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.

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.

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.

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.