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 | ||
| The | ||||
| 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 November 7, 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
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets - | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities– | ||||||||
| Accounts payable | $ | $ | ||||||
| Notes payable – related party | ||||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Other liabilities – | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting commission | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A ordinary shares subject to possible redemption; | ||||||||
| Shareholders’ deficit: | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ 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 | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) - | ||||||||||||||||
| Income from investments held in the Trust Account | ||||||||||||||||
| Transaction costs allocated to warrant liability | ( | ) | ||||||||||||||
| Change in fair value of warrant liability | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
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 September 30, 2022:
| Ordinary Shares | Additional | Total | ||||||||||||||||||
| Class B Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ (Deficit) | ||||||||||||||||
| Balances, June 30, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Accretion in value of Class A ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balances, September 30, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
For the nine months ended September 30, 2022:
| Ordinary Shares | Additional | Total | ||||||||||||||||||
| Class B Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ (Deficit) | ||||||||||||||||
| Balances, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Accretion in value of Class A ordinary shares subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Net income | - | |||||||||||||||||||
| Balances, September 30, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
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’ Deficit | ||||||||||||||||||||||
| Balances, June 30, 2021 (unaudited) | - | $ | - | $ | $ | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balances, September 30, 2021 (unaudited) | - | $ | - | $ | $ | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||
See accompanying notes to unaudited condensed financial statements.
3
Global Partner Acquisition Corp II
Condensed Statements of Changes in Shareholders’ Equity (Deficit), continued
For the nine months ended September 30, 2021:
| Ordinary Shares | Additional | Total Shareholders’ | ||||||||||||||||||
| Class B Shares | Amount | Paid-in | Accumulated Deficit | 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, September 30, 2021 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to unaudited condensed financial statements.
4
Global Partner Acquisition Corp II
Condensed Statements of Cash Flows
(unaudited)
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| 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: | ||||||||
| Decrease (increase) in prepaid expenses | ( | ) | ||||||
| Increase in accounts payable | ||||||||
| Increase in accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows used in 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 | ( | ) | ||||||
| Advances and (payment) of notes payable– related party | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Deferred underwriting compensation | $ | $ | ||||||
| Initial Warrant Liability in connection with initial public offering and private placement | $ | $ | ||||||
| Accrued offering costs | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements.
5
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 under the laws of the Cayman Islands as an exempted 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, 2022, the Company had not commenced any operations. All activity for the period from November 3, 2020 (inception) to September 30, 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 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”). On January 14, 2021, the Company consummated a $
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 treasury 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, legal and accounting fees related to regulatory reporting obligations, payment for services of investment professionals and support services, continued listing fees 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 $
6
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
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 earned on funds held in the trust account and not previously released to pay income
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 earned on funds held
in the trust account and not previously released to pay income taxes. 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 earned on funds held in the trust account and not previously released to pay income
taxes. 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.
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 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.
Mandatory Liquidation and Going Concern:
At September 30, 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 per Ordinary Share:
Net income per ordinary share is computed by dividing net income 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 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. The changes in redemption value that are accreted to Class A common stock subject to redemption (see below) is representative of fair value and therefore is not factored into the calculation of earnings per share.
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, 2022 | September 30, 2022 | |||||||||||||||
| 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 | $ | $ | $ | $ | ||||||||||||
| 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 Deposit Insurance Corporation
coverage limit 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 September 30, 2022 or December 31, 2021.
9
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 September 30, 2022 and December 31, 2021, the carrying value of cash, prepaid expenses, accounts payable, accrued expenses and notes payable – related party 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.
Use of Estimates:
The preparation of condensed 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 condensed 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 condensed 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 condensed 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 totaled approximately $
Class A Ordinary Shares Subject to Possible Redemption:
As discussed in Note 3, all of the
10
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, 2022 and December 31,
2021,
| Gross proceeds of Public Offering | $ | |||
| Less: Proceeds allocated to Public Warrants | ( | ) | ||
| Offering costs | ( | ) | ||
| Plus: Accretion of carrying value to redemption value at Public Offering | ||||
| Subtotal at inception and at December 31, 2022 | ||||
| Accretion of carrying value to redemption value since Public Offering | ||||
| Class A ordinary shares subject to possible 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 September 30, 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 September 30, 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.
The Company is considered a Cayman Islands exempted 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 condensed financial statements.
11
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 condensed 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
12
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
13
If the Company does not complete a Business Combination, then the proceeds from the sale of the Private Placement Warrants that were placed into the trust account will be part of the liquidating distribution from the trust account 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.
Notes Payable – Related Party:
Sponsor loans - In November 2020, the Sponsor agreed to
loan the Company up to an aggregate of $
Sponsor working capital loans - On
August 1, 2022, the Company issued a promissory note (the “Note” or “Notes payable – related party”) in
the principal amount of up to $
Administrative Services Agreement:
The Company has agreed to pay $
Note 5 – Accounting for Warrant Liability and Fair Value of Warrants
At September 30, 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.
14
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 September 30, 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 September 30, 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 September 30, 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 September 30, 2022 and December 31, 2021, the Company valued its (a) public warrants based on the closing price at September 30, 2022 and December 31, 2021, respectively, 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, 2022:
| Public | Private Placement | Warrant Liabilities | ||||||||||
| Fair value measurement on December 31, 2021 | $ | $ | $ | |||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of September 30, 2022 | $ | $ | $ | |||||||||
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 | $ | $ | $ | |||||||||
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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 nine months ended September 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 $
At September 30, 2022 and December 31, 2021, the Trust Account was invested in a money market fund meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, and that invests solely in U.S. government treasury obligations. The Company classifies its U.S. government treasury bills and equivalent securities (when it owns them) 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.
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 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 September 30, 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 treasury obligations, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assts or liabilities as follows:
| Quoted Price | ||||||||
| Carrying value at | Prices in Active | |||||||
| Description | September 30, 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.
At September 30, 2022 and December 31, 2021 there were
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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 may 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 commission) would be charged to operations in the quarter that an Initial Business Combination is consummated. In most instances (except with respect to the Company’s 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 condensed financial statements. These condensed 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 condensed 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 intend to effectuate our Initial Business Combination using cash from the proceeds of the Public 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. |
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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 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 condensed financial statements, as of September 30, 2022, we had $247,000 of cash and negative working capital of approximately $3,514,000. Further, we may incur additional costs in the pursuit of our Initial Business Combination and if we cannot complete a Business Combination within the Combination Period, 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 September 30, 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 for each of the three months ended September 30, 2022 and 2021 and $225,000 and $213,000, respectively, for the nine months ended September 30, 2022 and 2021. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $128,000 and $354,000, respectively, for the three and nine months ended September 30, 2022 and approximately $115,000 and $365,000, respectively, for the three and nine months ended September 30, 2021. General and administrative costs also include approximately $1,006,000 and $1,151,000, respectively, of professional and consulting fees in the three and nine months ended September 30, 2022 and approximately $802,000 and $2,765,000, respectively, in the three and nine months ended September 30, 2021, respectively, associated with our review of Business Combination candidates.
Our costs may increase as we continue to investigate and evaluate 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 any definitive agreement and related agreements and related required public reporting and governance matters.
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Other income (expense) includes both interest income and the change in the fair value of the public and private warrants at each reporting date. Interest income was approximately $1,466,000 and $1,946,000, respectively, for the three and nine months ended September 30, 2022 and approximately $8,000 and $68,000, respectively, for the three and nine months ended September 30, 2022. The variations in interest income reflect market conditions occurring in connection with the Covid-19 pandemic and its aftermath.
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. For the three and nine months ended September 30, 2022, other income from change in fair value of the warrant liability of approximately $1,868,000 and $11,986,000 respectively, and approximately $2,490,000 and $8,250,000, respectively, for the three and nine months ended September 30, 2021. Other income (expense) in the three and nine months ended September 30, 2021 also includes charges to other expense aggregating approximately $-0- and $800,000, respectively, for warrant liability issuance costs.
Income taxes were $-0- and $-0-, respectively, for the three and nine months ended September 30, 2022 and 2021 because we are a Cayman Islands exempted 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 and nine months ended September 30, 2022 or 2021.
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. 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 September 30, 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.
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 certain amounts to pay taxes, if any). At September 30, 2022 and December 31, 2021, we had approximately $247,000 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 September 30, 2022.
At September 30, 2022, the Company has approximately $247,000 in cash and approximately $3,514,000 in negative working capital. The Company has incurred significant costs and may incur additional costs in pursuit of its Business Combination. Further, if the Company cannot complete a Business Combination within the Combination Period, 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 condensed 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, to draw down as required under the Note (see below), and to complete a Business Combination within the Combination Period or to dissolve if it is unable to complete a Business Combination within the Combination Period. The proximity to January 14, 2023 increases the difficulty of completing a Business Combination. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful within the Combination Period. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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On August 1, 2022, the Company issued a promissory note (the “Note”) in the principal amount of up to $2,000,000 to its Sponsor. The Note was issued in connection with advances the Sponsor may make to the Company for expenses reasonably related to its business and the consummation of the Business Combination. The Note bears no interest and is due and payable upon the earlier to occur of (i) January 14, 2023 and (ii) the effective date of a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination, involving the Company and one or more businesses (the “Business Combination”). As of September 30, 2022, the outstanding principal balance under the note was $400,000.
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 Combination Period, we will be forced to cease operations and liquidate the trust account.
The Company has the time until the end of the Combination Period to complete an Initial Business Combination, or until the expiration of any 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 the end of the Combination 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 earned on funds held in the trust account and not previously released to pay income taxes, but less up to $100,000 of such 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.
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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, 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 and investment support services.
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. 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 commission) 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 condensed 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 condensed 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 condensed 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 condensed 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 June 30, 2021 and for periods thereafter, the fair value of the warrant liability was determined based on public trading information as discussed below.
At September 30, 2021, our public warrants were trading in an active market. As such, at September 30, 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 ($0.06 per public warrant on September 30, 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 Public Offering 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 December 31, 2021 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.
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.
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Management assessed the effectiveness of our internal control over financial reporting at September 30, 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 September 30, 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 condensed 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. At 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 a special purpose acquisition company (“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 this 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 condensed 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, our Form 10-K filed with the SEC on March 18, 2022 and our Form 10-Q filed with the SEC on August 10, 2022; see below. Any of these factors, including those 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:
Were we considered to be a “foreign person,” we might not be able to complete an initial Business Combination with a U.S. target company if such initial Business Combination is subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (“CFIUS”), or ultimately prohibited.
Certain federally licensed businesses in the United States, such as broadcasters and airlines, may be subject to rules or regulations that limit foreign ownership. In addition, CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States by foreign persons in order to determine the effect of such transactions on the national security of the United States. Were we considered to be a “foreign person” under such rules and regulations, any proposed Business Combination between us and a U.S. business engaged in a regulated industry or which may affect national security could be subject to such foreign ownership restrictions and/or CFIUS review. The scope of CFIUS was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to include certain non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subject certain categories of investments to mandatory filings. If our potential initial Business Combination with a U.S. business falls within the scope of foreign ownership restrictions, we may be unable to consummate an initial Business Combination with such business. In addition, if our potential Business Combination falls within CFIUS’s jurisdiction, we may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial Business Combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial Business Combination. Our sponsor is a U.S. entity, and the managing member of our sponsor is a U.S. person. Although a small number of foreign investors from Bermuda (including one of our directors, Andrew Cook) collectively hold an approximately 5.9% minority interest in our sponsor, our sponsor is not controlled by, and we do not believe that our sponsor has substantial ties with, a non-U.S. person. However, if CFIUS has jurisdiction over our initial Business Combination, CFIUS may decide to block or delay our initial Business Combination, impose conditions to mitigate national security concerns with respect to such initial Business Combination or order us to divest all or a portion of a U.S. business of the combined company if we had proceeded without first obtaining CFIUS clearance. If we were considered to be a “foreign person,” foreign ownership limitations, and the potential impact of CFIUS, may limit the attractiveness of a transaction with us or prevent us from pursuing certain initial Business Combination opportunities that we believe would otherwise be beneficial to us and our shareholders. As a result, the pool of potential targets with which we could complete an initial Business Combination could be limited and we could be adversely affected in terms of competing with other SPACs which do not have similar foreign ownership issues.
Moreover, the process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial Business Combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we liquidate, our public shareholders may only receive $10.00 per share, and our warrants will expire worthless. This will also cause you to lose any potential investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.
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Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a “going concern.”
When issuing their report on our December 31, 2021 financial statements, our independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern, since we will cease all operations except for the purpose of liquidating if we are unable to complete a Business Combination by January 14, 2023 (unless that time period is extended). As of September 30, 2022, we had cash of approximately $247,000 held outside of the trust account. We have incurred significant costs and may incur additional costs in pursuit of our Business Combination. Our plans to consummate our Business Combination may not be successful. The condensed unaudited financial statements contained elsewhere in this Report do not include any adjustments that might result from our inability to continue as a going concern.
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.
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: November 7, 2022 | /s/ Paul J. Zepf | |
| Name: | Paul J. Zepf | |
| Title: | Chairman of the Board of Directors and | |
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: November 7, 2022 | /s/ David Apseloff | |
| Name: | David Apseloff | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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