UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Warrants to purchase one-half of one share of common stock | QFTA WS | The New York Stock Exchange | ||
| Units, each consisting of one share of common stock and one redeemable warrant | QFTA.U | The New York Stock Exchange |
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company | ||||
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 15, 2021, there were
QUANTUM FINTECH ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
QUANTUM FINTECH ACQUISITION CORPORATION
CONDENSED BALANCE SHEETS
| September 30, 2021 (Unaudited) | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Deferred offering costs | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued offering costs | ||||||||
| Promissory note – related party | ||||||||
| Total Current Liabilities | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments | ||||||||
| Common stock subject to possible redemption; | ||||||||
| Stockholders’ (Deficit) Equity | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ (Deficit) Equity | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
QUANTUM FINTECH ACQUISITION CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30, | Nine Months September 30, | |||||||
| 2021 | 2021 | |||||||
| Operating and formation costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Change in fair value of warrant liability | ||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Unrealized gain on marketable securities held in Trust Account | ||||||||
| Total Other income | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average shares outstanding, Redeemable common stock | ||||||||
| Basic and diluted net loss per share, Redeemable common stock | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ||||||||
| Basic and diluted net loss per share, Non-redeemable common stock | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
QUANTUM FINTECH ACQUISITION CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ (Deficit) | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance — January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Accretion of Common Stock subject to possible redemption (restated – see Note 2) | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Cash paid in excess of fair value for Private Warrants | — | |||||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance – March 31, 2021 (restated – see Note 2) | ( | ) | ( | ) | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – June 30, 2021 (restated – see Note 2) | ( | ) | ( | ) | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
QUANTUM FINTECH ACQUISITION CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
| Cash Flows from Operating Activities: | ||||
| Net loss | $ | ( | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Transaction costs incurred in connection with warrant liability | ||||
| Unrealized gain on marketable securities held in Trust Account | ( | ) | ||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ( | ) | ||
| Accounts payable and accrued expenses | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash Flows from Investing Activities: | ||||
| Investment of cash in Trust Account | ( | ) | ||
| Net cash used in investing activities | ( | ) | ||
| Cash Flows from Financing Activities: | ||||
| Proceeds from sale of Units, net of underwriting discounts paid | ||||
| Proceeds from sale of Private Warrants | ||||
| Proceeds from promissory note – related party | ||||
| Repayment of promissory note – related party | ( | ) | ||
| Payment of offering costs | ( | ) | ||
| Net cash provided by financing activities | ||||
| Net Change in Cash | ||||
| Cash – Beginning of period | ||||
| Cash – End of period | $ | |||
| Non-Cash investing and financing activities: | ||||
| Initial classification of common stock subject to possible redemption | $ | |||
| Accretion of common stock subject to possible redemption | $ | |||
| Initial classification of private warrant liabilities | $ | |||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Quantum FinTech Acquisition Corporation (the “Company”) was incorporated in Delaware on October 1, 2020. The Company is a blank check company formed 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 businesses or entities (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income and expenses in the form of interest income from the proceeds derived from the Initial Public Offering and change in fair value of warrant liability.
The registration statements for the Company’s
Initial Public Offering were declared effective on February 4, 2021. On February 9, 2021, the Company consummated the Initial Public Offering
of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
Following the closing of the Initial Public Offering
on February 9, 2021, an amount of $
On February 12, 2021, the underwriters fully exercised
their over-allotment option, resulting in an additional
Transaction costs amounted to $
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Warrants, although
substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination. The Company must
complete a Business Combination having an aggregate fair market value of at least
The Company will provide its stockholders with
the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection
with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether
the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in
its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the
Trust Account (initially anticipated to be $
5
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The Company will proceed with a Business Combination
if the Company has net tangible assets of at least $
At the time of the Initial Public Offering, the Co-Sponsors and the other holders of the Company’s shares prior to the Initial Public Offering (the “initial stockholders”) have agreed (A) to vote their Founder Shares and any Public Shares in favor of a Business Combination, (B) not to propose, or vote in favor of, prior to and unrelated to a Business Combination, an amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all Public Shares if the Company cannot complete a Business Combination within 18 months (August 9, 2022) (or 24 months from the closing of the Initial Public Offering (February 9, 2023) if the Company has executed a letter of intent, agreement in principle or definitive agreement for a Business Combination by August 9, 2022) unless the Company provides public stockholders an opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to convert any shares (including the Founder Shares) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve the Company’s Business Combination or sell any shares to the Company in a tender offer in connection with a Business Combination, and (D) that the Founder Shares shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated.
The Company has until August 9, 2022 (or February
9, 2023, as applicable) to complete a Business Combination (the “Combination Period”). If the Company is unable to complete
a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay taxes, dissolution expenses up to
At the time of the Initial Public Offering,
the initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to
complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or
after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the
Company fails to complete a Business Combination within the Combination Period. In the event of such distribution, it is possible
that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per
Unit ($
In order to protect the amounts held in the Trust
Account, Quantum Ventures has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below $
6
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Liquidity and Management’s Plan
As of September 30, 2021, the Company had $
In
September 2021, the Sponsor committed to provide the Company an aggregate of $
Based on the foregoing, the Company believes it will have sufficient cash available to meet its needs through the earlier of consummation of a Business Combination or one year and one day from the date of issuance of these financial statements.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s
financial statements as of September 30, 2021, management determined it should restate its previously reported financial statements.
The Company determined, at the closing of the Company’s Initial Public Offering it had improperly valued its common stock subject
to possible redemption. The Company previously determined the common stock subject to possible redemption to be equal to the redemption
value, while also taking into consideration a redemption cannot result in net tangible assets being less than $
In connection with the change in presentation for the common stock subject to redemption, the Company also restated its net income (loss) per common share calculation to allocate net income (loss) evenly to all common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, all common stock share pro rata in the income (loss) of the Company.
There has been no change in the Company’s total assets, liabilities or operating results.
The impact of the restatement on the Company’s financial statements for periods prior to September 30, 2021 is reflected in the following tables.
| Balance Sheet as of February 9, 2021 | As Previously March 31, | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
7
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
| Balance Sheet as of March 31, 2021 (unaudited) | As Previously March 31, | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Retained Earnings (accumulated deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Balance Sheet as of June 30, 2021 (unaudited) | As Previously June 30, | Adjustment | As Restated | |||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity (Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
Statement of Operations for the Three Months Ended March 31, 2021 (unaudited) | As Previously March 31, | Adjustment | As Restated | |||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ( | ) | ||||||||||
| Basic and diluted net income per common stock, Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | $ | ( | ) | |||||||||
| Basic and diluted net income (loss) per common stock, Non-redeemable common stock | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Redeemable common stock | ||||||||||||
| Basic and diluted net income (loss) per share, Redeemable common stock | $ | $ | $ | |||||||||
Statement of Operations for the Three Months Ended June 30, 2021 (unaudited) | As Previously June 30, | Adjustment | As Restated | |||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ( | ) | ||||||||||
| Basic and diluted net income per share, Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | $ | ( | ) | |||||||||
| Basic and diluted net income (loss) per share, Non-redeemable common stock | $ | ( | ) | $ | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, Redeemable common stock | ||||||||||||
| Basic and diluted net income (loss) per share, Redeemable common stock | $ | $ | ( | ) | $ | ( | ) | |||||
Statement of Operations for the Six Months Ended June 30, 2021 (unaudited) | As Previously June 30, | Adjustment | As Restated | |||||||||
| Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption | ( | ) | ||||||||||
| Basic and diluted net income per share, Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | $ | ( | ) | |||||||||
| Basic and diluted net income (loss) per share, Non-redeemable common stock | $ | ( | ) | $ | $ | ( | ) | |||||
| Basic and diluted weighted average shares outstanding, Redeemable common stock | ||||||||||||
| Basic and diluted net income (loss) per share, Redeemable common stock | $ | $ | ( | ) | $ | ( | ) | |||||
8
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
| Statement of Changes in Stockholders’ Equity (Deficit) for the
three months ended March 31, 2021 | As Previously March 31, | Adjustment | As Restated | |||||||||
| Sale of 20,125,000 units, net of underwriting discounts, initial value of public warrants and other offering costs | $ | $ | ( | ) | $ | |||||||
| Common stock subject to possible redemption | $ | ( | ) | $ | $ | |||||||
| Accretion for Class A Common Stock to Redemption amount | $ | $ | ( | ) | $ | ( | ) | |||||
| Total stockholders’ equity (deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
| Statement of Changes in Stockholders’ Equity (Deficit) for the
three months ended June 30, 2021 | As Previously June 30, | Adjustment | As Restated | |||||||||
| Change in value of common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Total stockholders’ equity (deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
Statement of Cash Flows for the Three Months Ended March 30, 2021 (unaudited) | As Previously March 31, | Adjustment | As Restated | |||||||||
| Non-Cash investing and financing activities: | ||||||||||||
| Initial classification of common stock subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Accretion of common stock subject to possible redemption | $ | $ | $ | |||||||||
Statement of Cash Flows for the Six Months Ended June 30, 2021 (unaudited) | As Previously June 30, | Adjustment | As Restated | |||||||||
| Non-Cash investing and financing activities: | ||||||||||||
| Initial classification of common stock subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of common stock subject to possible redemption | $ | ( | ) | $ | $ | |||||||
| Accretion of common stock subject to possible redemption | $ | $ | $ | |||||||||
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2020, as filed with the SEC on March 31, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
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 stockholder 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 statement 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.
9
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Use of Estimates
The preparation of the condensed financial statements in conformity with GAAP requires the Company’s 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 revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Two of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities and fair value of the sale of the Founder Shares. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly 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. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At September 30, 2021, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Offering Costs
Offering costs consisted of legal, and other expenses
incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated
to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds
received. Offering costs allocated to warrant liabilities were expensed as incurred in the statements of operations. Offering costs associated
with the common stock issued were initially charged to temporary equity and then accreted to common stock subject to redemption upon the
completion of the Initial Public Offering. Offering costs amounting to $
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the private warrants was estimated using a Binomial lattice model approach (see Note 10).
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including Common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated deficit.
10
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
At September 30, 2021, the common stock subject to possible redemption reflected in the condensed balance sheets is reconciled in the following table:
| Gross proceeds from the IPO | $ | |||
| Less: | ||||
| Common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of carrying value to redemption value | ||||
| Common stock subject to possible redemption | $ |
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 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 recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and December 31, 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 is subject to income tax examinations by major taxing authorities since inception. The effective tax rate differs from the statutory
tax rate of
Net income (Loss) per Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. The Company applies a two-class method in calculating earnings per share. Accretion associated with the redeemable shares of common stock is excluded from earnings (loss) per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share
does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private
placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase
The following table reflects the calculation of basic and diluted net loss per common stock (in dollars, except share amounts):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2021 | September 30, 2021 | |||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
| Basic and diluted net loss per common stock | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||
| Basic and diluted net loss per share of common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
11
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Deposit Insurance Coverage of $
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 Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature, except for warrant liabilities (see Note 10).
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 4. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, Quantum Ventures purchased
12
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On
October 23, 2020, Quantum Ventures purchased
At the time of the Initial Public Offering,
Administrative Services Agreement
The Company agreed, commencing on February 4,
2021, to pay Quantum Ventures a total of $
Promissory Note — Related Party
On October 1, 2020, the Company issued an unsecured
promissory note to Quantum Ventures (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate
principal amount of $
13
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Related Party Loans
In order to finance transaction costs in
connection with a Business Combination, Quantum Ventures or an affiliate of Quantum Ventures, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
In September 2021, the Sponsor committed to provide
the Company an aggregate of $
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on February 4, 2021, the holders of the Founder Shares, as well as the holders of the Private Warrants (and underlying securities) and any warrants issued in payment of Working Capital Loans made to Company (and underlying securities) will have registration and stockholder rights pursuant to an agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the insider shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities) can elect to exercise these registration rights at any time after the consummation of a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The registration and stockholder rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day
option to purchase up to
Business Combination Marketing Agreement
The Company engaged the underwriters as advisors
in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business
Combination and the target business’s attributes, introduce the Company to potential investors that are interested in purchasing
the Company’s securities in connection with the potential Business Combination, assist the Company in obtaining stockholder approval
for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination.
The Company will pay the underwriters the marketing fee for such services upon the consummation of our initial business combination in
an amount equal to, in the aggregate,
14
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company
is authorized to issue
Common stock — The Company
is authorized to issue
NOTE 9. WARRANTS
As of September 30, 2021, there are
Once the warrants become exercisable, the Company may redeem the Public Warrants:
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
15
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
In addition, if (x) the Company issues additional common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares or Private Warrants held by the initial stockholders or their affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.50 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and Newly Issued Price, and the $16.50 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 165% of the higher of the Market Value and the Newly Issued Price.
As of September 30, 2021, there are
NOTE 10. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
At September 30, 2021, assets held in the Trust Account were comprised of $
16
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | September 30, 2021 | ||||||
| Assets: | ||||||||
| Marketable securities held in Trust Account | 1 | $ | ||||||
| Liabilities: | ||||||||
| Warrant liability – Private Warrants | 3 | $ | ||||||
The Private Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statements of operations.
The Private Placement Warrants were initially and as of the end of each subsequent report period, valued using a lattice model, specifically a binomial lattice model incorporating the Cox-Ross-Rubenstein methodology, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of our common stocks. The expected volatility of the Company’s ordinary shares was determined based on the implied volatility of the Public Warrants.
The key inputs into the binomial lattice model for the Private Warrants were as follows:
| Input | February 9, 2021 (Initial Measurement) and February 12, 2021 (over- allotment exercise) | September 30, 2021 | ||||||
| Market price of public shares | $ | $ | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
| Effective expiration date | ||||||||
The following table presents the changes in the fair value of warrant liabilities:
| Private Placement | ||||
| Fair value as of January 1, 2021 | $ | |||
| Initial measurement on February 9, 2021 | ||||
| Exercising of underwriters’ over-allotment on February 12, 2021 | ||||
| Change in valuation inputs or other assumptions | ( | ) | ||
| Fair value as of September 30, 2021 | $ | |||
There were no transfers between levels during the three and nine months ended September 30, 2021.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
17
QUANTUM FINTECH ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Merger Agreement
On November 4, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, TradeStation Group, Inc., a Florida corporation (“TradeStation”), and TSG Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of TradeStation (“Merger Sub”). The Merger Agreement was unanimously approved by the Company’s board of directors. If the Merger Agreement is approved by the Company’s stockholders, and the transactions contemplated by the Merger Agreement are consummated, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of TradeStation (the “TradeStation Business Combination”).
Prior to the closing of the TradeStation Business
Combination (the “Closing”), TradeStation will undergo a pre-closing reorganization which will result in there being
In connection with the Closing, (i) each share
of the Company’s common stock (“Company Common Stock”) that (x) is held by Quantum Ventures LLC and Chardan Quantum
LLC and the Company’s directors and officers (collectively, the “Sponsors”) after taking into effect the forfeitures
described below or (y) was acquired pursuant to the Subscription Agreements (as further described below), will be converted into one share
of TradeStation Common Stock, (ii) each share of Company Common Stock (other than the shares referred to in clause (i)) that is outstanding
and has not been redeemed will be converted into a number of shares of TradeStation Common Stock equal to (A) the sum of (1) the number
of public shares outstanding for which holders have not elected redemption as of immediately prior to the Closing and (2)
Each outstanding warrant to purchase Company Common Stock (“Company Warrant”) will become a warrant to purchase TradeStation Common Stock, with each such warrant exercisable for the number of shares of TradeStation Common Stock the holder of the Company Warrant would have received in the Merger if it exercised the Company Warrant immediately prior to the Merger.
Subscription Agreements
Additionally, the Company and TradeStation
entered into subscription agreements (collectively, the “Subscription Agreements”), each dated as of November 4, 2021, with
certain investors (collectively, the “PIPE Investors”) pursuant to which, among other things, the Company agreed to issue
and sell, in private placements to close immediately prior to the Closing, an aggregate of
TradeStation will assume upon Closing the Company’s obligation to file, within 15 calendar days of Closing (the “Filing Deadline”), a registration statement registering the resale of such common stock and will use commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) forty-five (45) calendar days (or ninety (90) calendar days if the SEC notifies the Company that it will “review” the registration statement) following the Filing Deadline and (ii) the third (3rd) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that the registration statement will not be “reviewed” or will not be subject to further review.
Sponsor Support Agreement
Additionally, the Company
entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) with TradeStation, Monex and the initial stockholders,
pursuant to which, among other things, the initial stockholder agreed to vote any of the shares of Company Common Stock held by them in
favor of the TradeStation Business Combination and not to redeem any such shares at the special meeting of stockholders to be held in
connection with the TradeStation Business Combination. In addition, the insiders agreed not to transfer
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Quantum FinTech Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Co-Sponsors” refer to Quantum Ventures LLC (“Quantum Ventures”) and Chardan Quantum LLC (“Chardan Quantum”). The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the 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, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (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 Quarterly Report 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 this Quarterly Report and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“Annual Report on Form 10-K”) 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.
Restatement
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of March 31, 2021 and June 30, 2021. Management identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our common stock subject to possible redemption. We previously determined the common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management concluded that the redemption value should include all common stock subject to possible redemption, resulting in the common stock subject to possible redemption being equal to their redemption value. As a result, management has restated temporary equity and permanent equity. This resulted in a accretion adjustment to the initial carrying value of the common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on October 1, 2020 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 businesses or entities (“Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering (defined below) and the sale of the Private Warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Significant Events and Transactions
We entered into an Agreement and Plan of Merger (the “Merger Agreement”) with TradeStation Group, Inc. (“TradeStation”) on November 4, 2021. Pursuant to the Merger Agreement, and assuming the satisfaction or waiver of various closing conditions, including approval of the Merger Agreement by the Company’s stockholders, TSG Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of TradeStation, will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of TradeStation (the “TradeStation Business Combination”).
Additionally, the Company and TradeStation entered into subscription agreements (collectively, the “Subscription Agreements”), each dated as of November 4, 2021, with certain investors (collectively, the “PIPE Investors”) pursuant to which, among other things, the Company agreed to issue and sell, in private placements to close immediately prior to the closing of the TradeStation Business Combination (the “Closing”), an aggregate of 12,500,000 shares of the Company’s common stock for $10.00 per share (the “Company PIPE Shares”), including 5,000,000 shares to Monex Group, Inc. The PIPE Investment will be consummated substantially concurrently with the Closing, subject to the terms and conditions contemplated by the Subscription Agreements. The Company PIPE Shares will be converted in the Merger into an equal number of shares of TradeStation Common Stock.
19
Additionally, the Company entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) with TradeStation, Monex and the initial stockholders, pursuant to which, among other things, the initial stockholder agreed to vote any of the shares of Company Common Stock held by them in favor of the TradeStation Business Combination and not to redeem any such shares at the special meeting of stockholders to be held in connection with the TradeStation Business Combination. In addition, the insiders agreed not to transfer (i) their TradeStation common stock following the closing, subject to certain exceptions, until the earlier of (A) (1) in the case of Co-Sponsors, 12 months from closing and (2) in the case of the Company’s directors and officers, 6 months from closing and (B) subsequent to the closing, the date on which the last reported sale price of TradeStation common stock exceeds $12.50 per share for 20 out of any 30 consecutive trading days and (ii) their TradeStation warrants following the closing, subject to certain exceptions, until the earlier of (A) 30 days from closing and (B) February 4, 2022.
Refer to Note 11 to our financial statements for further details on the TradeStation Business Combination, the Merger Agreement and the Subscription Agreements and the Sponsor Support Agreement.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 2021 were formation, the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had a net loss of $924,163, which consists of a change in fair value of warrant liability of $697,765, an unrealized gain on marketable securities held in our Trust Account of $10,576, interest earned on marketable securities held in Trust Account of $15,095, offset by operating costs of $1,647,599.
For the nine months ended September 30, 2021, we had a net loss of $1,792,927, which consists of a change in fair value of warrant liability of $451,640, interest earned on marketable securities held in Trust Account of $34,625, and an unrealized gain on marketable securities held in our Trust Account of $875, offset by operating and formation costs of $2,280,067.
Liquidity and Capital Resources
On February 9, 2021, we consummated the Initial Public Offering of 17,500,000 units, each unit consisting of one share of common stock, par value $0.0001 per share, and one warrant to purchase one-half of one share of common stock at an exercise price of $11.50 (the “Units”), at $10.00 per Unit, generating gross proceeds of $175,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 5,562,500 Private Warrants at a price of $1.00 per Private Warrant in a private placement to the Co-Sponsors, generating gross proceeds of $5,562,500.
On February 12, 2021, in connection with the underwriters’ exercise of their over-allotment option in full, we consummated the sale of an additional 2,625,000 Units at a price of $10.00 per Unit, generating total gross proceeds of $26,250,000. In addition, we also consummated the sale of an additional 590,625 Private Warrants at $1.00 per Private Warrant, generating gross proceeds of $590,625.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Warrants, a total of $201,250,000 was placed in the Trust Account. We incurred $5,017,526 in Initial Public Offering related costs, including $4,528,125 of underwriting fees and $489,401 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities was $932,916. Net loss of $1,792,927 was affected by unrealized gain on marketable securities held in the Trust Account of $875, interest earned on marketable securities held in the Trust Account of $34,625, the change in fair value of warrant liability of $451,640 and transaction costs allocated to the warrant liabilities of $9,348. Changes in operating assets and liabilities provided $1,337,803 of cash for operating activities.
As of September 30, 2021, we had marketable securities of $201,285,500 (including $35,500 of interest income, net of unrealized loss) held in a trust (the “Trust Account”), invested in U.S. government treasury bills, notes or bonds having a maturity of 185 days or less and/or (ii) in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company. Interest income on the balance in the Trust Account may be used by us to pay taxes and dissolution expenses up to $100,000. Through September 30, 2021, we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
20
As of September 30, 2021, we had cash of $202,370. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, Quantum Ventures or an affiliate of Quantum Ventures, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a 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. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant. The warrants would be identical to the Private Warrants. Through the date of this filing, there have been no amounts advanced to the Company under the Working Capital Loans.
In September 2021, the Sponsor committed to provide the Company an aggregate of $2,000,000 in loans in connection with the Working Capital Loans as described in Note 6. The Company may raise additional capital through loans or additional investments from the Sponsors or its stockholders, officers, directors, or third parties.
Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or one year and one day from the date of issuance of these financial statements.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. 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.
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 Quantum Ventures a monthly fee of $10,000 for office space, utilities and secretarial support. We began incurring these fees on February 4, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and or our liquidation.
We have engaged Chardan Capital Markets LLC, the representative of the underwriters in the Initial Public Offering (“Chardan”), as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’s attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the potential Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. We will pay Chardan the marketing fee for such services upon the consummation of our initial business combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the Initial Public offering or $7,043,750.
21
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. We have concluded that the Public Warrants should be classified as equity instruments, and the Private Warrants should be classified as liability instruments.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, all shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Accretion associated with the redeemable shares of common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. We are currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were not effective due to the material weaknesses related to the errors in accounting classification of our Public Warrants and Private Warrants previously disclosed in our quarterly reports on Form 10-Q for the quarters ended March 31, 2021 (“Q1 Form 10-Q”), as amended, and June 30, 2021 (“Q2 Form 10-Q”), as well as the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments described below. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report present fairly, in all material respects, our financial position, result of operations and cash flows for the periods presented.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended September 30, 2021, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than as described herein. In connection with the preparation of this Quarterly Report, and as a result of recent SEC guidance, management has identified a material weakness in internal controls related to the accounting for complex financial instruments. Management has identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our common stock subject to possible redemption. As a result, management has restated temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock. Refer to Note 2 to our financial statements for more information regarding impact of this restatement on our historical financial statements. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurances that these initiatives will ultimately have the intended effects.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K filed with the SEC. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC, except for the below:
Our Private Warrants are accounted for as liabilities and the changes in value of our Private Warrants could have a material effect on our financial results.
On April 12, 2021, the staff of the SEC (the “SEC Staff”) issued the SEC Statement, wherein the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging (“ASC 815”), determined the Private Warrants should be classified as derivative liabilities measured at fair value on our balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations.
As a result of the recurring fair value measurement, our financial statements may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
In connection with the Company’s Initial Public Offering, the Company accounted for a portion of the proceeds received from the offering as stockholders’ equity. Following the SEC’s guidance on this issue, during the preparation of this Quarterly Report, management identified errors in its historical financial statements and performed a quantitative assessment under SAB 99. Based on this assessment, after consultation with our independent registered public accounting firm, our management and audit committee concluded that a restatement of our financial statements for periods prior to September 30, 2021 was required to reclassify such amounts as common stock subject to possible redemption and that a material weakness in our internal controls over financial reporting exists as a result of the identified errors that led to such restatement.
Previously, following the issuance of the SEC Statement described above, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that, in light of the SEC Statement, we identified a material weakness in our internal control over financial reporting. In addition, in connection with the restatement of our financial statements as of and for the three months ended March 31, 2021 (as described in our Q1 Form 10-Q, as amended, and Q2 Form 10-Q), management and our audit committee concluded that a material weakness also exists as it relates to the accounting for our public warrants presented in the Q1 Form 10-Q.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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We, and following our initial business combination, the post-business combination company, may face litigation and other risks as a result of the material weaknesses in our internal control over financial reporting.
As a result of the material weaknesses in our internal controls over financial reporting described above, the change in accounting for the Private Warrants, the change in classification of redeemable public shares, the restatements and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For a description of the use of the proceeds generated in our Initial Public Offering and private placement, see Part I, Item 2 of this Quarterly Report. There has been no material change in the planned use of the proceeds from the Initial Public Offering and private placement as is described in the Company’s final prospectus related to the Initial Public Offering.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| No. | Description of Exhibit | |
| 31.1* | Certification of Chief Executive Officer (Principal Executive Officer) required by Rule 13a-14(a) or Rule 15d-14(a). | |
| 31.2* | Certification of Chief Financial Officer (Principal Financial and Accounting Officer) required by Rule 13a-14(a) or Rule 15d-14(a). | |
| 32.1** | Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. | |
| 32.2** | Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| QUANTUM FINTECH ACQUISITION CORPORATION | ||
| Date: November 15, 2021 | By: | /s/ John Schaible |
| Name: | John Schaible | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 15, 2021 | By: | /s/ Miguel Leon |
| Name: | Miguel Leon | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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