UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
| (Exact Name of Registrant as Specified in Its Charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one Class A common stock and one redeemable warrant | MFAC.U | New York Stock Exchange | ||
| Redeemable warrants, exercisable for Class A common stock at an exercise price of $11.50 per share | MFAC.W | New York Stock Exchange |
Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | |
| Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company | |||
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 9, 2020 there were
MEGALITH FINANCIAL ACQUISITION CORPORATION
TABLE OF CONTENTS
i
Megalith Financial Acquisition Corp.
CONSOLIDATED BALANCE SHEETS
| September 30, 2020 | December 31, 2019 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| OTHER ASSETS | ||||||||
| Marketable securities held in trust account | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Income taxes payable | ||||||||
| Franchise taxes payable | ||||||||
| Total current liabilities | ||||||||
| LONG TERM LIABILITIES | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total long term liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Class A common stock subject to possible redemption, $ | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Class A Common Stock; $ | ||||||||
| Class B Common Stock; $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Megalith Financial Acquisition Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Legal and professional fees | ||||||||||||||||
| Franchise tax | ||||||||||||||||
| Support services - related party | ||||||||||||||||
| Total expenses | ||||||||||||||||
| OTHER INCOME | ||||||||||||||||
| Interest income on investments held in Trust Account | ||||||||||||||||
| INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ||||||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average shares outstanding of Class A common stock | ||||||||||||||||
| Basic and diluted net income (loss) per share, Class A | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding of Class B common stock | ||||||||||||||||
| Basic and diluted net loss per share, Class B | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
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Megalith Financial Acquisition Corp.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Common stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | paid-in | Retained | stockholders’ | ||||||||||||||||||||||||
| For the Nine Months Ended September 30, 2020 (Unaudited) | Shares | Amount | Shares | Amount | capital | earnings | equity | |||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Change in shares of Class A common stock subject to redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, March 31, 2020 | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Change in shares of Class A common stock subject to redemption | ||||||||||||||||||||||||||||
| Stockholder redemptions | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, June 30, 2020 | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Change in shares of Class A common stock subject to redemption | ||||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Common stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | paid-in | Retained | stockholders’ | ||||||||||||||||||||||||
| For the Nine Months Ended September 30, 2019 (Unaudited) | Shares | Amount | Shares | Amount | capital | earnings | equity | |||||||||||||||||||||
| Balance, December 31, 2018 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Change in shares of Class A common stock subject to redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, March 31, 2019 | ||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Change in shares of Class A common stock subject to redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, June 30, 2019 | ||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Change in shares of Class A common stock subject to redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2019 | $ | $ | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
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Megalith Financial Acquisition Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the nine months ended | For the nine months ended | |||||||
| September 30, | September 30, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Franchise taxes payable | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash released from Trust Account for Class A common stock redemptions | ||||||||
| Investment income released from Trust Account to pay taxes | ||||||||
Net cash flows provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Cash used for Class A common stock redemptions | ( | ) | ||||||
| Net cash flows used in financing activities | ( | ) | ||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of noncash activities: | ||||||||
| Federal income taxes paid from operating account | $ | $ | ||||||
| Change in value of Class A common stock subject to possible redemption | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
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Megalith Financial Acquisition Corp.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Description of Organization and Business Operations
Megalith Financial Acquisition Corp. (the “Company”) was incorporated in Delaware on November 13, 2017. The Company was 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 (the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on the financial technology and the financial services sectors. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of September 30, 2020, the Company had not commenced any
operations. All activity through September 30, 2020 relates to the Company’s formation and Initial Public Offering, (as defined
below), which is described below, and since such offering, the search for a prospective Business Combination. The Company will
not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company
will generate non-operating income in the form of interest income earned on investments from the proceeds derived from the Initial
Public Offering. The registration statement for the Company’s initial public offering (“Initial Public Offering”)
was declared effective on August 23, 2018. On August 28, 2018, the Company consummated the Initial Public Offering of 15,000,000
units (“Units”) with respect to the Class A Common Stock, par value
Simultaneously with the closing of the Initial Public Offering,
the Company consummated the sale of
Offering costs for the
Initial Public Offering amounted to $
Following the closing
of the Initial Public Offering on August 28, 2018, an amount of $
On September 21, 2018,
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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. There is no assurance that the Company will be able to complete a Business Combination
successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least
The Company will provide its holders of the outstanding shares
of its Class A Common Stock, sold in the Initial Public Offering (the “Public Stockholders”) with the opportunity to
redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will
seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account
(initially $
Notwithstanding the
foregoing, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 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
The Company’s Sponsor, officers and directors (the “Initial Stockholders”) have agreed not to propose an amendment to the Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their shares of Class A Common Stock in conjunction with any such amendment.
On May 26, 2020, the stockholders of Megalith Financial Acquisition Corp. (the “Company”) voted to approve a proposal (the “Trust Amendment Proposal”) to amend the Investment Management Trust Agreement, dated April 23, 2018 (the “Trust Agreement”), by and between the Company and Continental Stock Transfer & Trust Company (the “Transfer Agent”). In connection with the approval of the Trust Amendment Proposal, the Company and the Transfer Agent entered into the Amendment No. 1 to the Trust Agreement (the “Amendment”). The Amendment extends the date on which the Trust Account (as defined below) must be liquidated if the Company has not completed an initial business combination by 21 months from the closing of the IPO, which is May 28, 2020, to November 30, 2020. All other terms of the Trust Agreement remain unchanged.
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If the Company is unable
to complete a Business Combination by November 30, 2020 , which is 24 months from the closing of the Initial Public Offering (“Combination Period”), the Company will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds
held in the Trust Account and not previously released to us to pay the Company’s franchise and income taxes (less up to $
All of the
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The Initial Stockholders
have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the Initial Public
Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company
fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to its
deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination
within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account
that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the
per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $
On August 6, 2020, the Company entered in a materially definitive agreement which was amended on November 2, 2020, each of which are discussed in Note 8 and Note 9, respectivley.
Going Concern and Liquidity
The accompanying
consolidated financial statements have been prepared assuming the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.
As of September 30, 2020, the Company had a cash balance of $
In addition, in connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, management has determined that the liquidity, mandatory liquidation and subsequent dissolution 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 November 30, 2020.
Until the consummation of a Business Combination, the Company will be using funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination. If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If the Company completes a Business Combination, the Company would repay such loaned amounts.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
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Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in consolidated 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 comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of a normal and recurring nature, which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented. Interim results are not necessarily indicative of results for a full year.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 16, 2020 (the “Annual Report”).
Principles of Consolidated
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, MFAC Merger Sub, Inc., since their formation. All material intercompany balances and transactions have been eliminated.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (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 an emerging growth 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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2020 and December 31, 2019.
Redeemable Common Stock
As discussed in Note 1
– Description of Organization and Business Operations, all of the
The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of the security at the end of each reporting period. Increases or decreases in the carrying number of redeemable shares of Class A common stock shall be affected by charges against additional paid in capital.
Accordingly, at September
30, 2020,
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Class A Common Stock subject to possible redemption
The Company accounts for its Class A Common Stock subject to
possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A Common Stock subject to mandatory redemption (if any) is classified as a liability
instrument and is measured at fair value. Conditionally redeemable Class A Common Stock (including Class A 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, Class A Common Stock is classified
as stockholders’ equity. The Company’s Class A 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, at September 30,
2020 and December 31, 2019,
Offering Costs
Offering costs consist
principally of legal, accounting, underwriting fees and other costs directly related to the Initial Public Offering. Offering costs
amounting to $
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which,
at times, may exceed the Federal Depository Insurance Coverage of $
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Net Income (Loss) Per Share
The Company complies with accounting and disclosure requirements
of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income applicable
to common stockholders by the weighted average number of shares of common stock outstanding for the period. As of September 30,
2020 the Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase
an aggregate of
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Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.
Income Taxes
The Company follows
the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets
and liabilities are recognized for the estimated future tax consequences attributable to differences between the balance sheet
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to
the amount expected to be realized. Management has determined that a full valuation allowance on the deferred tax asset (related
to startup costs) is appropriate at this time after consideration of all available positive and negative evidence related to the
realization of the deferred tax asset. As of September 30, 2020 and December 31, 2019, the Company had deferred tax assets of $
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts were accrued for the payment of interest or penalties as of September 30, 2020 or December 31, 2019. 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.
Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year’s income taxable for federal and state income tax reporting purposes. Total tax provision may differ from the statutory tax rates applied to income before provision for income taxes due principally to expenses charged which are not tax deductible.
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Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
Note 3 — Initial Public Offering and Private Placement
Pursuant to the Initial
Public Offering, the Company sold
Note 4 — Related Party Transactions
Founder Shares
On November 13, 2017, the Sponsor purchased
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Private Placement Warrants
Concurrently with the
closing of the Initial Public Offering, the Sponsor and Chardan purchased an aggregate of
The Sponsor and Chardan and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and Public Warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the lock up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
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Support Services
The Company presently
occupies office space provided by an affiliate of the Sponsor. The affiliate has agreed that, until the Company consummates a Business
Combination, it will make such office space, as well as certain administrative and support services, available to the Company,
as may be required by the Company from time to time. The Company will pay the affiliate an aggregate of $
Note 5 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and Public Warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration rights agreement dated August 23, 2018. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
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Underwriting Agreement
The Company had
granted the underwriters a 45-day option to purchase up to
The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $3 million in the aggregate at the closing of the Initial Public Offering and $192,889 in conjunction with the underwriters’ partial exercise of its overallotment option. In addition, the underwriters are entitled to a deferred underwriting commissions of $0.40 per Unit, or $6 million in the aggregate from the closing of the Initial Public Offering and $771,556 from the underwriters’ partial exercise of its overallotment option will be payable to the underwriters. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry 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 consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 6 — Stockholders’ Equity
Common Stock
Class A Common
Stock — The Company is authorized to issue
On May 26, 2020, the
Company’s stockholders approved an extension of the date by which the Company must consummate an initial Business Combination
from May 28, 2020 to November 30, 2020.
Class B Common
Stock — The Company is authorized to issue
Holders of Class A Common Stock and Class B Common Stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law.
The shares of Class
B Common Stock will automatically convert into shares of Class A Common Stock upon consummation of the initial Business Combination
on a one-for-one basis, subject to adjustment.
Preferred Stock —
The Company is authorized to issue
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Warrants - The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A Common Stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A Common Stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
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 and the Class A Common Stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company may call the Public Warrants for redemption (except with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
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.
In addition, except in the case of the Private Placement Warrants purchased by Chardan, if (x) we issue additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of our initial Business Combination at an issue price or effective issue price of less than $9.50 per share of Class A Common Stock (with such issue price or effective issue price to be determined in good faith by our board of directors), (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 our initial Business Combination, and (z) the volume weighted average trading price of our Class A Common Stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial Business Combination (such price, the “Market Value”) is below $9.50 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Market Value, and the $24.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 240% of the Market Value.
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Note 7 — Trust Account and Fair Value Measurement
The Trust Account can be invested in U.S. government securities, within the meaning set forth in the Investment Company Act, having a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act.
The Certificate of
Incorporation provides that, other than the withdrawal of interest to pay income and franchise taxes and up to $
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 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.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | September 30, 2020 | December 31, 2019 | |||||||||
| Assets: | ||||||||||||
| Marketable securities in Trust Account | 1 | $ | $ | |||||||||
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Note 8 — Entry Into a Materially Definitive Agreement
On August 6, 2020, the Company entered into an Agreement and Plan of Merger (the “Original Agreement”), by and among the Company, MFAC Merger Sub Inc., a Pennsylvania corporation and (“Merger Sub”) a wholly-owned subsidiary of the Company, BankMobile Technologies, Inc., a Pennsylvania corporation (“BankMobile”) and Customers Bank, a Pennsylvania state chartered bank and the sole stockholder of BankMobile (the “Stockholder”).
Pursuant to the Original Agreement, at the closing of the transactions contemplated by the Original Agreement (the “Closing”), BankMobile will merge with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Surviving Corporation”)
The aggregate consideration to be paid pursuant to the Original Agreement to the Stockholder will be an amount (the “Merger Consideration”) equal to: (i) $140,000,000 (the “Enterprise value”), minus (ii) $9,324,323 (“Sponsor Equity Adjustment”), plus (or minus, if negative) (iii) BankMobile’s net working capital less a target net working capital of $10,000,000, minus (iv) the aggregate amount of any outstanding indebtedness of BankMobile at Closing, and minus (v) the amount of any unpaid transaction expenses of BankMobile, the Company’s transaction expenses and other liabilities of the Company due and owing at the Closing.
The Merger Consideration
will consist of cash and stock.
The Merger Consideration is subject to adjustment after the Closing based on confirmed amounts of the net working capital, the outstanding indebtedness of BankMobile and any unpaid transaction expenses of BankMobile, as of the Closing Date. If the adjustment is a negative adjustment in favor of the Company, the Stockholder will deliver to the Company a number of shares of Class A Common Stock of the Company with a value equal to the absolute value of the adjustment amount (with each share valued at the Per Share Price). If the adjustment is a positive adjustment in favor of BankMobile, the Company will issue to the Stockholder an additional number of shares of Class A common Stock of the Company with a value equal to the adjustment amount (with each share valued at the Per Share Price). The Merger Consideration is also subject to reduction for the indemnification obligations of the Stockholder.
Note 9 — Subsequent Events
On November 2, 2020, the Company, Merger Sub, BankMobile, Customers Bank and Customers Bancorp, Inc. (“Customers Bancorp”) entered into a First Amendment to Agreement and Plan of Merger (the “First Amendment,” and together with the Original Agreement, the “Merger Agreement”). The First Amendment effected the following amendments to the Original Agreement:
| ● | Providing that the stock portion of the Merger Consideration would be paid directly to the stockholders of Customers Bancorp instead of to Customers Bank, provided that Customers Bancorp can redirect or reallocate the distribution of the Merger Consideration Shares to other parties, by written notice to the Company at any time prior to the Closing at its sole discretion. |
| ● | Any post-closing adjustments requiring a negative adjustment to the Merger Consideration, and any indemnification payments due by Customers Bank, shall be satisfied in cash, and not in shares of the Company |
| ● | The Company will be required to file a registration statement on Form S-4 including a proxy statement. Under the Original Agreement, the Company was not required to file a registration statement on Form S-4. The Company filed the registration statement on S-4, including a proxy statement, with the SEC on November 3, 2020. |
| ● | Customers Bancorp was added as a party to the Merger Agreement. |
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were available to be issued.
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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 Megalith Financial Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to MFA Investor Holdings LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this 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 Annual Report and set forth herein, as filed with 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 under the laws of the State of Delaware in November 2017 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more target businesses. We intend to effectuate our Business Combination using cash from the proceeds of our Initial Public Offering and the sale of the Private Placement Warrants that occurred simultaneously with the completion of our Initial Public Offering, and proceeds from offerings of our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares in connection with an initial Business Combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B Common Stock resulted in the issuance of shares of Class A Common Stock on a greater than one-to-one basis upon conversion of the Class B Common Stock; |
| ● | may subordinate the rights of holders of our Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock; |
| ● | could cause a change in control if a substantial number of shares of our Common Stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our Class A Common Stock and/or Public Warrants. |
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Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our Common Stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
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We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Management continues to evaluate the impact of the COVID-19 pandemic on the industry 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 consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception to September 30, 2020 were organizational activities and those necessary to prepare for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We are incurring expenses as a result of being a public company for legal, financial reporting, accounting and auditing compliance, and other purposes, as well as for due diligence expenses.
For the nine months ended September 30, 2020, we had net loss of $(312,430) which consisted of operating costs of $1,453,187, and a provision for income taxes of $263,425, offset by interest income on marketable securities held in the Trust Account of $1,404,182.
For the nine months ended September 30, 2019, we had net income of $1,824,457, which consisted of operating costs of $628,806 and a provision for income taxes of $609,915, offset by interest income on marketable securities held in the Trust Account of $3,063,178.
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Going Concern Consideration and Capital Resources
On August 28, 2018, we consummated the Initial Public Offering of 15,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $150,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,560,000 Private Placement Warrants. 5,810,000 of the Private Placement Warrants were sold to the Sponsor and 750,000 Private Placement Warrants were sold to the Underwriters at a price of $1.00 per warrant, generating gross proceeds of $6,560,000.
On September 21, 2018, in connection with the underwriters’ election to partially exercise their over-allotment option, we consummated the sale of an additional 1,928,889 Units and the sale of an additional 385,778, Private Placement Warrants, generating total gross proceeds of $19,674,667.
Following the Initial Public Offering, the exercise of the over-allotment option and the sale of the Private Placement Warrants, a total of $170,981,779 was placed in the Trust Account and we had $1,785,062 outside of the Trust Account, after payment of all costs related to the Initial Public Offering and the exercise of the over-allotment option.
For the nine months ended September 30, 2020, cash used in operating activities was $1,536,544 which was comprised of our net loss of $312,430, less interest earned on marketable securities held in the Trust Account of $1,404,182, increase in prepaid expenses and other current assets of $37,426, increase in accounts payable of $839,654, decrease in income taxes payable of $572,160, and a decrease in franchise taxes payable of $50,000.
As of September 30, 2020, we had cash and marketable securities held in the Trust Account of $33,178,146 (including approximately $6,587,124 of interest income and unrealized gains and net of transfers out of $1,818,989 to the Operating Account for payment of federal income tax estimates and franchise taxes paid and $142,571,768 paid out to redeem Class A Common Stock) consisting of cash and U.S. Treasury Bills with a maturity of 180 days or less. The balance of interest income held in the Trust Account may be used by us to pay taxes.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which shall be net of taxes payable and excluding deferred underwriting commissions) to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
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At September 30, 2020, we had cash of $11,009 held outside 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 a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.00 per warrant at the option of the lender.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2020, the Company had a cash balance of $11,009 and a working capital deficit of $895,616. Accrued income and franchise taxes of $30,000 can be paid by interest income available in the Trust Account.
Until the consummation of a Business Combination, the Company will be using funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination. If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If the Company completes a Business Combination, the Company would repay such loaned amounts.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
In addition, in connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, management has determined that the liquidity, mandatory liquidation and subsequent dissolution 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 November 30, 2020.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 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.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than the deferred underwriter commission discussed above, payment to an entity affiliated with the Company’s President a fee of approximately $16,667 per month until the earlier of the consummation of the Business Combination or liquidation, and an agreement to pay an affiliate of the Sponsor a monthly fee of $2,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on August 24, 2018 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated 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:
Common stock subject to possible redemption
We account for our Common Stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and 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 our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A Common Stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A Common Stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets.
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Net income (loss) per common share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income applicable to common stockholders by the weighted average number of shares of Common Stock outstanding for the period. As of September 30, 2020 the Company has not considered the effect of the Public Warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 23,874,667 shares of Class A Common Stock in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method.
The Company’s statements of operations include a presentation of income per share for Common Stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share, basic and diluted for Class A Common Stock is calculated by dividing the investment income earned on the Trust Account of $1,404,182 and $3,063,178, net of applicable taxes of $263,425 and $609,915, by the weighted average number of 3,195,004 and 16,928,889 shares of Class A Common Stock outstanding for the nine months ended September 30, 2020 and 2019, respectively. Net income (loss) per share, basic and diluted for Class B Common Stock is calculated by dividing the net income, less income attributable to Class A Common Stock, by the weighted average number of shares of Class B Common Stock outstanding for the period.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The net proceeds of the Initial Public Offering and the sale of the Private Warrants held in the Trust Account are invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Offer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2020, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report. As of the date of this Quarterly Report, other than as described below, there have been no material changes to the risk factors disclosed in our Annual Report filed with the SEC.
The securities in which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by Public Stockholders may be less than $10.00 per share.
The proceeds held in the Trust Account are invested only in U.S. government treasury obligations 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, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our Certificate of Incorporation, our Public Stockholders are entitled to receive their pro-rata share of the proceeds held in the Trust Account, plus any interest income not released to us, net of taxes payable. Negative interest rates could impact the per-share redemption amount that may be received by Public Stockholders.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith |
| ** | Furnished herewith |
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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.
| MEGALITH FINANCIAL ACQUISITION CORP. | ||
| Date: November 9, 2020 | By: | /s/ A.J. Dunklau |
| Name: | A.J. Dunklau | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 9, 2020 | By: | /s/ Philip Watkins |
| Name: | Philip Watkins | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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