NEW YORK and SHANGHAI, July 19, 2017 /PRNewswire/ -- Pacific Special Acquisition Corp. (Nasdaq: PAAC) ("Pacific"), which has agreed to acquire Borqs International Holding Corp ("BORQS"), today jointly announced with BORQS certain preliminary financial results of BORQS for the quarter ended March 31, 2017. BORQS is a global leader in software and products providing customizable, differentiated and scalable Android-based smart connected devices and cloud service solutions.
First Quarter 2017 Financial Highlights
For the quarter ended March 31, 2017, BORQS unaudited consolidated net revenue was $31.6 million, compared to $23.3 million (unaudited) for the comparable quarter of 2016. The increase reflects growth in the connected solutions business unit ("Connected Solutions BU"), where revenues rose to $24.8 million (unaudited) from $14.6 million (unaudited) for the comparable quarter of 2016. Revenue from the BORQS mobile virtual network operator business unit ("MVNO BU") declined to $6.3 million (unaudited) from $8.0 million (unaudited) in the comparable quarter of 2016, primarily due to stricter regulatory requirements of customer identification for each SIM card sold.
Gross profit of the Connected Solutions BU for the quarter ended March 31, 2017 was $3.9 million (unaudited), representing a 15.6% gross margin, compared to $3.2 million (unaudited) and 21.8% gross margin for the comparable quarter of 2016. The reduction in Connected Solutions BU gross margin reflected the impact of a large order from an overseas mobile operator, which carried more competitive pricing. MVNO BU gross profit for the quarter was $1.1 million (unaudited), representing a 17.7% gross margin, compared to $0.9 million (unaudited) and 10.6% gross margin for the comparable quarter of 2016. The increase in MVNO BU gross margin reflected increased efficiency of the unit.
BORQS net income before taxes was $0.5 million (unaudited) for the quarter ended March 31, 2017, compared to a loss of ($1.16 million) (unaudited) for the comparable quarter of 2016. Income taxes were $0.4 million (unaudited) and $0.7 million (unaudited) in the 2017 and 2016 quarters, respectively. Net income after taxes was $0.02 million (unaudited) for the quarter ended March 31, 2017, compared to a loss of ($1.87 million) (unaudited) for the comparable quarter of 2016. The BORQS' effective tax rate was higher than statutory rate because the MVNO BU net operating loss could not be used to offset taxable income of the Connected Solutions BU. BORQS net income for the quarter ended March 31, 2017 included a non-cash interest charge of $0.3 million (unaudited) due to outstanding warrants held by our commercial lenders and a non-cash charge $0.2 million (unaudited) as a result in a change in the fair value of such warrants.
Pat Chan, Chairman and CEO of BORQS, explained, "We are pleased by the significant growth in Connected Solutions BU revenues that we encountered in the first quarter of 2017 and believe that we will continue to execute well for the rest of the year."
About Pacific
Pacific is a blank check company, also commonly referred to as a Special Purpose Acquisition Company, or SPAC, formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities. Pacific's efforts to identify a target business have not been limited to a particular industry or geographic region, although it intends to focus efforts on seeking a business combination with a company or companies that have their primary operations located in Asia, with an emphasis on China. Pacific is sponsored by Zhengqi International Holding Limited, a subsidiary of Pacific Securities Co. Ltd., a publicly traded company in China (Ticker 601099.SS). LH Group Holdings Inc., the largest shareholder of Pacific Securities Co. Ltd., invests in financial services, clean energy as well as golf course and resort businesses globally and currently has billions of U.S. dollars in assets.
About BORQS
Borqs International Holding Corp., is a global leader in software and products for IoT providing customizable, differentiated and scalable Android-based smart connected devices and cloud service solutions. Deloitte named BORQS as one of the fastest growing technology companies in China & Asia Pacific in 2011, 2012 and 2013. In 2013, 2014, 2015 and 2016, BORQS was awarded Company of the Year for Innovation & Leadership in Mobile Technology for Asia Pacific from the International Alternative Investment Review. Recently BORQS received the "50 Most Promising IoT Solution Providers 2016" recognition from CIO Review magazine. For more info, visit: http://www.borqs.com/
On December 27, 2016, and as amended on May 10, 2017 and June 29, 2017, entered into a definitive merger agreement with BORQS, as described in Pacific's current reports on Form 8-K filed January 3, 2017, May 12, 2017 and July 3, 2017. It is expected that after the closing, Pacific will change its name to "Borqs Technologies, Inc."
Additional Information
The proposed merger between BORQS and Pacific will be submitted to the shareholders of Pacific for their approval. In connection with that approval, Pacific filed with the Securities and Exchange Commission (the "SEC") a definitive proxy statement on July 14, 2017 in connection with the proposed merger and other matters on July 17, 2017 mailed a definitive proxy statement and other relevant documents to its shareholders as of the record date of July 14, 2017, which has been established for voting on the proposed merger.
Shareholders of Pacific and other interested persons are advised to read the definitive proxy statement and any other relevant documents that have been or will be filed with the SEC in connection with Pacific's solicitation of proxies, because these documents will contain important information out Pacific, Borqs, the proposed merger and other matters. Such persons can also read Pacific's annual report on Form 10-K for the fiscal year ended June 30, 2016 for a description of the security holdings of Pacific's officers and directors and their respective interests as security holders in the successful consummation of the proposed merger, and other information. Pacific's definitive proxy statement is being delivered to shareholders of Pacific as of a record date of July 14, 2017 for voting on the proposed merger and other matters as set forth in the definitive proxy statement. Shareholders will also be able to obtain a free copy of the proxy statement, as well as other filings containing information about Pacific, without charge, at the SEC's website (www.sec.gov) or by calling 1-800-SEC-0330. Copies of the proxy statement and other filings with the SEC can also be obtained, without charge, by directing a request to Pacific at 855 Pudong South Road, the World Plaza, 27th Floor, Pudong, Shanghai, China, 200120.
Participants in the Solicitation
Pacific and its directors and executive officers and other persons, including EarlyBird Capital, Inc., the managing underwriter in Pacific's initial public offering, may be deemed to be participants in the solicitation of proxies from Pacific's shareholders in respect of the proposed merger. Information regarding Pacific's directors and executive officers is available in its annual report on Form 10-K for the fiscal year ended June 30, 2016 and in Pacific's definitive proxy statement filed with the SEC on July 14, 2017. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests is contained in the definitive proxy statement relating to the transaction with BORQS when it becomes available and which can be obtained free of charge from the sources indicated above.
Disclaimer
This press release is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any securities or in respect of the proposed business combination and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of Pacific or BORQS, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.
Forward-Looking Statements
This press release includes "forward-looking statements" that involve risks and uncertainties that could cause actual results to differ materially from what is expected. Words such as "expects", "believes", "anticipates", "intends", "estimates", "seeks", "may", "might", "plan", "possible", "should" and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future results, based on currently available information and reflect both BORQS' and Pacific's managements' current beliefs. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements. Such factors include, among other things: the possibility that the merger will not close or that the closing may be delayed because conditions to the closing may not be satisfied, including shareholder and other approvals; the performances of Pacific and BORQS; the ability of the combined company to meet the NASDAQ Capital Market's listing standards; the reaction of BORQS customers to the merger; unexpected costs, liabilities or delays in the transaction; the outcome of any legal proceedings related to the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; and general economic conditions. In addition, please refer to the Risk Factors section of Pacific's proxy statement and its Forms 10-K and 10-Q for additional information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Except as expressly required by applicable securities law, Pacific disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
