NOTES TO CONDENSED INTERIM
FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — ORGANIZATION AND PLAN
OF BUSINESS OPERATIONS
Union Acquisition
Corp. II (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on December 6,
2018. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities that the Company has not yet identified
(a “Business Combination”).
The Company’s
efforts to identify a prospective target business will not be limited to a particular industry or geographic region, although the
Company intends to focus its search for a target business located in Latin America. The Company is an emerging growth company and,
as such, the Company is subject to all of the risks associated with emerging growth companies.
At December 31, 2020,
the Company had not yet commenced any operations. All activity through December 31, 2020 relates to the Company’s formation,
the initial public offering (the “Initial Public Offering”), which is described below, and, after the Initial Public
Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after
the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of
interest income from the proceeds derived from the Initial Public Offering. The Company has selected September 30 as its fiscal
year end.
The registration statement
for the Company’s Initial Public Offering was declared effective on October 17, 2019. On October 22, 2019, the Company consummated
the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the ordinary shares included in the Units
being offered, the “Public Shares”), which includes the partial exercise by the underwriters of their over-allotment option
in the amount of 2,500,000 Units, at $10.00 per Unit, generating gross proceeds of $200,000,000 which is described in Note 4.
Simultaneously with the
closing of the Initial Public Offering, the Company consummated the sale of 6,250,000 warrants (the “Private Placement Warrants”)
at a price of $1.00 per warrant in a private placement to two of the Company’s shareholders, generating gross proceeds of $6,250,000,
which is described in Note 5.
Transaction costs
amounted to $4,529,222, consisting of $4,000,000 of underwriting fees and $529,222 of other offering costs.
Following the closing
of the Initial Public Offering on October 22, 2019, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale
of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust
Account”) and invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, or the Investment Company Act, which invest
only in direct U.S. government treasury obligations, until the earlier of (i) the consummation of the Business Combination or (ii)
the distribution of the Trust Account, as described below.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
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 Placement Warrants, although substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the balance in the Trust Account (excluding taxes payable on the
income earned on the funds held in trust) at the time of the signing of an agreement to enter into a Business Combination. The
Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to
be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will
be able to successfully effect a Business Combination.
The Company will provide
the holders of the public shares (the “Public Shareholders”) 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 shareholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval
of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders
will be entitled to redeem their Public Shares for a pro rata portion of the aggregate amount then on deposit in the Trust Account.
There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will proceed
with a Business Combination only if it has net tangible assets of at least $5,000,001 upon consummation of the Business Combination
and, in the case of a shareholder vote, a majority of the outstanding ordinary shares voted are voted in favor of the Business
Combination. Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company
does not conduct redemptions pursuant to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder
or any other person with whom such shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be restricted from redeeming its shares
with respect to more than an aggregate of 15% of the Public Shares. In connection with any initial Business Combination, the holders
of the Company’s ordinary shares issued prior to the Initial Public Offering (the “Initial Shareholders”) and
officers and directors and their affiliates have agreed (i) to vote any ordinary shares owned by them in favor of a Business Combination
if a vote is held to approve the Business Combination, (ii) not to redeem any of their ordinary shares in connection therewith
or any amendment to the Company’s charter documents prior to the consummation of a Business Combination and (iii) not to
sell any of their ordinary shares to the Company in a tender offer.
The Company initially
had until April 22, 2021 to complete a Business Combination (the “Combination Period”). If the Company has not completed
a Business Combination within the Combination Period (and shareholders have not amended the Company’s amended and restated memorandum
and articles of association to extend such date), 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 100% of 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 (which interest shall be net
of taxes payable, and less up to $100,000 of interest to pay liquidation expenses) divided by the number of then outstanding Public Shares,
which redemption will completely extinguish the rights of the Public Shareholders as shareholders (including the right to receive further
liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company’s remaining shareholders and its Board of Directors, dissolve and liquidate, subject in
each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other
applicable law. The proceeds deposited in the Trust Account could, however, become subject to claims of creditors. Therefore, the actual
per-share redemption amount could be reduced.
On April 16, 2021, the
Company held a special meeting pursuant to which the Company’s shareholders approved extending the Combination Period from April
22, 2021 to October 22, 2021 (the “Extension Date”). In connection with the approval of the extension, shareholders elected
to redeem an aggregate of 6,446,836 ordinary shares. As a result, an aggregate of $64,898,081 (or approximately $10.07 per share) was
released from the Company’s Trust Account to pay such shareholders.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
In the event of a
liquidation, the Public Shareholders will be entitled to receive a full pro rata interest in the Trust Account (less up to $100,000
of interest to pay liquidation expenses and which interest shall be net of taxes payable). There will be no redemption rights or
liquidating distributions with respect to the Public Warrants (as defined in Note 3), the Founder Shares (as defined in Note 4)
or the Private Placement Warrants, which will expire worthless if the Company fails to complete a Business Combination within the
Combination Period.
In order to protect
the amounts held in the Trust Account, Union Group International Holdings Limited (“Union Group”), one of the Company’s
initial shareholders and an affiliate of a director of the Company, has agreed to be liable to the Company if and to the extent
any claims by a vendor 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. This liability will not apply
with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any
monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public
Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Union Group will
not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility
that Union Group will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service
providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities
with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind
in or to monies held in the Trust Account.
NOTE
2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The
Company previously accounted for its outstanding Public Warrants (as defined in Note 4) and Private Placement Warrants (collectively,
with the Public Warrants, the “Warrants”) issued in connection with its Initial Public Offering as components of equity instead
of as derivative liabilities. The warrant agreement governing the Warrants includes a provision that provides for potential changes to
the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a
provision that in the event of a tender offer or exchange offer made to and accepted by holders of more than 50% of the outstanding shares
of a single class of shares, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer
provision”).
On
April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange
Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition
companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies (“SPACs”)” (the “SEC Statement”). 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.
In
further consideration of the SEC Statement, the Company’s management further evaluated the Warrants under Accounting Standards
Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC 815-40 addresses equity versus liability
treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified
as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC 815-40, a
warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon
a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s
audit committee, in consultation with management, concluded that the Company’s Private Placement Warrants are not indexed to the
Company’s ordinary shares in the manner contemplated by ASC 815-40 because the holder of the instrument is not an input into the
pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit
committee, in consultation with management, concluded that the tender offer provision fails the “classified in shareholders’
equity” criteria as contemplated by ASC 815-40.
As
a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued financial statements.
Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period
and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The
Company’s accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the
Company’s previously reported investments held in trust, operating expenses or cash.
The
table below summarizes the effects of the restatement on the financial statements for all periods being restated:
|
|
As
Previously
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
Balance
sheet as of December 31, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Liabilities
|
|
$
|
—
|
|
|
$
|
31,375,000
|
|
|
$
|
31,375,000
|
|
Ordinary
Shares Subject to Possible Redemption
|
|
|
197,029,190
|
|
|
|
(31,375,000
|
)
|
|
|
165,654,190
|
|
Ordinary
Shares
|
|
|
530
|
|
|
|
313
|
|
|
|
843
|
|
Additional
Paid-in Capital
|
|
|
4,716,058
|
|
|
|
18,924,687
|
|
|
|
23,640,745
|
|
Retained
Earnings (Accumulated Deficit)
|
|
|
283,420
|
|
|
|
(18,925,000
|
)
|
|
|
(18,641,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Operations for the Three Months Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of warrant liabilities
|
|
$
|
—
|
|
|
$
|
(5,875,000
|
)
|
|
$
|
(5,875,000
|
)
|
Net
loss
|
|
|
(201,872
|
)
|
|
|
(5,875,000
|
)
|
|
|
(6,076,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flow Statement for the Period from February 14, 2020 (inception) to December 31, 2020 (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(201,872
|
)
|
|
$
|
(5,875,000
|
)
|
|
$
|
(6,076,872
|
)
|
Change
in fair value of warrant liabilities
|
|
|
—
|
|
|
|
5,875,000
|
|
|
|
5,875,000
|
|
Change
in value of ordinary shares subject to possible redemption
|
|
|
(201,870
|
)
|
|
|
(5,875,000
|
)
|
|
|
(6,076,870
|
)
|
NOTE 3 — SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited
condensed interim 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 Securities and Exchange Commission (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 interim 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 interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the
year ended September 30, 2020 as filed with the SEC on December 30, 2020, which contains the audited financial statements and notes
thereto. The financial information as of September 30, 2020 is derived from the audited financial statements presented in the Company’s
Annual Report on Form 10-K for the years ended September 30, 2020 and 2019. The interim results for the three months ended December
31, 2020 are not necessarily indicative of the results to be expected for the year ending September 30, 2021 or for any future
interim periods.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Going Concern
In connection with the
Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting
Standards Codification (“ASC”) Subtopic 205-40, “Disclosures of Uncertainties about an Entity’s Ability to Continue
as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution, should the Company be
unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after October
22, 2021.
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 shareholder 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
the unaudited condensed interim 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
unaudited condensed interim financial statements and the reported amounts of revenues and expenses during the reporting periods.
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. One of the more significant accounting estimates included
in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject
to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Warrant Liabilities
The Company accounts
for the Warrants in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity
treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and
adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of operations. The Public Warrants for periods where no observable
traded price was available are valued using a Monte Carlo simulation model. For periods subsequent to the detachment of the Public Warrants
from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date. The fair value of Private
Warrants was determined using a Black-Scholes option pricing model.
Ordinary Shares Subject to Possible
Redemption
The Company accounts
for its ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities
from Equity.” Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured at redemption
value. Conditionally redeemable ordinary shares (including ordinary shares 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, ordinary shares are classified as shareholders’ equity. The Company’s
ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence
of uncertain future events. Accordingly, at December 31, 2020 and September 30, 2020, respectively, there are 16,565,419 and 17,173,106
ordinary shares subject to possible redemption presented as temporary equity, outside of the shareholders’ equity section of the
Company’s unaudited condensed balance sheets.
Offering Costs
Offering costs consist
of underwriting, legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to
the Initial Public Offering. Offering costs amounting to $4,529,222 were charged to shareholders’ equity upon the completion
of the Initial Public Offering.
Income Taxes
ASC Topic 740, “Income
Taxes”, 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’s management determined that the Cayman Islands is the
Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax
benefits as income tax expense. As of December 31, 2020 and September 30, 2020, there were no unrecognized tax benefits 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.
The Company’s
tax provision is zero because the Company is incorporated in the Cayman Islands with no connection to any other taxable jurisdiction.
The Company is considered to be an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing
requirements in the Cayman Islands or the United States. As such, the Company has no deferred tax assets.
Net Income (Loss) Per Ordinary Share
Net income (loss) per
ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for each of the
periods. 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, (ii) the exercise of the over-allotment option and (iii) Private Placement Warrants since the inclusion
of such warrants would be anti-dilutive. The warrants are exercisable to purchase 26,250,000 shares of ordinary shares in the aggregate.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The Company’s
condensed statements of operations include a presentation of income (loss) per share for ordinary shares subject to possible redemption
in a manner similar to the two-class method of income (loss) per share. Net income per share, basic and diluted, for redeemable
ordinary shares is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of redeemable
ordinary shares outstanding since original issuance. Net loss per share, basic and diluted, for non-redeemable ordinary shares
is calculated by dividing the net income (loss), adjusted for income attributable to redeemable ordinary shares, by the weighted
average number of non-redeemable ordinary shares outstanding for the periods. Non-redeemable ordinary shares include the Founder
Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
The following table
reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
|
Three
Months Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Redeemable
Ordinary Shares
|
|
|
|
|
|
|
Numerator:
Earnings allocable to Redeemable Ordinary Shares
|
|
|
|
|
|
|
Interest
Income
|
|
$
|
29,136
|
|
|
$
|
587,273
|
|
Net
Earnings
|
|
$
|
29,136
|
|
|
$
|
587,273
|
|
Denominator:
Weighted Average Redeemable Ordinary Shares
|
|
|
|
|
|
|
|
|
Redeemable
Ordinary Shares, Basic and Diluted
|
|
|
20,000,000
|
|
|
|
20,000,000
|
|
Earnings/Basic
and Diluted Redeemable Ordinary Shares
|
|
$
|
0.00
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable
Ordinary Shares
|
|
|
|
|
|
|
|
|
Numerator:
Net Income minus Redeemable Net Earnings
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(6,076,872
|
)
|
|
$
|
(1.780,964
|
)
|
Redeemable
Net Earnings
|
|
|
(29,136
|
)
|
|
|
(587,273
|
)
|
Non-Redeemable
Net Loss
|
|
$
|
(6,106,008
|
)
|
|
$
|
(2,368,237
|
)
|
Denominator:
Weighted Average Non-Redeemable Ordinary Shares
|
|
|
|
|
|
|
|
|
Non-Redeemable
Ordinary Shares, Basic and Diluted
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
Loss/Basic
and Diluted Non-Redeemable Ordinary Shares
|
|
$
|
(1.22
|
)
|
|
$
|
(0.47
|
)
|
As of December 31,
2020 and 2019, basic and diluted shares are the same as there are no securities that are dilutive to the shareholders.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
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 Corporation limit of $250,000. At December 31, 2020 and September
30, 2020, 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, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the accompanying unaudited condensed interim financial statements, primarily due to
their short-term nature, except for the Warrants (see Note 9).
Recent Accounting Standards
In August 2020, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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)
(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope
exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces
additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.
ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible
instruments. ASU 2020-06 is for fiscal years beginning after December 15, 2021 and should be applied on a full or modified retrospective
basis. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within
those fiscal years. 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 other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the
Company’s unaudited condensed interim financial statements.
NOTE 4 — INITIAL PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 20,000,000 Units, at a purchase price of $10.00 per Unit, which includes the partial exercise
by the underwriters of their over-allotment option in the amount of 2,500,000 Units at $10.00 per Unit. Each Unit consists of one
ordinary share and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one
ordinary share at a price of $11.50 per share (see Note 6).
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
In December 2018,
the Company issued an aggregate of 4,312,500 ordinary shares (“Founder Shares”) for an aggregate purchase price of
$25,000. In August 2019, the Company effected a share capitalization pursuant to which the Company issued an additional 718,750
ordinary shares. All share and per-share amounts have been retroactively restated to reflect the share capitalization. As a result,
there were 5,031,250 shares outstanding, of which an aggregate of up to 656,250 shares were subject to forfeiture by the Initial
Shareholders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Initial
Shareholders would own 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As a result
of the underwriters’ election to partially exercise their over-allotment option, 31,250 Founder Shares were forfeited and
625,000 Founder Shares are no longer subject to forfeiture, resulting in 5,000,000 ordinary shares outstanding.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The Initial Shareholders
have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (i)
one year after the date of the consummation of a Business Combination and (ii) the date on which the closing price of the Company’s
ordinary shares equals or exceeds $12.50 price per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing 150 days after a Business Combination, or earlier if, subsequent
to a Business Combination, the Company consummates a subsequent liquidation, merger, share exchange or other similar transaction
which results in all of the Company’s shareholders having the right to exchange their ordinary shares for cash, securities
or other property.
Private Placement
Simultaneously with
the closing of the Initial Public Offering, certain of the Initial Shareholders purchased an aggregate of 6,250,000 Private Placement
Warrants at a price of $1.00 Per Private Placement Warrant for an aggregate purchase price of $6,250,000. Each Private Placement
Warrant is exercisable to purchase one ordinary share at an exercise price of $11.50. The proceeds from the Private Placement Warrants
were added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a
Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to
fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will
expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private
Placement Warrants.
The Private Placement
Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private
Placement Warrants (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long
as they are held by the initial purchasers or any of their permitted transferees. If the Private Placement Warrants are held by
holders other than the initial purchasers or any of their permitted transferees, the Private Placement Warrants will be redeemable
by the Company and exercisable by the holders on the same basis as the Public Warrants. In addition, the Private Placement Warrants
may not be transferable, assignable or salable until 30 days after the consummation of a Business Combination, subject to certain
limited exceptions.
Promissory Note — Related Party
The Company issued
an unsecured promissory note to Union Group on December 19, 2018, pursuant to which the Company may borrow up to aggregate principal
amount of $200,000 (the “Promissory Note”). The Promissory Note was non-interest bearing and payable on the earlier
of (i) December 31, 2019, (ii) the consummation of the Initial Public Offering or (iii) the date on which the Company determined
not to proceed with the Initial Public Offering. The Company borrowed $175,000 under the Promissory Note and fully repaid the balance
during the three months ended December 31, 2019.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Support Services
The
Company entered into an agreement, commencing on October 17, 2019 through the earlier of the consummation of a Business Combination
or the Company’s liquidation, to pay an affiliate of one of the Company’s directors a monthly fee of $10,000 for office
space, utilities and administrative support. For the three months ended December 31, 2020 and 2019, the Company incurred $30,000
and $25,000 in fees for these services, respectively. At December 31, 2020 and September 30, 2020, $0 and $115,000 of such fee
is included in accrued expenses in the accompanying unaudited condensed interim balance sheets.
The Company also pays
its Chief Operating Officer a $10,000 per month consulting fee, commencing on October 17, 2019 through the earlier of the consummation
of a Business Combination or the Company’s liquidation. For each of the three months ended December 31, 2020 and 2019, the
Company incurred and paid $30,000 in fees for these services.
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Initial Shareholders, the Company’s officers, directors
or their affiliates may, but are not obligated to, loan the Company funds, from time to time or at any time, as may be required
(“Working Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans
would either be paid upon consummation of a Business Combination, without interest, or, at the holder’s discretion, up to
$1,500,000 of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical
to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of the
working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used
for such repayment. There are no borrowings under the working capital loans to date. As of December 31, 2020 and September 30,
2020, no Working Capital Loans were outstanding.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
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 these unaudited condensed interim financial statements. The unaudited
condensed interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Registration Rights
Pursuant to a registration
rights agreement entered into on October 17, 2019, the holders of the Founder Shares, the Private Placement Warrants (and their
underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities)
are entitled to registration rights. The holders of a majority of these securities will be entitled to make up to two demands that
the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration
rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The
holders of a majority of the Private Placement Warrants and warrants issued in payment of Working Capital Loans made to the Company
(or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business
Combination. In addition, the holders will have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to the completion of a Business Combination. 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 2,625,000 additional Units to cover over-allotments at the Initial Public Offering
price, less the underwriting discounts and commissions. In connection with the closing of the Initial Public Offering on October
22, 2019, the underwriters elected to partially exercise their over-allotment option to purchase 2,500,000 Units at a purchase
price of $10.00 per Unit.
Business Combination Marketing Agreement
The Company engaged
the representative of the underwriters in the Initial Public Offering as an advisor in connection with a Business Combination to
assist the Company in holding meetings with its shareholders to discuss the potential Business Combination and the target business’
attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection
with a Business Combination, assist the Company in obtaining shareholder 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 this entity an aggregate
cash fee for such services upon the consummation of a Business Combination in an amount equal to $4,200,000 (exclusive of any applicable
finders’ fees which might become payable).
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 — SHAREHOLDERS’ EQUITY
Preference Shares
The Company is authorized
to issue 1,000,000 preference shares with a par value of $0.0001 per share with such designation, rights and preferences as may
be determined from time to time by the Company’s Board of Directors. At December 31, 2020 and September 30, 2020, there were
no preference shares issued or outstanding.
Ordinary Shares
The Company is authorized
to issue 150,000,000 ordinary shares, with a par value of $0.0001 per share. Holders of the ordinary shares are entitled to one vote
for each ordinary share. At December 31, 2020 and September 30, 2020, there were 8,434,581 and 7,826,894 ordinary shares issued and outstanding,
excluding 16,565,419 and 17,173,106 ordinary shares subject to possible redemption, respectively.
NOTE
8 — WARRANTS
The Public Warrants
will become exercisable on the later of (a) the completion of a Business Combination or (b) 12 months from the closing of the Initial
Public Offering. Each Public Warrant entitles the holder to purchase one ordinary share at a price of $11.50 per share. In addition,
if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with
the closing of an initial Business Combination at an issue price or effective issue price of less than $9.20 per share (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 Company’s Initial Shareholders or their affiliates, without taking into account any founders’
shares held by the Initial Shareholders 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 the initial Business Combination on the date of the consummation of the initial Business Combination
(net of redemptions), and (z) the volume weighted average trading price of the ordinary shares during the 20 trading day period
starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the
“Market Value”) is below $9.20 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 the Newly Issued Price, and the $18.00 per share redemption trigger price
described below will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued
Price.
No Public Warrants
will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares
issuable upon exercise of the Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing,
if a registration statement covering the ordinary shares issuable upon exercise of the Public Warrants is not effective within
a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective
registration statement and during any period when the Company shall have failed to maintain an effective registration statement,
exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that
such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their
warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier
upon redemption or liquidation.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The Company may redeem
the Public Warrants:
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
at any time after the warrants become exercisable;
|
|
●
|
upon not less than 30 days’ prior written notice of redemption;
|
|
●
|
if, and only if, the reported last sale price of the Company’s ordinary shares equals or exceeds $18.00 per share (subject to adjustment) for any 20 trading days within a 30-trading day period ending on the third business day prior to the notice of redemption to the warrant holders; and
|
|
●
|
if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants and a current prospectus relating to those shares is available throughout the 30-day redemption period.
|
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 ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the
event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the warrants
will not be adjusted for issuance of ordinary shares at a price below its exercise price. The Company has agreed to use its best
efforts to have declared effective a prospectus relating to the ordinary shares issuable upon exercise of the warrants and keep
such prospectus current until the expiration of the warrants. However, if the Company does not maintain a current prospectus relating
to the ordinary shares issuable upon exercise of the warrants, holders will be unable to exercise their warrants for cash and the
Company will not be required to net cash settle or cash settle the warrant exercise. There will be no redemption rights upon the
completion of a Business Combination with respect to the Company’s 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.
NOTE 9 — FAIR VALUE
MEASUREMENTS
The Company follows
the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting
period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The Company
classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC 320 “Investments - Debt
and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to
hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheets and
adjusted for the amortization or accretion of premiums or discounts.
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The fair value of
the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have
received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities,
the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the
use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following
fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in
order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
At December 31, 2020, assets held
in the Trust Account were comprised of $201,339,975 in money market funds, which are invested in U.S. Treasury securities.
At September 30, 2020, assets
held in the Trust Account were comprised of $46,650 in cash and $201,276,689 in U.S. Treasury Bills.
Transfers to/from Levels 1, 2, and 3 are
recognized at the end of the reporting period. There were no transfers between levels for the three months ended December 31, 2020
and 2019.
The
following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at December 31, 2020 and September 30, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value:
Description
|
|
Level
|
|
December 31, 2020
|
|
|
September 30, 2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
1
|
|
$
|
201,339,975
|
|
|
$
|
201,276,435
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities – Public Warrants
|
|
1
|
|
$
|
19,000,000
|
|
|
$
|
15,000,000
|
|
Warrant Liabilities – Private Placement Warrants
|
|
3
|
|
$
|
12,375,000
|
|
|
$
|
10,500,000
|
|
The
gross holding losses and fair value of held-to-maturity securities at September 30, 2020 are presented below. There were no held-to-maturity
securities at December 31, 2020.
|
|
Held-To-Maturity
|
|
Level
|
|
Amortized Cost
|
|
|
Gross
Holding
Loss
|
|
|
Fair Value
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Matured on 10/22/2020)
|
|
1
|
|
$
|
26,298,490
|
|
|
$
|
195
|
|
|
$
|
26,298,685
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Matured on 10/29/2020)
|
|
1
|
|
$
|
24,998,590
|
|
|
$
|
(340
|
)
|
|
$
|
24,998,250
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Matured on 11/5/2020)
|
|
1
|
|
$
|
49,994,033
|
|
|
$
|
1,967
|
|
|
$
|
49,996,000
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Matured on 11/27/2020)
|
|
1
|
|
$
|
49,993,862
|
|
|
$
|
(1,362
|
)
|
|
$
|
49,992,500
|
|
September 30, 2020
|
|
U.S. Treasury Securities (Matured on
12/10/2020)
|
|
1
|
|
$
|
49,991,714
|
|
|
$
|
(714
|
)
|
|
$
|
49,991,000
|
|
|
|
|
|
|
|
$
|
201,276,689
|
|
|
$
|
(254
|
)
|
|
$
|
201,276,435
|
|
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The
Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying
condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair
value presented within loss on warrant liabilities in the condensed statements of operations.
The
Private Placement Warrants were valued using a Black Scholes Model, which is considered to be a Level 3 fair value measurement.
The Public Warrants were valued using a Monte Carlo simulation. The primary unobservable input utilized in determining the fair value
of the Warrants is the expected volatility of the ordinary shares. The expected volatility was initially derived from observable public
warrant pricing on comparable ‘blank-check’ companies without an identified target. The subsequent measurements of the Public
Warrants after the detachment of the Public Warrants from the Units was classified as Level 1 due to the use of an observable market
quote in an active market. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public
Warrant price was used as the fair value as of each relevant date.
The
following table presents the quantitative information regarding Level 3 fair value measurements:
|
|
As
of
December 31,
2020
|
|
|
As
of
September 30, 2020
|
|
Share Price
|
|
|
10.40
|
|
|
$
|
9.93
|
|
Term (in years)
|
|
|
5.5
|
|
|
|
5.5
|
|
Volatility
|
|
|
23.7
|
%
|
|
|
23.5
|
%
|
Risk-free rate
|
|
|
0.43
|
%
|
|
|
0.33
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The
following table presents the changes in the fair value of Level 3 warrant liabilities:
|
|
Private Placement
|
|
Fair value as of September 30, 2020
|
|
$
|
10,500,000
|
|
Change in fair value
|
|
|
1,875,000
|
|
Fair value as of December 31, 2020
|
|
$
|
12,375,000
|
|
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three months
ended March 31, 2021.
NOTE
10 — SUBSEQUENT EVENTS
The Company evaluated
subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed interim financial
statements were issued. Based upon this review, other than as described in Note 2 and below, the Company did not identify any subsequent
events that would have required adjustment or disclosure in the unaudited condensed interim financial statements.
Procaps
Business Combination Agreement
On
March 31, 2021, the Company (the “Registrant” or “SPAC”), Crynssen Pharma Group Limited, a private
limited liability company registered and incorporated under the laws of Malta (the “Company”), Procaps (“Holdco”)
and OZLEM Limited, an exempted company incorporated under the laws of the Cayman Islands (“Merger Sub”) entered into
a Business Combination Agreement (the “Business Combination Agreement”).
UNION ACQUISITION CORP. II
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Pursuant
to the Business Combination Agreement, (i) Merger Sub will merge with and into SPAC, with SPAC surviving such merger and becoming a direct
wholly-owned subsidiary of Holdco (the “Merger”) and, in the context of the Merger, (a) all ordinary shares of SPAC,
par value $0.0001 per share (“SPAC Ordinary Shares”) outstanding will be exchanged with Holdco for the right to receive
ordinary shares of Holdco, nominal value $0.01 per share (“Holdco Ordinary Shares”) pursuant to a share capital increase
of Holdco, (b) the SPAC Warrants will become warrants of Holdco (“Holdco Warrants”) exercisable for Holdco Ordinary
Shares, on substantially the same terms as the SPAC Warrants and (c) Holdco shall enter into an Assignment, Assumption and Amendment
Agreement with SPAC and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent, to amend and assume
SPAC’s obligations under the existing Warrant Agreement, dated October 17, 2019, to give effect to the conversion of SPAC Warrants
to Holdco Warrants; (ii) immediately following consummation of the Merger and pursuant to those certain individual Contribution and Exchange
Agreements, each dated as of March 31, 2021, and entered into by and among Holdco, the Company and each of the shareholders of the Company
(the “Company Shareholders”) (collectively, the “Exchange Agreements”), each of the Company Shareholders,
effective on the Closing Date immediately following the Merger (the “Exchange Effective Time”) will contribute its
respective ordinary shares of the Company, nominal value $1.00 per share (“Company Ordinary Shares”) to Holdco in
exchange for Holdco Ordinary Shares, and, in the case of the International Finance Corporation (“IFC”), for Holdco
Ordinary Shares and redeemable B shares of Holdco (the “Holdco Redeemable B Shares”), to be subscribed for by each
such Company Shareholder (such contributions and exchanges of Company Ordinary Shares for Holdco Ordinary Shares and, with respect to
IFC, Holdco Ordinary Shares and Holdco Redeemable B Shares, collectively, the “Exchange”) and Holdco will, simultaneously
with the Exchange, redeem all redeemable A shares of Holdco (the “Holdco Redeemable A Shares” and together with the
Holdco Ordinary Shares and Holdco Redeemable B Shares, the “Holdco Shares”) held by the Company as a result of its
incorporation; (iii) as a result of the Exchange, the Company will become a direct wholly-owned subsidiary of Holdco and the Company
Shareholders will become holders of issued and outstanding Holdco Shares; and (iv) immediately following the Exchange, Holdco will redeem
6,000,000 Holdco Redeemable B Shares for a total purchase price of $60,000,000 in accordance with that certain Share Redemption Agreement
entered into by and between Holdco and IFC on March 31, 2021. Capitalized terms used but not defined herein shall have the respective
meanings set forth in the Business Combination Agreement.
The
Company has entered into separate subscription agreements (collectively, the “Subscription Agreements”), dated March
31, 2021, with certain investors, pursuant to which SPAC has agreed to issue and sell, in private placements to close contemporaneously
with, but immediately prior to, the Merger, an aggregate of 10,000,000 SPAC Ordinary Shares, for a purchase price of $10.00 per SPAC
Ordinary Share and an aggregate purchase price of $100,000,000 (the “PIPE Investment”), which will automatically be
converted into Holdco Ordinary Shares at the Merger Effective Time. The Subscription Agreements give the investors customary registration
and indemnification rights.
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 Union Acquisition Corp. II. References to our
“management” or our “management team” refer to our officers and directors. 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” 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 the Company’s Annual Report on Form 10-K/A filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly
required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed on December
6, 2018 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 target businesses. We intend to effectuate our initial Business Combination using
cash from the proceeds of the initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination
of cash, stock and debt.
We have neither engaged in any operations nor
generated any revenues to date. Our entire activity since inception has been to prepare for our initial Public Offering, which was consummated
on October 22, 2019 and, after the Initial Public Offering, identifying a target company for a Business Combination.
Recent Developments
On April 16, 2021, we held a special meeting
pursuant to which our shareholders approved extending the period of time for which we are required to consummate a Business Combination
from April 22, 2021 to October 22, 2021. In connection with the approval of the extension, shareholders elected to redeem an aggregate
of 6,446,836 ordinary shares. As a result, an aggregate of $64,898,081 (or approximately $10.07 per share) was released from our Trust
Account to pay such shareholders.
Results of Operations
We have neither engaged in any operations nor
generated any revenues to date. Our only activities were organizational activities, those necessary to prepare for the Initial Public
Offering, 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 after the Initial Public Offering. We are incurring 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 a Business Combination.
For the three months ended December 31, 2020,
we had net loss of $6,076,872, which consists of operating expenses of $231,008 and change in value of fair value on warrant liabilities
of $5,875,000, offset by interest earned on marketable securities held in the Trust Account of $29,136.
For the three months ended December 31, 2019,
we had net loss of $1,780,964, which consists of operating expenses of $243,237 and change in value of fair value on warrant liabilities
of $2,125,000, offset by interest earned on marketable securities held in the Trust Account of $587,273.
Liquidity and Capital Resources
On October 22, 2019, we consummated the initial
Public Offering of 20,000,000 units, which includes the partial exercise by the underwriters of their over-allotment option in the amount
of 2,500,000 units, at a price of $10.00 per unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of the initial
Public Offering, we consummated the sale of 6,250,000 Private Warrants to Union Acquisition Associates II, LLC and Union Group International
Holdings Limited at a price of $1.00 per Private Warrant, generating total proceeds of $6,250,000.
Following the initial Public Offering and the
sale of the Private Warrants, a total of $200,000,000 was placed in the Trust Account. We incurred $4,529,222 in initial Public Offering-related
costs, including $4,000,000 of underwriting fees and $529,222 of other offering costs.
For the three months ended December 31, 2020,
net cash used in operating activities was $281,837. Net loss of $6,076,872 was impacted by interest earned on marketable securities of
$29,136, fees charged on the Trust Account of $12,500 and a change in fair value of warrant liabilities of $5,875,000. Changes in operating
assets and liabilities used $63,329 of cash from operating activities.
For the three months ended December 31, 2019,
net cash used in operating activities was $360,821. Net loss of $1,780,964 was impacted by interest earned on marketable securities of
$587,273, fees charged on the Trust Account of $7,083, a change in fair value of warrant liabilities of $2,125,000 and changes in operating
assets and liabilities, which used $124,667 of cash from operating activities.
At December 31, 2020, we had cash and marketable
securities held in the Trust Account of $201,339,975. 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 taxes payable) to complete our initial Business Combination. We may
withdraw interest from the Trust Account to pay taxes. To the extent that our equity or debt is used, in whole or in part, as consideration
to complete our initial 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.
At December 31, 2020, we had cash of $673,963
held outside of the Trust Account. 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 an initial Business Combination, our officers, directors or their affiliates may, but
are not obligated to, loan us funds as may be required. If we consummate an initial Business Combination, we would repay such loaned amounts.
In the event that the initial 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 of the post Business Combination entity at a price of $1.00 per warrant at the option of the lender.
The warrants would be identical to the private warrants.
We do not believe we will need to raise additional
funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of undertaking in-depth due
diligence and negotiating an initial Business Combination is less than the actual amount necessary to do so, we may have insufficient
funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing
either to consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares
upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with
such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously
with the completion of our Business Combination. Following our Business Combination, if cash on hand is insufficient, we may need to obtain
additional financing in order to meet our obligations. If we are unable to complete our initial Business Combination because we do not
have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
Going Concern
In connection with our assessment of going
concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification Subtopic 205-40,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined
that the mandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern.
No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after October 22, 2021.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of December 31, 2020. 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 UCG International Corp., an affiliate
of Juan Sartori, a monthly fee of $10,000 for office space, utilities and administrative support provided to the Company. We began incurring
these fees on October 17, 2019 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination
and the Company’s liquidation.
We also pay our Chief Operating Officer a $10,000
per month consulting fee, commencing on October 17, 2019 through the earlier of the consummation of a Business Combination or the Company’s
liquidation.
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 Liabilities
We account for the Warrants in accordance
with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded
as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value
is recognized in our statement of operations. The Public Warrants for periods where no observable traded price was available are valued
using a Monte Carlo simulation model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant
quoted market price was used as the fair value as of each relevant date. The fair value of Private Warrants was determined using a Black-Scholes
option pricing model.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to
possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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, ordinary shares is classified as shareholders’ equity. Our ordinary shares features certain
redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly,
ordinary shares subject to possible redemption is presented as temporary equity, outside of the shareholders’ equity section of
our unaudited condensed balance sheets.
Net Loss Per Ordinary Share
We apply the two-class method in calculating earnings
per share. Net income (loss) per ordinary share, basic and diluted for redeemable ordinary shares is calculated by dividing the interest
income earned on the Trust Account, by the weighted average number of redeemable ordinary shares outstanding for the period. Net income
(loss) per ordinary share, basic and diluted for non-redeemable ordinary shares is calculated by dividing the net income (loss), less
income attributable to redeemable ordinary shares, by the weighted average number of non-redeemable ordinary shares outstanding for the
periods.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 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) (“ASU 2020-06”)
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining
to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is for fiscal
years beginning after December 15, 2021 and should be applied on a full or modified retrospective basis. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. 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 other
recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed
interim financial statements.