OppFi Inc. (formerly FG New America Acquisition Corp.) — Q2 2021 Form 10-Q
Business context and reporting period
This filing covers the quarter and six months ended June 30, 2021. At quarter-end, the registrant was a SPAC and had not yet completed its business combination with Opportunity Financial, LLC (“OppFi”). It had no operating revenue or operating business. The combination closed on July 20, 2021, after the reporting period; therefore, the financial statements below are the SPAC’s, not OppFi’s operating results.
Financial highlights
| Metric | Q2 2021 / June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| Net loss | $16.3 million | $19.3 million |
| Operating expenses | $543,637 | $2.4 million |
| Net loss per share | $1.48 | $1.76 |
| Cash used in operations | $270,000 | $826,000 |
| Cash outside trust | $311,216 | — |
| Trust account securities | $243.4 million | — |
| Total liabilities | $41.0 million | — |
The Q2 loss was driven primarily by a $15.7 million noncash increase in the fair value of warrant liabilities; six-month warrant remeasurement expense was $17.0 million. The warrant liability totaled $39.4 million at June 30. Interest income partly offset expenses ($6,069 for Q2; $12,071 for six months). The filing provides no meaningful operating-margin measure because the SPAC had no operating revenue. It reported no long-term debt before closing.
Material changes and transaction developments
- Compared with Q2 2020, when the company had no activity, Q2 2021 included SPAC operating expenses and substantial warrant fair-value losses. The comparison is not an operating-company year-over-year comparison.
- On July 20, 2021, the business combination closed. After redemptions of 14,822,435 public shares, OppFi received $91.6 million in cash consideration; total consideration to OppFi members was approximately $806.5 million, including equity consideration.
- On August 6, 2021, OppFi LLC amended its BMO revolving credit agreement, extending its scheduled termination from August 19 to September 30, 2021 and revising certain financial covenants. The filing does not provide the amended covenant values in this summary text.
Outlook, risks, contingencies and unusual items
No operating guidance or forecast is provided in this filing. Management directs readers to OppFi’s separate management discussion filed as an exhibit to a contemporaneous Form 8-K for the post-combination business’s liquidity and capital resources. The company reported no legal proceedings and no material changes to previously disclosed risk factors.
- Management concluded disclosure controls were ineffective because of a material weakness involving accounting for IPO and private-placement warrants. Remediation was in progress, with no assurance it would be effective.
- The post-closing tax receivable agreement generally requires the company to pay members 90% of certain realized tax savings. Certain termination, change-of-control, breach or payment events can accelerate obligations and require a lump-sum cash payment.
- The filing reports $5.0 million of stockholders’ equity and $197.8 million of Class A shares subject to possible redemption at June 30. These SPAC balances predate the combination and should not be treated as a post-closing OppFi balance sheet.
- Chief Operating Officer Salvador Hazday resigned effective August 25, 2021, to pursue another opportunity.
Most important facts for investors to verify
- Review OppFi’s post-combination financial statements and liquidity disclosures; this 10-Q principally reports the SPAC shell’s pre-closing results.
- Check the terms, capacity, covenant requirements and subsequent status of the amended BMO credit facility.
- Assess the warrant-accounting material weakness, remediation progress and any resulting reporting or valuation effects.
- Evaluate the potential size, timing and acceleration provisions of the tax receivable agreement.
- Reconcile the post-closing capitalization, redemptions, consideration and cash available to the combined company with subsequent filings.