AGBA (AGBA) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The unaudited financial statements show a net loss and decreased assets due to share redemptions and warrant reclassification Unaudited Condensed Balance Sheets Total assets decreased to $43.7 million while total liabilities increased, widening the shareholders' deficit Condensed Balance Sheet Data (as of Sept 30, 2021 vs. Dec 31, 2020) | Metric | September 30, 2021 | December 31, 2020 (Revised) | | :--- | :--- | :--- | | Assets | | | | Cash | $356,075 | $672,443 | | Cash and investments held in trust account | $43,355,977 | $48,249,909 | | Total Assets | $43,712,052 | $48,954,047 | | Liabilities & Equity | | | | Total current liabilities | $4,079,710 | $2,205,024 | | Warrant liabilities | $480,000 | $390,000 | | Total Liabilities | $6,399,710 | $4,435,024 | | Ordinary shares subject to possible redemption | $39,631,100 | $46,000,000 | | Total shareholders' deficit | ($2,318,758) | ($1,480,977) | Unaudited Condensed Statements of Operations and Comprehensive Income (Loss) The company reported a net loss of $516k for the nine-month period, driven by operating and administrative expenses Statement of Operations Highlights | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 (Revised) | | :--- | :--- | :--- | | Total operating expenses | ($439,395) | ($301,068) | | Change in fair value of warrant liabilities | ($90,000) | $120,000 | | Total other (expense) income, net | ($76,593) | $462,261 | | Net (Loss) Income | ($515,988) | $161,193 | | Comprehensive (Loss) Income | ($515,988) | $73,306 | Net (Loss) Income Per Share | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 (Revised) | | :--- | :--- | :--- | | Basic and diluted net loss per share, common stock | ($0.15) | $0.03 | Unaudited Condensed Statements of Changes in Shareholders' Deficit The shareholders' deficit increased to $2.32 million, primarily due to the period's net loss and value accretion - The total shareholders' deficit grew to ($2,318,758) as of September 30, 2021, from ($1,480,977) at the start of the year[18] - Key drivers for the increased deficit in the first nine months of 2021 were the net loss of $515,988 and an accretion of carrying value to redemption value of $311,620[18] Unaudited Condensed Statements of Cash Flows Cash used in operations was $429k, resulting in a net cash decrease of $316k for the nine-month period Cash Flow Summary (Nine Months Ended Sep 30) | Metric | 2021 | 2020 (Revised) | | :--- | :--- | :--- | | Cash used in operating activities | ($428,819) | ($337,370) | | Net cash provided by (used in) financing activities | $112,451 | ($288,125) | | Net Change in Cash | ($316,368) | ($625,495) | | Cash, end of period | $356,075 | $303,840 | - Non-cash financing activities included $1,783,400 in proceeds from a promissory note deposited into the Trust Account and a $6,680,520 cash payout from the trust account for share redemptions[21] Notes to Unaudited Condensed Financial Statements Notes detail the company's SPAC status, accounting policy changes, and a definitive business combination agreement - The Company is a blank check company incorporated to effect a business combination, focusing on sectors like healthcare, education, entertainment, and financial services in China[23] - On November 3, 2021, the Company entered into a definitive business combination agreement with TAG Holdings Limited and its subsidiaries[34] - Following SEC guidance issued in April 2021, the company re-evaluated its accounting for warrants, concluding they should be classified as derivative liabilities measured at fair value, which prompted a revision of previously issued financial statements[74][75] - The company has extended the time to consummate a business combination seven times, with the current deadline being February 16, 2022, funded by insider-deposited funds[37] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's blank check status, operating losses, and the definitive business combination agreement - The company is a blank check company with no revenue and has incurred losses since inception, with operations funded by its IPO proceeds and sponsor loans[130] - A definitive business combination agreement was signed on November 3, 2021, with TAG Holdings Limited, involving the issuance of 55.5 million ordinary shares as consideration[139] Net (Loss) / Income Comparison | Period | Net (Loss) / Income | | :--- | :--- | | Nine months ended Sep 30, 2021 | ($515,988) | | Nine months ended Sep 30, 2020 | $161,193 | - The deadline to complete a business combination has been extended to February 16, 2022, funded by the Sponsor depositing additional funds into the Trust Account[134] Quantitative and Qualitative Disclosures about Market Risk The company holds short-term U.S. government securities and believes its exposure to interest rate risk is not material - Funds held in the trust account are invested in U.S. government treasury bills, notes, or bonds with maturities of 180 days or less, or in money market funds[164] - The company believes there is no material exposure to interest rate risk due to the short-term nature of its investments[164] Controls and Procedures Management concluded disclosure controls were ineffective due to the misclassification of redeemable public shares - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2021[165] - The ineffectiveness was identified due to the re-evaluation of classifying all public shares subject to redemption as temporary equity[165] - The company plans to implement remediation measures, including enhanced access to accounting literature and increased communication with third-party professionals[166] PART II – OTHER INFORMATION Legal Proceedings The company reports no current legal proceedings - None[169] Unregistered Sales of Equity Securities and Use of Proceeds This section details the IPO and private placement proceeds, with $46 million placed in a trust account - On May 16, 2019, the company completed its IPO of 4,600,000 units at $10.00 per unit, generating gross proceeds of $46,000,000[169] - Simultaneously, 225,000 private units were sold to the Sponsor at $10.00 per unit, raising $2,250,000[169] - A total of $46,000,000 from the IPO and private placement was deposited into a trust account for the benefit of public shareholders[171] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[171] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[171] Other Information The company reports no other material information - None[172] Exhibits This section lists the exhibits filed with the report, including officer certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act[173] - Inline XBRL Instance, Schema, Calculation, Definition, Labels, and Presentation Linkbase documents are filed with the report[173]