Stardust Power Inc 10-Q for FY2022 Q1
Stardust Power Inc. (SDST)
About this 10-Q
Stardust Power Inc filed this 10-Q on May 12, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $6.68M
- up 44.3% from net income of $4.63M a year earlier
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 incorporation or organization) | (I.R.S. Employer Identification Number) |
| (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 share, $.0001 par value, and one-sixth of one redeemable warrant | GPACU | The Nasdaq Stock Market LLC | ||
| Redeemable warrants | 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 May 12, 2022, 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
| March 31, | December 31, | ||||||||
| 2022 | 2021 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets - | |||||||||
| Cash | $ | $ | |||||||
| Prepaid expenses | |||||||||
| Total current assets | |||||||||
| Cash and investments held in Trust Account | |||||||||
| Total assets | $ | $ | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | |||||||||
| Current liabilities– | |||||||||
| Accounts payable | $ | $ | |||||||
| Accrued liabilities | |||||||||
| Total current liabilities | |||||||||
| Other liabilities – | |||||||||
| Warrant liability | |||||||||
| Deferred underwriting compensation | |||||||||
| Total liabilities | |||||||||
| Commitments and contingencies | |||||||||
| 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 unaudited condensed financial statements.
1
Global Partner Acquisition Corp II
Condensed Statements of Operations
(unaudited)
| For the three months | ||||||||
| ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| 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 income | $ | $ | ||||||
| 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 unaudited condensed financial statements
2
Global Partner Acquisition Corp II
Condensed
Statements of Changes in Shareholders’ Equity (Deficit)
For the three months ended March 31, 2022 and 2021
For the three months ended March 31, 2022:
| Ordinary Shares | Total | |||||||||||||||||||
| Class
B Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shareholders’ Equity (Deficit) | ||||||||||||||||
| Balances, December 31, 2021, | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Balances, March 31, 2022 (unaudited) | $ | $ | - | $ | ( | ) | $ | ( | ) | |||||||||||
For the three months ended March 31, 2021:
| Ordinary Shares | Total | |||||||||||||||||||
| Class
B Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shareholders’ Equity (Deficit) | ||||||||||||||||
| Balances, December 31, 2020, | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Proceeds from sale of | - | |||||||||||||||||||
| Accretion for Class A ordinary shares subject to redemption to redemption amount | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Balances, March 31, 2021 (unaudited) | $ | $ | - | $ | ( | ) | $ | ( | ) | |||||||||||
See accompanying notes to unaudited condensed financial statements.
3
Global Partner Acquisition Corp II
Condensed Statements of Cash Flows
(unaudited)
| For the three months | ||||||||
| ended March 31, | ||||||||
| 2022 | 2022 | |||||||
| 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 | ( | ) | ( | ) | ||||
| Decrease in accounts payable | ( | ) | ||||||
| Increase (decrease) in accrued liabilities and rounding | ( | ) | ||||||
| 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 (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Deferred underwriter compensation | $ | $ | ||||||
| Offering costs included in offering costs, payable and accrued | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements.
4
Global Partner Acquisition Corp II
Notes to Condensed Financial Statements
(unaudited)
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 March 31, 2022, the Company had not commenced any operations. All activity for the period from November 3, 2020 (inception) to March 31, 2022 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 generates non-operating income in the form of interest income on cash from the proceeds derived from the Public Offering.
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
5
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 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 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 or until the end of any extension period that may be proposed to and approved by the Company’s shareholders in the form of an amendment to the Company’s amended and restated memorandum and articles of association (the “Combination Period”). 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 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 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.
6
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 Securities and Exchange Commission (“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 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 or any future periods.
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 audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 18, 2022.
Liquidity and Going Concern:
At
March 31, 2022, 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 Ordinary 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
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 among 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.
7
The following table reflects the earnings per share after allocating income between the shares based on outstanding shares.
| Three months ended | Three months ended | |||||||||||||||
| March 31, 2022 | March 31, 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 $
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at March 31, 2022 or December 31, 2021.
Fair Value Measurements
The Company complies with FASB ASC 820, Fair Value Measurements and Disclosures, 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. As of March 31, 2022 and December 31, 2021, the carrying value of cash, prepaid expenses, accounts payable and accrued expenses approximate their fair values primarily due to the short-term nature of the instruments.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
8
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.
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 totalled approximately $
Class A Ordinary Shares Subject to Possible Redemption:
As
discussed in Note 3, all of the
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 March 31, 2022,
| Gross proceeds of Public Offering | $ | |||
| Less: Proceeds allocated to Public Warrants | ( | ) | ||
| Offering costs | ( | ) | ||
| Plus: Accretion of carrying value to redemption value | ||||
| Class A ordinary shares subject to redemption | $ |
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 March 31, 2022 and December 31, 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 March 31, 2022 or December 31, 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.
9
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, 2024 and should be applied on a full or modified retrospective basis. 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.
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.
10
Note 3 – Public Offering
On
January 14, 2021, the Company consummated the Public Offering and sale of
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
11
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
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 $
12
Note 5 – Accounting for Warrant Liability and Fair Value of Warrants
At
March 31, 2022 and December 31, 2021, there were
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. As such, the company’s warrants are accounted for as warrant liabilities which are required to be valued at fair value at each reporting period.
The
Company has recorded approximately $
The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Description | At March 31, 2022 | 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 March 31, 2022 | $ | $ | $ | $ | ||||||||||||
| Description | At December 31, 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 December 31, 2021 | $ | $ | $ | $ | ||||||||||||
At March 31, 2022 and December 31, 2021, the Company values its (a) public warrants based on the closing price at March 31, 2022 and December 31, 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.
13
The following table presents the changes in the fair value of warrant liabilities during the three months ended March 31, 2022:
| Public | Private Placement | Warrant Liabilities | ||||||||||
| Fair value measurement on December 31, 2021 | $ | $ | $ | |||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of March 31, 2022 | $ | $ | $ | |||||||||
The following table presents the changes in the fair value of warrant liabilities during the three months ended March 31, 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 March 31, 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.
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 $
In April 2021, the Company’s U.S. government treasury bills matured and the proceeds were deposited in a money market fund which meets certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and invests only in direct U.S. government obligations. At March 31, 2022 and December 31, 2021, the Trust Account continues to be invested in that money market fund. The Company classifies its U.S. government treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments – Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Money market funds are valued at market.
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The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 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 March 31, 2022 and December 31, 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 | Prices
in Active | |||||||
| Description | March
31, 2022 | Markets (Level 1) | ||||||
| Assets: | ||||||||
| Money Market Fund | ||||||||
| Total | $ | $ | ||||||
| Quoted Price | ||||||||
| Carrying value at | Prices
in Active | |||||||
| Description | December
31, 2021 | Markets (Level 1) | ||||||
| Assets: | ||||||||
| Money Market Fund | ||||||||
| Total | $ | $ | ||||||
Note 7 – Shareholders’ Equity (Deficit)
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.
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At
March 31, 2022 and December 31, 2021 there were
Preference Shares:
The
Company is authorized to issue
Note 8 – Commitments and Contingencies
Business Combination Costs
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, the Company has entered into, and expects to enter into additional, engagement letters or agreements with various consultants, advisors, professionals and others. The services under these engagement letters and agreements are material in amount and in some instances 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.
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 pandemic could have an effect on the Company’s financial position, results of 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 financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Conflict in Ukraine — In February 2022, the Russian Federation and Belarus commenced a military action against the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. The impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements.
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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.
Cautionary 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 existing investors, 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; |
| ➤ | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
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| ➤ | 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 March 31, 2022, we had $528,000 of cash and negative working capital of approximately $1,975,000. Further, we expect to incur significant costs in the pursuit of our initial business combination and if we cannot complete a business combination by January 14, 2023 we could be forced to wind up our operations and liquidate unless we receive an extension approval from our shareholders. We cannot assure you that our plans to complete our initial business combination will be successful.
Results of Operations
For the period from November 3, 2020 (date of inception) to March 31, 2022 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, 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 $63,000, respectively, for the three months ended March 31, 2022 and 2021. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $116,000 and $84,000, respectively, for the three months ended March 31, 2022 and 2021. General and administrative costs also include approximately $-0- and $72,000, respectively, of professional and consulting fees in the three months ended March 31, 2022 and 2021, respectively, associated with our review of business combination candidates.
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- and $-0-, respectively, for the three months ended March 31, 2022 and 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 March 31, 2022.
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 months ended March 31, 2022 and 2021 reflects other income from change in fair value of the warrant liability of approximately $6,849,000 and $5,604,000 and charges to other expense aggregating approximately $-0- and $800,000, respectively, for warrant liability issuance costs.
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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 that matured in April 2021. At March 31, 2022 and December 31, 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 $25,000 and $45,000, respectively, for the three months ended March 31, 2022 and 2021. As a result of market conditions occurring in connection with the Covid-19 pandemic, interest rates on available investments have been historically low.
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 March 31, 2022 and December 31, 2021, we had approximately $528,000 and $842,000, 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 our Class B ordinary shares 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 available or were outstanding under the Note at March 31, 2022.
At March 31, 2022, the Company has approximately $528,000 in cash and approximately $1,975,000 in negative working capital. The Company has incurred and expects to continue to incur significant costs in pursuit of its Business Combination. Further, if the Company cannot complete a Business Combination prior to January 14, 2023, it could be forced to wind up its operations and liquidate unless it receives an extension approval from its shareholders. 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. The Company’s plan to deal with these uncertainties is to preserve cash by deferring payments with anticipated cooperation from its service providers and to complete a Business Combination prior to January 14, 2023. 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.
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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.
The Company has until January 14, 2023 to complete an initial business combination, or until the expiration of any extension period (“Extension Period”) that may be proposed to and approved by our shareholders in the form of an amendment to our amended and restated memorandum and articles of association (the “Initial Business Combination”). If the Company does not complete an Initial Business Combination by January 14, 2023 or the end of any approved Extension period, 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 Class A ordinary shares 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 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 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.
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Contractual obligations
At March 31, 2022, 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.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
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Critical Accounting Estimates
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 estimates:
Warrant Liability
A critical accounting estimate made in our financial statements is the estimated fair value of our warrant liability. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value may be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety based on the lowest level input that is significant to the fair value measurement.
The estimated fair value of our warrant liability at January 14, 2021 was determined using Level 3 inputs. At January 14, 2021, the Company utilized an independent valuation consultant that used a binomial lattice simulation methodology to value the Warrants. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares based on historical volatility that matches the expected remaining life of the Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the Warrants. The expected life of the Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. Beginning on March 31, 2021 and for periods thereafter, the fair value of the warrant liability was determined based on public trading information as discussed below.
At March 31, 2021, our public warrants were trading in an active market. As such, at March 31, 2021 and thereafter, the Company valued its public warrants based on publicly observable inputs (Level 1 inputs) from the trading in the public warrants in an active market ($0.39 per public warrant on March 31, 2022). Since the private placement warrants are substantially similar to the public warrants but do not trade, the company valued them based on the value of the public warrants (significant other observable inputs – Level 2).
For reference, each $0.10 change in fair value of our warrants translates to approximately $1,557,000 gain or loss.
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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We are required to comply with the internal control requirements of the Sarbanes- Oxley Act for the period ending March 31, 2022 and thereafter. 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.
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Disclosure controls are procedures with the objective of ensuring that information required to be disclosed in our reports under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are designed with the objective of ensuring that information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management assessed the effectiveness of our internal control over financial reporting at March 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on that assessment, management concluded that our disclosure controls and procedures were not effective as of March 31, 2022 due to material weakness in accounting for complex financial instruments. See “Changes in Internal Control over Financial Reporting”, below. In light of this assessment, we performed additional analyses as deemed necessary to ensure that our audited financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, our management believes that the financial statements included in this report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
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; | |
| ➤ | 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
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our internal control over financial reporting did not result in the proper classification of our warrants. Since issuance on January 14, 2021, our warrants were accounted for as equity within our balance sheet. On April 12, 2021, the SEC Staff issued the SEC Staff Statement in which the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. After discussion and evaluation, taking into consideration the SEC Staff Statement, we have concluded that our warrants should be presented as liabilities with subsequent fair value remeasurement as previously restated. In addition, our management has concluded that our internal control over financial reporting did not result in the proper classification of all of our public shares as temporary equity. The reclassification of all of our public shares as temporary equity resulted in changes to the Company’s net income (loss) per share calculations that have previously been restated.
In light of material weakness, we have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements, including by making greater use of third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have their intended effects. We believe our efforts will enhance our controls relating to accounting for complex financial transactions, but we can offer no assurance that our controls will not require additional review and modification in the future, in particular as industry accounting practice evolves 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 changes to the risk factors disclosed in our Prospectus filed with the SEC on January 11, 2021 and our Form 10-K filed with the SEC on March 18, 2022; 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.
In addition:
Changes in laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete our initial business combination.
We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments and applicable non-U.S. jurisdictions. In particular, our consummation of a business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications, and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with the foregoing may be difficult, time consuming and costly. Laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving SPACs and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940, as amended, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities would be restricted, including through restrictions on the nature of our investments, restrictions on our issuance of securities and restrictions on our incurrence of debt. In addition, we would have imposed upon us extensive regulatory requirements, including to register as an investment company with the SEC, adopt a specified form of corporate structure and comply with reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations to which we are currently not subject.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading of “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business is to identify and complete an initial business combination and thereafter operate the post-transaction business or assets for the long term. We do not plan to invest in businesses or assets with a view to resale or profiting from their resale. We do not plan to buy multiple unrelated businesses or assets or to be a passive investor. We do not plan to buy or sell businesses in the manner of a merchant bank or private equity fund.
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We do not believe that our principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act, having 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. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the trust account, and by having a business plan targeted at acquiring and growing a business for the long term, we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. Holding securities in our Company is not intended for persons who are seeking a return on investments in government securities or investment securities. Instead, the trust account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our initial business combination; (ii) the redemption of any public shares properly submitted in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to offer redemption rights in connection with any proposed initial business combination (B) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity; or (iii) absent an initial business combination within the Combination Period, our return of the funds held in the trust account to our public shareholders as part of our redemption of the public shares.
We are aware of litigation against certain special purpose acquisition companies asserting that, notwithstanding the foregoing, those special purpose acquisition companies should be considered investment companies. Although we believe that these claims are without merit, we cannot guarantee that we will not considered an investment company and thus to be subject to the Investment Company Act.
In addition, on March 30, 2022, the SEC issued proposed rules relating to, among other items, the extent to which SPACs could become subject to regulation under the Investment Company Act. The SEC’s proposed rule under the Investment Company Act would provide a safe harbor for SPACs from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that the SPACs satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. The duration component of the proposed safe harbor rule would require a SPAC to file a report on Form 8-K with the Commission announcing that it has entered into an agreement with the target company (or companies) to engage in an initial business combination no later than 18 months after the effective date of the SPAC’s registration statement for its initial public offering. The SPAC would then be required to complete its initial business combination no later than 24 months after the effective date of its registration statement for its initial public offering. Although that proposed safe harbor rule has not yet been adopted, the SEC has indicated that there are serious questions concerning the applicability of the Investment Company Act to a SPAC that does not complete its initial business combination within the proposed time frame set forth in the proposed safe harbor rule.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
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
| * | Filed herewith |
| ** | Furnished herewith |
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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: May 12, 2022 | /s/ Paul J. Zepf |
| Name: Paul J. Zepf | |
| Title: Chairman of the Board of Directors and | |
| Chief Executive Officer | |
(Principal Executive Officer)
| |
| Dated: May 12, 2022 | /s/ David Apseloff |
| Name: David Apseloff | |
| Title: Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER
Pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the
Securities Exchange Act of 1934
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Paul J. Zepf, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: May 12, 2022 | /s/ Paul J. Zepf |
| Name: Paul J. Zepf | |
| Title: Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Rule 13a-14(a) and Rule 15d-14(e) under the
Securities Exchange Act of 1934
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, David Apseloff, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: May 12, 2022 | /s/ David Apseloff |
| Name: David Apseloff | |
| Title: Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II (the “Company”) for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Paul J. Zepf, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: May 12, 2022 | /s/ Paul J. Zepf |
| Name: Paul J. Zepf | |
| Title: Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II (the “Company”) for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, David Apseloff, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: May 12, 2022 | /s/ David Apseloff |
| Name: David Apseloff | |
| Title: Chief Financial Officer and Secretary |