NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE
1 – ORGANIZATION AND BUSINESS BACKGROUND
AGBA Acquisition Limited (the “Company”)
is a newly organized blank check company incorporated on October 8, 2018, under the laws of the British Virgin Islands for the
purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all
of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more
businesses or entities (an “initial business combination”). Although the Company is not limited to a particular geographic
region, the Company intends to focus on operating businesses in the healthcare, education, entertainment and financial services
sectors that have their principal operations in China.
The accompanying financial statements are
presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and
Exchange Commission (the “SEC”).
The Company’s entire activity from
inception up to May 16, 2019 was in preparation for the initial public offering. Since the initial public offering, the Company’s
activity has been limited to the evaluation of business combination candidates. The Company has selected December 31 as its fiscal
year end and tax year end.
Financing
The registration statement for the Company’s
initial public offering (the “Public Offering” as described in Note 3) was declared effective by the United States
Securities and Exchange Commission (“SEC”) on May 13, 2019. The Company consummated the Public Offering on May 16,
2019 of 4,600,000 units at $10.00 per unit (the “Public Units’) and sold to the Sponsor to purchase 225,000 units at
$10.00 per unit. The Company received net proceeds of $46,716,219. The Company incurred $2,559,729 in initial public offering related
costs, including $2,175,948 of underwriting fees and $383,781 of initial public offering costs. All of which were paid except the
deferred underwriting fee of $1,025,948.
Trust Account
Upon the closing of the Public
Offering and the private placement, $46,000,000 was placed in a trust account (the “Trust Account”) with
Continental Stock Transfer & Trust Company, acting as trustee. The funds held in the Trust Account can be invested in
United States government treasury bills, bonds or notes, having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act until the earlier of (i) the
consummation of the Company’s initial business combination and (ii) the Company’s failure to consummate a
business combination within 15 months (or up to 21 months with two more extensions) from the closing of the Public Offering.
Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the
Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute
agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no
guarantee that such persons will execute such agreements. The remaining net proceeds (not held in the Trust Account) may be
used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and
administrative expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to pay
the Company’s tax obligations.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Business Combination
Pursuant to Nasdaq listing rules, the Company’s
initial business combination must occur with one or more target businesses having an aggregate fair market value equal to at least
80% of the value of the funds in the Trust Account (excluding any deferred underwriter’s fees and taxes payable on the income
earned on the Trust Account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement
for our initial business combination, although the Company may structure a business combination with one or more target businesses
whose fair market value significantly exceeds 80% of the trust account balance. If the Company is no longer listed on Nasdaq, it
will not be required to satisfy the 80% test. The Company currently anticipates structuring a business combination to acquire 100%
of the equity interests or assets of the target business or businesses.
The Company may, however, structure a business
combination where the Company merges directly with the target business or where the Company acquires less than 100% of such interests
or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other
reasons, but the Company will only complete such business combination if the post-transaction company owns 50% or more of the outstanding
voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be required to
register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of a target
business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is
owned or acquired is what will be valued for purposes of the 80% test.
As set forth in the memorandum of association,
the objects for which are established are unrestricted and the Company shall have full power and authority to carry out any object
not prohibited by the British Virgin Islands Business Companies Act, as amended (“Companies Law”) or as the same may
be revised from time to time, or any other law of the British Virgin Islands.
The Company’s amended and restated
memorandum and articles of association contains provisions designed to provide certain rights and protections to our ordinary shareholders
prior to the consummation of the initial business combination. These provisions cannot be amended without the approval of 50% (or
65% if approved in connection with the initial business combination) of the Company’s outstanding ordinary shares attending
and voting on such amendment. The Company’s initial shareholders, who beneficially own 23.01% of ordinary shares upon the
closing of the initial public offering (assuming they do not purchase any units in the initial public offering), will participate
in any vote to amend the amended and restated memorandum and articles of association and will have the discretion to vote in any
manner they choose. Prior to the initial business combination, if the Company seek to amend any provisions of the amended and restated
memorandum and articles of association relating to shareholders’ rights or pre-business combination activity, the Company
will provide dissenting public shareholders with the opportunity to redeem their public shares in connection with any such vote
on any proposed amendments to the amended and restated memorandum and articles of association. The Company and the directors and
officers have agreed not to propose any amendment to the amended and restated memorandum and articles of association that would
affect the substance and timing of the Company’s obligation to redeem the public shares if the Company are unable to consummate
the initial business combination within 12 months (or 21 months, as applicable) from the closing of the initial public offering,
unless we provide dissenting public shareholders with the opportunity to convert their public shares into the right to receive
cash from the trust account in connection with any such vote. The Company’s initial shareholders have agreed to waive any
redemption rights with respect to any insider shares and any public shares they may hold in connection with any vote to amend our
amended and restated memorandum and articles of association prior to our initial business combination.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The Company will either seek shareholder
approval of any business combination at a meeting called for such purpose at which shareholders may seek to convert their shares
into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid,
or provide shareholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount equal
to their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid.
These shares have been recorded at redemption value and are classified as temporary equity, in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities
from Equity.” The Company will proceed with a business combination only if it will have net tangible assets of at least $5,000,001
upon consummation of the business combination and, solely if shareholder approval is sought, a majority of the outstanding ordinary
shares of the Company voted are voted in favor of the business combination.
Notwithstanding the foregoing, a public
shareholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group”
(as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 25% or more
of the ordinary shares sold in the Public Offering. Accordingly, all shares purchased by a holder in excess of 25% of the shares
sold in the Public Offering will not be converted to cash. In connection with any shareholder vote required to approve any business
combination, the initial shareholders will agree (i) to vote any of their respective shares, including the ordinary shares sold
to the initial shareholders in connection with the organization of the Company (the “Initial Shares”), ordinary shares
included in the Private Units to be sold in the Private Placement, and any ordinary shares which were initially issued in connection
with the Public Offering, whether acquired in or after the effective date of the Public Offering, in favor of the initial business
combination and (ii) not to convert such respective shares into a pro rata portion of the Trust Account or seek to sell their shares
in connection with any tender offer the Company engages in.
Liquidation
If the Company does not complete a
business combination within 12 months from the consummation of the Public Offering, the Company will trigger an automatic
winding up, dissolution and liquidation pursuant to the terms of the amended and restated memorandum and articles of
association. As a result, this has the same effect as if the Company had formally gone through a voluntary liquidation
procedure under the Companies Law. Accordingly, no vote would be required from our shareholders to commence such a voluntary
winding up, dissolution and liquidation. However, if the Company anticipate that the Company may not be able to consummate
its initial business combination within 12 months, the Company may, but are not obligated to, extend the period of time to
consummate a business combination three times by an additional three months each time (for a total of up to 21 months to
complete a business combination). Pursuant to the terms of the amended and restated memorandum and articles of association
and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company, in order to
extend the time available for the Company to consummate our initial business combination, the Company’s insiders or
their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust
account $400,000, or $460,000 if the underwriters’ over-allotment option is exercised in full ($0.10 per share in
either case), on or prior to the date of the applicable deadline. The insiders will receive a non-interest bearing, unsecured
promissory note equal to the amount of any such deposit that will not be repaid in the event that the Company is unable to
close a business combination unless there are funds available outside the trust account to do so. Such notes would either be
paid upon consummation of the Company’s initial business combination, or, at the lender’s discretion, converted
upon consummation of our business combination into additional private units at a price of $10.00 per unit. The
Company’s shareholders have approved the issuance of the private units upon conversion of such notes, to the extent the
holder wishes to so convert such notes at the time of the consummation of the Company’s initial business combination.
In the event that the Company receives notice from the Company’s insiders five days prior to the applicable deadline of
their intent to effect an extension, the Company intend to issue a press release announcing such intention at least three
days prior to the applicable deadline. In addition, the Company intends to issue a press release the day after the applicable
deadline announcing whether or not the funds had been timely deposited. The Company’s insiders and their affiliates or
designees are not obligated to fund the trust account to extend the time for the Company to complete our initial business
combination. To the extent that some, but not all, of the Company’s insiders, decide to extend the period of time to
consummate the Company initial business combination, such insiders (or their affiliates or designees) may deposit the entire
amount required. If the Company is unable to consummate the Company’s initial business combination within such time
period, the Company will, as promptly as possible but not more than ten business days thereafter, redeem 100% of the
Company’s outstanding public shares for a pro rata portion of the funds held in the trust account, including a pro rata
portion of any interest earned on the funds held in the trust account and not necessary to pay taxes, and then seek to
liquidate and dissolve. However, the Company may not be able to distribute such amounts as a result of claims of creditors
which may take priority over the claims of the Company’s public shareholders. In the event of dissolution and
liquidation, the public rights will expire and will be worthless.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
These accompanying financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”)
and pursuant to the rules and regulations of the SEC. The interim financial information provided is unaudited, but includes all
adjustments which management considers necessary for the fair presentation of the results for these periods. Operating results
for the interim period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2020. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion
and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended
December 31, 2019, filed with the SEC on March 31, 2020.
●
|
Emerging growth company
|
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to
comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
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 expenses
during the reporting period. Actual results could differ from those estimates.
●
|
Cash and cash equivalents
|
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents.
●
|
Cash and investments held in trust account
|
At June 30, 2020, the trust assets were
held in a money market fund that invests in U.S. Treasury Obligations.
The Company classified investments
that are directly invested in U.S. Treasuries as available for sales and money market funds are classified in accordance with
the trading method. All marketable securities are recorded at their estimated fair value. Unrealized gains and losses for
available-for-sale securities are recorded in other comprehensive income (loss). The Company evaluates its investments to
assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other
than temporary if they are related to deterioration in credit risk or if it is likely the Company will sell the securities
before the recovery of the cost basis. Realized gains and losses and declines in value determined to be other than temporary
are determined based on the specific identification method and are reported in other income (expense), net in the statements
of operations and comprehensive (income) loss.
●
|
Ordinary shares subject to possible redemption
|
The Company accounts for its ordinary shares
subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are
classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s
ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject
to occurrence of uncertain future events. Accordingly, as of June 30, 2020, 3,987,478 ordinary shares subject to possible redemption
are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
●
|
Fair value of financial instruments
|
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
The fair value hierarchy is categorized
into three levels based on the inputs as follows:
|
Level 1 —
|
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
|
|
|
|
|
Level 2 —
|
Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
|
|
|
|
|
Level 3 —
|
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
The fair value of the Company’s
certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, and other current
assets, accrued expenses, due to sponsor are estimated to approximate the carrying values as of June 30, 2020 due to the short
maturities of such instruments.
The following table presents information
about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2020, and
indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
|
June 30,
2020
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
Description
|
|
(Unaudited)
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities held in Trust Account*
|
|
$
|
47,307,540
|
|
|
$
|
47,307,540
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
December 31,
2019
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
Description
|
|
(Audited)
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities held in Trust Account*
|
|
$
|
46,603,976
|
|
|
$
|
46,603,976
|
|
|
$
|
-
|
|
|
$
|
-
|
|
*
|
included in the Cash and investments held in trust account on the Company’s balance sheet.
|
●
|
Concentration of credit risk
|
Financial instruments that potentially
subject the Company to concentration of credit risk consist of cash and trust accounts in a financial institution which, at times
may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and
management believes the Company is not exposed to significant risks on such accounts.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The Company complies with the accounting
and reporting requirements of ASC Topic 740, “ Income Taxes ,” which requires an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. The Company’s management determined that the British Virgin Islands is the Company’s
major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as
income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2020.
The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation
from its position.
The Company may be subject to potential
examination by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the
timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
The Company’s tax provision is zero
and it has no deferred tax assets. The Company is considered to be an exempted British Virgin Islands Company, and is presently
not subject to income taxes or income tax filing requirements in the British Virgin Islands or the United States.
The Company calculates net income (loss)
per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing
the net income (loss) by the weighted-average number of ordinary shares outstanding during the period, excluding ordinary
shares subject to forfeiture by the Sponsor. Diluted income (loss) per share is computed similar to basic income (loss) per share
except that the denominator is increased to include the number of additional ordinary shares that would have been outstanding if
the potential ordinary share equivalents had been issued and if the additional ordinary shares were dilutive.
|
|
Three months
ended
June 30,
2020
|
|
|
Six months
ended
June 30,
2020
|
|
|
|
|
|
|
|
|
Net loss attributable to ordinary shareholders
|
|
$
|
(35,508
|
)
|
|
$
|
(168,326
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares outstanding – Basic and diluted
|
|
|
1,919,201
|
|
|
|
1,924,732
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – Basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.09
|
)
|
|
|
Three months
ended
June 30,
2019
|
|
|
Six months
ended
June 30,
2019
|
|
|
|
|
|
|
|
|
Net loss attributable to ordinary shareholders
|
|
$
|
(115,288
|
)
|
|
$
|
(125,303
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares outstanding – Basic and diluted
|
|
|
1,447,398
|
|
|
|
934,798
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – Basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.13
|
)
|
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Parties, which can be a corporation or
individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operational decisions. Companies are also considered
to be related if they are subject to common control or common significant influence.
●
|
Recent accounting pronouncements
|
The Company has considered all new accounting
pronouncements and has concluded that there are no new pronouncements that may have a material impact on the results of operations,
financial condition, or cash flows, based on the current information.
NOTE 3 — CASH AND INVESTMENT HELD
IN TRUST ACCOUNT
As of June 30, 2020, investment
securities in the Company’s Trust Account consisted of $47,307,540 in a money market fund that invests in primarily
United States Treasury Bills. The Company classifies its United States Treasury securities as
available-for-sale. Available-for-sale marketable securities are recorded at their estimated fair value on the accompanying
June 30, 2020 balance sheet. The carrying value, including gross unrealized holding gain as other comprehensive income and
fair value of held to marketable securities on June 30, 2020 is as follows:
|
|
Carrying
Value as of
June 30,
2020
(Unaudited)
|
|
|
Gross
Unrealized
Holding
Gain
|
|
|
Fair Value
as of
June 30,
2020
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market U.S. Treasury Securities Fund
|
|
$
|
47,307,540
|
|
|
$
|
-
|
|
|
$
|
47,307,540
|
|
|
|
Carrying
Value as of
December 31,
2019
(Audited)
|
|
|
Gross
Unrealized
Holding
Gain
|
|
|
Fair Value
as of
December 31,
2019
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities
|
|
$
|
46,421,849
|
|
|
$
|
171,659
|
|
|
$
|
46,593,508
|
|
NOTE 4 — PUBLIC OFFERING
On May 16, 2019, the Company sold 4,600,000
units at a price of $10.00 per Public Unit in the Public Offering. Each Public Unit consists of one ordinary share of the Company,
$0.001 par value per share (the “Public Shares”), and one right (the “Public Rights”). Each Public Right
entitles the holder to receive one-tenth (1/10) of an ordinary share upon consummation of an initial business combination. In
addition, the Company has granted Maxim, the underwriter of the Public Offering, a 45-day option to purchase up to 225,000 Public
Units solely to cover over-allotments, if any.
If the Company does not complete its business
combination within the necessary time period described in Note 1, the Public Rights will expire and be worthless. Since the Company
is not required to net cash settle the Rights and the Rights are convertible upon the consummation of an initial business combination, the Management determined that the Rights are classified within shareholders’ equity as “Additional paid-in capital”
upon their issuance in accordance with ASC 815-40. The proceeds from the sale are allocated to Public Shares and Rights based on
the relative fair value of the securities in accordance with ASC 470-20-30. The value of the Public Shares and Rights will be based
on the closing price paid by investors.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The Company paid an upfront underwriting
discount of $1,150,000 (2.5%) of the per unit offering price to the underwriter at the closing of the Public Offering, with an
additional fee of $1,025,948 (the “Deferred Discount”) of 2.0% of the gross offering proceeds payable upon the Company’s
completion of the business combination. The Deferred Discount will become payable to the underwriter from the amounts held in
the Trust Account solely in the event the Company completes its business combination. In the event that the Company does not close
the business combination, the underwriter has waived its right to receive the Deferred Discount. The underwriter is not entitled
to any interest accrued on the Deferred Discount.
Simultaneously with the closing of the
Public Offering, the Company consummated a private placement of 210,000 private units, at $10.00 per unit, purchased by the Sponsor.
Simultaneously with the sale of the Over-Allotment
Units, the Company consummated a private placement of 15,000 private units, at $10.00 per unit, purchased by the Sponsor.
The private units are identical to the
units sold in the Public Offering except that the private warrants are non-redeemable and may be exercised on a cashless basis.
NOTE 5 – RELATED PARTY TRANSACTIONS
Insider
Shares
In October 2018, the Company’s Chief
Executive Officer, Gordon Lee, subscribed for an aggregate of 1,000 of ordinary shares for an aggregate purchase price of $1, or
approximately $0.001 per share. On February 22, 2019, the Company issued an aggregate of 1,149,000 Ordinary Shares to AGBA Holding
Limited for an aggregate purchase price of $25,000 in cash.
The initial shareholders have agreed, subject
to certain limited exceptions, not to transfer, assign or sell any of their insider shares until, with respect to 50% of the insider
shares, the earlier of six months after the consummation of a business combination and the date on which the closing price of the
ordinary shares equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within a 30-trading day period commencing after a business combination and, with respect
to the remaining 50% of the insider shares, until the six months after the consummation of a business combination, or earlier,
in either case, if, subsequent to a business combination, the Company completes a liquidation, merger, stock exchange or other
similar transaction which results in all of the Company’s shareholders having the right to exchange their ordinary shares,
securities or other property.
Administrative Services Agreement
The Company is obligated to pay AGBA Holding
Limited, a company owned by the insiders, a monthly fee of $10,000 for general and administrative services. However, pursuant to
the terms of such agreement, the Company may delay payment of such monthly fee upon a determination by the Company’s audit
committee that the Company lack sufficient funds held outside the trust to pay actual or anticipated expenses in connection with
the initial business combination. Any such unpaid amount will accrue without interest and be due and payable no later than the
date of the consummation of our initial business combination.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
Related
Party Loan
In order to meet the working capital needs
following the consummation of the Public Offering, the initial shareholders, officers and directors or their affiliates may, but
are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their
sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial
business combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon
consummation of our business combination into private units at a price of $10.00 per unit (which, for example, would result in
the holders being issued units to acquire 55,000 ordinary shares (which includes 5,000 shares issuable upon conversion of rights)
and warrants to purchase 25,000 ordinary shares if $500,000 of notes were so converted). The Company’s shareholders have
approved the issuance of the units and underlying securities upon conversion of such notes, to the extent the holder wishes to
so convert them at the time of the consummation of our initial business combination. If the Company does not complete a business
combination, the loans will not be repaid.
Related Party Extensions Loan
The Company will have until 12 months from
the consummation of the initial public offering to consummate the initial business combination. However, if the Company anticipate
that the Company may not be able to consummate the initial business combination within 12 months, the Company may, but are not
obligated to, extend the period of time to consummate a business combination three times by an additional three months each time
(for a total of up to 21 months to complete a business combination). Pursuant to the terms of our amended and restated memorandum
and articles of association and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company, in order to extend the time available for us to consummate our initial business combination, the Company’s insiders
or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account
$400,000, or $460,000 if the underwriters’ over-allotment option is exercised in full ($0.10 per share in either case), on
or prior to the date of the applicable deadline. The insiders will receive a non-interest bearing, unsecured promissory note equal
to the amount of any such deposit that will not be repaid in the event that we are unable to close a business combination unless
there are funds available outside the trust account to do so. Such notes would either be paid upon consummation of our initial
business combination, or, at the lender’s discretion, converted upon consummation of our business combination into additional
private units at a price of $10.00 per unit.
On May 11, 2020, we issued a $460,000
Convertible Promissory Note to the Sponsor, pursuant to which such amount was deposited into our Trust Account in order to
extend the amount of time we have available to complete a business combination from May 16, 2020 to August 16, 2020. The Note
is non-interest bearing and is payable upon the closing of a business combination. In addition, the Note may be converted,
at the lender’s discretion, into additional Private Units at a price of $10.00 per unit.
Related Party Advances
In the event the Sponsor pays for any
expense or liability on behalf of the Company, then such payments would be accounted for as loan to the Company by the Sponsor.
The advances are non interest bearing and during the six months ended June 30, 2020, the Company paid $322,078 on the advances
to the Sponsor.
As of June 30, 2020 and December 31, 2019,
the Company owed a balance of $221,115 and $543,193 to AGBA Holding Limited, respectively.
NOTE 6 – SHAREHOLDERS’ EQUITY
Ordinary Shares
The Company is authorized to issue 100,000,000
ordinary shares at par $0.001.
The Company’s shareholders of record
are entitled to one vote for each share held on all matters to be voted on by shareholders. In connection with any vote held to
approve our initial business combination, all of the initial shareholders, as well as all of the officers and directors, have agreed
to vote their respective ordinary shares owned by them immediately prior to the initial public offering and any shares purchased
in the open market in favor of the proposed business combination.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
On February 22, 2019, the Company issued
an aggregate of 1,149,000 founder shares to the sponsor for an aggregate purchase price of $25,000 in cash.
As of June 30, 2020 and December 31, 2019,
1,987,522 and 1,930,264 ordinary shares issued and outstanding excluding 3,987,478 and 4,044,736 shares are subject to possible
conversion.
Accumulated Other Comprehensive Income
The table below presents the changes in
accumulated other comprehensive income (“AOCI”), including the reclassification out of AOCI.
|
|
Available-
for-sale
securities
|
|
Balance as of January 1, 2020
|
|
$
|
98,103
|
|
Other comprehensive income before reclassifications
|
|
|
236,491
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(334,594
|
)
|
Balance as of June 30, 2020
|
|
$
|
-
|
|
Warrants
Each redeemable warrant entitles the holder
thereof to purchase one-half (1/2) of one ordinary share at a price of $11.50 per full share, subject to adjustment. Pursuant to
the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only an even
number of warrants may be exercised at any given time by a warrant holder.
No public warrants will be exercisable
for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise
of the warrants and a current prospectus relating to such ordinary shares. It is the Company’s current intention to have
an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current
prospectus relating to such ordinary shares in effect promptly following consummation of an initial business combination.
Notwithstanding the foregoing, if a registration
statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within 90 days following
the consummation of our initial business combination, public warrant holders may, until such time as there is an effective registration
statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on
a cashless basis pursuant to an available exemption from registration under the Securities Act. In such event, each holder would
pay the exercise price by surrendering the warrants for that number of ordinary shares equal to the quotient obtained by dividing
(x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price
of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the day prior to the date
of exercise. For example, if a holder held 300 warrants to purchase 150 shares and the fair market value on the date prior to exercise
was $15.00, that holder would receive 35 shares without the payment of any additional cash consideration. If an exemption from
registration is not available, holders will not be able to exercise their warrants on a cashless basis.
The warrants will become exercisable on
the later of the completion of an initial business combination and May 13, 2020. The warrants will expire at 5:00 p.m., New York
City time, on the fifth anniversary of our completion of an initial business combination, or earlier upon redemption.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
The Company may redeem the outstanding
warrants (excluding the private warrants but including any outstanding warrants issued upon exercise of the unit purchase option
issued to Maxim Group LLC), in whole and not in part, at a price of $0.01 per warrant:
●
|
at any time while the warrants are exercisable,
|
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption,
|
|
|
●
|
if, and only if, the last sales price of the ordinary shares equals or exceeds $16.50 per share for any 20 trading days within a 30 trading day period ending three business days before the Company send the notice of redemption, and
|
|
|
●
|
if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
|
If the foregoing conditions are satisfied
and the Company would issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled
redemption date. However, the price of the ordinary shares may fall below the $16.50 trigger price as well as the $11.50 warrant
exercise price per full share after the redemption notice is issued and not limit our ability to complete the redemption.
The redemption criteria for the warrants
have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price
and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share
price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price
of the warrants.
If the Company call the warrants for redemption
as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary
shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied
by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the
fair market value. The “fair market value” shall mean the average reported last sale price of the ordinary shares for
the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders
of warrants. Whether the Company will exercise our option to require all holders to exercise their warrants on a “cashless
basis” will depend on a variety of factors including the price of our ordinary shares at the time the warrants are called
for redemption, the Company’s cash needs at such time and concerns regarding dilutive share issuances.
The private warrants will be non-redeemable
and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted
transferees. Additionally, because the private units will be issued in a private transaction, the holders of the private warrants
and their transferees will be allowed to exercise such warrants for cash even if a registration statement covering the ordinary
shares issuable upon exercise of such warrants is not effective and receive unregistered ordinary shares.
Rights
Except in cases where the Company is not
the surviving company in a business combination, each holder of a right will automatically receive one-tenth (1/10) of an ordinary
share upon consummation of the initial business combination. In the event the Company will not be the surviving company upon completion
of the initial business combination, each holder of a right will be required to affirmatively convert his, her or its rights in
order to receive the one-tenth (1/10) of a share underlying each right upon consummation of the business combination. The Company
will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the
nearest whole share or otherwise addressed in accordance with the applicable provisions of the British Virgin Islands law. As a
result, you must hold rights in multiples of 10 in order to receive shares for all of your rights upon closing of a business combination.
If we are unable to complete an initial business combination within the required time period and the Company redeem the public
shares for the funds held in the trust account, holders of rights will not receive any of such funds for their rights and the rights
will expire worthless.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS
(Currency expressed in United States
Dollars (“US$”), except for number of shares)
(Unaudited)
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of our insider shares issued
and outstanding prior to our initial public offering, as well as the holders of the Private Units (and all underlying securities)
and any securities our initial shareholders, officers, directors or their affiliates may be issued in payment of working capital
loans made to us, are entitled to registration rights pursuant to a registration rights agreement entered into concurrently
without initial public offering. In addition, the holders have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters is entitled to a cash
underwriting discount of six and half percent (6.5%), or $0.65 per unit, of the gross proceeds of the initial public offering.
Two and one-half percent (2.5%), or $0.25 per share, is not contingent and has been paid at the closing of the initial public offering.
Four percent (4.0%), or $0.40 per unit, is contingent on the closing of a business combination and will be deferred by the underwriters
and be placed in the Trust Account. Such deferred amount will only be payable to the underwriters upon closing of a business combination.
Further, the deferred amount paid to the underwriters upon the closing of a business combination will be reduced by two percent
(2.0%), or $0.20 per unit, for each unit that is redeemed by shareholders in connection with the business combination. If the business
combination is not consummated, the deferred amount will be forfeited by the underwriters. The underwriters will not be entitled
to any interest accrued on the deferred amount.
Unit Purchase Option
The Company sold to Maxim for $100, an
option to purchase 276,000 units exercisable, at $11.50 per unit, between the first and fifth anniversary of the effective date
of the registration statement relating to our initial public offering. The purchase option may be exercised for cash or on a cashless
basis, at the holder’s option, and expires on May 13, 2024. The Company accounted for the unit purchase option, inclusive
of the receipt of $100 cash payment, as an expense of the initial public offering resulting in a charge directly to shareholders’
equity. The Company estimates that the fair value of the unit purchase option is approximately $747,960, or $2.71 per Unit, using
the Black-Scholes option-pricing model. The fair value of the unit purchase option to be granted to the underwriters is estimated
as of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 2.18% and
(3) expected life of four years between first and fifth anniversary dates of the Effective Date. The option and the units, as well
as the ordinary shares and warrants to purchase ordinary shares that may be issued upon exercise of the option, have been deemed
compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date
of the registration statement for our initial public offering pursuant to Rule 5110(g)(1) of FINRA’s Rules, during which
time the option may not be sold, transferred, assigned, pledged or hypothecated, or be subject of any hedging, short sale, derivative
or put or call transaction that would result in the economic disposition of the securities. Additionally, the option may not be
sold, transferred, assigned, pledged or hypothecated prior to May 13, 2020 except to any underwriters and selected dealer participating
in the offering and their bona fide officers or partners. The option grants to holders demand and “piggy back” rights
for periods of five and seven years, respectively, from the effective date of the registration statement of which forms a part
with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the
option. We will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which will
be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted
in certain circumstances including in the event of a share dividend, or our recapitalization, reorganization, merger or consolidation.
However, the option will not be adjusted for issuances of ordinary shares at a price below its exercise price.
Right of First Refusal
Subject to certain conditions, the Company
granted Maxim, for a period of 18 months after the date of the consummation of the business combination, a right of first refusal
to act as lead underwriters or minimally as a co-manager, with at least 30% of the economics; or, in the case of a three-handed
deal, 20% of the economics, for any and all future public and private equity and debt offerings. In accordance with FINRA Rule
5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the
registration statement for our initial public offering.
NOTE 8 – SUBSEQUENT EVENTS
On August 12, 2020, the Company issued an
unsecured promissory note in the aggregate principal amount of $460,000 (the “Note”) to AGBA Holding Limited, the
Company’s Sponsor in exchange for Sponsor depositing such amount into the Company’s trust account in order to extend
the amount of time it has available to complete a business combination. The Note does not bear interest and mature upon closing
of a business combination by the Company. In addition, the Note may be converted by the holder into units of the Company identical
to the units issued in the Company’s initial public offering at a price of $10.00 per unit.
Except as noted above, in accordance
with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions
that occurred after June 30, 2020, up through the date was the Company issued the balance sheet.