 31, 2021
| Ordinary Shares | Additional Paid-in | Retained
Earnings (Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Change in value of ordinary shares subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
THREE MONTHS ENDED MARCH 31, 2020
| Ordinary Shares | Additional Paid | Retained | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | in Capital | Earnings | Equity | ||||||||||||||||
| Balance – January 1, 2020 | $ | $ | $ | $ | ||||||||||||||||
| Change in value of ordinary shares subject to possible redemption | ( | ) | ( | ) | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – March 31, 2020 | $ | $ | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
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ANDINA ACQUISITION CORP. III
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Unrealized gain on marketable securities held in Trust Account | ( | ) | ||||||
| Change in fair value of warrant liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account for redemption of ordinary shares | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Redemption of ordinary shares | ||||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Change in value of ordinary shares subject to possible redemption | ( | ) | ||||||
The accompanying notes are an integral part of these condensed financial statements.
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ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Note 1 — Organization and Plan of Business Operations
Andina Acquisition Corp. III (the “Company”) was incorporated in the Cayman Islands on July 29, 2016 as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business are not limited to a particular industry or geographic region, although the Company initially intended to focus on target businesses in the Americas.
All activity through March 31, 2021 related to the Company’s formation, its initial public offering (the “Initial Public Offering”), which is described below, and since the closing of the Initial Public Offering, the Company’s search for an initial business combination, specifically, activities in connection with the announced and subsequently terminated proposed acquisition of EMMAC Life Sciences Limited, (“EMMAC”) (which activities ceased in November 2020) and activities in connection with the proposed acquisition of Stryve Foods LLC (“Stryve”), as described below.
Initial Public Offering
The
registration statement for the Initial Public Offering (the “IPO”) was declared effective on January 24, 2019 pursuant to
Section 8(a) of the Securities Act of 1933, as amended. On January 31, 2019, the Company consummated the Initial Public Offering of units (the “Units” and, with respect
to the ordinary shares included in the Units offered, the “Public Shares”), which included a partial exercise by the underwriters
of their over-allotment option in the amount of Units, at $per Unit, generating gross proceeds of $
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Units”) at a
price of $per Private Unit in a private placement (the
“Private Placement”) to certain shareholders, or their affiliates (collectively, the “Initial Shareholders”)
and the underwriters, generating gross proceeds of $
Transaction
costs amounted to $
Following
the closing of the Initial Public Offering on January 31, 2019, an amount of $
In
order to meet its working capital needs following the consummation of the Initial Public Offering, the Company’s Initial
Shareholders, officers and directors or their affiliates may, but are not obligated to, loan the Company funds, from time to time
or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory
note. The notes would either be paid upon consummation of the Company’s initial Business Combination, without interest,
or, at the lender’s discretion. Up to $
| 8 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Initial Business Combination
In
connection with any proposed initial Business Combination, the Company will either (1) seek shareholder approval of such initial
Business Combination at a meeting called for such purpose at which public shareholders may seek to convert their Public Shares,
regardless of whether they vote for or against the proposed Business Combination, into their pro rata share of the aggregate amount
then on deposit in the Trust Account (net of taxes payable) or (2) provide public shareholders with the opportunity to sell their
Public Shares to the Company by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal
to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), in each case subject
to the limitations described herein. Notwithstanding the foregoing, the Initial Shareholders have agreed, pursuant to written
letter agreements with the Company, not to convert any Public Shares held by them into their pro rata share of the aggregate amount
then on deposit in the Trust Account. If the Company determines to engage in a tender offer, such tender offer will be structured
so that each public shareholder may tender any or all of his, her or its Public Shares rather than some pro rata portion of his,
her or its shares. The decision as to whether the Company will seek shareholder approval of a proposed Business Combination or
will allow shareholders to sell their Public Shares to it in a tender offer will be made by the Company based on a variety of
factors such as the timing of the transaction, whether the terms of the transaction would otherwise require it to seek shareholder
approval or whether the Company is deemed to be a foreign private issuer (which would require us to conduct a tender offer rather
than seeking shareholder approval under the U.S. Securities and Exchange Commission (the “SEC”) rules). If the Company
engages in a tender offer in connection with an initial Business Combination, the Company will file tender offer documents with
the SEC, which will contain substantially the same financial and other information about the initial Business Combination as is
required under the SEC’s proxy rules. The Company will consummate an initial Business Combination only if it has net tangible
assets of at least $5,000,001 upon such consummation of a Business Combination and, solely if it seeks shareholder approval, a
majority of the issued and outstanding ordinary shares voted are voted in favor of the Business Combination. The $
The Initial Shareholders have agreed (i) to vote their insider shares, Private Shares (as defined in Note 5) and any Public Shares purchased in or after the Initial Public Offering in favor of any proposed Business Combination and (ii) not to convert any shares (including the insider shares) in connection with a shareholder vote to approve, or sell their shares to the Company in any tender offer in connection with, a proposed initial Business Combination.
Failure to Consummate a Business Combination
The
Company initially had until July 31, 2020 to complete a Business Combination. On July 29, 2020, the Company held a special meeting
pursuant to which the Company’s shareholders approved extending the date by which the Company had to complete a Business
Combination from July 31, 2020 to October 31, 2020 (or December 31, 2020 if the Company had executed a definitive agreement for
a Business Combination by October 31, 2020). In connection with the approval of the extension, shareholders elected to redeem
an aggregate of ordinary shares. As a result, an aggregate of $
| 9 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
On
October 28, 2020, the Company held a special meeting pursuant to which the Company’s shareholders approved extending the
date by which the Company had to complete a Business Combination from October 31, 2020 to January 31, 2021 (or April 30, 2021
if the Company had executed a definitive agreement for a Business Combination by January 31, 2021) (such date or later date, as
applicable, the “Extended Date”). In connection with the approval of the extension, shareholders elected to redeem
an aggregate of ordinary shares. As a result, an aggregate of $
On
January 27, 2021, the Company held a special meeting pursuant to which the Company’s shareholders approved extending the date by which the Company had to
complete a Business Combination from January 31, 2021 to April 30, 2021 (or July 31, 2021 if the Company has executed a definitive agreement
for a Business Combination by April 30, 2021) (such date or later date, as applicable, the “Extended Date”). In connection
with the approval of the extension, shareholders elected to redeem an aggregate of ordinary shares. As a result, an aggregate
of $
On
January 28, 2021, the Company entered into a definitive business combination agreement (the “Business
Combination Agreement”), pursuant to which, subject to the terms and conditions set forth therein, (i) the
Company will re-domesticate as a Delaware corporation, (ii) Stryve will conduct a reorganization pursuant to which Stryve
Foods Holdings LLC (“Stryve Holdings”) will become a holding company for Stryve, the former owners of Stryve will
become the owners of Stryve Holdings, and Stryve will retain all of its business, assets and liabilities, and become a
wholly-owned subsidiary of Stryve Holdings, (iii) Stryve Holdings will contribute to Andina Holdings LLC, the
Company’s subsidiary (“Andina Holdings”), the equity interests of Stryve, in exchange for newly issued
non-voting membership interests of Andina Holdings and the Company’s voting (but non-economic) common stock, and
(iv) the Company will contribute all of the Company’s cash and cash equivalents to Andina Holdings, after
payment of Company shareholders that elect to have their shares redeemed or converted in connection with the
consummation of the Merger, in exchange for newly issued voting membership interests of Andina Holdings, all upon the terms
and subject to the conditions set forth in the Business Combination Agreement. Simultaneously with the execution of the
Business Combination Agreement, the Company and Stryve entered into subscription agreements with investors for an aggregate
of $
Pursuant to the terms of the Company’s amended and restated memorandum and articles of association, failure to consummate a Business Combination by the Extended Date will trigger the automatic winding up, dissolution and liquidation of the Company. As a result, this has the same effect as if the Company had formally gone through a voluntary liquidation procedure under Cayman Islands Companies Law. Accordingly, no vote would be required from shareholders to commence such a voluntary winding up, dissolution and liquidation. The holders of the insider shares will not participate in any liquidation distribution from the Trust Account with respect to their insider shares.
Liquidity and Going Concern
As
of March 31, 2021, the Company had $
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating target businesses, performing due diligence on prospective target businesses, traveling to and from the offices, plants or similar location of prospective target businesses or their representatives or owners, reviewing corporate documents and material agreements of prospective target businesses and structuring, negotiating and completing a Business Combination.
The Company will need to raise additional capital through loans or additional investments from its Sponsor, an affiliate of the Sponsor, or its officers or directors. The Company’s officers, directors and Sponsor, or their affiliates, may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through the Extended Date, which is the date the Company is required cease all operations except for the purpose of winding up if it has not completed a Business Combination. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 – Restatement of Interim Financial Statements
Impact of the Restatement
The impact of the restatement on the Condensed Statement balance sheet as of March 31, 2021 included in this Report is presented below.
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Statement of Operations for the three months ended March 31, 2021 (unaudited) | ||||||||||||
| Ordinary shares subject to redemption: | ||||||||||||
| Number of shares outstanding | ||||||||||||
| Amount | $ | $ | $ | |||||||||
| Ordinary shares excluding shares subject to possible redemption | ( | ) | ||||||||||
| Number of shares outstanding | ||||||||||||
| Common stock value | $ | ( | ) | $ | $ | ( | ) | |||||
| Additional paid-in capital | $ | ( | ) | $ | $ | |||||||
| Accumulated deficit | $ | $ | $ | |||||||||
The impact of the restatement on the Condensed Statement of operations for the three months ended March 31, 2021 included in this filing is presented below.
| Basic and diluted weighted average shares outstanding, Ordinary shares subject to possible redemption | ||||||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable ordinary shares | ( | ) | ||||||||||
| Basic and diluted net loss per share, Non-redeemable ordinary shares | $ | ( | ) | $ | ( | ) | $ | ( | ) |
The impact of the restatement on the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2021 included in this filing is presented below.
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Statement of Cash Flows for the three months ended March 31, 2021 (unaudited) | ||||||||||||
| Non-Cash Investing and Financing Activities: | ||||||||||||
| Change in value of ordinary shares subject to possible redemption | ( | ) | ||||||||||
Note 3 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars and 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 10 of Regulation S-X of the Securities and Exchange Commission (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 comprehensive 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 Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 18, 2021, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
| 10 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Use of Estimates
The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ 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 March 31, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At March 31, 2021, the assets held in the Trust Account were substantially held in money market fund (Select Treasury Institutional Funds), which primarily invest in short term U.S. Treasury securities. The Company accounts for its securities held in the trust account in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 320 “Debt and Equity Securities.” These securities are classified as trading securities with unrealized gains/losses, if any, recognized through the statement of operations.
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheets.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities rather than equity on a SPAC’s balance sheet.
Historically, the Company’s Private Warrants and Public Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the warrants, based on the Company’s application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). Some of the views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. After discussion and evaluation, including with the Company’s accounting advisor and the Company’s audit committee, and taking into consideration the SEC Staff Statement, management has concluded that the Company’s Private Warrants should be presented as liabilities with subsequent fair value remeasurement.
Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the warrants initially was estimated using a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology.
Net
loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the
period. The Company applies the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption
at March 31, 2021 and December 31, 2020, which are not currently redeemable and are not redeemable at fair value, have been excluded
from the calculation of basic net loss per ordinary share since such shares, if redeemed, only participate in their pro rata share
of the Trust Account earnings. The Company has not considered the effect of (1) warrants sold in the Initial Public Offering and
the Private Placement to purchase
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Ordinary Shares subject to possible redemption | ||||||||
| Numerator: Earnings allocable to ordinary shares subject to possible redemption | ||||||||
| Interest earned on marketable securities held in Trust Account | $ | $ | ||||||
| Unrealized gain on marketable securities held in Trust Account | ||||||||
| Net Income allocable to ordinary shares subject to possible redemption | $ | $ | ||||||
| Denominator: Weighted Average ordinary shares subject to possible redemption | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per redeemable ordinary share | $ | $ | ||||||
| Non-Redeemable Ordinary Shares | ||||||||
| Numerator: Net Loss minus Net Earnings | ||||||||
| Net Income (loss) | $ | ( | ) | $ | ||||
| Net Income allocable to ordinary shares stock subject to possible redemption | ( | ) | ( | ) | ||||
| Non-Redeemable Net Loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Non-Redeemable ordinary shares | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per Non-Redeemable ordinary share | $ | ( | ) | $ | ( | ) | ||
| 11 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
Topic 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. The Company’s management determined that the Cayman Islands is the
Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. As of March 31, 2021 and December 31, 2020, there were
The Company may be subject to potential examination by foreign taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
The Company is considered an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision is zero for all periods presented.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution,
which, at times may exceed the federal depository insurance coverage 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 Measurement,” approximates the carrying amounts represented in the accompanying condensed financial statements, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
• Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
• Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
• Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Standards
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 condensed financial statements.
Note 4 — Initial Public Offering
Pursuant
to the Initial Public Offering, the Company sold Units at a purchase price of $per Unit, which included a partial exercise by
the underwriters of their over-allotment option in the amount of Units at $per Unit.
| 12 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
If the Company is unable to complete an initial Business Combination by the Extended Date and the Company redeems the public shares for the funds held in the Trust Account, holders of the rights and warrants will not receive any of such funds for their rights and warrants and the rights and warrants will expire worthless.
Note 5 — Private Units
Simultaneously
with the closing of the Initial Public Offering, certain of the Initial Shareholders, including the underwriters in the Initial
Public Offering (and their respective designees), purchased an aggregate of Private Units at a price of $ per Private
Unit, for an aggregate purchase price of $
The Private Units are identical to the Units sold in the Initial Public Offering except that the Private Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the initial purchasers or their permitted transferees. Additionally, the purchasers of the Private Units have agreed (A) to vote the Private Shares in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended and restated memorandum and articles of association with respect to its pre-Business Combination activities prior to the consummation of such a Business Combination unless the Company provides public shareholders with the opportunity to convert their Public Shares in connection with any such vote, (C) not to convert any Private Shares into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a proposed initial Business Combination or a vote to amend the provisions of the Company’s amended and restated memorandum and articles of association relating to shareholders’ rights or pre-Business Combination activity and (D) that the Private Shares shall not participate in any liquidating distribution from the Trust Account upon winding up if a Business Combination is not consummated. The purchasers of the Private Units have also agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to permitted transferees) until the completion of an initial Business Combination.
Note 6 — Related Party Transactions
As
of March 31, 2021 directors and officers have reimbursable expenses of $
Note 7 — Commitments
Business Combination Marketing Agreement
The
Company engaged the joint book-running managers in the Initial Public Offering as advisors in connection with a Business Combination
to assist the Company in holding meetings with its shareholders to discuss the potential Business Combination and the target business’
attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection
with a Business Combination, assist the Company in obtaining shareholder approval for the Business Combination and assist the
Company with its press releases and public filings in connection with the Business Combination. The Company will pay the joint
book-running managers aggregate cash fees for such services upon the consummation of a Business Combination in an amount equal
to $
Fee Arrangements
Following
the Initial Public Offering, the Company entered into a letter agreement with a member of the Company’s board of directors
that provides for a success fee to be paid to such director upon consummation of a Business Combination with a target business
introduced to the Company by such director in an amount equal to
In
addition, the Company entered into several letter agreements with unaffiliated third parties that provide for a success fee to
be paid to each such third party upon consummation of a Business Combination with a target business introduced to the Company
by such third party in amounts ranging from
| 13 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Registration Rights
Pursuant to a registration rights agreement entered into on January 28, 2019, the holders of the insider shares, as well as the holders of the Private Units (and underlying securities) and any securities issued in payment of working capital loans made to the Company, are entitled to registration rights. The holders of a majority of these securities are entitled to make up to three demands that the Company register such securities. Notwithstanding anything to the contrary, the underwriters (and their designees) may only make a demand registration (i) on one occasion and (ii) during the five-year period beginning on January 28, 2019. The holders of the majority of the insider shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Units (and underlying securities) and securities issued in payment of working capital loans (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. Notwithstanding anything to the contrary, the underwriters (and their designees) may participate in a “piggy-back” registration only during the seven-year period beginning January 28, 2019. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Extension
On January 5, 2021, the Company received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that the Company is not in compliance with Listing Rule 5620(a) and 5810(c)(2)(G), due to the Company’s failure to hold an annual meeting of stockholders within twelve months of the end of the Company’s fiscal year end. The Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities on the Nasdaq Capital Market. The Company held their 2020 general annual meeting on January 27, 2021 and intends to submit a plan of compliance with Nasdaq. On February 2, 2021, the Company received a letter from Nasdaq indicating it had regained compliance.
On
January 27, 2021, the Company held a special meeting pursuant to which the Company’s shareholders approved extending the
date by which the Company had to complete a Business Combination from January 31, 2021 to April 30, 2021 (or July 31, 2021 if
the Company has executed a definitive agreement for a Business Combination by April 30, 2021) (such date or later date, as applicable,
the “Extended Date”). In connection with the approval of the extension, shareholders elected to redeem an aggregate
of ordinary shares. As a result, an aggregate of $
Business Combination Agreement
On January 28, 2021, the Company entered into a definitive business combination agreement (the “Business Combination Agreement”), pursuant to which, subject to the terms and conditions set forth therein (the “Merger”), (i) the Company will re-domesticate as a Delaware corporation, (ii) Stryve, will conduct a reorganization pursuant to which Stryve Foods Holdings LLC (“Stryve Holdings”) will become a holding company for Stryve, the former owners of Stryve will become the owners of Stryve Holdings, and Stryve will retain all of its business, assets and liabilities, and become a wholly owned subsidiary of Stryve Holdings, (iii) Stryve Holdings will contribute to Andina Holdings LLC, a subsidiary of Andina (“Andina Holdings”), the equity interests of Stryve, in exchange for newly issued non-voting membership interests of Andina Holdings and voting (but non-economic) common stock of the Company, and (iv) the Company will contribute all of its cash and cash equivalents to Andina Holdings, after payment of the Company shareholders that elect to have their Company shares redeemed or converted in connection with the consummation of the Merger, in exchange for newly issued voting membership interests of Andina Holdings, all upon the terms and subject to the conditions set forth in the Business Combination Agreement.
Subject
to and upon the terms and conditions of the Business Combination Agreement, Stryve Holdings will contribute to Andina
Holdings all of the issued and outstanding equity interests of Stryve (the “Seller Contribution”) and Andina
Holdings shall issue to Stryve Holdings a number of newly issued Andina Holdings Class B Units (the “Seller
Consideration Units”) equal in value to (the “Seller Consideration”) (i) One Hundred and Thirty Million
U.S. Dollars ($
The Business Combination Agreement contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain conditions as further described in the Business Combination Agreement.
Simultaneously
with the execution of the Business Combination Agreement, the Company and Stryve entered into subscription agreements with investors
for an aggregate of $
| 14 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Note 8 — Shareholders’ Equity
Ordinary Shares
The Company is authorized to issue ordinary shares with a par value of $per share. As of March 31, 2021 and December 31, 2020, there were and ordinary shares issued and outstanding, excluding and ordinary shares subject to possible redemption, respectively.
In connection with the organization of the Company, a total of ordinary shares were sold to the Initial Shareholders for an aggregate purchase price of $. The 2,875,000 shares included an aggregate of up to shares subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part so that the Company’s Initial Shareholders would own % of the issued and outstanding shares after the Initial Public Offering. As a result of the underwriters’ election to partially exercise their over-allotment option to purchase an additional Units, shares are no longer subject to forfeiture and shares were forfeited, resulting in an aggregate of shares issued and outstanding at the Initial Public Offering date.
Rights
If the Company is unable to complete a Business Combination by the Extended Date and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.
Warrants
The Public Warrants will become exercisable on the later of the completion of an initial Business Combination or January 28, 2020. However, except as set forth below, no Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon exercise of the Public Warrants is not effective within 90 days from the consummation of an initial 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 from registration provided by Section 3(a)(9) of the Securities Act provided that such exemption is available. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The warrants will expire five years from the consummation of an initial Business Combination.
The Company may call the Public Warrants for redemption (excluding the Private Warrants), in whole and not in part, at a price of $.01 per warrant:
| ● | at any time while the warrants are exercisable, | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder, | |
| ● | if, and only if, the reported last sale price of the ordinary shares equals or exceeds $18.00 per share, for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to warrant holders, and | |
| ● | if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
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 ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable on a cashless basis 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 purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
| 15 |
ANDINA ACQUISITION CORP. III
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
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 ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional ordinary shares 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 $8.50 per ordinary share (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 Company affiliates, without taking into account any insider shares held by such affiliates prior to such issuance)
Note 9 — Fair Value Measurements
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 that are measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | March 31, 2021 | December 30, 2020 | |||||||||
| Assets: | ||||||||||||
| Marketable securities held in Trust Account | 1 | $ | ||||||||||
| Liabilities: | ||||||||||||
| Warrant Liability – Private Warrants | 3 | |||||||||||
Marketable securities held in Trust Account
As
of March 31, 2021 and December 31, 2020, investment in the Trust Account consisted of $
Private Warrants
The Private Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s consolidated balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statement of operations.
The Private Warrants were valued using a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology, which is considered to be a Level 3 fair value measurement. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
At
the time of the IPO, in January 31, 2019, the Private Warrants liability had a fair value $per Private Warrant, or an aggregate amount of
$
The key inputs into the binomial lattice model incorporating the Cox-Ross-Rubenstein methodology for the Private Warrants were as follows at March 31, 2021:
| Input | March 31, 2021 | |||
| Risk-free interest rate | % | |||
| Dividend yield | % | |||
| Selected volatility | % | |||
| Exercise price | $ | |||
| Market Stock Price | $ | |||
On
March 31, 2021, the Private Placement Warrants were determined to be $ per warrant for an aggregate value of $
The following table presents the changes in the fair value of warrant liabilities for the period:
| Private | ||||
| Fair value as of March 31, 2021 | $ | |||
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has based these forward-looking statements on the Company’s current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us”, “our” or the “Company” are to Andina Acquisition Corp. III, except where the context requires otherwise. The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this report.
Recent Developments
On January 5, 2021, we received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that we are not in compliance with Listing Rule 5620(a), due to our failure to hold an annual meeting of stockholders within twelve months of the end of our fiscal year end. The Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of our securities on the Nasdaq Capital Market. We held the 2020 general annual meeting on January 27, 2021. On February 2, 2021, the Company received a letter from Nasdaq indicating it had regained compliance with Listing Rule 5620(a).
On January 27, 2021, we held a special meeting pursuant to which our shareholders approved extending the date by which we had to complete a Business Combination from January 31, 2021 to April 30, 2021 (or July 31, 2021 if we have executed a definitive agreement for a Business Combination by April 30, 2021) (such date or later date, as applicable, the “Extended Date”). In connection with the approval of the extension, shareholders elected to redeem an aggregate of 300 ordinary shares. As a result, an aggregate of $3,073 (or approximately $10.24 per share) was released from our Trust Account to pay such shareholders and 4,417,096 ordinary shares are now issued and outstanding.
On January 28, 2021, we entered into a definitive business combination agreement (the “Business Combination Agreement”), pursuant to which, subject to the terms and conditions set forth therein, (i) we will re-domesticate as a Delaware corporation, (ii) Stryve Foods, LLC (“Stryve”) will conduct a reorganization pursuant to which Stryve Foods Holdings LLC (“Stryve Holdings”) will become a holding company for Stryve, the former owners of Stryve will become the owners of Stryve Holdings, and Stryve will retain all of its business, assets and liabilities, and become a wholly-owned subsidiary of Stryve Holdings, (iii) Stryve Holdings will contribute to Andina Holdings LLC, our subsidiary (“Andina Holdings”), the equity interests of Stryve, in exchange for newly issued non-voting membership interests of Andina Holdings and our voting (but non-economic) common stock, and (iv) we will contribute all of our cash and cash equivalents to Andina Holdings, after payment of our shareholders that elect to have their shares redeemed or converted in connection with the consummation of the Merger, in exchange for newly issued voting membership interests of Andina Holdings, all upon the terms and subject to the conditions set forth in the Business Combination Agreement. Simultaneously with the execution of the Business Combination Agreement, the Company and Stryve entered into subscription agreements with investors for an aggregate of $42,500,000 at a price of $10.00 per share in a private placement in the Company (the “Closing PIPE Investment”), to be consummated simultaneously with the Closing of the Business Combination. Additionally, simultaneously with the execution of the Business Combination Agreement, the Company and Stryve entered into subscription agreements with the holders (the “Bridge Investors”) of $10,600,000 in unsecured promissory notes of Stryve (the “Bridge Notes”) where the obligations of Stryve under the Bridge Notes will be used to offset and satisfy the obligations of the Bridge Investors and the Bridge Investors will be issued shares of Class A Common Stock at a price of $8.00 per share (the “Bridge PIPE Investment” and, together with the Closing PIPE Investment, the “PIPE Investment”). Consummation of the PIPE Investment is conditioned on the concurrent Closing of the Business Combination (and other customary closing conditions).
Overview
We are a blank check company formed on July 29, 2016 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar Business Combination with one or more target businesses. We intend to effectuate our initial Business Combination using cash from the proceeds of our Initial Public Offering and the sale of the Private Units, our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional ordinary shares or preferred shares:
| ● | may significantly reduce the equity interest of our shareholders; |
| ● | may subordinate the rights of holders of ordinary shares if we issue preferred shares with rights senior to those afforded to our ordinary shares; |
| ● | will likely cause a change in control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and |
| ● | may adversely affect prevailing market prices for our securities. |
Similarly, if we issue debt securities, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after a Business Combination are insufficient to pay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
| ● | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
| 17 |
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2021 were organizational activities and those necessary to prepare for our Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2021, we had a net loss of $1,472,407, which consists operating costs of $702,476 and change in the fair value of warrants liabilities of $770,250, offset by interest income on marketable securities held in the Trust Account of $319.
For the three months ended March 31, 2020, we had a net income of $333,179, which consists of interest income on marketable securities held in the Trust Account of $418,597, and an unrealized gain on marketable securities held in the Trust Account of $58,919. This income is offset by our operating costs of $144,337.
Liquidity and Capital Resources
On January 31, 2019, we consummated our Initial Public Offering of 10,800,000 Units, which included a partial exercise by the underwriters of their over-allotment option in the amount of 800,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $108,000,000. Simultaneously with the closing of our Initial Public Offering we consummated the sale of 395,000 Private Units to certain initial shareholders and the underwriters at a price of $10.00 per Unit, generating gross proceeds of $3,950,000.
Following our Initial Public Offering and the sale of the Private Units, a total of $108,000,000 was placed in the Trust Account. We incurred $3,204,451 in Initial Public Offering related costs, including $2,700,000 of underwriting fees and $504,451 of other costs.
As of March 31, 2021, we had marketable securities held in the Trust Account of $13,542,749, which was held within a Treasury Institutional Fund. Interest income on the balance in the Trust Account may be used by us to pay taxes.
For the three months ended March 31, 2021, cash used in operating activities was $120,988. Net loss of $1,472,407 was impacted by interest earned on marketable securities held in the Trust Account of $319, a change in the fair value of warrant liabilities of $770,250 and changes in operating assets and liabilities, which provided $581,488 of cash for operating activities.
For the three months ended March 31, 2020, cash used in operating activities was $194,242. Net income of $333,179 was offset by interest earned on marketable securities held in the Trust Account of $418,598, an unrealized gain on marketable securities held in our Trust Account of $58,919, and changes in operating assets and liabilities, which used $49,905 of cash for operating activities.
For the three months ended March 31, 2021, cash flow from investing and financing activities was $3,073, withdrawn from Trust Account for redemption of ordinary shares. For Non-cash investing and financing activities, the change in value of shares subject to redemption was $5,682,236.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable) to complete our initial Business Combination. We may withdraw interest from the Trust Account to pay franchise and 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.
| 18 |
Following our Initial Public Offering, we entered into a letter agreement with a member of our board of directors that provides for a success fee to be paid to such director upon consummation of a Business Combination with a target business introduced to us by such director in an amount equal to 0.6% of the total consideration paid by us in the transaction, subject to certain minimum and maximum amounts set forth in the agreement.
In addition, we entered into several letter agreements with unaffiliated third parties that provide for a success fee to be paid to each such third party upon consummation of a Business Combination with a target business introduced to us by such third party in amounts ranging from 0.75% to 1% of the total consideration paid by us in the transaction, subject to certain minimum and maximum amounts set forth in the various agreements.
Related to the business combination with Stryve, we entered into engagement letters with Cowen and Craig-Hallum, to be financial advisors and placement agent to the transaction, with an aggregate success fee of 2% of the transaction value and 6% fee of gross proceeds raised as agents and a capital markets advisory fee.
As of March 31, 2021, we had cash of $77,204 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
We will need to raise additional capital through loans or additional investments from our Sponsor, an affiliate of our Sponsor, or our officers or directors. Our officers, directors and Sponsor, or their affiliates, may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern through the Extended Date, which is the date we are required cease all operations except for the purpose of winding up if we have not completed a Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of March 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than as described below.
We entered into an agreement to pay the joint book-running managers in our Initial Public Offering as advisors in connection with a Business Combination to assist us in holding meetings with its shareholders to discuss the potential Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with a Business Combination, assist us in obtaining shareholder approval for the Business Combination and assist us with its press releases and public filings in connection with the Business Combination. We will pay the joint book-running managers aggregate cash fees for such services upon the consummation of a Business Combination in an amount equal to $3,240,000 (exclusive of any applicable finders’ fees which might become payable). In the case of a Business Combination with Stryve, the fees have been reduced by 50%.
We entered into a letter agreement with a member of our board of directors that provides for a success fee to be paid to such director upon consummation of a Business Combination with a target business introduced to us by such director in an amount equal to 0.6% of the total consideration paid by us in the transaction, subject to certain minimum and maximum amounts set forth in the agreement.
In addition, we entered into several letter agreements with unaffiliated third parties that provide for a success fee to be paid to each such third party upon consummation of a Business Combination with a target business introduced to us by such third party in amounts ranging from 0.75% to 1.0% of the total consideration paid by us in the transaction, subject to certain minimum and maximum amounts set forth in the various agreements.
Related to the business combination with Stryve, we entered into engagement letters with Cowen and Craig-Hallum, to be financial advisors and placement agent to the transaction, with an aggregate success fee of 2% of the transaction value and 6% fee of gross proceeds raised as agents and a capital markets advisory fee.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our condensed balance sheets.
Net Loss Per Ordinary Share
We apply the two-class method in calculating earnings per share. Net loss per ordinary share, basic and diluted for ordinary shares subject to possible redemption is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number of shares of ordinary shares subject to possible redemption outstanding for the period. Net loss per ordinary share, basic and diluted for and non-redeemable ordinary shares is calculated by dividing net loss less income attributable to ordinary shares subject to possible redemption, by the weighted average number of shares of non-redeemable ordinary shares outstanding for the period presented.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities rather than equity on a SPAC’s balance sheet.
Historically, our Private Warrants and Public Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the warrants, based on our application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). Some of the views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. After discussion and evaluation, including with our accounting advisor our registered public accounting firm and our audit committee, and taking into consideration the SEC Staff Statement, management has concluded that our Private Warrants should be presented as liabilities with subsequent fair value remeasurement.
Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the warrants initially was estimated using a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology.
The change in accounting for the Private Warrants did not have any impact on our liquidity, cash flows, revenues or costs of operating our business and the other non-cash adjustments. The change in accounting for the Private Warrants does not materially impact the amounts previously reported for the Company’s cash and cash equivalents, investments held in the trust account, operating expenses or total cash flows from operations for any of these periods.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Following the consummation of the Offering, the net proceeds of the Offering, including amounts in the Trust Account, may be invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal financial officer (the “Executives”), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this Report.
Based on their initial evaluation, the Executives concluded that the Company’s disclosure controls and procedures as of March 31, 2021 were effective. Subsequently, in connection with the restatements discussed in Note 2 “Restatement of Previously Issued Financial Statements” to the financial statements included herein, the Executives reevaluted the Company’s disclosure controls and procedures as of March 31, 2021. During their reevaluation, the Executives identified a material weakness in internal control over financial reporting that resulted in reclassifying the Company’s ordinary shares as temporary and permanent equity in its previously issued financial statements. On May 24, 2021, our Audit Committee authorized management to restate the Company’s interim condensed financial statements as of and for the three months ended March 31, 2021, as discussed in more detail in Note 2 of the accompanying condensed financial statements (the “Restatement Footnote”). Solely as a result of this material weakness, the Executives have revised their earlier assessment and now concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2021.
Remediation Plan
To remediate the material weakness surrounding the Company’s classification of its ordinary shares as temporary and permanent equity, the Company has reviewed these internal controls and enhanced the supervisory review of accounting procedures in this financial reporting area. All necessary revisions are properly reflected in the Restatement Footnote to the financial statements included herein.
Changes in Internal Control Over Financial Reporting
Other than execution of the material weakness remediation activities described above, there has been no change in the Company’s internal control over financial reporting that occurred during the three months ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on February 18, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Report, other than as described below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on February 18, 2021, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public shareholders may be less than $10.00 per share.
The proceeds held in the Trust Account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our Amended and Restated Memorandum and Articles of Association our public shareholders are entitled to receive their pro-rata share of the proceeds held in the Trust Account, plus any interest income not released to us, net of taxes payable. Negative interest rates could impact the per-share redemption amount that may be received by public shareholders.
Our Private Warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our future financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). As a result of the SEC Statement, the Company reevaluated the accounting treatment and determined to classify the Private Warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly as a result of factors which are outside of our control. We expect that we will recognize non-cash gains or losses on our Private Warrants each reporting period and those amounts could be material.
We identified a material weakness in our internal control over financial reporting affecting our interim financial statements for the three month period ended March 31, 2021. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any changes and material weaknesses identified through such evaluation in those internal controls. 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 our annual or interim financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this Report, we identified a material weakness in our internal control over financial reporting related to the classification of our ordinary shares between temporary and permanent equity in connection with to guidance related to the accounting treatment for the PIPE Investment which is the subject of the subscription agreements we entered into as of January 28, 2021, in connection with the proposed Business Combination with Stryve. On May 24, 2021, our Audit Committee authorized management to restate our Interim Financial Statements for the first fiscal quarter of this year and, accordingly, management concluded that the control deficiency that resulted in the incorrect classification of our ordinary shares between temporary and permanent equity constituted a material weakness as of March 31, 2020. This material weakness resulted in a material misstatement of our additional paid-capital, accumulated deficit and basic and diluted loss per share for the three-month period ended March 31, 2021.
We have implemented a remediation plan, described under Part I, Item 4, Evaluation of Disclosure Controls and Procedures, to remediate the material weakness surrounding our historical presentation of our ordinary shares subject to redemption, but can give no assurance that the measures we have taken will prevent any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| + | Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). Andina agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request. |
| * | Filed herewith. |
| ** | Furnished. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on February 3, 2021 and incorporated by reference herein. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ANDINA ACQUISITION CORP. III | ||
| Date: May 25, 2021 | By: | /s/ Julio Torres |
| Name: | Julio Torres | |
| Title: | Chief Executive Officer and Director | |
| (Principal Executive Officer) | ||
| By: | /s/ Mauricio Orellana | |
| Name: | Mauricio Orellana | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer) | ||
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