AGBA ACQU The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Overview We were formed onOctober 8, 2018 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not be limited to any particular industry or geographic region. OnNovember 3, 2021 , the Company entered into the Business Combination Agreement with TAG, OPH, Fintech, B2B, B2BSub, and HKSub. OPH, through its wholly-owned subsidiaries, is engaged in business-to-business services, while Fintech, through its wholly-owned subsidiaries, is engaged in the financial technology or fintech business. B2BSub is a wholly-owned subsidiary of B2B, and HKSub is a wholly-owned subsidiary of B2BSub. Pursuant to the Business Combination Agreement, OPH will merge with HKSub prior to the closing of the business combination, with HKSub as the surviving entity. At the closing of the business combination, B2B and Fintech will merge with two Merger Sub I and Merger Sub II, respectively, resulting in B2B and Fintech becoming wholly-owned subsidiaries of AGBA. In consideration of the business combination, AGBA will issue 55,500,000 ordinary shares with a deemed price per share ofUS$10.00 to certain persons as directed by TAG. At the closing of the business combination, AGBA will deliver to such persons as directed by TAG, in its capacity as the sole shareholder of B2B and Fintech, subject to compliance with applicable law, the Aggregate Stock Consideration less three percent (3%) of the Aggregate Stock Consideration. Subject to the provisions of the Business Combination Agreement, AGBA will release the Holdback Shares at the end of six (6) months following the closing of the business combination, which may be extended for an additional three-month period, provided that AGBA will be entitled to retain some or all of the Holdback Shares to satisfy certain indemnification claims during the Survival Period. We presently have no revenue, have had losses since inception from incurring formation costs and have had no operations other than the active solicitation of a target business with which to complete a business combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.
OnMay 16, 2019 , the Company consummated its IPO of 4,600,000 Units, which includes the full exercise of the over-allotment option. Each Unit consists of one ordinary share, one redeemable warrant, and one right to receive one-tenth (1/10) of an ordinary share upon the consummation of a business combination. Each redeemable warrant entitles the holder thereof to purchase one-half (1/2) of one ordinary share, and each ten rights entitle the holder thereof to receive one ordinary share at the closing of a business combination. The Units were sold at an offering price of$10.00 per Unit, generating gross proceeds of$46,000,000 . Simultaneously with the closing of the IPO, the Company consummated a Private Placement of 225,000 units at a price of$10.00 per Private Unit, generating total proceeds of$2,250,000 . A total of$46,000,000 of the net proceeds from the sale of Units in the IPO (including the over-allotment option units) and the Private Placements were placed in a trust account established for the benefit of the Company's public shareholders.
As of
Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination. OnMay 11, 2020 ,August 12, 2020 , andNovember 10, 2020 , the Company issued unsecured promissory note in the aggregate principal amount of$460,000 each time to our Sponsor in exchange for its 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 fromMay 16, 2020 toFebruary 16, 2021 .
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On October 15, 2020 , the Company dismissed Marcum LLP as its independent
registered public accounting firm and effective October 20, 2020 , Friedman LLP
has been engaged as the Company's new independent registered public accounting
firm. The audit committee of the Company's board of directors (the "Audit
Committee"), on October 15, 2020 , approved the dismissal of Marcum LLP and the
engagement of Friedman LLP as the independent registered public accounting firm.
On February 5, 2021 , the Company held its extraordinary meeting of shareholders.
During this meeting, the Company's shareholders approved the proposals to (i)
amend the second amended and restated memorandum and articles of association to
further extend the date by which it has to consummate a business combination
three times for three additional months each time from February 16, 2021 to
November 16, 2021 ; and (ii) amend the investment management trust agreement,
dated as of May 14, 2019 by and between the Company and Continental Stock
Transfer & Trust Company, LLC ("Continental") to allow it to further extend the
time to complete a business combination three times for three additional months
each time from February 16, 2021 to November 16, 2021 . On February 8, 2021 ,
636,890 shares were redeemed by a number of shareholders at a price of
approximately $10.49 per share, including interest generated and extension
payments deposited in the Trust Account, in an aggregate amount of $6,680,520 .
None of the funds held in trust will be released from the trust account, other
than interest income to pay any tax obligations, until the earlier of the
completion of an initial business combination within the required time period or
our entry into liquidation if we have not completed a business combinationbyNovember 16, 2021 . OnFebruary 10 ,May 11 andAugust 11, 2021 , the Company issued unsecured promissory note in the aggregate principal amount of$594,467 each time to our Sponsor in exchange for its 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. OnNovember 2, 2021 , the Company held its extraordinary meeting of shareholders. During this meeting, the Company's shareholders approved the proposals to (i) amend the third amended and restated memorandum and articles of association to further extend the date by which it has to consummate a business combination two times for three additional months each time fromNovember 16, 2021 toMay 16, 2022 ; and (ii) amend the investment management trust agreement, dated as ofMay 14, 2019 by and between the Company and Continental to allow it to further extend the time to complete a business combination two times for three additional months each time fromNovember 16, 2021 toMay 16, 2022 . OnNovember 10, 2021 andFebruary 7, 2022 , the Company issued unsecured promissory note in the aggregate principal amount of$546,991 each time to our Sponsor in exchange for its 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 toMay 16, 2022 . The outbreak of the COVID-19 coronavirus has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, and potential target companies may defer or end discussions for a potential business combination with us whether or not COVID-19 affects their business operations. The extent to which COVID-19 impacts completion of the proposed business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. We may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company's personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. Results of Operations Our entire activity from inception up toMay 16, 2019 was in preparation for the IPO. Since the IPO, our activity has been limited to the evaluation of business combination candidates and engaging in activities in connection with the proposed business combination transaction with TAG Business, and we will not be generating any operating revenues until the closing and completion of our business combination. For the year endedDecember 31, 2021 , we had a net loss of$769,316 which consisted of interest income from our trust account offset by operating expenses. Operating expenses generally consist of the$10,000 monthly payment to our Sponsor for office and administrative support, monthly professional fees owed to our service providers, travel expenses, Nasdaq market listing fees and amortization of our directors and officers insurance policy. Operating expenses after our initial public offering increased dramatically due to our having commenced operations, and certain professional expenses no longer being charged directly against paid-in-capital on our balance sheet, but now being expensed in the consolidated statement of operations.
Liquidity and Capital Resources
As ofDecember 31, 2021 , we had cash outside our trust account of$164,863 available for working capital needs. All remaining cash was held in the trust account and is generally unavailable for our use, prior to the business combination. Our management is of the opinion that we have sufficient funds to meet our working capital requirements and debt obligations as they become due for at least one year from the date of this report. OnMay 16, 2019 , we consummated the IPO of 4,600,000 Units (which includes the full exercise of the underwriter's over-allotment option), at a price of$10.00 per Unit, generating gross proceeds of$46,000,000 . Simultaneously with the closing of the IPO, we consummated the sale of 225,000 Private Units, at a price of$10.00 per Unit, generating gross proceeds of$2,250,000 .
Following the IPO and the exercise of the over-allotment option, a total of
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Our liquidity needs have been satisfied to date through receipt of$25,000 from the sale of the insider shares, advances from our Sponsor and an affiliate of our Sponsor in an aggregate amount of$952,761 outstanding as ofDecember 31, 2021 , and the remaining net proceeds from our IPO and Private Placement. We intend to use substantially all of the net proceeds of the IPO, including the funds held in the Trust Account, to acquire a target business or businesses and to pay our expenses relating thereto. To the extent that our capital stock is used in whole or in part as consideration to effect our business combination, the remaining proceeds held in the Trust Account, as well as any other net proceeds not expended, will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business' operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders' fees which we had incurred prior to the completion of our business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses. We may not be able to obtain additional financing. If we are unable to raise additional capital, it may be required to take additional measures to conserve liquidity from the filing date of this Form 10-K, assuming that a business combination is not consummated during that time. Over this time period, we will be using these funds primarily for activities relating to consummating the proposed business combination with TAG Business. If our estimates of the costs of consummating our proposed business combination is less than the actual amount necessary to do so, or the amount of interest available to us from the trust account is less than we expect as a result of the current interest rate environment, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations, and there is no assurance that such financing can be obtained on favorable terms, or at all.
Off-Balance Sheet Financing Arrangements
As ofDecember 31, 2021 , we did not have any off-balance sheet arrangements. We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets. Contractual Obligations AtDecember 31, 2021 , we have long-term liabilities. We did not have any long-term debt, capital lease obligations or operating lease obligations. Maxim is entitled to a deferred fee of$1,840,000 (i.e, four percent (4.0%) of the IPO proceeds, or$0.40 per unit). The deferred fee will be paid in cash upon the closing a business combination from the amounts held in the trust account. Such deferred amount will only be payable upon closing of a business combination. Further, the deferred amount paid to Maxim 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. Maxim will not be entitled to any interest accrued on the deferred amount.
Critical Accounting Policies
Basis of presentation
These accompanying consolidated financial statements have been prepared inU.S. Dollars in conformity with generally accepted accounting principles inthe United States of America ("U.S. GAAP") and pursuant to the rules and regulations of theSecurities and Exchange Commission ("SEC"). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. 17 Cash
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as ofDecember 31, 2021 or 2020.
Cash and Investments Held in Trust Account
At
The Company classified investments that are directly invested inU.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 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 consolidated statements of operations and comprehensive loss. Warrant liabilities The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the Private Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our consolidated statement of operations. The Private Warrants are valued using a Black Scholes model.
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 andDecember 31, 2021 and 2020, 3,646,607 and 4,600,000 ordinary shares subject to possible redemption, respectively, are presented as temporary equity, outside of the shareholders' equity section of the Company's consolidated balance sheets.
Fair Value of Financial Instruments
FASB ASC Topic 820 "Fair Value Measurements and Disclosures" defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
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 December
31, 2021 and 2020 due to the short maturities of such instruments.
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The following table presents information about the Company's assets and
liabilities that were measured at fair value on a recurring basis as of
Significant
Quoted Prices Other
In Active Significant Other Unobservable
December 31, Markets Observable Inputs Inputs
Description 2021 (Level 1) (Level 2) (Level 3)
Assets:
U.S. Treasury Securities held in Trust
Account* $ 40,441,469 $ 40,441,469 $ - $ -
Liabilities:
Warrant liabilities $ 490,000 $ - $ - $ 490,000
Significant Significant
Quoted Prices Other Other
In Active Observable Unobservable
December 31, Markets Inputs Inputs
Description 2020 (Level 1) (Level 2) (Level 3)
Assets:
U.S. Treasury Securities held in Trust
Account* $ 48,249,518 $ 48,249,518 $ - $ -
Liabilities:
Warrant liabilities $ 390,000 $ - $ - $ 390,000 * included in cash and investments held in trust account on the Company's
consolidated balance sheets.
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$250,000 . The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. Net Loss Per Share
The Company calculates net loss per share in accordance with ASC Topic 260, "Earnings per Share". In order to determine the net loss attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed loss allocable to both the redeemable ordinary shares and non-redeemable ordinary shares and the undistributed loss is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed loss ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable ordinary shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject to possible redemption was considered to be dividends paid to the public stockholders. As ofDecember 31, 2021 , the Company has not considered the effect of the warrants sold in the Initial Public Offering to purchase an aggregate of 2,412,500 shares in the calculation of diluted net loss per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive and the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary share and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented. The net loss per share presented in the statements of operations is based on the following: For the For the Year Year Ended Ended December 31, December 31, 2021 2020 Net loss$ (769,316 ) $ (37,426 ) Accretion of carrying value to redemption value (4,584,555 ) - Net loss including accretion of carrying value to redemption value$ (5,353,871 ) $ (37,426 ) 19 For the For the Year Ended Year Ended December 31, December 31, 2021 2020 Non- Redeemable Redeemable Redeemable Ordinary Ordinary share Ordinary share share Non-Redeemable Ordinary
share
Basic and diluted net loss per share: Numerators: Allocation of net loss including carrying value to redemption value$ (3,981,368 ) $ (1,372,503 ) $ (28,813 ) $ (8,613 ) Accretion of carrying value to redemption value 4,584,555 - - - Allocation of net income (loss) $ 603,187$ (1,372,503 ) $ (28,813 ) $ (8,613 ) Denominators: Weighted-average shares outstanding 3,988,613 1,375,000 4,600,000
1,375,000
Basic and diluted net income (loss) per share $ 0.15 $
(1.00 ) $ (0.01 ) $ (0.01 )
Related Parties
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.
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