NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Orisun
Acquisition Corp. (the “Company”) was incorporated in Delaware on October 22, 2018. The Company was formed for the
purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar
business combination with one or more businesses or entities (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 companies in and around the high-tech industry. The Company is an early stage and emerging growth
company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As
of June 30, 2020, the Company had not commenced any operations. All activity through June 30, 2020 relates to the Company’s
formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target
company for a Business Combination and activities in connection with the proposed acquisition of Ucommune Group Holdings Limited
(“Ucommune”) (see Note 7). The Company will not generate any operating revenues until after the completion of a Business
Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds
derived from the Initial Public Offering.
The
Company’s subsidiaries are comprised of Ucommune International Ltd, a Cayman Islands exempted company and a wholly owned
subsidiary of the Company (the “Purchaser”), and Everstone International Ltd, a Cayman Islands exempted company and
a wholly owned subsidiary of Purchaser (the “Merger Sub,” together with the Company, Purchaser, the “Purchaser
Parties”).
The
registration statement for the Company’s Initial Public Offering was declared effective on August 2, 2019. On August 6,
2019, the Company consummated the Initial Public Offering of 4,000,000 units (the “Units” and, with respect to the
shares of common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds
of $40,000,000, which is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 220,000 units (the “Private Units”)
at a price of $10.00 per Private Unit in a private placement to Everstone Investments, LLC (the “Sponsor”) and Chardan
Capital Markets LLC (and their designees) (“Chardan”), generating gross proceeds of $2,200,000, which is described
in Note 5.
Following
the closing of the Initial Public Offering on August 6, 2019, an amount of $40,000,000 ($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 Units was placed in a trust account (the “Trust
Account”), located in the United States which has been invested in U.S. government securities, within the meaning set forth
in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with 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, as determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.
On
August 28, 2019, in connection with the underwriters’ election to partially exercise their over-allotment option, the Company
consummated the sale of an additional 440,024 Units at a price of $10.00 per Unit and the sale of an additional 13,201 Private
Units at a price of at $10.00 per unit, generating total gross proceeds of $4,532,250. Following the closing, an additional $4,400,240
of net proceeds ($10.00 per Unit) was placed in the Trust Account, resulting in $44,400,240 ($10.00 per Unit) held in the Trust
Account.
Transaction
costs amounted to $3,180,906, consisting of $1,332,010 of underwriting fees, $1,332,010 of deferred underwriting fees and $516,886
of other offering costs. In addition, at June 30, 2020, cash of $83,829 was held outside of the Trust Account (as defined below)
and is available for working capital purposes.
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 Units, 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 a Business Combination having an aggregate fair market value of at least 80% of the assets
held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account)
at the time of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination
if the post-transaction 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.
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
The
Company will provide its holders of the outstanding Public Shares (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 anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds
held in the Trust Account and not previously released to the Company to pay its franchise and income tax obligations). There will
be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public
Shares subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of
the Proposed Offering in accordance with the Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” The Company will proceed with a Business Combination if the Company has net tangible assets of
at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority
of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company
does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and
Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions
pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents
with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law,
or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each
public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor and any of the
Company’s officers or directors that may hold Founder Shares (as defined in Note 6) (the “Initial Stockholders”)
and Chardan have agreed (a) to vote their Founder Shares, Private Shares (as defined in Note 5) and any Public Shares purchased
during or after the Initial Public Offering in favor of approving a Business Combination and (b) not to convert any shares (including
the Founder Shares) in connection with a stockholder vote to approve, or sell the shares to the Company in any tender offer in
connection with, a proposed Business Combination.
If
the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer
rules, the Amended and Restated 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 20% or more of the Public Shares, without the prior consent of the Company.
The
Initial Stockholders and Chardan have agreed (a) to waive their redemption rights with respect to the Founder Shares, Private
Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose, or vote
in favor of, an amendment to the Amended and Restated 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 Public Shares in conjunction with any such amendment.
The
Company initially had until August 6, 2020 to consummate a Business Combination. However, if the Company anticipates that it may
not be able to consummate a Business Combination by August 6, 2020, or such later extended date, the Company may extend the period
of time to consummate a Business Combination up to three times, each by an additional three months (for a total of 21 months to
complete a Business Combination) (the “Combination Period”). In order to extend the time available for the Company
to consummate a Business Combination, the Sponsor or its affiliate or designees must deposit into the Trust Account $444,002 ($0.10
per Public Share), or an aggregate of $1,332,010, or $0.30 per Unit, on or prior to the date of the applicable deadline for each
three month extension.
On
July 28, 2020, the Company issued two unsecured promissory notes each in an amount of $222,001 (or an aggregate principal amount
of $444,002), to the Sponsor and Ucommune, respectively, in exchange for the Sponsor and Ucommune each depositing such amount
into the Company’s Trust Account in order to extend the amount of time it has available to complete a Business Combination
from August 6, 2020 to November 6, 2020 (see Note 6).
If
the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter,
redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account
including interest earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and
income taxes, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating 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
stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails
to complete a Business Combination within the Combination Period.
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
The
Sponsor and Chardan have agreed to waive their liquidation rights with respect to the Founder Shares and Private Shares if the
Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or Chardan acquires Public
Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust
Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to
waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does
not complete a Business Combination within in 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 assets remaining available for distribution will be less than the
Initial Public Offering price per Unit ($10.00).
In
order to protect the amounts held in the Trust Account, Ms. Wei Chen, the Company’s chief executive officer, 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 to below $10.00 per Public Share, except as to any claims by a third party who executed a valid
and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any
monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of 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, Ms. Wei Chen,
the chief executive officer, will not be responsible to the extent of any liability for such third-party claims. The Company will
seek to reduce the possibility that Ms. Chen will have to indemnify the Trust Account due to claims of creditors by endeavoring
to have all vendors, service providers, 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.
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 closing of a business combination, the specific
impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
NOTE
2. LIQUIDITY AND GOING CONCERN
As
of June 30, 2020, the Company had $83,829 in its operating bank accounts, $44,804,228 in securities held in the Trust Account
to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital
of $55,235, which excludes franchise and income taxes payable as these amounts can be paid from the interest earned in the Trust
Account. As of June 30, 2020, approximately $404,000 of the amount on deposit in the Trust Account represented interest income,
which is available to pay the Company’s tax obligations.
Until
the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying
and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The
Company will need to raise additional capital through loans or additional investments from its Sponsor, officers, directors, or
their affiliates. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from
time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working
capital needs. Accordingly, the Company may not be able to obtain additional financing. 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, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern through November 6, 2020, the date that
the Company will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated.
These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE
3. 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 (“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 consolidated 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.
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
The
accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 30, 2020, which contains the audited financial
statements and notes thereto. The financial information as of December 31, 2019 is derived from the audited financial statements
presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The interim results for the
three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December
31, 2020 or for any future interim periods.
Principles
of Consolidation
The
accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
All intercompany balances and transactions have been eliminated in consolidation.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to,
not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of
the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
financial statement with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of June 30, 2020 and December 31, 2019.
Marketable
Securities Held in Trust Account
At June 30, 2020 and December 31, 2019,
the assets held in the Trust Account held in trust funds that invests in U.S. Treasury Bills. Through June 30, 2020, an
aggregate of $62,559 was withdrawn from the interest earned on the Trust Account, of which $12,500 was used to pay trustee
fees and $40,545 was withdrawn to pay for franchise taxes during the six months ended June 30, 2020.
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
Common
Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption
is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common
stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are
considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common
stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s condensed consolidated balance sheets.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for
interest and penalties as of June 30, 2020 and 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. The effective tax rate differs from the statutory tax rate of 21%
for the three and six months ended June 30, 2020 due to the valuation allowance recorded against the Company’s net operating
losses.
Net
Loss Per Common Share
Net
loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the
period. At June 30, 2019, weighted average shares were reduced for the effect of an aggregate of 150,000 shares of common stock
that were subject to forfeiture if the over-allotment option was not exercised by the underwriters. The Company applies the two-class
method in calculating earnings per share. Shares of common stock subject to possible redemption at June 30, 2020, which are not
currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per common share
since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered
the effect of (1) warrants sold in the Initial Public Offering and private placement to purchase 2,336,613 shares of common stock
(2) rights sold in the Initial Public Offering and private placement that convert into 467,323 share of common stock and (3) a
unit purchase option sold to the underwriter that is exercisable for 333,002 shares of common stock, warrants to purchase 166,501
shares of common stock and rights that convert into 33,300 shares of common stock, in the calculation of diluted loss per share,
since the exercise of the warrants and the conversion of the rights into shares of common stock are contingent upon the occurrence
of future events. As a result, diluted loss per share is the same as basic loss per share for the periods presented.
Reconciliation
of Net Loss Per Common Share
The
Company’s net loss is adjusted for the portion of income that is attributable to common stock subject to possible redemption,
as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly,
basic and diluted loss per common share is calculated as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net loss
|
|
$
|
(91,605
|
)
|
|
$
|
(103
|
)
|
|
$
|
(48,533
|
)
|
|
$
|
(16,759
|
)
|
Less: Income attributable to shares subject to possible redemption
|
|
|
—
|
|
|
|
—
|
|
|
|
(98,489
|
)
|
|
|
—
|
|
Adjusted net loss
|
|
$
|
(91,605
|
)
|
|
$
|
(103
|
)
|
|
$
|
(147,022
|
)
|
|
$
|
(16,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
1,955,909
|
|
|
|
1,000,000
|
|
|
|
1,954,003
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.05
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.02
|
)
|
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair
Value Measurement,” approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets,
primarily due to their short-term nature.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s condensed consolidated financial statements.
NOTE
4. PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 4,440,024 units at $10.00 per Unit, inclusive of 440,024 Units sold to the underwriters
on August 28, 2019 upon the underwriters’ election to partially exercise their over-allotment option. Each Unit consists
of one share of common stock, one right (“Public Right”) and one warrant (“Public Warrant”). Each Public
Right will convert into one-tenth (1/10) of one share of common stock upon the consummation of a Business Combination (see Note
8). Each Public Warrant entitles the holder to purchase one half of one share of common stock at a price of $11.50 per whole
share, subject to adjustment (see Note 8).
NOTE
5. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor and Chardan (and their designees) purchased an aggregate of 220,000
Private Units at a price of $10.00 per Private Unit, of which 200,000 Private Units were purchased by the Sponsor and 20,000
Private Units were purchased by Chardan, for an aggregate purchase price of $2,200,000. On August 28, 2019, the Company
consummated the sale of an additional 13,201 Private Units at a price of $10.00 per Private Unit, which was purchased by the Sponsor
and Chardan, generating gross proceeds of $132,010. Each Private Unit consists of one share of common stock (“Private Share”),
one right (“Private Right”) and one warrant (“Private Warrant”). Each Private Right will convert into
one-tenth (1/10) of one share of common stock upon the consummation of a Business Combination (see Note 8). Each Private Warrant
is exercisable to purchase one-half of one share of common stock at an exercise price of $11.50 per whole share, subject to adjustment
(see Note 8). The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust
Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of
the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and
the Private Units and all underlying securities will expire worthless.
NOTE
6. RELATED PARTY TRANSACTIONS
Founder
Shares
In
December 2018, the Sponsor purchased 1,150,000 shares (the “Founder Shares”) of the Company’s common stock for
an aggregate price of $25,000. The Founder Shares included an aggregate of up to 150,000 shares subject to forfeiture by the Initial
Stockholders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Initial
Stockholders would collectively own 20% of the Company’s issued and outstanding shares after the Initial Public Offering
(assuming the Initial Stockholders did not purchase any Public Shares in the Initial Public Offering and excluding the Private
Units). On August 28, 2019, as a result of the underwriters’ election to partially exercise their over-allotment option,
110,010 Founder Shares are no longer subject to forfeiture. The underwriters elected not to exercise the remaining portion of
the over-allotment option and, therefore, 39,990 Founder Shares were forfeited.
The
Initial Stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of their Founder
Shares until, with respect to 50% of the Founder Shares, the earlier of six months after the consummation of a Business Combination
and the date on which the closing price of the common stock equals or exceeds $12.50 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing
after a Business Combination and, with respect to the remaining 50% of the Founder Shares, until the six months after the consummation
of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation,
merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right
to exchange their shares of common stock for cash, securities or other property.
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
Advances
— Related Party
The
Sponsor advanced the Company an aggregate of $57,500 to cover expenses related to the Initial Public Offering. The advances were
non-interest bearing and due on demand. At June 30, 2020 and December 31, 2019, advances of $0 and $57,500, respectively, were
outstanding and due on demand.
Promissory
Note — Related Party
On
December 28, 2018, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant
to which the Company may borrow up to an aggregate principal amount of $300,000, of which $225,000 was outstanding under the Promissory
Note as of June 30, 2019. The Promissory Note is non-interest bearing and due on the earlier of the consummation of the Initial
Public Offering or on the date on which the Company determines not to proceed with the Initial Public Offering. On August 9, 2019,
the outstanding balance of $234,000 under the Promissory Note was repaid in full.
Related
Party Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $500,000 of such Working Capital Loans
may be converted into units of the post Business Combination entity at a price of $10.00 per unit. The units would be identical
to the Private Units.
Related
Party Extension Loans
As
discussed in Note 1, the Company may extend the period of time to consummate a Business Combination up to three times, each by
an additional three months (for a total of 21 months to complete a Business Combination). In order to extend the time
available for the Company to consummate a Business Combination, the Sponsor or its affiliates or designees must deposit into the
Trust Account $444,002 ($0.10 per Public Share), or an aggregate of $1,332,010, or $0.30 per Unit, on or prior to the date of
the applicable deadline. The Sponsor will receive a non-interest bearing, unsecured promissory note that will not be repaid in
the event that the Company is unable to close a Business Combination unless there are funds available outside the Trust Account
to do so. The note would either be repaid upon consummation of a Business Combination or, at the lender’s discretion, converted
upon the consummation of a Business Combination into additional Private Units at a price of $10.00 per unit. The initial
stockholders and its affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to
complete a Business Combination.
On
July 28, 2020, the Company issued two unsecured promissory notes each in an amount of $222,001 (or an aggregate principal amount
of $444,002), to the Sponsor and Ucommune, respectively, in exchange for the Sponsor and Ucommune each depositing such amount
into the Company’s Trust Account in order to extend the amount of time it has available to complete a Business Combination
from August 6, 2020 to November 6, 2020. The Notes are non-interest bearing and due upon the consummation of a Business Combination.
In addition, the Notes may be converted at the lender’s discretion into units identical to the Units issued in the Initial
Public Offering at a price of $10.00 per unit.
NOTE
7. COMMITMENTS
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
Registration
Rights
Pursuant
to a registration rights agreement entered into on August 2, 2019, the holders of the Founder Shares, Private Units (and all underlying
securities), and any shares that may be issued upon conversion of Working Capital Loans will be entitled to registration rights.
The holders of the majority of these securities are entitled to make up to two demands that the Company register such securities.
The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three
months prior to the date on which the Founder Shares are to be released from escrow. The holders of a majority of the Private
Units and units issued in payment of Working Capital Loans made to the Company can elect to exercise these registration rights
at any time commencing on the date that the Company consummates a Business Combination. In addition, the holders have certain
“piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a
Business Combination. The 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 600,000 additional Units to cover over-allotments, if any,
at the Initial Public Offering price less the underwriting discounts and commissions. On August 28, 2019, the underwriters elected
to partially exercise their over-allotment option to purchase an additional 440,024 Units at a purchase price of $10.00 per Unit.
In
connection with the closing of the Initial Public Offering and the over-allotment option, the underwriters are entitled to a deferred
fee of $0.30 per Unit, or $1,332,010 in the aggregate. The deferred fee will be forfeited by the underwriters solely in
the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement.
Right
of First Refusal
The
Company has granted Chardan a right of first refusal, for a period of 18 months after the date of the consummation of a Business
Combination, to act as lead investment banker, or minimally as a co-manager, with at 30% of the economics or 20% if three investment
banks are involved in the transaction, for any public or private equity and debt offerings during such period.
Warrant
Solicitation Fee
The Company has agreed to pay Chardan a warrant
solicitation fee of 5% of the exercise price of each Public Warrant exercised during the period commencing 12 months from the effective
date of the registration statement (August 2, 2019) other than (a) in conjunction with a force-call provision, or (b) in the case
that all solicitations to warrant holders are made exclusively by the Company and/or the Sponsor without third party assistance
on an engaged or non-engaged basis. The warrant solicitation fee will be payable in cash. There is no limitation on the maximum
warrant solicitation fee payable to Chardan except to the extent it is limited by the number of warrants outstanding. As of June
30, 2020, no warrants have been exercised.
Advisory Agreement
The Company entered into an agreement with
Chardan, pursuant to which Chardan will act as a financial and mergers and acquisition advisor to the Company with respect to a
Business Combination involving the Company. The Company will Chardan a cash fee equal to 5% of the aggregate sales price of the
Company’s securities sold in the Business Combination. In addition, the Company has agreed to pay Chardan an aggregate mergers
and acquisition fee based on the aggregate value (as defined in the agreement) of the Busines Combination.
Merger
Agreement
On
June 29, 2020, the Purchaser Parties entered into a Merger Agreement (the “Agreement”) with Ucommune, certain shareholders
of Ucommune (“Ucommune Shareholders”), and Mr. Daqing Mao, as representative of shareholders of Ucommune.
Pursuant
to the Agreement, the Company will merge with and into Purchaser, resulting in all the Company stockholders becoming shareholders
of the Purchaser. Concurrently therewith, Merger Sub will merge with and into Ucommune, resulting in Purchaser acquiring 100%
of the issued and outstanding equity securities of Ucommune (the “Acquisition Merger”).
Under
the Agreement, upon the closing of the Acquisition Merger, the ordinary shares of Purchaser shall be reclassified into class A
(“Purchaser Class A Ordinary Shares”) and class B ordinary shares (“Purchaser Class B Ordinary Shares,”
together with Purchaser Class A Ordinary Shares, collectively “Purchaser Ordinary Shares”), where each Purchaser Class
A Ordinary Share shall be entitled to one (1) vote on all matters subject to vote at general and special meetings of the post-closing
company and each Purchaser Class B Ordinary Share shall be entitled to fifteen (15) votes on all matters subject to vote at general
and special meetings of the post-closing company. At the closing of the Acquisition Merger, the former security holders of the
Company will receive the consideration specified, as further described in the Agreement and the former Ucommune Shareholders will
receive an aggregate of 53,358,932 Purchaser Class A Ordinary Shares and 9,452,407 Class B Ordinary Shares, among which 3,140,567
Purchaser Ordinary Shares are to be issued and held in escrow to satisfy any indemnification obligations incurred under the Agreement.
7,188,661 Purchaser Class A Ordinary Shares will be reserved and authorized for issuance under the equity incentive plan upon
closing.
Additionally, certain shareholders of Ucommune
may be entitled to receive earn-out shares as follows: (1) 2,000,000 Purchaser Class A Ordinary Shares if (x) the VWAP of the Purchaser
Class A Ordinary Shares equals or exceeds $16.50 (or any foreign currency equivalent) in any twenty trading days within a thirty
trading day period before December 31, 2022 on any securities exchange or securities market on which the Purchaser Ordinary Shares
are then traded or (y) Ucommune’s revenue exceeds RMB850,000,000 in the fiscal year of 2020 pursuant to the audited consolidated
financial statements of Ucommune as of and for the fiscal year ended December 31, 2020; (2) 1,000,000 Purchaser Class A Ordinary
Shares if (x) the VWAP of the Purchaser Class A Ordinary Shares equals or exceeds $22.75 (or any foreign currency equivalent) in
any twenty trading days within a thirty trading day period before December 31, 2023 on any securities exchange or securities market
on which the Purchaser Ordinary Shares are then traded or (y) Ucommune’s revenue exceeds RMB1,275,000,000 in the fiscal year
of 2021 pursuant to the audited consolidated financial statements of Ucommune as of and for the fiscal year ended December 31,
2021; and (3) 1,000,000 Purchaser Class A Ordinary Shares if (x) the VWAP of the Purchaser Class A Ordinary Shares equals or exceeds
$30 (or any foreign currency equivalent) in any twenty trading days within a thirty trading day period before December 31, 2024
on any securities exchange or securities market on which the Purchaser Ordinary Shares are then traded or (y) Ucommune’s
revenue exceeds RMB1,912,000,000 in the fiscal year of 2022 pursuant to the audited consolidated financial statements of Ucommune
as of and for the fiscal year ended December 31, 2022.
The
Acquisition Merger will be consummated subject to the deliverables and provisions as further described in the Agreement.
NOTE
8. STOCKHOLDERS’ EQUITY
Common
Stock — The Company is authorized to issue 30,000,000 shares of common stock with a par value of $0.00001
per share. Holders of the common stock are entitled to one vote for each share. At June 30, 2020 and December 31, 2019, there
were 1,965,671 and 1,952,097 shares of common stock issued and outstanding, excluding 3,817,564 and 3,831,138 shares of common
stock subject to possible redemption, respectively.
Rights
— Each holder of a right will receive one-tenth (1/10) of one share of common stock upon consummation of a Business
Combination, even if the holder of such right redeemed all shares held by it in connection with a Business Combination. No fractional
shares will be issued upon conversion of the rights. No additional consideration will be required to be paid by a holder of rights
in order to receive its additional shares upon consummation of a Business Combination, as the consideration related thereto has
been included in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive
agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide
for the holders of rights to receive the same per share consideration the holders of the common stock will receive in the transaction
on an as-converted into common stock basis and each holder of a right will be required to affirmatively covert its rights in order
to receive 1/10 share underlying each right (without paying additional consideration). The shares issuable upon conversion of
the rights will be freely tradable (except to the extent held by affiliates of the Company).
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 rights will not receive any of such funds with respect to their rights, nor will they receive
any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights
will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights
upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights.
Accordingly, holders of the rights might not receive the shares of common stock underlying the rights.
Warrants
— Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Public 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. No Public Warrants will be exercisable for cash unless the Company
has an effective and current registration statement covering the shares of common stock issuable upon exercise of the Public Warrants
and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering
the shares of common stock issuable upon exercise of the Public Warrants is not effective within 90 days from 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 the Public Warrants on a cashless
basis pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act provided that such exemption
is available. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on
a cashless basis. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption
or liquidation.
The
Company may call the warrants for redemption (excluding the private warrants and warrants underlying the units that may be issued
upon conversion of working capital loans but including any outstanding warrants issued upon exercise of the unit purchase option
issued to Chardan Capital Markets, LLC), in whole and not in part, at a price of $0.01 per warrant:
|
●
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at
any time while the warrants are exercisable,
|
|
|
|
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●
|
upon
not less than 30 days’ prior written notice of redemption to each warrant holder,
|
|
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●
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if,
and only if, the reported last sale price of the shares of common stock equals or exceeds $16.50 per share (as adjusted for
stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30-trading day period
ending on the third business day prior to the notice of redemption to warrant holders, and
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|
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●
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if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such
warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter
until the date of redemption.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and
number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in
the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the
warrants will not be adjusted for issuances of shares of common stock at a price below its exercise price. Additionally, in no
event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive
any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held
outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
The
Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the
Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable
or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private
Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their
permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees,
the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Unit
Purchase Option
The
Company sold to Chardan (and its designees), for $100, an option to purchase 300,000 Units exercisable at $11.50 per Unit (or
an aggregate exercise price of $3,450,000) commencing on the later of February 2, 2020 and the consummation of a Business Combination.
In connection with the underwriters election to partially exercise their over-allotment option on August 28, 2019, the Company
issued an additional 33,002 unit purchase options to Chardan and its designees. The unit purchase option may be exercised for
cash or on a cashless basis, at the holder’s option, and expires August 2, 2024. The Units issuable upon exercise of the
option are identical to those sold in the Initial Public Offering. The Company accounted for the unit purchase option, inclusive
of the receipt of $100 cash payment, as an expense of the Initial Public Offering, resulting in a charge directly to stockholders’
equity. The Company estimated the fair value of the unit purchase option to be approximately $941,000 (or $2.83 per Unit) using
the Black-Scholes option-pricing model. The fair value of the unit purchase option granted to the underwriters was estimated as
of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.53% and
(3) expected life of five years. The option and the underlying securities that may be issued upon exercise of the option, have
been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA’s
NASDAQ Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year
period (including the foregoing 180-day period) following the date of Initial Public Offering except to any underwriter and selected
dealer participating in the Initial Public Offering and their bona fide officers or partners. The option grants to holders demand
and “piggyback” rights for periods of five and seven years, respectively, from the effective date of the registration
statement with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise
of the option. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions
which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option
may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s recapitalization,
reorganization, merger or consolidation. However, the option will not be adjusted for issuances of shares of common stock at a
price below its exercise price.
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
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.
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|
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Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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ORISUN ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2020
(Unaudited)
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
June 30, 2020 and December 31, 2019 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine
such fair value:
|
|
|
|
June
30,
|
|
|
December 31,
|
|
Description
|
|
Level
|
|
2020
|
|
|
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable
securities held in Trust Account
|
|
1
|
|
$
|
44,804,228
|
|
|
$
|
44,694,457
|
|
NOTE
10. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial
statements were issued. Other than as described in these financial statements, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the condensed consolidated financial statements.