Stardust Power Inc 10-Q for FY2021 Q3
Stardust Power Inc. (SDST)
About this 10-Q
Stardust Power Inc filed this 10-Q on November 12, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $1.51M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not applicable
(Former name or former address, if changed since last report)
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 ordinary shares, $.0001 par value, and one-sixth of one redeemable warrant | GPACU | The Nasdaq Stock Market LLC | ||
| Redeemable warrants included as part of the units | GPACW | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Date File required to be submitted and 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. (Check one):
| Large accelerated filer | ☐ | 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 12, 2021, there were
GLOBAL PARTNER ACQUISITION CORP II
Table of Contents
i
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Global Partner Acquisition Corp II
Condensed Balance Sheets
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets - | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Cash and investments held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities– | ||||||||
| Offering costs, payable and accrued | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Note Payable to Sponsor | ||||||||
| Total current liabilities | ||||||||
| Other liabilities – | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting compensation | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A ordinary shares subject to possible redemption; | ||||||||
| Shareholders’ equity (deficit): | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Retained earnings (accumulated deficit) | ( | ) | ( | ) | ||||
| Total shareholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and shareholders’ equity (deficit) | $ | $ | ||||||
See accompanying notes to condensed financial statements.
1
Global Partner Acquisition Corp II
Condensed Statements of Operations
| For the three months ended September 30, 2021 | For the nine months ended September 30, 2021 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) - | ||||||||
| Income from cash and investments held in the Trust Account | ||||||||
| Transaction costs allocated to warrant liability | ( | ) | ||||||
| Change in fair value of warrant liability | ||||||||
| Net (loss) income | $ | $ | ||||||
| Two Class Method for Per Share Information: | ||||||||
| Weighted average Class A ordinary shares outstanding - basic and diluted | ||||||||
| Net income per Class A ordinary share – basic and diluted | $ | $ | ||||||
| Weighted average Class B ordinary shares outstanding – basic and diluted | ||||||||
| Net income per Class B ordinary share – basic and diluted | $ | $ | ||||||
See accompanying notes to condensed financial statements
2
Global Partner Acquisition Corp II
Condensed Statement of Changes in Shareholders’
Equity (Deficit)
For the three months ended September 30, 2021
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A Shares | Amount | Class B Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’
Equity (Deficit) | ||||||||||||||||||||||
| Balances, June 30, 2021, as revised (unaudited) | - | $ | $ | $ | - | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net income (loss), three months ended September 30, 2021 | - | - | - | - | - | |||||||||||||||||||||||
| Balances, September 30, 2021 (unaudited) | - | $ | $ | $ | - | $ | ( | ) | $ | ( | ) | |||||||||||||||||
See accompanying notes to condensed financial statements.
3
Global Partner Acquisition Corp II
Condensed Statement of Changes in Shareholders’
Equity (Deficit)
For the nine months ended September 30, 2021
| Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
| Class A Shares | Amount | Class B Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’
Equity (Deficit) | ||||||||||||||||||||||
| Balances, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Sale of Units to the public at $ | - | |||||||||||||||||||||||||||
| Underwriters’ discount and offering Expenses, net of approximately $ | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Proceeds from sale of | - | - | - | - | - | |||||||||||||||||||||||
| Change in Class A ordinary shares subject to possible redemption | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||
| Transfer negative balance in Additional Paid in Capital to Accumulated Deficit | - | - | ( | ) | ||||||||||||||||||||||||
| Net income, nine months ended September 30, 2021 | - | - | - | |||||||||||||||||||||||||
| Balances, September 30, 2021 (unaudited) | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
See accompanying notes to condensed financial statements.
4
Global Partner Acquisition Corp II
Condensed Statement of Cash Flows
(unaudited)
| For the nine months ended September 30, 2021 | ||||
| (unaudited) | ||||
| Cash flow from operating activities: | ||||
| Net income | $ | |||
| Adjustments to reconcile net income to net cash used in operating activities | ||||
| Income from cash and investments held in the Trust Account | ( | ) | ||
| Transaction costs allocated to warrant liability | ||||
| Change in fair value of warrant liability | ( | ) | ||
| Changes in operating assets and liabilities: | ||||
| Increase in prepaid expenses | ( | ) | ||
| Increase in accrued liabilities | ||||
| Net cash used in operating activities | ( | ) | ||
| Cash flows from investing activities: Cash deposited in Trust Account | ( | ) | ||
| Cash flows from financing activities: | ||||
| Proceeds from sale of Public Offering Units | ||||
| Proceeds from sale of Private Placement Warrants | ||||
| Payment of underwriting discounts | ( | ) | ||
| Payment of offering costs | ( | ) | ||
| Payment of notes payable and advances – related party | ( | ) | ||
| Net cash provided by financing activities | ||||
| Net increase in cash | ||||
| Cash at beginning of period | ||||
| Cash at end of period | $ | |||
| Supplemental disclosure of non-cash financing activities: | ||||
| Initial value of Class A ordinary shares subject to redemption, as revised | $ | |||
| Change in value of Class A ordinary shares subject to redemption | $ | |||
| Deferred underwriter compensation | $ | |||
| Offering costs included in offering costs, payable and accrued | $ | |||
| Initial Warrant liability in connection with initial public offering and private placement | $ | |||
See accompanying notes to condensed financial statements.
5
Global Partner Acquisition Corp II
Notes to Condensed Financial Statements
Note 1 – Description of Organization and Business Operations
Global Partner Acquisition Corp II (the “Company”) was incorporated in the Cayman Islands as an exempt company on November 3, 2020. The Company was formed for the purpose of effecting a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At September 30, 2021, the Company had not commenced any operations. All activity for the period from November 3, 2020 (inception) to September 30, 2021 relates to the Company’s formation and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and completing a suitable Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company expects to generate non-operating income in the form of interest income on cash from the proceeds derived from the Public Offering. The Company has selected December 31 as its fiscal year end.
All dollar amounts are rounded to the nearest thousand dollars.
Sponsor and Public Offering:
The
Company’s sponsor is Global Partner Sponsor II LLC, a Delaware limited liability company (the “Sponsor”). The Company
intends to finance a Business Combination with proceeds from the $
The Trust Account:
The funds in the Trust Account can only be invested in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of its initial Business Combination or (ii) the distribution of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisition targets and continuing general and administrative expenses.
The
Company’s amended and restated memorandum and articles of association provides that, other than the withdrawal of interest to pay
tax obligations, if any, less up to $
Business Combination:
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering,
although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business
Combination with (or acquisition of) a Target Business. As used herein, “Target Business” is one or more target businesses
that together have a fair market value equal to at least
6
The
Company, after signing a definitive agreement for a Business Combination, will either (i) seek shareholder approval of the Business
Combination at a meeting called for such purpose in connection with which shareholders may seek to redeem their shares, regardless of
whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit
in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less
taxes payable and amounts released for taxes, or (ii) provide shareholders with the opportunity to have their shares redeemed by
the Company by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount in cash equal to their pro rata
share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer,
including interest but less taxes payable and amounts released to the Company for working capital. The decision as to whether the Company
will seek shareholder approval of the Business Combination or will allow shareholders to sell their shares in a tender offer will be
made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether
the terms of the transaction would otherwise require the Company to seek shareholder approval unless a vote is required by the rules
of the Nasdaq Capital Market. If the Company seeks shareholder approval, it will complete its Business Combination only if a majority
of the outstanding shares of Class A and Class B ordinary shares voted are voted in favor of the Business Combination. However,
in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $
If
the Company holds a shareholder vote or there is a tender offer for shares in connection with a Business Combination, a public shareholder
will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in
the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less
taxes payable and amounts released to the Company for working capital. As a result, such shares of Class A ordinary shares are recorded
at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from
Equity.
The Company will have 24 months, until January 14, 2023, from the closing date of the Public Offering to complete its initial Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A ordinary shares for a per share pro rata portion of the Trust Account, including interest, but less taxes payable and amounts released to the Company for working capital (less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining shareholders, as part of its plan of dissolution and liquidation. The initial shareholders have entered into letter agreements with us, pursuant to which they have waived their rights to participate in any redemption with respect to their Founders Shares; however, if the initial shareholders or any of the Company’s officers, directors or affiliates acquire shares of Class A ordinary shares in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within 24 months, January 14, 2023, from the closing of the Public Offering.
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 less than the price per Unit (as defined below in Note 3) in the Public Offering.
7
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation:
The accompanying unaudited condensed interim financial statements of the Company are presented in U.S. dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of September 30, 2021, and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year.
The accompanying unaudited condensed interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s final prospectus dated January 11, 2021, as well as the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2021.
At
September 30, 2021, the Company has approximately $
Emerging Growth Company:
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting 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.
Net Income (Loss) per Share:
Net
income (loss) per ordinary share is computed by dividing net income (loss) applicable to ordinary shareholders by the weighted average
number of ordinary shares outstanding for the period. The Company has not considered the effect of the warrants sold in the Public Offering
and Private Placement to purchase an aggregate of
8
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding during the respective period.
The following table reflects the earnings per share after allocating income between the shares based on outstanding shares.
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2021 | September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Basic and diluted net income per ordinary share: | ||||||||||||||||
| Allocation of income – basic and diluted | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average ordinary shares: | ||||||||||||||||
| Basic and diluted net income per ordinary share | $ | $ | $ | $ | ||||||||||||
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 (excluding the Warrant liability), which qualify as financial instruments under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC 820”), “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the financial statements, primarily due to their short-term nature.
Use of Estimates:
The preparation of 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 balance sheet and the reported amounts of 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 statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A— “Expenses
of Offering.” Costs incurred in connection with preparation for the Public Offering total approximately $
Class A Ordinary Shares Subject to Possible Redemption:
As
discussed in Note 3, all of the
9
The
Company recognizes changes immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period.
Increases or decreases in the carrying amount of redeemable Class A ordinary shares are affected by adjustments to additional paid-in
capital. Accordingly, at September 30, 2021,
Income Taxes:
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the balance sheet recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. There were no unrecognized tax benefits as of September 30, 2021. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Warrant Liability:
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in “FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued.
Recent Accounting Pronouncements:
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact that the pronouncement will have on the financial statements.
10
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
Subsequent Events:
The Company evaluated subsequent events and transactions that occurred after the date of the balance sheet through the date that the condensed financial statements were available to be issued and has concluded that all such events that would require adjustment or disclosure in the condensed financial statement have been recognized or disclosed.
Note 3 – Public Offering
On
January 14, 2021, the Company consummated the Public Offering and sale of
11
The
Company had granted the underwriters a 45-day option to purchase up to
The
Company paid an underwriting discount of
Note 4 – Related Party Transactions
Founder Shares:
During
2020, the Sponsor purchased
The
Sponsor agreed to forfeit up to
In
addition to the vesting provisions of the Founder Shares discussed in Note 8, the Company’s initial shareholders have agreed not
to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or (B), subsequent to the Company’s initial Business Combination, if (x) the last sale price
of the Company’s Class A ordinary shares equals or exceeds $
Private Placement Warrants:
The
Sponsor purchased from the Company an aggregate of
12
If the Company does not complete a Business Combination, then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the public shareholders and the Private Placement Warrants issued to the Sponsor will expire worthless.
Registration Rights:
The Company’s initial shareholders and the holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration and shareholder rights agreement. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the registration and shareholder rights agreement.
Related Party Loans:
In
November 2020, the Sponsor agreed to loan the Company up to an aggregate of $
Administrative Services Agreement:
The
Company has agreed to pay $
Note 5 – Accounting for Warrant Liability, Correction of Previously Issued Balance Sheet and Fair Value of Warrants
At
September 30, 2021, there were
The Company accounts for its warrants outstanding as liabilities consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPAC’s)” issued on April 12, 2021 by the staff (the “Staff”) of the Division of Corporation Finance of the SEC. The Staff Statement, among other things, highlights the potential accounting implications of certain terms that are common in warrants issued in connection with the initial public offerings of special purpose acquisition companies (“SPAC”) and calls into question the common practice among SPAC’s, including the Company, of classifying the public and private warrants issued in connection with the SPAC’s public offering as equity. As a result of this guidance, the Company’s management further evaluated its public and private warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity including with the assistance of accounting and valuation consultants and concluded that the Company’s warrants are not indexed to the Company’s ordinary shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares.
13
In
its closing balance sheet as of January 14, 2021 prepared in connection with the Public Offering and filed with the SEC on January 21,
2021, the Company accounted for its outstanding public and private warrants as components of equity instead of as derivative liabilities. The
impact of accounting for public and private warrants as liabilities at fair value resulted in approximately a $
The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Description | At September 30, 2021 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Warrant Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Warrant liability at September 30, 2021 | $ | $ | $ | $ | ||||||||||||
At September 30, 2021, the Company values its (a) public warrants based on the closing price at September 30, 2021 in an active market and (b) its private placement warrants based on the closing price of the public warrants since they are similar instruments.
The following table presents the changes in the fair value of warrant liabilities during the nine months ended September 30, 2021:
| Public | Private Placement | Warrant Liabilities | ||||||||||
| Fair value measurement on December 31, 2020 | $ | $ | $ | |||||||||
| Fair value at inception of the warrants on January 14, 2021 | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of September 30, 2021 | $ | $ | $ | |||||||||
The warrant liabilities are not subject to qualified hedge accounting.
The Company’s policy is to record transfers at the end of the reporting period.
The public warrants were transferred from Level 3 to Level 1, and the private placement warrants were transferred from Level 3 to Level 2, during the period ended June 30, 2021.
Note 6 – Trust Account and Fair Value Measurement
The Company complies with FASB ASC 820, Fair Value Measurements, 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.
Upon
the closing of the Public Offering and the Private Placement, a total of $
14
In
April 2021, the Company’s U.S. government treasury bills yielding approximately
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s permitted investments at September 30, 2021 consisted of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations U.S. government treasury bills, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities as follows:
| Quoted Price | ||||||||||||
| Carrying value at | Gross Unrealized | Prices in Active | ||||||||||
| Description | September 30, 2021 | Holding Gains | Markets (Level 1) | |||||||||
| Assets: | ||||||||||||
| Cash | $ | $ | ||||||||||
| Money Market Fund | ||||||||||||
| Total | $ | $ | $ | |||||||||
Note 7 – Revision of Previously Issued Financial Statements
Class A Ordinary Shares Subject to Redemption:
In
September 2021, the Chief Accountant of the Securities and Exchange Commission determined that under the terms of share redemption applicable
to the Class A ordinary shares of most special purpose acquisition companies (“SPAC”), including the Company, all of such
shares should be accounted for as redeemable in such companies’ financial statements. Previously, most SPAC’s, including
the Company, had accounted for Class A ordinary shares as redeemable except for the amount of such shares necessary to have a minimum
shareholders’ equity of $
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As a result of the above, the Company has recorded all outstanding Class A ordinary shares as Class A ordinary shares subject to redemption in the September 30, 2021 condensed balance sheet. The effect of this change on previously issued financial statements is as follows:
| As Previously | Adjustment | As Revised | ||||||||||
| Balance Sheet at January 14, 2021 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | |||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total shareholders’ equity (deficit) | ( | ) | ( | ) | ||||||||
| Balance Sheet at March 31, 2021 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | |||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Total shareholders’ equity (deficit) | ( | ) | ( | ) | ||||||||
| Balance Sheet at June 30, 2021 | ||||||||||||
| Class A ordinary shares subject to possible redemption | $ | |||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Total shareholders’ equity (deficit) | ( | ) | ( | ) | ||||||||
The Company’s accounting for the all of the Class A ordinary shares as redeemable instead of including a portion in shareholders’ equity did not have any effect on the Company’s previously reported operating expenses, cash flows or cash.
Note 8 – Shareholders’ Equity
Ordinary Shares:
The
authorized ordinary shares of the Company include
The Founder Shares are subject to vesting as follows: 50% upon the completion of a business combination and then an additional 12.5% on the attainment of each of a series of certain “shareholder return” targets exceeding 20%, 30%, 40% and 50%, as further defined in the agreement. Certain events, as defined in the agreement, could trigger an immediate vesting under certain circumstances. Founder Shares that do not vest within an eight-year period from the closing of the business combination will be cancelled.
At
September 30, 2021, after the January 2021 share recapitalization of Class B ordinary shares and the Public Offering including Class
A ordinary shares, there were
Preference Shares:
The
Company is authorized to issue
Note 9 – Commitments and Contingencies
Risks and Uncertainties—COVID-19—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 an effect on the Company’s financial position, results of its operations and/or search for a target company and/or a target company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
Overview
We are a blank check company incorporated on November 3, 2020 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the sale of the private placement warrants, our shares, debt or a combination of cash, equity and debt.
The issuance of additional shares in a business combination:
| ➤ | may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| ➤ | may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares; |
| ➤ | could cause a change in control if a substantial number of our Class A ordinary shares are 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 share ownership or voting rights of a person seeking to obtain control of us; |
| ➤ | may adversely affect prevailing market prices for our units, Class A ordinary shares and/or warrants; and may not result in adjustment to the exercise price of our warrants. |
Similarly, if we issue debt or otherwise incur significant debt, 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; |
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| ➤ | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ➤ | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
| ➤ | our inability to pay dividends on our Class A ordinary shares; |
| ➤ | 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 Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and 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; and limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying financial statements, as of September 30, 2021, we had $969,000 of cash. Further, we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to o complete our initial business combination will be successful.
COVID-19
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic.” COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide. The business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
Results of Operations
For the period from November 3, 2020 (date of inception) to September 30, 2021 our activities consisted of formation and preparation for the Public Offering and, subsequent to completion of the Public Offering on January 14, 2021, identifying and completing a suitable Initial Business Combination. As such, in 2021 we had no operations or significant operating expenses until after the completion of the Public Offering in January 2021.
Our normal operating costs since January 14, 2021 include costs associated with our search for an Initial Business Combination (see below), costs associated with our governance and public reporting (see below), and a charge of $25,000 per month from our Sponsor for administrative services for an aggregate of $75,000 and $213,000, respectively, for the three and nine months ended September 30, 2021. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $115,000 and $365,000 for the three and nine months ended September 30, 2021. General and administrative costs also include approximately $802,000 and $2,765,000 of professional and consulting fees in the three and nine months ended September 30, 2021, respectively, associated with our review of business combination candidates.
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As we identify Initial Business Combination candidates, our costs are expected to increase significantly in connection with investigating potential Initial Business Combination candidates, as well as additional professional, due diligence and consulting fees and travel costs that will be required and professional and other costs associated with negotiating and executing a definitive agreement and related agreements and related required public reporting and governance matters.
Income taxes were $-0-, for the three and nine months ended September 30, 2021 because we are an exempt Cayman Islands company and are not subject to income tax in the United States or in the Cayman Islands. We did not withdraw any interest from the Trust Account in the three months ended September 30, 2021.
See below regarding other income and expense items associated with the warrant liability.
As discussed further in Note 6 to the condensed financial statements, the Company accounts for its outstanding public and private warrants as components as derivative liabilities in the accompanying unaudited condensed financial statements. As a result, the Company is required to measure the fair value of the public and private warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for each current period. The statement of operations for the three and nine months ended September 30, 2020 reflects other income from change in fair value of the warrant liability of approximately $2,490,000 and $8,250,000 and charges to other expense aggregating approximately $-0- and $800,000, respectively, for warrant liability issuance costs.
The Public Offering and the Private Placement closed on January 14, 2021 as more fully described in “Liquidity and Capital Resources” below. At that time, the proceeds in the Trust Account were initially invested in cash. On January 15, 2021, the Company purchased U.S. government treasury bills due in April 2021 and yielding less than 0.01% and at September 30, 2021, the proceeds in the Trust Account are invested in a money market fund that invests solely U.S. government treasury bills. Interest income was approximately $8,000 and $68,000 for the three and nine months ended September 30, 2021. As a result of market conditions occurring in connection with the Covid-19 pandemic, interest rates on available investments are historically low. It is unclear how long this condition will persist, or whether it could get worse.
Liquidity and Capital Resources
On January 14, 2021, we consummated the Public Offering of an aggregate of 30,000,000 Units at a price of $10.00 per unit generating gross proceeds of approximately $300,000,000 before underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the Private Placement of 5,566,667 Private Placement Warrants, each exercisable to purchase one share of our Class A ordinary shares at $11.50 per share, to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds, before expenses, of approximately $8,350,000.
The net proceeds from the Public Offering and Private Placement were approximately $301,471,000, net of the non-deferred portion of the underwriting commissions of $6,000,000 and offering costs and other expenses of approximately $904,000 (including approximately $554,000 of offering expenses and approximately $350,000 of insurance that is accounted for as prepaid expense). $300,000,000 of the proceeds of the Public Offering and the Private Placement have been deposited in the Trust Account and are not available to us for operations (except amounts to pay taxes, if any). At September 30, 2021 and December 31, 2020, we had approximately $1,261,000 and $20,000, respectively, of cash available outside of the Trust Account to fund our activities until we consummate an Initial Business Combination.
Until the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of shares of our Class B ordinary share for $25,000 by the Sponsor, and the availability of loans to us of up to $300,000 by our sponsor under an unsecured promissory note (the “Note”), a total of $199,000 was actually loaned by the Sponsor against the issuance of the Note. The Note was non-interest bearing and was paid in full on January 14, 2021 in connection with the closing of the Public Offering, accordingly, no amounts are outstanding under the Note at September 30, 2021.
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At September 30, 2021, the Company has approximately $969,000 in cash and approximately $1,527,000 in negative working capital. The Company has incurred and expects to continue to incur significant costs in pursuit of its Business Combination. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination, other than funds which may be available from loans from our sponsor, its affiliates or members of our management team. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial 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 our initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $2,000,000 of such loans may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor, its affiliates or our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We expect our principal liquidity requirements during this period to include legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; legal and accounting fees related to regulatory reporting obligations; payment for investment professionals’ services and support services; Nasdaq continued listing fees; and general working capital that will be used for miscellaneous expenses and reserves.
Our estimates of expenses may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
Moreover, we may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public shares upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with such business combination. If we have not consummated our initial business combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.
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The Company has until January 14, 2023 to complete an Initial Business Combination. If the Company does not complete an Initial Business Combination by January 14, 2021, the Company will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A ordinary share for a pro rata portion of the Trust Account, including interest, but less taxes payable (and less up to $100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as reasonably possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining shareholders, as part of its plan of dissolution and liquidation. The initial shareholders have waived their redemption rights with respect to their founder shares; however, if the initial shareholders or any of the Company’s officers, directors or their affiliates acquire shares of Class A ordinary share in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete an Initial Business Combination within the required time period.
In the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per unit in the Public Offering.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. 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 entered into any agreements for non-financial assets.
Contractual obligations
At September 30, 2021, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with the Public Offering, we entered into an Administrative Support Agreement with Global Partner Sponsor II LLC, our Sponsor, pursuant to which the Company pays Global Partner Sponsor II LLC $25,000 per month for office space, utilities and secretarial and administrative support.
In connection with identifying an Initial Business Combination candidate and negotiating an Initial Business Combination, the Company may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an Initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an Initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting policies:
Emerging Growth Company
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting 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.
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Net Income (Loss) per Share:
Net income (loss) per ordinary share is computed by dividing net income (loss) applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 15,566,667 Class A ordinary shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per ordinary share is the same as basic loss per ordinary share for the period.
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding during the respective period.
The following table reflects the earnings per share after allocating income between the shares based on outstanding shares.
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2021 | September 30, 2021 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Basic and diluted net income per ordinary share: | ||||||||||||||||
| Allocation of income – basic and diluted | $ | 1,205,000 | $ | 301,000 | $ | 3,340,000 | $ | 835,000 | ||||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average ordinary shares: | 30,000,000 | 7,500,000 | 28,462,000 | 7,142,000 | ||||||||||||
| Basic and diluted net income per ordinary share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||||||
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.
Financial Instruments:
The fair value of the Company’s assets and liabilities (excluding the warrant liability), which qualify as financial instruments under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC 820”), “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the financial statements, primarily due to their short-term nature.
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Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 balance sheet and the reported amounts of 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 statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Deferred Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A— “Expenses of Offering.” Costs incurred in connection with preparation for the Public Offering total approximately $17,054,000 including $16,500,000 of underwriters’ discount. Such costs were allocated among the equity and warrant liability components and approximately $16,253,000 has been charged to equity for the equity components based on the relative fair-value of the warrants and approximately $800,000 has been charged to other expense for the warrant liability components upon completion of the Public Offering.
Class A ordinary shares Subject to Possible Redemption:
As discussed in Note 3, all of the 30,000,000 Class A ordinary shares sold as part of the Units in the Public Offering contain a redemption feature that allows for their redemption under the Company’s liquidation or tender offer/shareholder approval provisions. In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company has not specified a maximum redemption threshold, its articles of association provide that in no event will it redeem its Public Shares in an amount that would cause its net tangible assets (shareholders’ equity) to be less than $5,000,001. However, because all of the Class A ordinary shares are redeemable, all of the shares are recorded as Class A ordinary shares subject to redemption on the enclosed balance sheet. See also, Note 7, regarding a revision to the presentation of redeemable shares in these financial statements and the effect on previously reported financial statements.
The Company recognizes changes immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Class A ordinary shares are affected by adjustments to additional paid-in capital. Accordingly, at September 30, 2021, 30,000,000 of the 30,000,000 Public Shares were classified outside of permanent equity.
Income Taxes:
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the balance sheet recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. There were no unrecognized tax benefits as of September 30, 2021. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at September 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the warrants was estimated using Level 1 observable inputs.
Recent Accounting Pronouncements:
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact that the pronouncement will have on the financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds of our IPO and a portion of the proceeds of our concurrent sale of private placement warrants are held in a trust account invested 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 of 1940, as amended, and 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. However, if the interest rates of U.S. Government Treasury obligations become negative, we may have less interest income available to us for the payment of taxes, and a decline in the value of the assets held in the trust account could reduce the amount of principal in the trust account below the amount initially deposited in the trust account.
ITEM 4. CONTROLS AND PROCEDURES
On April 12, 2021, the staff at the Securities and Exchange Commission (the “SEC”) issued a statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). In the SEC Statement, the SEC staff noted that certain provisions in the typical SPAC warrant agreement may require that the warrants be classified as a liability measured at fair value, with changes in fair value reported each period in earnings, as compared to the historical treatment of the warrants as equity, which has been the practice of most SPACs, including us. We had previously classified our private placement warrants and public warrants, which we issued on January 14, 2021, as equity (for a full description of our private placement warrants and public warrants, refer to the registration statement on Form S-1 (File No. 333- 251558 and 333-252033), filed in connection with the Company’s initial public offering, declared effective by the SEC on January 11, 2021).
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Based on the guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, we have since concluded that provisions in the warrant agreement preclude the warrants from being accounted for as components of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants should have been recorded as derivative liabilities on the balance sheet and measured at fair value at issuance and reported as such at each subsequent reporting date in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the subsequent statements of operations for a period that included the change. Further, ASC 815 requires that upfront costs and fees related to items for which fair value accounting is applied (in this case, our warrant liabilities) should have been recognized as expense as incurred.
Evaluation of Disclosure Controls and Procedures
We will be required to comply with the internal control requirements of the Sarbanes- Oxley Act for the fiscal year ending December 31, 2021. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company would we be required to comply with the independent registered public accounting firm attestation requirement on internal control over financial reporting. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to 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 requirement.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Our management evaluated, with the participation of our chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective as of September 30, 2021.
We expect to assess the internal controls of our target business or businesses prior to the completion of our initial business combination and, if necessary, to implement and test additional controls as we may determine are necessary in order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Many small and mid-sized target businesses we may consider for our initial business combination may have internal controls that need improvement in areas such as:
| ➤ | staffing for financial, accounting and external reporting areas, including segregation of duties; | |
| ➤ | reconciliation of accounts; |
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| ➤ | proper recording of expenses and liabilities in the period to which they relate; | |
| ➤ | evidence of internal review and approval of accounting transactions; | |
| ➤ | documentation of processes, assumptions and conclusions underlying significant estimates; and | |
| ➤ | documentation of accounting policies and procedures. |
Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant expenses in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
Changes in Internal Control over Financial Reporting
The previously reported material weakness related to the misapplication of accounting for the Company's warrants as liabilities was remediated during the quarter ended September 30, 2021. There were no other changes in our internal control over financial reporting that occurred during the three months ended September 30, 2021, covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We believe our efforts will enhance our controls relating to warrant accounting, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practices based on the SEC Statement may evolve over time.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
As of the date of this Quarterly Report on Form 10-Q there have been no changes to the risk factors disclosed in our Prospectus filed with the SEC on January 11, 2021 and our Form 10-Q filed with the SEC on May 20, 2021; see below. Any of these factors, including that added below, could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Private Placement
On January 14, 2021, we consummated a private placement of an aggregate 5,566,667 warrants (“Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant, generating total proceeds of approximately $8,350,000. The Private Placement Warrants, which were purchased by our sponsor Global Partner Sponsor II, LLC are substantially similar to the warrants included in the units issued in our Public Offering (the “Public Warrants”), except that if held by the original holder or their permitted assigns, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption and (iii) are subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of our initial business combination. If the Private Placement Warrants are held by holders other than its initial holders, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants. The sale of the Private Placement Warrants was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”).
Use of Proceeds from the Initial Public Offering
On January 14, 2021, we consummated our Public Offering of 30,000,000 units, with each unit consisting of one share of our Class A ordinary shares and one detachable redeemable warrant (the “Detachable Redeemable Warrants”) and the contingent right to receive, in certain circumstances, in connection with the business combination, one-sixth of one distributable redeemable warrant for each public share that a public shareholder holds and does not redeem in connection with our initial business combination (the “Distributable Redeemable Warrants” and together with the Detachable Redeemable Warrants, the Redeemable Warrants). Each whole Redeemable Warrant offered in the Public Offering is exercisable to purchase one share of our Class A ordinary shares. Only whole Redeemable Warrants may be exercised. Each whole Redeemable Warrant is exercisable to purchase one share ordinary share at an exercise price of $11.50 per whole share. The warrants will become exercisable on the later of (i) 30 days after the completion of the initial business combination and (ii) 12 months from the closing of the Public Offering. The warrants expire five years after the completion of the initial business combination or earlier upon redemption or liquidation. Once the warrants become exercisable, the warrants will be redeemable in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ notice if, and only if, the last sale price of the Company’s Class A ordinary share equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period. The Units in the Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of approximately $300,000,000. UBS Investment Bank and RBC Capital Markets acted as joint book-runner managers for the Public Offering. The securities sold in the Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-251558). The SEC declared the registration statement effective on January 11, 2021.
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We paid a total of approximately $6,000,000 in underwriting discounts and commissions and approximately $554,000 for other costs and expenses related to the Public Offering. In addition, the underwriters for the Public Offering agreed to defer payment of approximately $10,500,000 in underwriting discounts and commissions, which amount will be payable upon consummation of our initial business combination, if consummated. We also repaid the promissory note to our Sponsor from the proceeds of the Public Offering.
After deducting the underwriting discounts and commissions (excluding the deferred portion of approximately $10,500,000 in underwriting discounts and commissions, which amount will be payable upon consummation of our Business Combination, if consummated) and the offering expenses, the total net proceeds from our Public Offering and the private placement of the Private Placement Warrants were approximately $301,471,000 of which approximately $300,000,000 (or $10.00 per unit sold in the Public Offering) was placed in the Trust Account. As of March 31, 2021, approximately $1.4 million was held outside the Trust Account and will be used to fund (a) the unpaid offering costs aggregating approximately $70,000 and (b) the Company’s operating expenses. The proceeds held in the trust account may be invested by the trustee only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. See also the Current Report on Forms 8-K filed by the Company on January 21, 2021.
In connection with the closing of the Public Offering a share recapitalization of 312,500 shares was made to the holders of 7,187,500 shares of Class B ordinary share (increasing the total number of shares of Class B ordinary shares outstanding to 7,500,000) so that the initial shareholders of the Company would collectively own 20.0% of the issued and outstanding ordinary shares of the Company after the Public Offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| * | Furnished herewith |
| (1) | Incorporated by reference to the Company’s current report on Form 8-K, filed with the SEC on January 15, 2021. |
| (2) | Incorporated by reference to the Company’s registration statement on Form S-1, filed on December 21, 2020. |
| (3) | Incorporated by reference to the Company’s registration statement on Form S-1/A, filed on December 31, 2020. |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GLOBAL PARTNER ACQUISITION CORP II | |
| Dated: November 12, 2021 | /s/ Paul J. Zepf |
| Name: Paul J. Zepf | |
| Title: Chairman of the Board of Directors and | |
| Chief Executive Officer | |
(Principal Executive Officer)
| |
| Dated: November 12, 2021 | /s/ David Apseloff |
| Name: David Apseloff | |
| Title: Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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