SEC Form 10-Q filed by FG New America Acquisition Corp.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

(Mark One)

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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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Commission File No. 001-39550

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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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 ☒ No ☐

As of August 10, 2021, there were 13,464,540 shares of Class A common stock, par value $0.0001 per share, 0 shares of Class B common stock, par value $0.0001 per share, and 96,500,243 shares of Class V common stock, par value $0.0001 per share, issued and outstanding.

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EXPLANATORY NOTE

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As previously disclosed, on July 20, 2021, FG New America Acquisition Corp., a Delaware corporation (“FGNA”), completed the transactions contemplated by that certain Business Combination Agreement, dated as of February 9, 2021 (the “Business Combination Agreement”), by and among FGNA, Opportunity Financial, LLC, a Delaware limited liability company (“OppFi”), OppFi Shares, LLC, a Delaware limited liability company (“OFS”), and Todd Schwartz, in his capacity as the representative (the “Members’ Representative”) of the members of OppFi (the “Members”) immediately prior to the closing (the “Closing”) of the transactions contemplated by the Business Combination Agreement (“Business Combination”).

Upon the Closing, FGNA as the registrant changed its name to “OppFi Inc.” Unless stated otherwise, this Quarterly Report on Form 10-Q contains information about FGNA before the Business Combination. References to the “Company” in this report refer to FGNA before the consummation of the Business Combination or OppFi Inc. after the Business Combination, as the context suggests.

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OppFi Inc.
Quarterly Report on Form 10-Q

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PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS.

OppFi Inc.

(formerly known as FG New America Acquisition Corp.)

Balance Sheet

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The accompanying notes are an integral part of these financial statements.

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OppFi Inc.

(formerly known as FG New America Acquisition Corp.)

Statement of Operations

(Unaudited)

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(1)  Excludes an aggregate of up to 19,325,575 shares subject to possible redemption at June 30, 2021.

The accompanying notes are an integral part of these financial statements.

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OppFi Inc.

(formerly known as FG New America Acquisition Corp.)

Statement of Changes in Stockholders’ Equity

For the Six Months Ended June 30, 2021

and the period from June 24, 2020 (inception) through June 30, 2020

(Unaudited) 

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(1)    Same balances as of June 30, 2020.

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The accompanying notes are an integral part of these financial statements.

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OppFi Inc.

(formerly known as FG New America Acquisition Corp.)

Statement of Cash Flows

(Unaudited) 

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The accompanying notes are an integral part of these financial statements.

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OppFi Inc.

(formerly known as FG New America Acquisition Corp.)

Notes to the Financial Statements

JUNE 30, 2021 (Unaudited)

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ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to OppFi Inc. (formerly FG New America Acquisition Corp.). References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to FG New America Investors LLC. 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.

Cautionary 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 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 our Definitive Proxy Statement on Schedule 14A, filed with the United States Securities and Exchange Commission (the “SEC”) on June 22, 2021 (the “Proxy Statement”), under Cautionary Note Regarding Forward-Looking Statements and Risk Factors. The Company’s securities filings can be accessed on the EDGAR section of the SEC 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 the Closing, we were a blank check company incorporated on June 24, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

Recent Developments

On February 9, 2021, the Company entered into the Business Combination Agreement.

On July 16, 2021, the Company held a special meeting of its stockholders, whereby, amongst other matters, the stockholders approved the previously announced Business Combination with OppFi. On July 20, 2021, the Company consummated the Business Combination with OppFi. On the Closing Date, the Company’s amended and restated certificate of incorporation, dated July 16, 2020, was replaced by the Second Amended and Restated Articles of Incorporation, which among other things changed the name of the Company to “OppFi Inc.” from “FG New America Acquisition Corp.” See Note 1 – The Business Combination in the financial statements included as part of this Quarterly Report on Form 10-Q for more information regarding the closing of the Business Combination.

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Results of Operations

We had neither engaged in any operations nor generated any revenues as of June 30, 2021. As of June 30, 2021, the Company had not yet completed the Business Combination. All activity through for the six months ended June 30, 2021 relates to the Company’s formation, its initial public offering, the Company’s identification of the target company for the Business Combination and the transactions contemplated by the Business Combination Agreement. The Company did not generate any operating revenues prior to the completion of the Business Combination. Prior to the Closing, we generated non-operating income in the form of interest income on marketable securities. Prior to the Closing, we also incurred expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing the Business Combination. Additionally, we recognized non-cash gains and losses within other income (expense) related to change in the recurring fair value measurement of our warrant liabilities at each reporting period.

For the three months ended June 30, 2021, we incurred a net loss of $16,261,727, which consisted of i) $15,724,159 related to increase in fair value of warrant liabilities primarily related to the Public Warrants (as defined below), and ii) $543,637 in operating expenses primarily related to legal and other expenses incurred pertaining to the Business Combination, partially offset by $6,069 in investment income earned in the trust account into which the net proceeds of the IPO were placed (the “Trust Account”).

For the six months ended June 30, 2021, we incurred a net loss of $19,347,744, which consisted of i) $17,005,183 related to increase in fair value of warrant liabilities primarily related to the Public Warrants and ii) $2,354,632 in operating expenses primarily related to legal and other expenses incurred pertaining to the Business Combination, partially offset by $12,071 in investment income earned in the Trust Account.

For the period June 24, 2020 (inception) to June 30, 2020, there was no activity recorded by the Company.

Liquidity and Capital Resources

For the six months ended June 30, 2021, cash used in operating activities was $826,233, consisting primarily of net loss of $19,347,744, reduced by change in fair value of warrant liabilities of $17,005,183, and change in operating assets and liabilities which include decrease in prepaid expenses by $111,731 and increase in accounts payable by $1,404,597.

For the three months ended June 30, 2021, cash used in operating activities was $269,952, consisting primarily of net loss of $16,261,727, reduced by change in fair value of warrant liabilities of $15,724,159, and change in operating assets and liabilities which include decrease in prepaid expenses by $95,769 and increase in accounts payable by $171,847.

As of June 30, 2021, we had cash of $311,216 held outside the Trust Account. We used substantially all of the funds held in the Trust Account (excluding deferred underwriting fees) to complete the Business Combination.

For a description of the liquidity and capital resources of OppFi, which comprises our business following the closing of the Business Combination, please see the section entitled Liquidity and Capital Resources in OppFi Management’s Discussion and Analysis of Financial Condition and Results of Operations filed as Exhibit 99.3 to the Company’s Amendment No. 1 to Current Report on Form 8-K filed with the SEC on the date hereof.

Off-Balance Sheet Arrangement

As of June 30, 2021, prior to the Closing, (i) we had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements, (ii) we did 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, and (iii) we had 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

Prior to the Closing, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an administrative agreement to reimburse the Sponsor for office space, secretarial and administrative services provided to members of the Company’s management team by the Sponsor, members of the Sponsor, and the Company’s management team or their affiliates in an amount not to exceed $10,000 per month in the event such space and/or services are utilized and the Company does not pay a third party directly for such services, from the date of closing of the Company’s initial public offering (the “IPO”). Upon completion of the Business Combination we ceased paying these monthly fees.

Additionally, at the IPO the Company granted underwriters for a period beginning on the closing of the IPO and ending on the later of 24 months after the closing of the IPO and 12 months after the consummation of our Business Combination, a right of first refusal to act as (i) exclusive financial advisor in connection with all of the Company’s proposed Business Combinations for a fee of up to 3.5% of the proceeds of the IPO (subject to the Company’s right to allocate up to 50% of such fee to another financial institution or extinguish such amount in Company’s sole discretion), and (ii) sole investment banker, sole book-runner and/or sole placement agent, at underwriters’ sole discretion, for each and every future public and private equity and debt offering, including all equity linked financings, during such period for the Company or any successor to it or any of its subsidiaries, on terms agreed to by both the Company and underwriters in good faith.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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 had identified the following as its critical accounting policies:

Basis of presentation

The accompanying financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.

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 auditor 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 statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

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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. Accordingly, the actual results could differ significantly from those estimates.

Marketable Securities Held in Trust Account

At June 30, 2021 and December 31, 2020, substantially all of the assets held in the Trust Account were held in a money market fund that invests exclusively in short term U.S. Treasury obligations. During the three months ended June 30, 2021, the Company withdrew $11,835 in interest income from the Trust Account to pay for its franchise taxes.

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 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) 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 balance sheet.

Warrant Liabilities

The Company accounts for the 11,887,500 Public Warrants, 3,848,750 $11.50 Exercise Price Warrants, 1,512,500 $15 Exercise Price Warrants, 231,250 Private Unit Warrants and 59,437 Underwriter Warrants in accordance with the guidance contained in ASC 815-40 “Derivatives and Hedging - Contracts in Entity’s Own Equity”. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, due to a provision in the warrant agreement related to certain tender or exchange offer provisions, each warrant must be recorded as a liability. Accordingly, the Company classifies each warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Public Warrants are valued at market price based on a quoted price in an active market The Company utilizes a Monte Carlo simulation model to value the Private Placement Warrants, Private Unit Warrants and Underwriter Warrants at each reporting period.

Income taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2021, any deferred tax assets are fully reserved against due to losses.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits as of June 30, 2021 and no amounts accrued for interest and penalties. 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.

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Net loss per share

Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. In the periods when net losses are incurred, no impact of dilutive securities is included in the calculation of diluted weighted average number of common shares outstanding. The weighted average shares outstanding are adjusted for the common shares subject to possible redemption.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair value of financial instruments

The fair value of the Company’s assets and liabilities, other than the warrant liabilities described above, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature. The Company reported warrants issued at the consummation of its IPO as financial instruments recorded as liabilities at their respective fair values.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

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ITEM 4.    CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective due to a material weakness in internal controls over financial reporting related to inaccurate accounting for warrants issued in connection with our IPO and private placement.

Changes in Internal Control Over Financial Reporting

During the three months ended June 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. We are in the process of implementing changes to our internal control over financial reporting to remediate the material weakness described above, as more fully described in our Annual Report on Form 10-K/A, filed with the SEC on April 26, 2021. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

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PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

None.

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ITEM 1A.    RISK FACTORS.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report or Proxy Statement. The significant risk factors known to us that could materially adversely affect our business, financial condition, or operating results are described in our Annual Report or the Proxy Statement. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Proxy Statement. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

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ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.

None.

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ITEM 4.    MINE SAFETY DISCLOSURES.

Not applicable.

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ITEM 5.    OTHER INFORMATION.

BMO Credit Agreement Amendment

On August 6, 2021, Opportunity Financial, LLC, a wholly-owned subsidiary of the Company (“OppFi LLC”), Opportunity Funding SPE IV, LLC, a wholly owned subsidiary of OppFi LLC, OppWin, LLC a wholly owned subsidiary of OppFi LLC, and the other credit parties and guarantors thereto, entered into an amendment (“Amendment No. 5”) to that certain Revolving Credit Agreement, originally entered into on August 19, 2019 (as amended to date, the “BMO Credit Agreement”), with BMO Harris Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto. Amendment No. 5, among other things, extends the scheduled termination date of the BMO Credit Agreement from August 19, 2021 to September 30, 2021 and amends certain of the financial covenants in the BMO Credit Agreement. The foregoing description of Amendment No. 5 is not complete and is qualified in its entirety by reference to the full text of Amendment No. 5, which is attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

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Resignation of Salvador Hazday

On August 6, 2021, Mr. Salvador Hazday notified the Company of his resignation as Chief Operating Officer of the Company, effective August 25, 2021 to pursue another executive opportunity.

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ITEM 6.    EXHIBITS.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.

*     Certain exhibits and schedules to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request.

†     Certain portions of this exhibit have been omitted pursuant to Item (601)(b)(10) of Regulation S-K.

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SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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