NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed
in United States Dollars (“US$”), except for number of shares)
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 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.
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
21 months 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.
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.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
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 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 65% (or 50% 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 will beneficially
own 20.0% of ordinary shares upon the closing of this offering (assuming they do not purchase any units in this 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 this
offering. 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.
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 $5,000,001 upon consummation of the Business Combination and, solely if shareholder
approval is sought, a majority of the outstanding common shares of the Company voted are voted in favor of the Business Combination.
Notwithstanding
the foregoing, a public shareholder, together with any affiliate of his or any other person with whom he is acting in concert
or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights
with respect to 25% or more of the common shares sold in the Public Offering. Accordingly, all shares purchased by a holder in
excess of 25% of the shares sold in the Public Offering will not be converted to cash. In connection with any shareholder vote
required to approve any Business Combination, the Initial Shareholders will agree (i) to vote any of their respective shares,
including the common shares sold to the Initial Shareholders in connection with the organization of the Company (the “Initial
Shares”), common shares included in the Private Units to be sold in the Private Placement, and any common shares which were
initially issued in connection with the Public Offering, whether acquired in or after the effective date of the Public Offering,
in favor of the initial Business Combination and (ii) not to convert such respective shares into a pro rata portion of the Trust
Account or seek to sell their shares in connection with any tender offer the Company engages in.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
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 anticipates 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). As of the date of this report, the
Company has extended three times the period of time to consummate a business combination until February 16, 2021. 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, LLC on the date of this prospectus, 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 intends 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’s
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.
Going
Concern
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards
Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about
the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after February 16, 2021.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES
These accompanying unaudited condensed
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 September 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.
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
September 30, 2020 and December 31, 2019, the trust assets were held in a money market fund that invests in U.S. Treasury Obligations.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
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, at September 30, 2020, 3,940,826 ordinary shares subject to possible redemption
are presented as temporary equity, outside of the shareholders’ equity section of the Company’s unaudited condensed
balance sheet.
|
●
|
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 September 30, 2020 and December 31, 2019 due to the short maturities of such instruments.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
The
following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring
basis as of September 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques the Company
utilized to determine such fair value.
|
|
September 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*
|
|
$
|
47,778,067
|
|
|
$
|
47,778,067
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
December 31,
2019
|
|
|
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*
|
|
$
|
46,593,508
|
|
|
$
|
46,593,508
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
*
|
included
in 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.
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 September 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.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
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 possible redemption. 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. Ordinary shares subject to possible
redemption at September 30, 2020 and December 31, 2019, which are not currently redeemable and are not redeemable at fair value,
have been excluded from the calculation of basic and diluted income (loss) per share since such shares, if redeemed, only participate
in their pro rata share of the Trust Account earnings.
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 September 30, 2020, investment securities in the Company’s Trust Account consisted of $47,778,067 in United States Treasury
Bills and $235 in cash. 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 September 30, 2020 balance sheet. The carrying
value, including gross unrealized holding gain as other comprehensive income and fair value of held to marketable securities as
of September 30, 2020 and December 31, 2019 are as follows:
|
|
Carrying
Value as of
September 30,
2020
(unaudited)
|
|
|
Gross
Unrealized
Holding
Gain
|
|
|
Fair Value
as of
September 30,
2020
|
|
Available-for-sale marketable securities
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities
|
|
$
|
47,767,851
|
|
|
$
|
10,216
|
|
|
$
|
47,778,067
|
|
|
|
Carrying
Value as of
December 31,
2019
(audited)
|
|
|
Gross
Unrealized
Holding
Gain
|
|
|
Fair Value
as of
December 31,
2019
|
|
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, $0.0001 par value per share (the “Public Shares”), and one right (the “Public
Rights”). Each Public Right entitles the holder to receive one-tenth (1/10) of an ordinary share upon consummation of an
initial Business Combination. In addition, the Company has granted Chardan Capital Markets, LLC, the underwriter of the Public
Offering, a 45-day option to purchase up to 225,000 Public Units solely to cover over-allotments, if any.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
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.
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 (the “Deferred
Discount”) of 4.0% of the gross offering proceeds payable upon the Company’s completion of the Business Combination.
The amount of Deferred Discount will be reduced by 2.0% for each Unit that is redeemed by shareholders in connection with the Company’s
Business Combination, and 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)
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’s will have until 12 months from the consummation of this 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 on the date of this prospectus, 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, August 12, 2020, and
November 10, 2020, the Company issued three Notes, each in an amount of $460,000 to the Sponsor, pursuant to which such amount
had been deposited into our Trust Account in order to extend the amount of time we have available to complete a business combination
until February 16, 2021. The Notes are 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 Sponsor, AGBA Holding Limited, has paid the expenses incurred by the Company an aggregate
of $255,020 on a non-interest bearing basis as of September 30, 2019.
As
of September 30, 2020 and December 31, 2019, the Company owed a balance of $255,020 and $543,193 to AGBA Holding Limited.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
NOTE
6 – SHAREHOLDER’S 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 this offering
and any shares purchased in this offering or following this offering in the open market in favor of the proposed business combination.
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 September 30, 2020, 2,034,174 ordinary
shares issued and outstanding excluding 3,940,826 shares are subject to possible redemption.
Accumulated
Other Comprehensive Income (Loss)
The
table below presents the changes in accumulated other comprehensive income (loss) (“AOCI”), including the reclassification
out of AOCI.
|
|
Available-for-sale
securities
|
|
Balance as of January 1, 2020
|
|
$
|
98,103
|
|
Other comprehensive income before reclassifications
|
|
|
234,618
|
|
Amounts reclassified from AOCI into interest income
|
|
|
-
|
|
Balance as of March 31, 2020
|
|
$
|
332,721
|
|
|
|
|
|
|
Balance as of April 1, 2020
|
|
$
|
332,721
|
|
Other comprehensive income before reclassifications
|
|
|
1,873
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(334,594
|
)
|
Balance as of June 30, 2020
|
|
$
|
-
|
|
|
|
|
|
|
Balance as of July 1, 2020
|
|
$
|
-
|
|
Other comprehensive income before reclassifications
|
|
|
10,762
|
|
Amounts reclassified from AOCI into interest income
|
|
|
(546
|
)
|
Balance as of September 30, 2020
|
|
$
|
10,216
|
|
Warrants
Each
redeemable warrant entitles the holder thereof to purchase one-half (1/2) of one ordinary share at a price of $11.50 per full
share, subject to adjustment as described in this prospectus. Pursuant to the warrant agreement, a warrant holder may exercise
its warrants only for a whole number of shares. This means that only an even number of warrants may be exercised at any given
time by a warrant holder.
No
public warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the
ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. It is the Company’s
current intention to have an effective and current registration statement covering the ordinary shares issuable upon exercise
of the warrants and a current prospectus relating to such ordinary shares in effect promptly following consummation of an initial
business combination.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
Notwithstanding
the foregoing, if a registration statement covering the ordinary shares issuable upon exercise of the public warrants is not effective
within 90 days 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 12 months from the date
of this prospectus. 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.
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 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 $11.50 warrant exercise price per full share after the redemption notice is issued and not limit our ability
to complete the redemption.
The
redemption criteria for the warrants have been established at a price which is intended to provide warrant holders a reasonable
premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant
exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share
price to drop below the exercise price of the warrants.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
If the Company calls 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.
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 $0.20 per unit, for each unit that is redeemed by shareholders
in connection with the business combination. If the business combination is not consummated, the deferred amount will be forfeited
by the underwriters. The underwriters will not be entitled to any interest accrued on the deferred amount.
AGBA ACQUISITION LIMITED
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
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. 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 of which this prospectus forms a part.
NOTE
8 – SUBSEQUENT EVENTS
On November 10, 2020, the Company issued
unsecured promissory note in the aggregate principal amount of $460,000 to AGBA Holding Limited in exchange for AGBA Holding Limited
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.