UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



|R | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|- | ----------------------------------------------------------------------------------------
|  |                                                                                         
|  | For the quarterly period ended June 30, 2012                                            
|  |                                                                                         
|  | or                                                                                      
|  |                                                                                         
| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission File Number: 000-54202



JWC ACQUISITION CORP.

(Exact name of registrant as specified in
its charter)



|Delaware                        | 27-3092187         
|------------------------------- | -------------------
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)



Bay Colony Corporate Center – North
Entrance

1000 Winter Street – Suite 4300

Waltham, Massachusetts 02451

(617) 753-1100

(Address, including
zip code, and telephone number, including area code,

of registrant’s principal executive
offices)



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



Yes R
No  ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).



Yes R
No  ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):



|Large accelerated filer  ̈ | Accelerated filer R                           | Non-accelerated filer  ̈ | Smaller reporting company  ̈
|------------------------- | --------------------------------------------- | ----------------------- | ---------------------------
|                          | (Do not check if a smaller reporting company)



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes R
No  ̈



As of July 23, 2012, the registrant
had 14,534,884 shares of its common stock, par value $0.0001 per share, outstanding.




















JWC ACQUISITION CORP.



TABLE OF CONTENT



|PART I. FINANCIAL INFORMATION                                                                 | 1 
|--------------------------------------------------------------------------------------------- | --
|ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)                                                      | 1 
|Condensed Consolidated Balance Sheets                                                         | 1 
|Condensed Consolidated Statement of Operations                                                | 2 
|Condensed Consolidated Statement of Stockholders’ Equity                                      | 3 
|Condensed Consolidated Statement of Cash Flows                                                | 4 
|Notes to Condensed Consolidated Interim Financial Statements                                  | 5 
|ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 14
|Special Note Regarding Forward-Looking Statements                                             | 14
|Overview                                                                                      | 14
|Results of Operations                                                                         | 16
|Liquidity and Capital Resources                                                               | 16
|Critical Accounting Policies and Estimates                                                    | 17
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 17
|ITEM 4. CONTROLS AND PROCEDURES                                                               | 18
|PART II. OTHER INFORMATION                                                                    | 18
|ITEM 1. LEGAL PROCEEDINGS                                                                     | 18
|ITEM 1A. RISK FACTORS                                                                         | 18
|ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           | 24
|ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                       | 24
|ITEM 4. MINE SAFETY DISCLOSURES                                                               | 24
|ITEM 5. OTHER INFORMATION                                                                     | 24
|ITEM 6. EXHIBITS                                                                              | 24



i







PART I — FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



JWC ACQUISITION CORP. AND SUBSIDIARY

(A Corporation in the Development Stage)

Condensed Consolidated Balance Sheets



|                                                                                                                                                                                                                                                 |  | June 30,  2012
 (Unaudited) |             |   | December 31, 2011 (Audited) |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | ----------- | - | --------------------------- | -
|Assets:                                                                                                                                                                                                                                          |  |                             |             |   |                             |  
|Current assets:                                                                                                                                                                                                                                  |  |                             |             |   |                             |  
|Cash                                                                                                                                                                                                                                             |  | $                           | 90,466      |   |                             | $
|Prepaid insurance                                                                                                                                                                                                                                |  |                             | 20,453      |   |                             |  
|Other current assets                                                                                                                                                                                                                             |  |                             | 2,591       |   |                             |  
|Total current assets                                                                                                                                                                                                                             |  |                             | 113,510     |   |                             |  
|Restricted cash equivalents held in trust                                                                                                                                                                                                        |  |                             | 124,950,000 |   |                             |  
|Total assets                                                                                                                                                                                                                                     |  | $                           | 125,063,510 |   |                             | $
|                                                                                                                                                                                                                                                 |  |                             |             |   |                             |  
|Liabilities and Stockholders' Equity:                                                                                                                                                                                                            |  |                             |             |   |                             |  
|Current liabilities:                                                                                                                                                                                                                             |  |                             |             |   |                             |  
|Loan payable to related party                                                                                                                                                                                                                    |  | $                           | 30,049      |   |                             | $
|Franchise tax payable                                                                                                                                                                                                                            |  |                             | 18,000      |   |                             |  
|Accounts payable and other liabilities                                                                                                                                                                                                           |  |                             | 536,201     |   |                             |  
|Total current liabilities                                                                                                                                                                                                                        |  |                             | 584,250     |   |                             |  
|Deferred offering costs                                                                                                                                                                                                                          |  |                             | 4,375,000   |   |                             |  
|Total liabilities                                                                                                                                                                                                                                |  |                             | 4,959,250   |   |                             |  
|                                                                                                                                                                                                                                                 |  |                             |             |   |                             |  
|Commitment and contingencies                                                                                                                                                                                                                     |  |                             |             |   |                             |  
|                                                                                                                                                                                                                                                 |  |                             |             |   |                             |  
|Common stock subject to possible redemption: 11,510,425 shares (at redemption value) at June 30, 2012 and 11,592,577 shares (at redemption value) at December 31, 2011                                                                           |  |                             | 115,104,250 |   |                             |  
|                                                                                                                                                                                                                                                 |  |                             |             |   |                             |  
|Stockholders' equity:                                                                                                                                                                                                                            |  |                             |             |   |                             |  
|Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding                                                                                                                                                     |  |                             | -           |   |                             |  
|Common stock, $0.0001 par value; 400,000,000 shares
    authorized; 14,534,884 shares issued and outstanding at June 30, 2012 and December 31, 2011 (includes 11,510,425 and
    11,592,577 shares subject to possible redemption, respectively) |  |                             | 1,453       |   |                             |  
|Additional paid-in capital                                                                                                                                                                                                                       |  |                             | 6,333,474   |   |                             |  
|Accumulated deficit during the development stage                                                                                                                                                                                                 |  |                             | (1,334,917  | ) |                             |  
|Total stockholders' equity, net                                                                                                                                                                                                                  |  |                             | 5,000,010   |   |                             |  
|Total liabilities and stockholders' equity                                                                                                                                                                                                       |  | $                           | 125,063,510 |   |                             | $



The accompanying notes are an integral part
of these condensed consolidated interim financial statements.



1







JWC ACQUISITION CORP. AND SUBSIDIARY

(A Corporation in the Development Stage)

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                                                                          |  | Three Months Ended June 30, 2012 |            |   | Three Months Ended June 30, 2011 |   |            | Six Months Ended June 30,
2012 |  |   | Six Months Ended June 30, 2011 |   |  | July 22, 2010 (date of inception) to June 30, 2012 |           
|--------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | -------------------------------- | - | ---------- | ------------------------------ |  | - | ------------------------------ | - |  | -------------------------------------------------- | ----------
|Revenue                                                                                                   |  | $                                | -          |   |                                  | $ | -          |                                |  | $ | -                              |   |  | $                                                  | -         
|General, administrative and transaction expenses                                                          |  |                                  | 708,683    |   |                                  |   | 100,682    |                                |  |   | 941,264                        |   |  |                                                    | 297,555   
|Loss from operations                                                                                      |  |                                  | (708,683   | ) |                                  |   | (100,682   | )                              |  |   | (941,264                       | ) |  |                                                    | (297,555  
|Interest income                                                                                           |  |                                  | 59,182     |   |                                  |   | 23,383     |                                |  |   | 119,744                        |   |  |                                                    | 64,970    
|Loss before provision for income taxes                                                                    |  | $                                | (649,501   | ) |                                  |   | (77,299    | )                              |  |   | (821,520                       | ) |  |                                                    | (232,585  
|Provision for income taxes                                                                                |  |                                  | -          |   |                                  |   | -          |                                |  |   | -                              |   |  |                                                    | -         
|Net loss attributable to common shares outstanding                                                        |  | $                                | (649,501   | ) |                                  | $ | (77,299    | )                              |  | $ | (821,520                       | ) |  | $                                                  | (232,585  
|                                                                                                          |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |                                                    |           
|Net loss                                                                                                  |  | $                                | (649,501   | ) |                                  | $ | (77,299    | )                              |  | $ | (821,520                       | ) |  | $                                                  | (232,585  
|Interest earned in Trust Account, attributable to common stock subject to possible redemption, net of tax |  |                                  | -          |   |                                  |   | -          |                                |  |   | -                              |   |  |                                                    | -         
|Net loss applicable to common shareholders                                                                |  | $                                | (649,501   | ) |                                  | $ | (77,299    | )                              |  | $ | (821,520                       | ) |  | $                                                  | (232,585  
|                                                                                                          |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |                                                    |           
|Two Class Method                                                                                          |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |                                                    |           
|Weighted average number of common shares outstanding subject to possible redemption                       |  |                                  | 11,510,425 |   |                                  |   | 12,500,000 |                                |  |   | 11,510,425                     |   |  |                                                    | 12,500,000
|Net loss per common share outstanding for shares subject
    to possible redemption - basic and diluted   |  | $                                | -          |   |                                  | $ | -          |                                |  | $ | -                              |   |  | $                                                  | -         
|                                                                                                          |  |                                  |            |   |                                  |   |            |                                |  |   |                                |   |  |                                                    |           
|Weighted average number of common shares, excluding shares subject to possible redemption                 |  |                                  | 3,024,459  |   |                                  |   | 2,034,884  |                                |  |   | 3,024,459                      |   |  |                                                    | 2,046,689 
|Net loss per common share, excluding shares subject to possible redemption - basic and diluted            |  | $                                | (0.21      | ) |                                  | $ | (0.04      | )                              |  | $ | (0.27                          | ) |  | $                                                  | (0.11     



The accompanying notes are an integral part
of these condensed consolidated interim financial statements.



2







JWC ACQUISITION CORP. AND SUBSIDIARY

(A Corporation in the Development Stage)

Condensed Consolidated Statement of Stockholders’
Equity





|                                                                                                                                      |  | Common Stock |            |   | Additional Paid-in |   |       | AccumulatedDeficit During the Development |  |   | Total Stockholders’ |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | - | ------------------ | - | ----- | ----------------------------------------- |  | - | ------------------- | -
|                                                                                                                                      |  | Shares       |            |   | Amount             |   |       | Capital                                   |  |   | Stage               |  
|Issuance of founder shares to Sponsor at $0.010 per founder share                                                                     |  |              | 2,464,286  |   |                    | $ | 246   |                                           |  | $ | 24,754              |  
|Return and cancellation on October 25, 2010 of 124,170 of founder shares                                                              |  |              | (124,170   | ) |                    |   | (12   | )                                         |  |   | 12                  |  
|Sale on November 23, 2010 of 12,500,000 units, net of offering expenses (including 11,659,490 shares subject to possible redemption   |  |              | 12,500,000 |   |                    |   | 1,250 |                                           |  |   | 124,998,750         |  
|Underwriters' discount and offering expenses                                                                                          |  |              | -          |   |                    |   | -     |                                           |  |   | (7,585,823          | )
|Proceeds from private placement of 5,333,333 warrants                                                                                 |  |              | -          |   |                    |   | -     |                                           |  |   | 4,000,000           |  
|Proceeds subject to possible redemption of 11,659,490 shares at November 23, 2010                                                     |  |              | -          |   |                    |   | -     |                                           |  |   | (116,594,900        | )
|Decrease in carrying amount of  redeemable shares to 11,640,520 shares subject to possible redemption at December 31, 2010            |  |              | -          |   |                    |   | -     |                                           |  |   | 189,700             |  
|Net loss                                                                                                                              |  |              | -          |   |                    |   | -     |                                           |  |   | -                   |  
|                                                                                                                                      |  |              |            |   |                    |   |       |                                           |  |   |                     |  
|Balances as of December 31, 2010                                                                                                      |  |              | 14,840,116 |   |                    | $ | 1,484 |                                           |  | $ | 5,032,493           |  
|                                                                                                                                      |  |              |            |   |                    |   |       |                                           |  |   |                     |  
|Forfeiture of common stock issued to initial stockholders on January 8, 2011                                                          |  |              | (305,232   | ) |                    |   | (31   | )                                         |  |   | 31                  |  
|Decrease in carrying amount of redeemable shares to 11,592,577 shares subject to possible redemption at December 31, 2011             |  |              | -          |   |                    |   | -     |                                           |  |   | 479,430             |  
|Net loss                                                                                                                              |  |              | -          |   |                    |   | -     |                                           |  |   | -                   |  
|                                                                                                                                      |  |              |            |   |                    |   |       |                                           |  |   |                     |  
|Balances as of December 31, 2011                                                                                                      |  |              | 14,534,884 |   |                    | $ | 1,453 |                                           |  | $ | 5,511,954           |  
|                                                                                                                                      |  |              |            |   |                    |   |       |                                           |  |   |                     |  
|Decrease in carrying amount of
    redeemable shares to 11,510,425 shares subject to possible redemption at June 30, 2012 (Unaudited) |  |              | -          |   |                    |   | -     |                                           |  |   | 821,520             |  
|Net loss (Unaudited)                                                                                                                  |  |              | -          |   |                    |   | -     |                                           |  |   | -                   |  
|Balances as of June 30, 2012 (Unaudited)                                                                                              |  |              | 14,534,884 |   |                    | $ | 1,453 |                                           |  | $ | 6,333,474           |  



At June 30,
2012 (unaudited), December 31, 2011 and December 31, 2010 there are 11,510,425, 11,592,577 and 11,640,520, respectively, of
common shares subject to possible redemption that are included in the above presentation of common shares issued and outstanding.



The accompanying notes are an integral part
of these condensed interim consolidated financial statements.



3







JWC ACQUISITION CORP. AND SUBSIDIARY

(A Corporation in the Development Stage)

Condensed Consolidated Statements of Cash
Flows

(Unaudited)



|                                                                            |  | Six
                                                                                       Months Ended June
                                                                                                                                                                                                                                    30,
                                                                                                                                                                                                                                    2012 |          |   | Six
                                                                                       Months Ended June
                                                                                                                                                                                                                                    30,
                                                                                                                                                                                                                                    2011 |   |          | July
                                                                                       22, 2010 (date
                                                                                                                       of inception)
                                                                                                                                                                                                                                 to June
                                                                                                                                                                                                                                                                                                                                            30,
                                                                                                                                                                                                                                                                                                                                            2012 | 
|--------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Cash Flows From Operating Activities:                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Net loss                                                                    |  | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | (821,520 | ) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $ | (232,585 | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Changes in operating assets & liabilities:                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Prepaid insurance                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 61,364   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 61,364   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Other current assets                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | (2,251   | ) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 13       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Franchise tax payable                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | (143,902 | ) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 61,151   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Accounts payable and other liabilities                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 406,850  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (157,627 | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|Proceeds from loan payable to related party                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Net cash used in operating activities                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | (499,459 | ) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (267,684 | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Cash Flows from Investing Activities:                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Proceeds from sale of cash equivalents held in trust                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 293,414  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Cash equivalents held in trust account                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Interest earned on cash equivalents held in trust                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | (119,744 | ) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (64,970  | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|Cash provided by (used in) investing activities                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 173,670  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (64,970  | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Cash Flows from Financing Activities:                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Proceeds from note payable to related party                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Payment of note payable to related party                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Proceeds from sale of shares to Sponsor                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Proceeds from public offering                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Proceeds from private placement                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Payment of offering costs                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Net cash provided by financing activities                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Increase (decrease) in cash                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | (325,789 | ) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (332,654 | )                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|Cash at beginning of period                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 416,255  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 865,355  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Cash at end of period                                                       |  | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 90,466   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $ | 532,701  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Supplemental Disclosure of Non-Cash Financing Activities:                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Deferred offering costs                                                     |  | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | -        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $ | -        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 



The accompanying notes are an integral part
of these condensed consolidated interim financial statements.



4







JWC ACQUISITION CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS



|1. | Organization and Business Operations and Going Concern Consideration
|-- | --------------------------------------------------------------------



Incorporation



JWC Acquisition Corp. (the “Company”)
was incorporated in Delaware on July 22, 2010.



Sponsor



The company’s sponsor is JWC Acquisition,
LLC, a Delaware limited liability company (the “Sponsor”). Members of the Sponsor owning a majority of the Sponsor’s
equity interests are affiliated with J.W. Childs Associates, L.P. (“Associates”), a private equity firm founded in
1995 by John W. Childs, the Company’s Chairman and Chief Executive Officer, and Adam L. Suttin, the Company’s President.



Business Purpose



The Company
was formed to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses (an “Initial Business Combination”). As more fully described in Note 8 – Proposed
Business Combination, the Company has entered into a Contribution and Merger Agreement dated as of June 27, 2012, by and among
the Company, The Tile Shop, LLC, a Delaware limited liability company (“The Tile Shop”), ILTS, LLC, a Delaware limited
liability company (“ILTS”), The Tile Shop, Inc., a Minnesota corporation (“TS Inc”), JWTS, Inc., a Delaware
corporation (“JWTS”), and each of the other members of The Tile Shop (together with TS Inc, JWTS and ILTS, the “Members”),
Nabron International Inc., a Bahamas corporation (“Nabron” and, together with the Members other that ILTS, the “Sellers”),
Tile Shop Holdings, Inc., a Delaware corporation (“TS Holdings”), Tile Shop Merger Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of TS Holdings (“Merger Sub”) and Peter Jacullo, in his capacity as Sellers’ representative,
pursuant to which (i)the Sellers will contribute, directly or indirectly, all of the membership interests in The Tile Shop
to TS Holdings in exchange for cash and common stock and promissory notes of TS Holdings, and (ii) the Company will merge with
and into Merger Sub, with the Company surviving, and each share of common stock of the Company will be exchanged for one share
of TS Holdings common stock, the result of which TS Holdings will hold all of the outstanding equity of The Tile Shop and the Company.



Financing



The registration statement for the Company’s initial public
offering (the “Public Offering”) (as described in Note 3) was declared effective November 17, 2010. The Company consummated
the Public Offering on November 23, 2010, and simultaneously with the closing of the Public Offering, the Sponsor purchased $4,000,000
of warrants in a private placement (Note 4).



On November 23, 2010, $124,950,000 from
the Public Offering and private placement was placed in the Trust Account (discussed below).



Trust Account



The trust account (the “Trust Account”)
can either be invested in permitted United States “government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180 days or less,
or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act. The funds in
the Trust Account are held in the name of JWC Acquisition Security Corporation, a wholly-owned subsidiary of the Company qualified
as a Massachusetts security corporation (See Note 2).



Except for a portion of interest
income earned on the Trust Account balance that may be released to the Company to pay any franchise and income taxes and
up to $1.25 million to fund working capital requirements, and any amounts necessary for the Company to purchase up to 15%
of the Company’s public shares if the Company seeks stockholder approval of the Initial Business Combination, none
of the funds held in the Trust Account will be released until the earlier of: (i) the consummation of the Initial Business
Combination (less deferred offering costs payable to the underwriters); or (ii) the redemption of 100% of the shares of
common stock included in the units sold in the Public Offering if the Company is unable to consummate an Initial Business
Combination within 21 months from the closing of the Public Offering (subject to the requirements of law).



5









JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Business Combination



An Initial Business Combination is subject
to the following size, focus and stockholder approval provisions:



Size —
The prospective target business will not have a limitation to size; however, the Company will not consummate an Initial Business
Combination unless it acquires a controlling interest in a target company or is otherwise not required to register as an investment
company under the Investment Company Act.



Focus —
The Company’s efforts in identifying prospective target businesses will initially be focused on businesses in the consumer
products and specialty retail sectors but the Company may pursue opportunities in other business sectors.



Tender Offer/Stockholder
Approval — The Company, after signing a definitive agreement for an Initial Business Combination, will
either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection
with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Initial Business
Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, including
interest but less franchise and income taxes payable, or (ii) provide stockholders with the opportunity to sell their shares
to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to
their pro rata share of the aggregate amount then on deposit in the Trust Account, including interest but less franchise and
income taxes payable. The decision as to whether the Company will seek stockholder approval of the Initial Business
Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its
discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the
transaction would otherwise require the Company to seek stockholder approval. If the Company seeks stockholder approval, it
will consummate its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted
in favor of the Initial Business Combination. However, in no event will the Company honor the redemption for any of
its public shares if such requested redemptions would cause the Company’s net tangible assets to be less than $5,000,001. In
such case, the Company would not proceed with the redemption of its public shares and the related Initial Business
Combination, and instead may search for an alternate Initial Business Combination.



Regardless of whether the Company holds
a stockholder vote or a tender offer in connection with an Initial Business Combination, a public stockholder will have the right
to redeem their shares for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust
Account, including interest but less franchise and income taxes payable upon the closing of the Initial Business Combination. As
a result, such shares of common stock were recorded at conversion/tender value and classified as temporary equity in accordance
with Financial Accounting Standards Board, or FASB, ASC Topic 480, “Distinguishing Liabilities from Equity.”



Permitted Purchase of Public Shares —
If the Company seeks stockholder approval prior to the Initial Business Combination and does not conduct redemptions pursuant to
the tender offer rules, prior to the Initial Business Combination, the Company’s Amended and Restated Certificate of Incorporation
permits the release to the Company from the Trust Account amounts necessary to purchase up to 15% of the shares sold in the Public
Offering. All shares so purchased by the Company will be immediately cancelled.



Liquidation



If the Company does not consummate an Initial
Business Combination by August 23, 2012, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the common stock sold as part of
the units in the Public Offering, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest but net of franchise and income taxes payable (less up to $100,000 of such net interest to pay dissolution
expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and
subject to the requirement that any refund of income taxes that were paid from the Trust Account which is received after such redemption
shall be distributed to the former public stockholders, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and
liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.



6







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



In the event of liquidation, it is likely
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less
than the initial public offering price per share in the Public Offering (assuming no value is attributed to the warrants contained
in the units to be offered in the Public Offering discussed in Note 3).



Going Concern



In the event that the Company does not
consummate an Initial Business Combination by August 23, 2012, the proceeds held in the Trust Account will be distributed to the
Company’s public stockholders. The potential mandatory liquidation raises substantial doubt about the Company’s ability
to continue as a going concern. The accompanying financial statements do not include any adjustments that may be necessary if the
Company is unable to continue as a going concern.



|2. | Significant Accounting Policies
|-- | -------------------------------



Basis of Presentation



The accompanying
unaudited condensed consolidated interim financial statements as ofJune 30, 2012 and the results
of operations and cash flows for the periods presented, have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and
pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include
all of the information and notes required by GAAP for complete financial statements of the Company. In the opinion of management,
all adjustments necessary for a fair presentation have been included and are of a normal recurring nature. Interim results are
not necessarily indicative of the results that may be expected for any other interim period or for the full year.



These unaudited condensed consolidated
interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto
for the period ended December 31, 2011 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15,
2012. The December 31, 2011 balance sheet included herein has been derived from those audited consolidated financial statements.
The accounting policies used in preparing these unaudited condensed consolidated interim financial statements are consistent with
those used in preparing the December 31, 2011 audited consolidated financial statements.



The condensed consolidated interim financial
statements include the accounts of JWC Acquisition Corp. and its wholly-owned subsidiary, JWC Acquisition Security Corporation.
All significant intercompany transactions and balances have been eliminated in consolidation.



Development Stage Company



The Company is considered to be in the
development stage as defined by FASB ASC 915, “Development Stage Entities,” and is subject to the risks associated
with activities of development stage companies. The Company has neither engaged in any operations nor generated any income to date.
All activity through the date the condensed consolidated interim financial statements were issued relates to the Company’s
organizational activities, activities relating to the Public Offering, activities relating to identifying and evaluating prospective
acquisition candidates and activities relating to general corporate matters. The Company will not generate any operating revenues
until after completion of an Initial Business Combination, at the earliest. The Company will generate non-operating income in the
form of interest income on the Trust Account after the Public Offering.



Restricted Cash Equivalents
Held in Trust



A total of $124,950,000, which includes $120,950,000
of the net proceeds from the Public Offering and $4,000,000 from the private placement, was placed in the Trust Account. As
of June 30, 2012, the restricted cash equivalents held in trust were $124,950,000. Restricted
cash equivalents held in trust are with Citibank, N.A., and Continental Stock Transfer & Trust Company serves as the
trustee. The restricted cash equivalents held in trust at June 30, 2012 are invested in the Western Assets Institutional
Liquid Reserves Money Market Fund, which meets the requirements of Rule 2a-7 under the Investment Company Act.



7







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Net Loss Per Share



Basic net loss per share is
computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period in
accordance with FASB ASC 260, “Earnings Per Share”. Diluted net loss per share is computed by dividing net loss
by the weighted average number of shares of common stock outstanding, plus to the extent dilutive, the incremental number of
shares of common stock to settle warrants issued in the Public Offering and private placement, as calculated using the
treasury stock method. As the Company reported a net loss for the three and six months ended June 30, 2012, the effect of the
17,833,333 warrants (including 5,333,333 warrants issued to the members of the Sponsor in the private placement), have not
been considered in the diluted loss per common share because their effect would be anti-dilutive. As a result, dilutive loss
per common share is equal to basic loss per common share.



The Company’s condensed
consolidated statement of operations includes a presentation of income per share for common stock in a manner similar to the
two-class method of income per share. Net income per common share, basic and diluted, for the number of shares subject to
possible redemption is calculated by dividing the interest earned in the Trust Account, net of applicable income taxes and
franchise taxes and net of up to $1.25 million of interest earned which may be released for working capital purposes, attributable to
common shares subject to possible redemption, by the weighted average number of common shares subject to
possible redemption.

Use of Estimates



The preparation of
condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.



Concentration of Credit Risk



Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times may exceed
the federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management
believes the Company is not exposed to significant risks on such accounts.



Income Taxes



The Company complies with GAAP which requires
an asset and liability approach to financial reporting for income taxes. Deferred income taxes are provided for the differences
between the bases of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established
when necessary to reduce deferred tax assets to the amount expected to be realized.



The Company evaluates the uncertainty in
tax positions taken or expected to be taken in the course of preparing the Company’s condensed consolidated interim financial
statements to determine whether the tax positions are “more likely than not” of being sustained by the applicable tax
authority. Tax positions deemed not to meet the “more likely than not” threshold would be recorded as a tax expense
in the current period. The Company has no uncertain tax positions at June 30, 2012 and December 31, 2011.



The Company recognizes interest
and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense
or penalties have been recognized as of and for the three and six months ended June 30,
2012, and for the period from July 22, 2010 (inception) through June 30, 2012.



The Company files a U.S. federal income
tax return and may file income tax returns in various U.S. states and foreign jurisdictions. Generally, the Company is subject
to income tax examinations by major taxing authorities since inception.



The Company may be subject to potential
examination by U.S. federal, U.S. states or foreign jurisdiction 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 U.S. federal, U.S. state and foreign tax laws. The Company’s management does not expect that the total amount of unrecognized
tax benefits will materially change over the next twelve months.



The Company is incorporated in the
State of Delaware and is therefore required to pay franchise taxes to the State of Delaware on an annual basis.



8







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Transaction Costs



Transaction
costs are amounts incurred by the Company in connection with advisory and due diligence on target acquisitions. Such costs
are expensed as incurred. During the six months ended June 30, 2012, approximately $569,000 of transaction costs were expensed.



Deferred Offering Costs



Deferred offering costs consist principally
of legal, accounting, and underwriting fees incurred through the balance sheet date that are related to the Public Offering and
that were charged to stockholders’ equity upon the receipt of the capital at the closing of the Public Offering on November
23, 2010.



Redeemable Common Stock



As discussed in Note 1, all of the 12,500,000
common shares sold as part of units in the Public Offering contain a redemption feature which allows for the redemption of common
shares under the Company’s Liquidation or Tender Offer/Stockholder Approval provisions. In accordance with ASC 480, redemption
provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary
liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded
from the provisions of ASC 480. Although the Company does not specify a maximum redemption threshold, its Amended and Restated
Certificate of Incorporation provides that in no event will the Company redeem its public shares in an amount that would cause
its net tangible assets (stockholders’ equity) to be less than $5,000,001.



The Company recognizes changes in redemption
value immediately as they occur and will adjust the carrying value of the security to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of redeemable common stock shall be affected by charges against
paid-in capital.



Accordingly, at June
30, 2012 and December 31, 2011, 11,510,425 and 11,592,577, respectively, of the 12,500,000 public shares are classified
outside of permanent equity at the redemption value. The redemption value is equal to the pro rata share of the aggregate amount
then on deposit in the Trust Account, including interest but less franchise and income taxes payable (approximately $10.00 at June
30, 2012).



Fair Value of Financial Instruments



Unless otherwise
disclosed, the fair value of the Company’s assets and liabilities,including the cash equivalents held in trust,approximate their carrying amount due primarily to their short-term nature.



Recent Accounting Pronouncements



Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed consolidated interim financial statements.



|3. | Public Offering
|-- | ---------------



Public Units



On November 23, 2010, the Company sold
12,500,000 units at a price of $10.00 per unit in the Public Offering. Each unit consists of one share of the Company’s common
stock, $0.0001 par value, and one warrant (the “Public Warrants”). The Company granted the underwriters a 45-day option
to purchase up to 1,875,000 additional units solely to cover over-allotments, if any. This option was not exercised.



Public Warrant Terms and Conditions:



Exercise Conditions —
Each Public Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $11.50 per
share commencing on the later of: (i) the consummation of an Initial Business Combination, or (ii) 12 months from the date of the
prospectus for the offering, provided that the Company has an effective registration statement covering the shares of common stock
issuable upon exercise of the Public Warrants (or the Public Warrants are exercisable on a cashless basis) and such shares are
registered or qualified under the securities laws of the state of the exercising holder. The Public Warrants expire five years
from the date of the completion of an Initial Business Combination, unless earlier redeemed. The Public Warrants are redeemable
in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days notice after the warrants become exercisable,
only in the event that the last sale price of the common stock exceeds $18.00 per share for any 20 trading days within a 30-trading
day period. If the Public Warrants are redeemed by the Company, management will have the option to require all holders that wish
to exercise warrants to do so on a cashless basis.



9







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Registration Risk —
In accordance with the warrant agreement relating to the Public Warrants, the Company will be required to use its best efforts
to maintain the effectiveness of a registration statement relating to common stock which would be issued upon exercise of the Public
Warrants. In the event that a registration is not effective at the time of exercise, the holders of Public Warrants shall not be
entitled to exercise such Public Warrants (except on a cashless basis under certain circumstances) and in no event (whether in
the case of a registration statement not being effective or otherwise) will the Company be required to net cash settle or cash
settle the Public Warrants or be subjected to any other contractual penalty for failure to permit such exercise. Consequently,
the Public Warrants may expire unexercised, unredeemed and worthless, and an investor in the Public Offering may effectively pay
the full unit price solely for the shares of common stock included in the units.



Accounting —
Since the Company is not required to net cash settle the Public Warrants, the Public Warrants will be recorded at fair value and
classified within stockholders’ equity as “Additional paid-in capital” upon their issuance in accordance with
FASB ASC 815-40.



Underwriting Agreement



The Company paid an
underwriting discount of 2.0% of the public unit offering price to the underwriters at the closing of the Public Offering,
with an additional fee of 3.5% of the gross offering proceeds payable upon the Company’s consummation of an Initial
Business Combination. Such amount is reflected as deferred offering costs of $4,375,000 on the consolidated balance sheet.
The underwriters will not be entitled to any interest accrued on the deferred discount. This deferred offering cost will be
paid from the amounts held in the Trust Account. If the Company does not consummate an Initial Business Combination, the
underwriters will forfeit any rights or claims to their deferred underwriting discounts and commissions including any accrued
interest thereon, then in the Trust Account, and the deferred underwriters’ discounts and commissions will
be distributed on a pro rata basis, together with any accrued interest thereon and net of franchise and income taxes payable
income taxes on such interest, to the public stockholders.



|4. | Related Party Transactions
|-- | --------------------------



Founder Shares —
In August 2010, the Sponsor purchased 2,464,286 shares of common stock (the “Founder Shares”) for $25,000, or $0.01
per share. Subsequently, on October 25, 2010, the Sponsor returned an aggregate of 124,170 of the Founder Shares to the Company,
which the Company cancelled. Thereafter, on October 25, 2010, the Sponsor transferred an aggregate of 23,400 of the Founder Shares
to John K. Haley and Sonny King, each of whom agreed to serve on the Company’s board of directors following the closing of
the Public Offering. The fair value of the securities transferred was nominal.



On November 23, 2010, members of the Sponsor
purchased an aggregate of 5,333,333 warrants (the “Sponsor Warrants”) at $0.75 per warrant (for an aggregate purchase
price of $4,000,000) from the Company on a private placement basis simultaneously with the closing of the Public Offering.



Forfeiture —
As a result of the underwriters’ over-allotment option not being exercised for the Public Offering, the Sponsor and the Company’s
independent directors, John K. Haley and Sonny King (collectively, the “Initial Stockholders”), forfeited an aggregate
of 305,232 Founder Shares on January 8, 2011. After giving effect to the forfeitures, the Initial Stockholders own 14% of the Company’s
issued and outstanding shares.



In addition, 290,697 of the Founder Shares
in an amount equal to 2.0% of the Company’s issued and outstanding shares after the Public Offering (“Earnout Shares”),
will be subject to forfeiture by the Initial Stockholders in the event the last sales price of the Company’s stock does not
equal or exceed $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period within 24 months following the closing of the Company’s Initial
Business Combination.



Rights —
The Founder Shares are identical to the shares of common stock included in the units sold in the Public Offering except that (i)
the Founder Shares are subject to certain transfer restrictions, as described in more detail below, and (ii) the Initial Stockholders
have agreed to waive their redemption rights with respect to the Founder Shares and public shares they purchase in connection with
the Initial Business Combination and will also waive their redemption rights with respect to the Founder Shares if the Company
fails to consummate an Initial Business Combination by August 23, 2012.



10







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Voting —
If the Company seeks stockholder approval of its Initial Business Combination, the Initial Stockholders have agreed to vote the
Founder Shares in accordance with the majority of the votes cast by the public stockholders and to vote any public shares purchased
during or after the Public Offering in favor of the Initial Business Combination.



Liquidation —
Although the Initial Stockholders and their permitted transferees waived their redemption rights with respect to the Founder Shares
if the Company fails to consummate an Initial Business Combination by August 23, 2012, they will be entitled to redemption rights
with respect to any public shares they may own.



Sponsor Warrants —
Each Sponsor Warrant is exercisable into one share of common stock at $11.50 per share. The proceeds from the sale of the Sponsor
Warrants were added to the proceeds from the Public Offering held in the Trust Account. The Sponsor Warrants are identical to the
warrants included in the units sold in the Public Offering except that the Sponsor Warrants (i) are not redeemable by the Company
as long as they are held by members of the Sponsor or any of their permitted transferees, (ii) are subject to certain transfer
restrictions described in more detail below and (iii) may be exercised for cash or on a cashless basis. Since the Company is not
required to net-cash settle the Sponsor Warrants, management has determined that the Sponsor Warrants are recorded at fair value
and classified within stockholders’ equity as “Additional paid-in capital” upon their issuance in accordance
with FASB ASC 815-40.



Transfer Restrictions

The Initial Stockholders have agreed not
to transfer, assign or sell any of their Founder Shares until one year after the completion of the Initial Business Combination
or earlier if the last sales price of the Company’s common stock exceeds $12.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days from the date of consummation of an Initial Business Combination. The members of the Sponsor have agreed not
to transfer, assign or sell any of the Sponsor Warrants, including the common stock issuable upon exercise of the Sponsor Warrants,
until 30 days after the completion of an Initial Business Combination.



Registration Rights

The holders of the Founder Shares, Sponsor
Warrants and warrants that may be issued upon conversion of working capital loans will have registration rights to require the
Company to register a sale of any of the securities held by them pursuant to the registration rights agreement. These security
holders will be entitled to make up to three demands, excluding short form demands, that the Company register such securities for
sale under the Securities Act of 1933, as amended (the “Securities Act”). In addition, these security holders have
“piggy-back” registration rights to include their securities in other registration statements filed by the Company.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the
Securities Act to become effective until termination of the applicable lock-up period, which occurs (i) in the case of the Founder
Shares, (A) one year after the completion of the Initial Business Combination or earlier if, subsequent to the Initial Business
Combination, the last sales price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the Initial Business Combination or (B) when the Company consummates a liquidation, merger,
stock exchange or other similar transaction after the Company’s Initial Business Combination which results in all of the
Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property,
and (ii) in the case of the Sponsor Warrants and the respective common stock underlying such warrants, 30 days after the completion
of the Company’s Initial Business Combination. The Company will bear the costs and expenses of filing any such registration
statements.



|5. | Other Related Party Transactions
|-- | --------------------------------



Administrative
Services

The Company
has agreed to pay $5,000 a month in total for office space and general and administrative services to Associates. Services commenced
promptly after the date the Company’s securities were first quoted on the OTCBB and will terminate upon the earlier of (i)
the consummation of an Initial Business Combination or (ii) the liquidation of the Company. No payments have been made under this
agreement, and as of June 30, 2012 and December 31, 2011, $100,000and $70,000,
respectively, is due to Associates and is included in accounts payable and other liabilities.



11







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Loan Payable



During the period from July 22, 2010 (date
of inception) to June 30, 2012, Associates paid vendor bills on behalf of the Company in the
aggregate amount of $30,049. This amount is payable on demand without interest. Such amount is outstanding at both June
30, 2012 and December 31, 2011.



|6. | Income Taxes
|-- | ------------



Components of the Company’s deferred
tax assets are as follows:



June 30, 2012



|Net operating loss carryforwards |  | $ | 182,000  |  
|-------------------------------- |  | - | -------- | -
|Amortizable start-up costs       |  |   | 272,000  |  
|                                 |  |   |          |  
|Less, valuation allowance        |  |   | (454,000 | )
|                                 |  |   |          |  
|                                 |  | $ | —        |  



December 31, 2011



|Net operating loss carryforwards |  | $ | 62,000   |  
|-------------------------------- |  | - | -------- | -
|Amortizable start-up costs       |  |   | 101,000  |  
|                                 |  |   |          |  
|Less, valuation allowance        |  |   | (163,000 | )
|                                 |  |   |          |  
|                                 |  | $ | —        |  



Management has recorded a full valuation
allowance against its deferred tax assets because it does not believe it is more likely than not that sufficient taxable income
will be generated. The effective tax rate differs from the statutory rate of 34% due to the establishment of the valuation allowance.
The net operating loss carry-forward expires in 2032.



|7. | Stockholders’ Equity
|-- | --------------------



Common Stock —
The authorized common stock of the Company includes up to 400,000,000 shares. Holders of the Company’s common stock are entitled
to one vote for each share of common stock. At June 30, 2012 and December 31, 2011, there were 14,534,884 shares of common stock
outstanding.



Preferred Shares —
The Company is authorized to issue 1,000,000 preferred shares with such designations, voting and other rights and preferences as
may be determined from time to time by the Company’s board of directors. At June 30, 2012 and December 31, 2011, there were
no shares of preferred stock outstanding.



|8. | Proposed Business Combination
|-- | -----------------------------



On June 27, 2012, the Company entered into
the Contribution and Merger Agreement. The transactions contemplated by the Contribution and Merger Agreement are collectively
referred to as the “Proposed Business Combination”.



12







JWC ACQUISITION
CORP. AND SUBSIDIARY
(A Corporation in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS — (Continued)



Pursuant to the terms of the
Contribution and Merger Agreement, the Sellers (other than Nabron) will contribute their membership interests in The Tile
Shop to TS Holdings, constituting all of the membership interests of The Tile Shop other than the membership interests held
by ILTS, and Nabron will contribute its membership interests in ILTS to TS Holdings (collectively, the
“Contribution”), resulting in The Tile Shop becoming wholly owned by TS Holdings, in exchange for (i) a cash
payment of $100,000,000, (ii) 29,500,000 shares of TS Holdings common stock and (iii) unsecured and subordinated
promissory notes issued by TS Holdings in an aggregate principal amount of $80,000,000 less the amount of indebtedness
(including capital lease obligations) of The Tile Shop and its subsidiary at closing and cash payments due to certain current
and former employees under an equity incentive plan of The Tile Shop.



Concurrently with the Contribution, Merger
Sub will merge with and into the Company (the “Merger”), with the Company surviving, and (i) each outstanding share
of the Company’s common stock will be exchanged for one share of TS Holdings common stock, (ii) each outstanding warrant
which is currently exercisable for one share of the Company’s common stock will be exercisable for one share of TS Holdings
common stock and (iii) each outstanding share of common stock of Merger Sub will be exchanged for one share of the Company with
the Company becoming a wholly owned subsidiary of TS Holdings. Prior to the Merger, each outstanding unit of the Company will
be separated into its component common stock and warrant, each of which will be treated as described above.



After the completion of the Proposed Business
Combination, TS Holdings will hold directly or indirectly all of the outstanding equity of The Tile Shop and the Company, and the
former members of The Tile Shop and the former stockholders of the Company will own approximately 67% and 33%, respectively, of
the issued and outstanding shares of TS Holdings common stock, assuming that none of the Company’s stockholders exercise
their redemption rights in connection with the Proposed Business Combination.



The board of directors of the Company and
the board of managers of The Tile Shop have unanimously approved the Proposed Business Combination. The Contribution and Merger
Agreement is subject to the approval of the Company’s stockholders, in accordance with the Company’s second amended
and restated certificate of incorporation and the Delaware General Corporation Law. If approved, the Proposed Business Combination
is expected to be consummated promptly following the receipt of approval from the Company’s stockholders and the satisfaction
or waiver of the other conditions contained in the Contribution and Merger Agreement.



13







ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



References to the “Company,”
“us” or “we” refer to JWC Acquisition Corp. The following discussion and analysis of the Company’s
consolidated financial condition and results of operations should be read in conjunction with the condensed consolidated financial
statements and the notes thereto contained elsewhere in this report and in the consolidated financial statements and the notes
thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2011. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.



Special Note Regarding Forward-Looking
Statements



All statements other than statements of
historical fact included in this Form 10-Q including, without limitation, statements under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the
plans and objectives of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar
expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based
on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results
could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our
filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf
are qualified in their entirety by this paragraph.



Overview



We are a blank check company formed on
July 22, 2010 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses (an “Initial Business Combination”). We have sought to
capitalize on the substantial deal sourcing, investing and operating expertise of our management team to identify, acquire and
operate a middle-market business in the consumer products or specialty retail sectors operating primarily in North America, although
we considered acquisition opportunities in other sectors or in other geographic regions.



Proposed Business Combination



We have entered into a Contribution and
Merger Agreement, dated as of June 27, 2012 (the “Contribution and Merger Agreement”), by and among, the
Company, The Tile Shop, LLC, a Delaware limited liability company (“The Tile Shop”) ILTS, LLC, a Delaware limited liability
company (“ILTS”), The Tile Shop, Inc., a Minnesota corporation (“TS Inc”), JWTS, Inc., a Delaware corporation
(“JWTS”), and each of the other members of The Tile Shop (together with TS Inc, JWTS and ILTS, the “Members”),
Nabron International Inc., a Bahamas corporation (“Nabron” and, together with the Members other than ILTS, the “Sellers”),
Tile Shop Holdings, Inc., a Delaware corporation (“TS Holdings”), Tile Shop Merger Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of TS Holdings (“Merger Sub”) and Peter Jacullo, in his capacity as Sellers’ representative
(the “Sellers’ Representative”). The transactions contemplated by the Contribution and Merger Agreement
are collectively referred to as the “Proposed Business Combination.



Pursuant to the terms of the Contribution
and Merger Agreement, the Sellers (other than Nabron) will contribute their membership interests in The Tile Shop to TS Holdings,
constituting all of the membership interests of The Tile Shop other than the membership interests held by ILTS, and Nabron will
contribute its membership interests in ILTS to TS Holdings resulting in The Tile Shop becoming wholly owned by TS Holdings (collectively,
the “Contribution”), in exchange for (i) a cash payment of $100,000,000 (the “Cash Consideration”),
(ii) 29,500,000 shares of TS Holdings common stock (the “Stock Consideration”) and (iii) unsecured and subordinated
promissory notes (“Promissory Notes”) issued by TS Holdings in an aggregate principal amount of $80,000,000 less the
amount of indebtedness (including capital lease obligations) of The Tile Shop and its subsidiary and cash payments due to certain
current and former employees under an equity incentive plan of The Tile Shop (collectively, the “Contribution Consideration”).



The Contribution Consideration is subject
to the following adjustments at the closing of the Proposed Business Combination:



| | 1. | If the Company’s stockholders exercise their rights to redeem greater than 1,500,000 shares of our common stock for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account, then (a) the Stock Consideration will be increased by the number of shares of TS Holdings common stock equal to the number of shares of our common stock that were redeemed in excess of 1,500,000, up to a maximum increase of an additional 2,500,000 shares of TS Holdings common stock and (b) the Cash Consideration will be reduced by the number of each such additional share of Stock Consideration multiplied by $10.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14







| | 2. | In the event that certain specified transaction expenses of the Company are less than $3,575,000, then the Stock Consideration will be increased by the number of shares of TS Holdings common stock equal to the amount of such deficiency divided by 10.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | In the event that the Company has entered into agreements to purchase a portion of
    our public warrants (the “Public Warrants”) with the consent of the Sellers’ Representative, then (i) the
    Stock Consideration will be increased by the number of shares equal to the amount paid for such warrants (the “Warrant
    Purchase Amount”) divided by 10, and (ii) the Cash Consideration will be reduced by an amount equal to the Warrant Purchase
    Amount.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Promissory Notes will mature three
years from the consummation of the Proposed Business Combination, be prepayable at any time by TS Holdings without premium or penalty,
and have an annual interest rate of 4% payable quarterly. Upon the issuance of senior indebtedness and the use of proceeds from
such issuance to repay not less than 50% of the principal amount of the Promissory Notes, the term of the Promissory Notes will
extend to 180 days after the term of such senior indebtedness and the interest rate on the Promissory Notes will be increased to
10% per annum. If the Promissory Notes have not been repaid in full within three years after the consummation of the Proposed Business
Combination, the holders of the Promissory Notes will have the right to convert their pro rata portion of up to an aggregate of
$20,000,000 of the then-outstanding aggregate principal amount of the Promissory Notes into common stock of TS Holdings at a conversion
price of $10 per share.



Concurrently with the Contribution, Merger
Sub will merge with and into the Company (the “Merger”), with the Company surviving, and (i) each outstanding share
of the Company’s common stock will be exchanged for one share of TS Holdings common stock, (ii) each outstanding warrant
which is currently exercisable for one share of the Company’s common stock will be exercisable for one share of TS Holdings
common stock and (iii) each outstanding share of common stock of Merger Sub will be exchanged for one share of the Company with
the Company becoming a wholly owned subsidiary of TS Holdings. Prior to the Merger, each outstanding unit of the Company will
be separated into its component common stock and warrant, each of which will be treated as described above.



After the completion of the Proposed Business
Combination, TS Holdings will hold directly or indirectly all of the outstanding equity of The Tile Shop and the Company, and the
former members of The Tile Shop and our former stockholders will own approximately 67% and 33%, respectively, of the issued and
outstanding shares of TS Holdings common stock, assuming that none of our stockholders exercise their redemption rights in connection
with the Proposed Business Combination.



Our board of directors and the board of
managers of The Tile Shop have unanimously approved the Proposed Business Combination. The Contribution and Merger Agreement is
subject to the approval of our stockholders in accordance with our second amended and restated certificate of incorporation and
the Delaware General Corporation Law. If approved, we expect the Proposed Business Combination to be consummated promptly following
the receipt of approval from our stockholders and the satisfaction or waiver of the other conditions contained in the Contribution
and Merger Agreement.



In connection with the Proposed Business
Combination, the holders of shares of our common stock included in the units sold in the Public Offering will have the opportunity
to redeem such shares upon the consummation of the Proposed Business Combination for cash in an amount equal to their pro rata
share of the aggregate amount on deposit in the Trust Account.



The Company, TS Holdings, the Sellers and
the members of our Sponsor, JWC Acquisition, LLC (the “Sponsor”) have also entered into a registration rights agreement
pursuant to which the Sellers and members of the Sponsor will be entitled to registration rights, subject to certain limitations,
with respect to TS Holdings common stock they receive in the Proposed Business Combination.



TS Holdings has filed with the SEC a registration
statement on Form S-4 (File No. 333-182482) in connection with the registration of the shares of TS Holdings to be issued to our
stockholders pursuant to the Contribution and Merger Agreement, which registration statement includes our preliminary proxy statement/prospectus
relating to the Proposed Business Combination.



15







Results of Operations



Through June
30, 2012, our efforts have been limited to organizational activities, activities relating to our Public Offering,
activities relating to identifying and evaluating prospective acquisition candidates and activities relating to general
corporate matters. We have not generated any revenues, other than interest income earned on the proceeds held in the Trust
Account. As of June 30, 2012, approximately $124.95 million was held in the Trust Account
(including $4.38 million of deferred underwriting discounts and commissions and $4.0 million from the sale of the Sponsor
Warrants (defined below) and approximately $0 in accrued interest) and we had cash outside of trust of $90,466 and $536,201
in accounts payable and other liabilities. Up to $1.25 million in interest income on the balance of the Trust Account (net of
franchise and income taxes payable) may be available to us to fund our working capital requirements. Through June
30, 2012, the Company has withdrawn $293,414 from interest earned on the trust proceeds. Other than the deferred
underwriting discounts and commissions, no amounts are payable to the underwriters of our Public Offering in the event of a
business combination.



For the period from January 1, 2012 through
June 30, 2012, we had a net loss of $821,520 and earned $119,744 in interest income. All of our
funds in the Trust Account are invested in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act.



We have agreed to pay Associates, an entity
controlled by John W. Childs, our Chairman and Chief Executive Officer, a total of $5,000 per month for office space, administrative
services and secretarial support. For the period from January 1, 2012 through June 30, 2012,
the Company accrued a payable of $30,000 for these costs.



Liquidity and Capital Resources



On November 23, 2010, we consummated our
Public Offering of 12,500,000 units at a price of $10.00 per unit. Simultaneously with the consummation of our Public Offering,
we consummated the private sale of 5,333,333 warrants (the “Sponsor Warrants”) to members of our Sponsor for $4.0 million.
We received net proceeds from our Public Offering and the sale of the Sponsor Warrants of approximately $125.75 million, net of
the non-deferred portion of the underwriting commissions of $2.5 million (none of which were incurred from January 1, 2012 through
June 30, 2012) and offering costs and other expenses of approximately $750,000 (none of which
were incurred from January 1, 2012 through June 30, 2012). For a description of the proceeds
generated in our Public Offering and a discussion of the use of such proceeds, we refer you to Note 3 of the unaudited condensed
consolidated interim financial statements included in Part I, Item 1 of this Report. As of June 30,
2012, we had cash of $90,466.



We will depend on sufficient interest being
earned on the proceeds held in the Trust Account to provide us with up to $1,250,000 of additional working capital we may need
to identify one or more target businesses, conduct due diligence and complete our initial business combination, as well as to pay
any franchise and income taxes that we may owe. As described elsewhere in this Report, the amounts in the Trust Account may be
invested only in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions
under Rule 2a-7 under the Investment Company Act. The current low interest rate environment may make it more difficult for such
investments to generate sufficient funds, together with the amounts available outside the Trust Account, to locate, conduct due
diligence, structure, negotiate and close our Initial Business Combination. If we are required to seek additional capital, we would
need to borrow funds from our Sponsor or management team to operate or may be forced to liquidate. Neither our Sponsor nor our
management team is under any obligation to advance funds to us in such circumstances. Any such loans would be repaid only from
funds held outside the Trust Account or from funds released to us upon completion of our Initial Business Combination. If we are
unable to complete our Initial Business Combination because we do not have sufficient funds available to us, we will be forced
to cease operations and liquidate the Trust Account.



For the period from January 1, 2012 through
June 30, 2012, we disbursed an aggregate of approximately $327,186 out of the proceeds of our
Public Offering not held in trust, for expenses in legal, accounting and filing fees relating to our SEC reporting obligations,
general corporate matters, and miscellaneous expenses.



Off-balance sheet financing arrangements



We have no obligations, assets or liabilities
which would be considered off-balance sheet arrangements. 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
entered into any non-financial assets.



16







Contractual obligations



We do not have any long-term debt, capital
lease obligations, operating lease obligations or long-term liabilities other than a monthly fee of $5,000 for office space and
general and administrative services payable to Associates, an entity controlled by our Chairman and Chief Executive Officer. We
began incurring this fee on November 23, 2010 and will continue to incur this fee monthly until the earlier of the completion of
our Initial Business Combination and our liquidation.



Critical Accounting Policies and Estimates



The preparation of 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 as our critical accounting policies:



Restricted Cash Equivalents Held
in Trust



A total of $124,950,000,
which includes $120,950,000 of the net proceeds from the Public Offering and $4,000,000 from the private placement, was
placed in the Trust Account. As of June 30, 2012, the restricted cash equivalents held in
trust were $124,950,000. Restricted cash equivalents held in trust are with Citibank, N.A., and Continental Stock Transfer
& Trust Company serves as the trustee. The restricted cash equivalents held in trust at June
30, 2012 are invested in the Western Assets Institutional Liquid Reserves Money Market Fund, which meets the
requirements of Rule 2a-7 under the Investment Company Act.



Loss per common share (excluding
shares subject to possible redemption)



Loss per share (excluding
shares subject to possible redemption) is computed by dividing net loss applicable to common stockholders by the weighted
average number of common shares outstanding for the period. The weighted average number of common shares, excluding shares
subject to possible redemption, at June 30, 2012 of 3,024,459 shares excludes the weighted average of 11,510,425 shares
subject to possible redemption. The aggregate weighted average common shares issued and outstanding of 14,534,884 for the
period from January 1, 2012 to June 30, 2012 takes into effect the 305,232 Founder Shares
forfeited on January 8, 2011 by the Initial Stockholders due to the underwriters’ over-allotment option not being
exercised. The 17,833,333 warrants related to our Public Offering and the private placement of the Sponsor Warrants are
contingently issuable shares and are excluded from the calculation of diluted earnings per share because they are
anti-dilutive.



Use of estimates



The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates.



Income taxes



Deferred income taxes are provided for
the differences between the bases of assets and liabilities for financial reporting and income tax purposes. A valuation allowance
is established when necessary to reduce deferred tax assets to the amount expected to be realized.



Recent accounting pronouncements



Management does not believe that any recently
issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial
statements.



ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



We were incorporated in Delaware on July
22, 2010 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination with one or more operating businesses. We were considered in the development stage at June
30, 2012 and had not yet commenced any operations. Through June 30, 2012, our efforts
have been limited to organizational activities, activities relating to our Public Offering, activities relating to identifying
and evaluating prospective acquisition candidates and activities relating to general corporate matters. We did not have any financial
instruments that were exposed to market risks at June 30, 2012.



17







ITEM 4. CONTROLS AND PROCEDURES



Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under
the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.



As required by Rules 13a-15 and 15d-15
under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as of June 30, 2012. Based
upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
(as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.



During the most recently completed fiscal
quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.



PART II — OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



None.



ITEM 1A. RISK FACTORS



Other than the additional risk factors set
forth below, and the risk factors disclosed in the preliminary proxy statement/prospectus, which we refer to as the Preliminary
Proxy Statement, included in the registration statement on Form S-4, which we refer to as the Registration Statement, filed with
the SEC by Tile Shop Holdings, Inc.on July 2, 2012, which are incorporated herein by reference, there have been no material
changes in our risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.



If the Proposed Business Combination’s
benefits do not meet the expectations of investors or securities analysts, the market price of our securities and, following the
Proposed Business Combination, TS Holdings’ securities, may decline.



If the Proposed Business Combination’s
benefits do not meet the expectations of investors or securities analysts, the market price of our securities prior to the closing
of the Proposed Business Combination may decline. Our stockholders will receive a fixed number of shares of TS Holdings’
common stock in the Proposed Business Combination, rather than a number of shares with a particular fixed market value. The market
values of our securities at the time of the Proposed Business Combination may vary significantly from their prices on the date
the Contribution and Merger Agreement was executed, the date of the definitive proxy statement/prospectus or the date on which
our stockholders vote on the Proposed Business Combination. Because the share exchange ratios will not be adjusted to reflect any
changes in the market prices of our common stock, the market value of the TS Holdings common stock issued in the Proposed Business
Combination and our common stock surrendered in the Merger may be higher or lower than the values of these shares on earlier dates.
100% of the consideration to be received by our stockholders in the Merger will be TS Holdings’ common stock.



In addition, following the Proposed Business
Combination, fluctuations in the price of TS Holdings’ common stock could contribute to the loss of all or part of your investment.
Prior to the Proposed Business Combination, there has not been a public market for TS Holdings’ or The Tile Shop’s
common stock, and trading in the shares of our common stock has not been active. Accordingly, the valuation ascribed to The Tile
Shop and the shares of our common stock in the Proposed Business Combination may not be indicative of the price that will prevail
in the trading market following the Proposed Business Combination. If an active market for TS Holdings’ common stock develops
and continues, the trading price of TS Holdings’ common stock following the Proposed Business Combination could be volatile
and subject to wide fluctuations in response to various factors, some of which are beyond our or TS Holdings’ control. Any
of the factors listed below could have a material adverse effect on your investment and TS Holdings’ common stock may trade
at prices significantly below the price you paid for our common stock. In such circumstances, the trading price of TS Holdings’
common stock may not recover and may experience a further decline.



18







Factors affecting the trading price of
TS Holdings’ common stock may include:



| | • | actual or anticipated fluctuations in TS Holdings’ quarterly financial results or the quarterly financial results of companies perceived to be similar to it;                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                        
| | • | changes in the market’s expectations about TS Holdings’ operating results;                                                                                                             
| |   |                                                                                                                                                                                        
| | • | the effects of seasonality on TS Holdings’ business cycle;                                                                                                                             
| |   |                                                                                                                                                                                        
| | • | success of competitive retailers;                                                                                                                                                      
| |   |                                                                                                                                                                                        
| | • | the failure of TS Holdings’ operating results to meet the expectation of securities analysts or investors in a particular period;                                                      
| |   |                                                                                                                                                                                        
| | • | changes in financial estimates and recommendations by securities analysts concerning TS Holdings, the housing market, the retail specialty tile market or the retail market in general;
| |   |                                                                                                                                                                                        
| | • | operating and stock price performance of other companies that investors deem comparable to TS Holdings;                                                                                
| |   |                                                                                                                                                                                        
| | • | the ability of TS Holdings to market new and enhanced products on a timely basis;                                                                                                      



| | • | changes in laws and regulations affecting TS Holdings’ business;                                                                                                         
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                          
| | • | commencement of, or involvement in, litigation involving TS Holdings;                                                                                                    
| |   |                                                                                                                                                                          
| | • | changes in TS Holdings’ capital structure, such as future issuances of securities or the incurrence of additional debt;                                                  
| |   |                                                                                                                                                                          
| | • | the volume of shares of TS Holdings’ common stock available for public sale;                                                                                             
| |   |                                                                                                                                                                          
| | • | any major change in TS Holdings’ board or management;                                                                                                                    
| |   |                                                                                                                                                                          
| | • | sales of substantial amounts of common stock by TS Holdings’ directors, executive officers or significant stockholders or the perception that such sales could occur; and
| |   |                                                                                                                                                                          
| | • | general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.             



Broad market and industry factors may materially
harm the market price of TS Holdings’ common stock irrespective of TS Holdings’ operating performance. The stock market
in general, and the Nasdaq Stock Market, have experienced price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of TS
Holdings’, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies
which investors perceive to be similar to TS Holdings could depress TS Holdings’ stock price regardless of TS Holdings’
business, prospects, financial conditions or results of operations. A decline in the market price of TS Holdings’ securities
could also adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future.



Our board of directors did not obtain
a third party valuation in determining whether or not to proceed with the Proposed Business Combination.



Our board of directors did not obtain a
third party valuation in connection with its decision to approve the Proposed Business Combination. In analyzing the Proposed Business
Combination, our board and management conducted due diligence on The Tile Shop, researched the industries in which The Tile Shop
operates, reviewed comparisons of comparable companies, developed a long-range financial model and concluded that the Proposed
Business Combination was in the best interest of our stockholders.



There may be tax consequences of
the Business Combination that may adversely affect our stockholders.



We expect that the Business Combination
can be effected such that our stockholders do not recognize gain or loss pursuant to Section 351 of the Internal Revenue Code.
To the extent the Business Combination does not so qualify, it could result in the imposition of substantial taxes on our stockholders.



19







TS Holdings may not be able to timely
and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002 that will be applicable
to it as a result of the Proposed Business Combination.



The Tile Shop is not currently subject
to Section 404 of the Sarbanes-Oxley Act of 2002. However, following the Proposed Business Combination, TS Holdings will be subject
to Section 404. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act of 2002 are significantly
more stringent than those required of The Tile Shop as a privately-held company. Management may not be able to effectively and
timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements
that will be applicable to TS Holdings. If management is not able to implement the additional requirements of Section 404 in a
timely manner or with adequate compliance, management may not be able to assess whether TS Holdings’ internal controls over
financial reporting are effective, which may subject TS Holdings to adverse regulatory consequences and could harm investor confidence
and the market price of TS Holdings common stock.



The Company and The Tile Shop will
be subject to business uncertainties and contractual restrictions while the Proposed Business Combination is pending.



Uncertainty about the effect of the Proposed
Business Combination on employees and customers may have an adverse effect on the Company or The Tile Shop and, consequently, on
TS Holdings. These uncertainties may impair The Tile Shop’s ability to retain and motivate key personnel and could cause
customers and others that deal with The Tile Shop to defer entering into contracts with The Tile Shop or making other decisions
concerning The Tile Shop, or to seek to change existing business relationships with The Tile Shop. If key employees depart because
of uncertainty about their future roles and the potential complexities of the Proposed Business Combination, The Tile Shop’s
business could be harmed.



Our founders, directors and executive
officers have certain interests in consummating the Proposed Business Combination that may have influenced their decision to approve
the Proposed Business Combination.



Certain of our founders, directors and
entities affiliated with certain of our directors and executive officers, own shares of our common stock that were issued prior
the Public Offering. Such purchasers have waived their right to receive distributions with respect to the Founder Shares in the
event of our liquidation in accordance with our Amended and Restated Certificate of Incorporation. Accordingly, the Founder Shares
will be worthless if we are forced to liquidate. In addition, in the event of our liquidation, our warrants, including the Sponsor
Warrants held by certain of our directors and executive officers, will expire worthless.



Additionally, the Contribution and Merger
Agreement provides that each of Messrs. Suttin and Watts will be a director of TS Holdings following the Proposed Business Combination.
As such, in the future, they may receive any cash fees, stock options or stock awards that TS Holdings’ board of directors
determines to pay to its non-executive directors, provided, that Mr. Suttin has agreed to initially waive his right to receive
any such cash fees, stock options or stock awards.



Our stockholders will experience
immediate dilution as a consequence of the issuance of common stock as consideration in the Proposed Business Combination. Having
a minority share position may reduce the influence that our current stockholders have on the management of TS Holdings.



TS Holdings will issue 29,500,000 shares
of common stock at the closing of the Proposed Business Combination to the Sellers, subject to adjustment pursuant to the terms
of the Contribution and Merger Agreement. Upon consummation of the Merger, holders of our common stock will receive one share of
common stock of TS Holdings for each share of our common stock that they own. As a result, holders of our common stock will receive
14,534,884 shares of TS Holdings common stock, or approximately 33% of the issued and outstanding shares of TS Holdings (assuming
no stockholder elects to redeem their shares of our common stock for a portion of the Trust Account). Consequently, the ability
of our former stockholders following the Proposed Business Combination to influence management of TS Holdings through the election
of directors will be substantially reduced.



The Company and TS Holdings will
incur significant transaction and transition costs in connection with the Proposed Business Combination.



The Company and TS Holdings expect to incur
significant, non-recurring costs in connection with consummating the Proposed Business Combination and integrating the operations
of the Company and The Tile Shop. TS Holdings may incur additional costs to maintain employee morale and to retain key employees.
We will also incur significant fees and expenses relating to financing arrangements and legal, accounting and other transaction
fees and costs associated with the Proposed Business Combination. Some of these costs are payable regardless of whether the Proposed
Business Combination is completed.



20







The unaudited pro forma financial
information included in the Preliminary Proxy Statement may not be indicative of what TS Holdings’ actual financial position
or results of operations would have been.



The unaudited pro forma financial information
in the Preliminary Proxy Statement is presented for illustrative purposes only and is not necessarily indicative of what TS Holdings’
actual financial position or results of operations would have been had the Proposed Business Combination been completed on the
dates indicated. See the section of the Registration Statement entitled “Unaudited Pro Forma Condensed Combined Financial
Information.”



TS Holdings’ working capital
will be reduced if our stockholders exercise their redemption rights in connection with the Proposed Business Combination, which
may adversely affect TS Holdings’ business and future operations.



Pursuant to our amended and restated certificate
of incorporation, holders of Public Shares may demand that we redeem their shares for a pro rata share of the cash held in the
Trust Account, less franchise taxes and income tax payable, calculated as of two business days prior to the closing of the Proposed
Business Combination.



If the Proposed Business Combination is
consummated, the funds held in the Trust Account will be released (i) to pay our stockholders who properly exercise their redemption
rights, (ii) to make a cash payment to the Sellers in partial consideration of their contribution to TS Holdings, (iii) to pay
$5.0 million in deferred underwriting compensation to the underwriters of our initial public offering and advisory fees to other
persons, (iv) to pay J.W. Childs Associates L.P. amounts owed for unpaid rent and unreimbursed administrative expenses incurred
on our behalf in connection with the Proposed Business Combination and general administrative expenses, not to exceed $500,000,
(v) to pay third parties (e.g., professional advisors, printers and consultants) who have rendered services to us, the Sellers,
The Tile Shop, its subsidiaries and TS Holdings in connection with the Proposed Business Combination (but as to the expenses of
the Sellers, The Tile Shop and TS Holdings, only if the Proposed Business Combination is consummated) and (vi) to pay the aggregate
purchase price payable by us for Public Warrants we may purchase under the terms of the Contribution and Merger Agreement, with
the balance to be used for working capital purposes.



Pursuant to the Contribution and Merger
Agreement, we will use up to $55,000,000 of the $125,021,283 in the Trust Account as of March 31, 2012 to pay our stockholders
who properly exercise their redemption rights. The first $15,000,000 of these payments will result in a corresponding decrease
in funds available for TS Holdings’ working capital. If the remaining amount is insufficient to fund TS Holdings’ working
capital requirements, it would need to borrow funds necessary to satisfy such requirements or sell additional shares of its common
stock, which would result in the dilution of the ownership interest of the holders of such common stock. There is no assurance
that such funds would be available to TS Holdings on terms favorable to it or at all. If such funds were not available, TS Holdings’
operations and profitability may be adversely affected.



Our warrants will become exercisable
for TS Holdings’ common stock, which would increase the number of shares eligible for future resale in the public market
and result in dilution to TS Holdings’ stockholders.



Outstanding warrants to purchase an aggregate
of 17,833,333 shares of our common stock will become exercisable for a like number of shares of TS Holdings’ common stock
upon consummation of the Business Combination. To the extent such warrants are exercised, additional shares of TS Holdings’
common stock will be issued, which will result in dilution to the holders of common stock of TS Holdings and increase the number
of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely
affect the market price of TS Holdings’ common stock.



If our stockholders fail to comply
with the redemption requirements specified in the Preliminary Proxy Statement, they will not be entitled to redeem their shares
of common stock for a pro rata portion of the Trust Account.



Holders of Public Shares are not required
to affirmatively vote against the Proposed Business Combination Proposal in order to exercise their rights to redeem their shares
for a pro rata portion of the Trust Account. In order to exercise their redemption rights, they are required to submit a request
in writing and deliver their stock (either physically or electronically) to our transfer agent at least two business days prior
to the special meeting of stockholders. Stockholders electing to redeem their shares will receive their pro rata portion of the
Trust Account less franchise and income taxes payable, calculated as of two business days prior to the anticipated consummation
of the Proposed Business Combination. See the section of the Registration Statement entitled “Special Meeting of JWCAC
Stockholders — Redemption Rights” for additional information on how to exercise your redemption rights.



21







Although TS Holdings intends to list
its securities on the Nasdaq Stock Market, there can be no assurance that its securities will be so listed or, if listed, that
TS Holdings will be able to comply with the continued listing standards.



TS Holdings intends to list its common
stock on the Nasdaq Stock Market upon consummation of the Proposed Business Combination. As part of the listing process, TS Holdings
will be required to provide evidence that it is able to meet the initial listing requirements. There can be no assurance that TS
Holdings will be able to meet the initial listing standards of the Nasdaq Stock Market or any other exchange or, if its securities
are listed, that TS Holdings will be able to maintain such listing.



In addition, if, after listing, the Nasdaq
Stock Market delists TS Holdings’ securities from trading on its exchange for failure to meet the continued listing standards,
TS Holdings and its securityholders could face significant material adverse consequences including:



| | • | a limited availability of market quotations for its securities;                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                    
| | • | a determination that its common stock is a “penny stock,” which will require brokers trading in its common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for its common stock;
| |   |                                                                                                                                                                                                                                                                    
| | • | a limited amount of analyst coverage; and                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                    
| | • | a decreased ability to issue additional securities or obtain additional financing in the future.                                                                                                                                                                   



If, following the Business Combination,
securities or industry analysts do not publish or cease publishing research or reports about TS Holdings, its business, or its
market, or if they change their recommendations regarding TS Holdings common stock adversely, the price and trading volume of TS
Holdings common stock could decline.



If, following the Business Combination,
securities or industry analysts do not publish or cease publishing research or reports about TS Holdings, its business, or its
market, or if they change their recommendations regarding TS Holdings common stock adversely, the price and trading volume of TS
Holdings common stock could decline. The trading market for TS Holdings common stock will be influenced by the research and reports
that industry or securities analysts may publish about it, its business, its market, or its competitors. Securities and industry
analysts do not currently, and may never, publish research on TS Holdings. If no securities or industry analysts commence coverage
of TS Holdings, its stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover TS
Holdings change their recommendation regarding its stock adversely, or provide more favorable relative recommendations about its
competitors, the price of TS Holdings common stock would likely decline. If any analyst who may cover TS Holdings were to cease
coverage of TS Holdings or fail to regularly publish reports on it, TS Holdings could lose visibility in the financial markets,
which in turn could cause its stock price or trading volume to decline.



The exercise of discretion by our
directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Contribution and Merger Agreement
may result in a conflict of interest when determining whether such changes to the terms of the Contribution and Merger Agreement
or waivers of conditions are appropriate and in our securityholders’ best interest.



In the period leading up to the closing
of the Proposed Business Combination, events may occur that, pursuant to the Contribution and Merger Agreement, would require us
to agree to amend the Contribution and Merger Agreement, to consent to certain actions taken by Sellers or to waive rights that
we are entitled to under the Contribution and Merger Agreement. Such events could arise because of changes in the course of The
Tile Shop’s business, a request by Sellers to undertake actions that would otherwise be prohibited by the terms of the Contribution
and Merger Agreement or the occurrence of other events that would have a material adverse effect on The Tile Shop’s business
and would entitle us to terminate the Contribution and Merger Agreement. In any of such circumstances, it would be in our discretion,
acting through our board of directors, to grant our consent or waive our rights. The existence of the financial and personal interests
of the directors described herein and in the Preliminary Proxy Statement may result in a conflict of interest on the part of one
or more of the directors between what he may believe is best for us and our securityholders and what he may believe is best for
himself or his affiliates in determining whether or not to take the requested action. As of the date of this report, we do not
believe that there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval
of the Proposed Business Combination has been obtained. While certain changes could be made without further stockholder approval,
if there is a change to the terms of the transaction that would have a material impact on the stockholders, we will be required
to circulate a new or amended proxy statement/prospectus or supplement thereto and resolicit the vote of our stockholders with
respect to the Proposed Business Combination.



22







TS Holdings may apply the net proceeds
released from the Trust Account in a manner that does not improve its results of operations or increase the value of your investment.



If the Proposed Business Combination is
consummated, the funds held in the Trust Account will be released (i) to pay our stockholders who properly exercise their redemption
rights, (ii) to make a cash payment to the Sellers in partial consideration of their contribution to TS Holdings, (iii) to pay
$5.0 million in deferred underwriting compensation to the underwriters of our initial public offering and advisory fees to other
persons, (iv) to pay J.W. Childs Associates L.P. amounts owed for unpaid rent and unreimbursed administrative expenses incurred
on our behalf in connection with the Proposed Business Combination and general administrative expenses, not to exceed $500,000,
(v) to pay third parties (e.g., professional advisors, printers and consultants) who have rendered services to us, the Sellers,
The Tile Shop, and TS Holdings in connection with the Proposed Business Combination (but, as to the expenses of the Sellers, The
Tile Shop, and TS Holdings, only if the Proposed Business Combination is consummated), (vi) to pay the aggregate purchase price
payable by us for Public Warrants we may purchase under the terms of the Contribution and Merger Agreement and (vii) with the balance
to be used for working capital purposes and general corporate purposes. Other than these uses, TS Holdings does not have specific
plans for the funds and will have broad discretion regarding how it uses such funds. These funds could be used in a manner with
which you may not agree or applied in ways that do not improve TS Holdings’ results of operations or increase the value of
your investment.



After the closing of the Proposed
Business Combination, there are significant limitations on our recourse against the Sellers for breach of any representations and
warranties made in the Contribution and Merger Agreement.



Other than with respect to the limited
matters described below, the representations and warranties in the Contribution and Merger Agreement expire as of the closing of
the Proposed Business Combination, and, thereafter, we will not have recourse against the Sellers for breaches thereof. Furthermore,
to the extent that the Sellers provide notice of a breach of a representation and warranty that occurs after the date of the Contribution
and Merger Agreement to us and, unless we have the right to terminate the Contribution and Merger Agreement with respect thereto
and exercise such right prior to the closing in accordance with the terms of the Contribution and Merger Agreement, such notice
shall cure any such breach, and we will not have any recourse against the Sellers with respect thereto. Notwithstanding the foregoing,
our stockholders may have limited recourse against the Sellers with respect to (i) certain unpaid taxes of the Company and ILTS
relating to the period prior to the closing of the Proposed Business Combination, (ii) certain pre-closing liabilities of ILTS
and (iii) breach of representations and warranties of the Sellers relating to ownership of the membership interests transferred
to us and certain limited matters related to ILTS, each as set forth in the Contribution and Merger Agreement.



As a result of the Jumpstart Our
Business Startups Act recently signed into law, if the Proposed Business Combination is completed, TS Holdings could be subject
to reduced reporting requirements relative to other public companies.



On April 5, 2012, the Jumpstart Our Business
Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, relax
certain reporting requirements for qualifying public companies. If the Proposed Business Combination is completed, TS Holdings
may, subject to certain conditions set forth under the JOBS Act, qualify as an “emerging growth company,” which would
provide TS Holdings a grace period of the first five years following completion of the Proposed Business Combination before TS
Holdings would be required to (i) provide an auditor’s attestation report on its system of internal controls over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) comply with new accounting pronouncements applicable to public
companies before such pronouncements are also applicable to private companies and (iii) provide all of the compensation disclosure
that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act.



23







ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS



Use of Proceeds from our Public Offering



On November 23, 2010, we consummated our
Public Offering of 12,500,000 units, with each unit consisting of one share of our common stock and one warrant to purchase one
share of our common stock at an exercise price of $11.50 per share. The warrants will become exercisable on the later of (i) 30
days after the completion of the Initial Business Combination and (ii) 12 months from the closing of the Public Offering. The warrants
expire five years after the completion of our Initial Business Combination or earlier upon redemption or liquidation. Once the
warrants become exercisable, the warrants will be redeemable in whole and not in part at a price of $0.01 per warrant upon a minimum
of 30 days’ notice if, and only if, the last sale price of our common stock equals or exceeds $18.00 per share for any 20
trading days within a 30 trading day period ending on the third business day before we send the notice of redemption. The units
in the Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of $125,000,000. Citigroup
Global Markets Inc., acted as sole bookrunning manager and as representative of I-Bankers Securities, Inc., Ladenburg Thalmann
& Co. Inc. and Maxim Group LLC. (together, the “Underwriters”). The securities sold in the offering were registered
under the Securities Act on a registration statement on Form S-1 (No. 333-168798). The SEC declared the registration statement
effective on November 17, 2010.



We paid a total of $2.5 million in underwriting
discounts and commissions (none of which were incurred from January 1, 2012 through June 30,
2012) and approximately $750,000 for other costs and expenses related to the offering (none of which were incurred from January
1, 2012 through June 30, 2012). In addition, the Underwriters agreed to defer $4.375 million
in underwriting discounts and commissions, which amount will be payable upon consummation of our Initial Business Combination if
consummated. We also repaid Associates in satisfaction of an outstanding promissory note after the closing of our Public Offering.



We also consummated the simultaneous private
sale of 5,333,333 Sponsor Warrants to members of our Sponsor at a price of $0.75 per warrant (for an aggregate purchase price of
$4,000,000). The Sponsor Warrants (including the common stock issuable upon exercise of the Sponsor Warrants) are not transferable,
assignable or salable until 30 days after the completion of our Initial Business Combination (except, among certain other limited
exceptions, to our officers and directors and other persons or entities affiliated with the members of our Sponsor) and they will
not be redeemable by the Company so long as they are held by members of our Sponsor or their permitted transferees. Otherwise,
the Sponsor Warrants have terms and provisions that are identical to those of the Public Warrants, except that the Sponsor Warrants
may be exercised by the holders on a cashless basis. The sale of the Sponsor Warrants was made pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act.



After deducting the underwriting discounts
and commissions (excluding the deferred portion of $4.375 million in underwriting discounts and commissions, which amount will
be payable upon consummation of our Initial Business Combination if consummated) and the estimated offering expenses, the total
net proceeds from our Public Offering and the private placement of Sponsor Warrants was $125,750,000 of which $124,950,000 (or
approximately $10.00 per unit sold in the Public Offering) was placed in the Trust Account.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. MINE SAFETY DISCLOSURES



Not applicable.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS



The following exhibits are filed as part
of this Quarterly Report on Form 10-Q.



|Exhibit Number |  | Description                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).                   
|31.2           |  | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).                   
|32.1           |  | Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
|32.2           |  | Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.



24







SIGNATURES



Pursuant to the requirements of Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



| | JWC ACQUISITION CORP.                                       
| | ------------------------------------------------------------
| | Date: July 30, 2012                                         
| |                                                             
| | /s/ John W. Childs                                          
| | Name: John W. Childs                                        
| | Title: Chief Executive Officer (principal executive officer)
| |                                                             
| | /s/ David A. Fiorentino                                     
| | Name: David A. Fiorentino                                   
| | Title: Chief Financial Officer (principal financial officer)



25