References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to AGBA Group Holding Limited (formerly known as AGBA
Acquisition Limited). References to our "management" or our "management team"
refer to our officers and directors, references to the "Sponsor" refer to AGBA
Holding Limited. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed consolidated financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts, and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's registration statement on Form S-1 filed with
the U.S. Securities and Exchange Commission (the "SEC"). The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
Prior to our business combination, we were a blank check company incorporated in
the British Virgin Islands on October 8, 2018 and formed for the purpose of
entering into a merger, share exchange, asset acquisition, share purchase,
recapitalization, reorganization or similar business combination with one or
more businesses or entities.
Prior to our business combination, we had no revenue, had losses since inception
from incurring formation costs and have no operations other than the active
solicitation of a target business with which to complete a business combination.
We relied upon the sale of our securities and loans from our officers and
directors to fund our operations.
On May 16, 2019, the Company consummated its initial public offering of
4,600,000 units, which includes the full exercise of the over-allotment option.
Each Public 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
an initial 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 initial business combination, the Company consummated the 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 Public Units in the initial business combination (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. 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.
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On each of May 11, August 13 and November 10, 2020, we issued a $460,000
unsecured 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 had
available to complete a business combination from May 16, 2020 to February 16,
2021. On each of February 10, May 11 and August 11, 2021, the Company issued an
unsecured promissory note, in an amount of $594,467, to the Sponsor, pursuant to
which such amount had been deposited into the Trust Account in order to extend
the amount of available time to complete a business combination until November
16, 2021. On each of November 10, 2021 and February 7, 2022, the Company issued
an unsecured promissory note in an amount of $546,991, to the Sponsor, pursuant
to which such amount had been deposited into the Trust Account in order to
extend the amount of available time to complete a business combination until May
16, 2022. Each of these promissory notes is non-interest bearing and is payable
upon the closing of a business combination. In addition, each of the promissory
notes may be converted, at the lender's discretion, into additional Private
Units at a price of $10.00 per unit. Upon the completion of business
combination, these promissory notes were fully converted.
We held our annual meeting of shareholders on May 3, 2022 (the "2022 Annual
Meeting"). During the 2022 Annual Meeting, shareholders approved, among other
things, (i) the Fourth Amended and Restated Memorandum and Articles of
Association to extend the date by which the Company has to consummate a business
combination two times for three additional months each time from May 16, 2022 to
November 16, 2022; (ii) an amendment to the Company's investment management
trust agreement, dated May 14, 2019, as amended, by and between the Company and
Continental Stock Transfer & Trust Company to extend the time to complete a
business combination to November 16, 2022; and (iii) elected all of the five
nominees for directors to serve until the next annual meeting of shareholders
approved. On each of May 9, 2022, and August 9, 2022, we issued an unsecured
promissory note, in an amount of $504,431 to the Sponsor, pursuant to which such
amount had been deposited into the Trust Account in order to extend the amount
of available time to complete a business combination until November 16, 2022.
Our management has broad discretion with respect to the specific application of
the net proceeds of the initial business combination and the private placement,
although substantially all of the net proceeds are intended to be applied
generally towards consummating a business combination.
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On November 3, 2021, the Company entered into the business combination
Agreement, which provides for a business combination between AGBA and TAG and
certain of TAG's wholly owned subsidiaries - OPH, Fintech, B2B, B2BSub, and
HKSub. OPH through its wholly-owned subsidiaries, is engaged in
business-to-business (or B2B) 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. In the business combination agreement, as amended, B2B, B2BSub, HKSub,
OPH, Fintech, together with their respective subsidiaries are referred to as the
"Group Parties". Pursuant to the business combination agreement, as amended, OPH
will first become a subsidiary of B2B through a merger with HKSub, with OPH as
the surviving entity (the "OPH Merger"). Subsequently, (i) AMSI will merge with
and into B2B; and AMSII will merge with and into Fintech (together with (i), the
"Acquisition Merger"). In consideration of the Acquisition Merger, AGBA will
issue 55,500,000 ordinary shares with a deemed price per share US$10.00
("Aggregate Stock Consideration") to TAG, in its capacity as sole shareholder of
B2B and Fintech.
At the closing of the Acquisition Merger, AGBA shall issue the full amount of
the Aggregate Stock Consideration, less three percent (3%) of the Aggregate
Stock Consideration (the "Holdback Shares"), to TAG, in its capacity as sole
shareholder of B2B and Fintech, subject to compliance with applicable law.
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 Acquisition Merger, which may be extended for an additional three-month
period (the "Survival Period"), provided that the AGBA will be entitled to
retain some or all of the Holdback Shares to satisfy certain indemnification
claims during the Survival Period.
On November 14, 2022, the Company completed its business combination with TAG
Holding Limited ("TAG"). Through an acquisition merger, the Company has become
the 100% owner of the issued and outstanding securities of each of TAG
International Limited and TAG Asia Capital Holdings Limited, each formerly
wholly-owned subsidiaries of TAG. The post-combination company has been renamed,
"AGBA Group Holding Limited" and its ordinary shares and warrants are expected
to begin trading on the Nasdaq Capital Market ("Nasdaq") on November 15, 2022
under the ticker symbols "AGBA" and "AGBAW" respectively.
Results of Operations
Our entire activity from inception up to May 16, 2019 was in preparation for the
initial public offering. Since the initial public offering, 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, and we will not be generating any operating revenues until the closing
and completion of our business combination.
For the three months ended September 30, 2022, we had a net income of $429,335,
which was comprised of dividend income and general and administrative expenses,
as well as a gain from the change in fair value of warrant liabilities.
For the three months ended September 30, 2021, we had a net loss of $209,743,
which was comprised of general and administrative expenses and a loss from
change in fair value of warrant liabilities.
For the nine months ended September 30, 2022, we had a net loss of 153,751,
which was comprised of interest and dividend income and general and
administrative expenses, as well as a gain from the change in fair value of
warrant liabilities.
For the nine months ended September 30, 2021, we had a net loss of $515,988,
which was comprised of general and administrative expenses and a loss from
change in fair value of warrant liabilities.
Liquidity and Capital Resources
As of September 30, 2022, we had cash of $96,914 outside our Trust Account
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.
On May 16, 2019, we consummated the initial public offering of 4,600,000 Public
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 initial public offering, 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 initial public offering and the exercise of the over-allotment
option, a total of $46,000,000 was placed in the Trust Account. We 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.
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Our liquidity needs have been satisfied to date through receipt of $25,000 from
the sale of the insider shares, note payable of $5,266,243 and advances from our
Sponsor in an aggregate amount of $1,645,353 outstanding as of September 30,
2022, and the remaining net proceeds from our initial public offering and
private placement.
We intend to use substantially all of the net proceeds of the initial public
offering, 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 intend to use the funds held outside the Trust Account primarily for
activities relating to consummating the proposed business combination with TAG.
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.
We may need to seek additional capital through loans or additional investments
from members of our management team, but such members of our management team are
not under any obligation to advance funds to, or invest in, us. In the event
that the business combination does not close, we may use a portion of the
working capital held outside the Trust Account to repay such loaned amounts, but
no proceeds from our Trust Account would be used for such repayment. Such loans
would be evidenced by promissory notes. The notes would either be paid upon
consummation of our 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 additional Private Units at a price of $10.00 per
unit. The terms of such loans by our initial shareholders, officers and
directors, if any, have not been determined and no written agreements exist with
respect to such loans.
Accordingly, the Company may not be able to obtain additional financing. If the
Company is unable to raise additional capital, it may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, curtailing operations, suspending the pursuit of a
potential transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all. These conditions raise substantial doubt about the
Company's ability to continue as a going concern if a business combination is
not consummated by November 16, 2022. These unaudited condensed consolidated
financial statements do not include any adjustments relating to the recovery of
the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
Off-balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements as of September 30, 2022. 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 purchased any non-financial assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities other than an agreement to pay our Sponsor
a monthly fee of $10,000 for general and administrative services, including
office space, utilities and administrative services to the Company. We began
incurring these fees on May 16, 2019 and will continue to incur these fees
monthly until the earlier of the completion of the business combination and the
Company's liquidation. Also, we are committed to the below:
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 underwriter 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.
Private Warrants
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 statement of
operations. The private warrants are valued using a Black Scholes model.
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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 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 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.
Critical Accounting Policies
The preparation of the unaudited condensed consolidated financial statements and
related disclosures in conformity with accounting principles generally accepted
in the United States of America ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the unaudited
condensed consolidated financial statements, and income and expenses during the
periods reported. Actual results could materially differ from those estimates.
The Company has not identified any significant accounting policies.
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 share subject to mandatory redemption (if any) is classified
as a liability instrument and is 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.
Net Income (Loss) Per Share
The Company calculates net loss per share in accordance with ASC Topic 260,
"Earnings per Share." Basic loss per share is computed by dividing the net loss
by the weighted-average number of ordinary shares outstanding during the period,
excluding ordinary shares subject to possible conversion. Diluted loss per share
is computed by dividing net loss by the weighted average number of ordinary
shares outstanding, plus to the extent dilutive, the incremental number of
ordinary shares to settle rights and other ordinary share equivalents (currently
none are outstanding), as calculated using the treasury stock method. Ordinary
shares subject to possible conversion at September 30, 2022, which are not
currently redeemable and are not redeemable at fair value, have been excluded
from the calculation of basic and diluted loss per share since such shares, if
redeemed, only participate in their pro rata share of the Trust Account
earnings. The Company has not considered the effect of rights that convert into
276,000 ordinary shares in the unit purchase option sold to the underwriter, in
the calculation of diluted loss per share, since the conversion of the rights
into ordinary is contingent upon the occurrence of future events.
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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 statement of
operations. The private warrants are valued using a Black Scholes model.
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