UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report
Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one share of Class A common stock, $0.0001 par value per share, and one-half of one redeemable warrant | GLHAU | The Nasdaq Stock Market LLC | ||
Redeemable warrants included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share | GLHAW | The Nasdaq Stock Market LLC | ||
Shares of Class A common stock underlying redeemable warrants included as part of the units | GLHA | The Nasdaq Stock Market LLC |
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.
Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | 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):
As
of August 16, 2021 there were
GLASS HOUSES ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GLASS HOUSES ACQUISITION CORP.
UNAUDITED CONDENSED BALANCE SHEET
June 30, 2021 | ||||
Assets | ||||
Current assets: | ||||
Cash | $ | |||
Prepaid expenses | ||||
Total current assets | ||||
Prepaid expenses, non-current | ||||
Marketable securities held in Trust Account | ||||
Total Assets | $ | |||
Liabilities and Stockholders’ Equity | ||||
Current liabilities: | ||||
Accrued expenses | $ | |||
Total current liabilities | ||||
Warrant liability | ||||
Deferred underwriting discount | ||||
Total liabilities | ||||
Commitments and Contingencies (Note 6) | ||||
Class A common stock subject to possible redemption, | ||||
Stockholders’ Equity: | ||||
Preferred stock, $ | ||||
Class A common stock, $ | ||||
Class B common stock, $ | ||||
Additional paid-in capital | ||||
Accumulated deficit | ||||
Total stockholders’ equity | ||||
Total Liabilities and Stockholders’ Equity | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
GLASS HOUSES ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended June 30, 2021 | For the Period from January 19, 2021 (Inception) through June 30, 2021 | |||||||
Formation and operating costs | $ | $ | ||||||
Loss from operations | ( | ) | ( | ) | ||||
Other income (expenses) | ||||||||
Warrant issuance costs | ( | ) | ||||||
Other expense relating to fair value exceeding amount paid for warrants | ( | ) | ||||||
Interest earned on marketable securities held in Trust Account | ||||||||
Change in fair value of warrant liability | ||||||||
Total other income | ||||||||
Net income | $ | $ | ||||||
Basic and diluted weighted average shares outstanding of Class A, common stock subject to redemption | $ | $ | ||||||
Basic and diluted net income per share of Class A, common stock subject to redemption | $ | $ | ||||||
Basic and diluted weighted average shares outstanding of Class A and B, non-redeemable common stock | $ | $ | ||||||
Basic and diluted net income per share of Class A and B, non-redeemable common stock | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
GLASS HOUSES ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance as of January 19, 2021 | $ | - | $ | $ | $ | $ | ||||||||||||||||||||||
Class B common stock issued to Sponsor | - | |||||||||||||||||||||||||||
Sale of | - | |||||||||||||||||||||||||||
Sale of | - | |||||||||||||||||||||||||||
Sale of | - | - | ||||||||||||||||||||||||||
Underwriting fee | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Deferred underwriting fee | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Offering costs charged to the stockholders’ equity | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Initial classification of warrant liability | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Reclassification of offering costs related to warrants | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Change in Class A common stock subject to possible redemption | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||
Balance as of March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Forfeiture of Class B common stock | - | ( | ) | ( | ) | |||||||||||||||||||||||
Net income | - | - | ||||||||||||||||||||||||||
Change in Class A common stock subject to possible redemption | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||
Balance as of June 30, 2021 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
GLASS HOUSES ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For the Period from January 19, 2021 (Inception) through June 30, 2021 | ||||
Cash flows from Operating Activities: | ||||
Net income | $ | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Interest earned on marketable securities held in Trust Account | ( | ) | ||
Change in fair value of warrants | ( | ) | ||
Warrant issuance costs | ||||
Other expense relating to fair value exceeding amount paid for warrants | ||||
Changes in current assets and current liabilities: | ||||
Prepaid expenses | ( | ) | ||
Accrued expenses | ||||
Net cash used in operating activities | ( | ) | ||
Cash Flows from Investing Activities: | ||||
Cash held in Trust Account | ( | ) | ||
Net cash used in investing activities | ( | ) | ||
Cash flows from Financing Activities: | ||||
Proceeds from Initial Public Offering, net of underwriter’s fees | ||||
Proceeds from private placement | ||||
Proceeds from issuance of founder shares | ||||
Repayment to promissory note to related party | ( | ) | ||
Payments of offering costs | ( | ) | ||
Net cash provided by financing activities | ||||
Net change in cash | ||||
Cash, beginning of the period | ||||
Cash, end of the period | $ | |||
Supplemental disclosure of noncash investing and financing activities: | ||||
Deferred underwriting commissions charged to additional paid in capital | $ | |||
Initial value of Class A common stock subject to possible redemption | $ | |||
Change in value of Class A common stock subject to possible redemption | $ | |||
Initial classification of warrant liability | $ | |||
Deferred offering costs paid by Sponsor loan | $ | |||
Forfeiture of Class B common stock | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
GLASS HOUSES ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
Glass Houses Acquisition Corp. (the “Company”) is a blank check company incorporated as a Delaware corporation on January 19, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). The Company has not selected any specific Business Combination target.
Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to search for a target business that provides critical resources and/or services to the technologies powering the 21st century industrial economy. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
The Company has selected December 31 as its fiscal year end.
As of June 30, 2021, the Company had not commenced any operations. All activity for the period from January 19, 2021 (inception) through June 30, 2021 relates to the Company’s formation, the initial public offering (“IPO”), which is described below, and, since the closing of the IPO, a search for a Business Combination candidate. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and will recognize changes in the fair value of warrant liability as other income (expense).
The Company’s sponsor is Glass Houses Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s
IPO was declared effective on March 22, 2021 (the “Effective Date”). On March 25, 2021, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Transaction costs amounted to $
The Company granted the underwriter in the IPO
a 45-day option to purchase up to
Trust Account
Following the closing of the IPO on March 25,
2021 and the closing of the underwriter’s partial exercise of over-allotment option on April 1, 2021, $
5
Initial Business Combination
The Company’s Business Combination must
be with one or more target businesses that together have a fair market value equal to at least
The Company will provide public stockholders with
the opportunity to redeem all or a portion of their public shares of Class A common stock upon the completion of the initial Business
Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender
offer. The decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer
will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata share of
the aggregate amount then on deposit in the Trust Account (initially approximately $
The shares of common stock subject to redemption
are recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed
with a Business Combination if the Company has net tangible assets of at least $
If the Company is unable to complete the initial
Business Combination within the Combination Period, the Company will: (i) cease all operations except for the purpose of winding up; (ii)
as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem
the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay the franchise and income taxes
(less up to $
The Sponsor, officers and directors have agreed (i) to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of the Company’s initial Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to any founder shares held by them if the Company fails to complete the initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete the Business Combination within the Combination Period.
6
Liquidity and Capital Resources
As of June 30, 2021,
the Company had approximately $
Prior to the completion of the Initial Public
Offering, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $
In addition, in order to finance transaction costs in connection with an intended initial Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the three months ended June 30, 2021 and for the period from January 19, 2021 (inception) through June 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on March 24, 2021.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart the Company’s Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
7
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires 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. Actual results could differ from those estimates.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company held cash of $
Cash and Securities Held in Trust Account
At June 30, 2021, the assets held in the Trust
Account consisted of $
Fair Value Measurements
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. See Note 7 for details.
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid expenses, and accrued expenses are estimated to approximate the carrying values as of June 30, 2021 due to the short maturities of such instruments.
8
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common
stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence
of uncertain future events. Accordingly, as of June 30, 2021, common stock subject to possible redemption of
Net Income Per Share of Common Stock
Net income per share of common stock is computed
by dividing net income by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of
diluted income per share of common stock does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise
of overallotment and (iii) Private Placement since the exercise of the warrants are contingent upon the occurrence of future events and
the inclusion of such warrants would be anti-dilutive. The warrants are exercisable to purchase
9
The Company’s statements of operation include a presentation of income per share for common stock subject to possible redemption in a manner similar to the two-class method of income per share of common stock. Net income per share of common stock, basic and diluted, for redeemable common stock is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of redeemable shares of common stock outstanding since original issuance. Net income per share of common stock, basic and diluted, for non-redeemable common stock is calculated by dividing the net income, adjusted for income attributable to redeemable common stock, by the weighted average number of non-redeemable shares of common stock outstanding for the periods. Non-redeemable common stock includes the founder shares as these ordinary shares do not have any redemption features and do not participate in the income earned on the Trust Account.
For the three months ended June 30, 2021 | For the Period from January 19, 2021 (Inception) through June 30, 2021 | |||||||
Class A common stock subject to possible redemption | ||||||||
Numerator: net income allocable to Class A common stock subject to possible redemption amortized interest income on marketable securities held in trust | $ | $ | ||||||
Less: interest available to be withdrawn for payment of taxes | ( | ) | ( | ) | ||||
Net income allocable to Class A common stock subject to possible redemption | $ | $ | ||||||
Denominator: weighted average redeemable Class A common stock redeemable common stock, basic and diluted | ||||||||
Basic and diluted net income per share, redeemable Class A common stock | $ | $ | ||||||
Non-redeemable Class A and Class B common stock | ||||||||
Numerator: net income minus redeemable net earnings for Class A and Class B common stock | ||||||||
Net income | $ | $ | ||||||
Redeemable net earnings | ||||||||
Non-redeemable net income for Class A and Class B common stock | $ | $ | ||||||
Denominator: weighted average non-redeemable common stock basic and diluted weighted average shares outstanding, Class A and Class B common stock | ||||||||
Basic and diluted net income per share, Class A and Class B common stock | $ | $ |
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs
consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Accordingly,
as of June 30, 2021, offering costs of $
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
10
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 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 has identified the United States as its only “major” tax jurisdiction.
The Company is subject to income tax examinations by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
In August 2020, the FASB issued 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 19, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Note 3 — Initial Public Offering
Pursuant to the IPO on March 25, 2021, the Company
sold
On March 30, 2021, the underwriter partially exercised
the over-allotment option to purchase
11
Following the closing of the IPO on March 25,
2021 and the closing of the underwriter’s partial exercise of the over-allotment option on April 1, 2021, $
Public Warrants
Each whole warrant entitles the holder to purchase
one share of the Company’s Class A common stock at a price of $
The warrants will become exercisable 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
12
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
● | in whole and not in part; |
● | at a price of $0.01 per warrant; |
● | upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and |
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
● | in whole and not in part; |
● | at $0.10 per warrant; |
● | upon a minimum of 30 days’ prior written notice of redemption; and |
If a registration statement covering the shares
of Class A common stock issuable upon exercise of the warrants is not effective by the 60th day after the closing of the initial Business
Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company
will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with
Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonable efforts to register or
qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the
exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of
Note 4 — Private Placement
Simultaneously with the closing of the IPO, the
Sponsor purchased an aggregate of
Pursuant to the underwriter’s partial exercise
of the over-allotment option on March 30, 2021, on April 1, 2021 the Sponsor purchased an additional
Each Private Placement Warrant entitles the holder
to purchase one share of the Class A common stock at a price of $
The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or saleable until 30 days after the completion of the initial Business Combination.
The Sponsor has agreed (i) to waive its redemption rights with respect to any founder shares and any public shares held by it in connection with the completion of the Company’s initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to any founder shares held by it if the Company fails to complete the initial Business Combination within the Combination Period, although the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any public shares it hold if the Company fails to complete the Business Combination within the Combination Period.
13
Note 5 — Related Party Transactions
Founder Shares
On January 19, 2021, the Sponsor paid $
On March 30, 2021, the underwriter partially exercised
the over-allotment option to purchase
With certain limited exceptions, the founder shares will not be transferable, assignable by the Sponsor until the earlier of: (A) one year after the completion of the initial Business Combination; or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
The Company’s Sponsor agreed to loan the
Company an aggregate of up to $
Related Party Loans
In order to finance transaction costs in connection
with an intended initial Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and
directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company
completes an initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans
but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $
Administrative Support Agreement
Pursuant to an administrative support agreement
effective on March 22, 2021, the Company agreed to pay the Sponsor a total of $
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Note 6 — Commitments and Contingencies
Registration and Shareholder Rights
The holders of the founder shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights and stockholder agreement signed on March 22, 2021, requiring the Company to register such securities for resale (in the case of the founder shares, only after conversion to the Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriters Agreement
The underwriter had a 45-day option from the date
of the IPO to purchase up to an additional
On March 25, 2021, the Company paid a fixed underwriting
discount in aggregate of $
On March 30, 2021, the underwriter partially exercised
the over-allotment option to purchase
Note 7 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
June 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Marketable securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
$ | $ | $ | $ | |||||||||||||
Liabilities: | ||||||||||||||||
Warrant Liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
Warrant Liability – Private Placement Warrants | ||||||||||||||||
$ | $ | $ | $ |
The fair value of the Public Warrants at June
30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market. As of June 30, 2021, the aggregate
value of Public Warrants was $
The fair value of the Private Placement Warrants is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The valuation model utilizes inputs such as assumed share prices, volatility, discount factors and other assumptions and may not be reflective of the price at which they can be settled at Level 3.
The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2021:
Private Placement Warrants | ||||
Expected term (years) | ||||
Expected volatility | % | |||
Risk-free interest rate | % | |||
Fair value of the common stock price | $ |
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The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the period from January 7, 2021 (inception) through June 30, 2021:
Warrant Liability | ||||
Fair value as of January 19, 2021 (inception) | $ | |||
Initial fair value of warrant liability on March 22, 2021 | ||||
Initial fair value of warrant liability on March 31, 2021 | ||||
Transfer out of Level 3 to Level 1 | ( | ) | ||
Change in valuation inputs or other assumptions | ( | ) | ||
Fair value as of June 30, 2021 | $ |
Note 8 — Stockholders’ Equity
Preferred Stock — The
Company is authorized to issue a total of
Class A Common Stock —
The Company is authorized to issue a total of
Class B Common Stock —
The Company is authorized to issue a total of
With certain limited exceptions, the founder shares will not be transferable, assignable by the Sponsor until the earlier of: (A) one year after the completion of the initial Business Combination; or (B) subsequent to the initial Business Combination, (x) if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.
The shares of Class B common stock will automatically
convert into shares of the Company’s Class A common stock at the time of the Company’s initial Business Combination on a one-for-one
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further
adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or
deemed issued in excess of the amounts offered in the registration statement and related to the closing of the initial Business Combination,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,
in the aggregate, on an as-converted basis,
Holders of founder shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders, except as required by law.
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Glass Houses Acquisition Corp.” “our,” “us” or “we” refer to Glass Houses Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to herein as our initial business combination. We have not selected any specific business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the private placement of the private placement warrants, our capital stock, debt or a combination of cash, stock and debt.
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We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial business combination will be successful.
Results of Operations
Our entire activity since inception up to June 30, 2021 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the three months ended June 30, 2021, we had net income of $3,726,994, which was comprised of change in fair value of warrants of $4,186,087 and interest earned on marketable securities held in trust account of $7,335, partially offset by operating costs of $466,428.
For the period from January 19, 2021 through June 30, 2021, we had net income of $294,615, which was comprised of change in fair value of warrants of $4,014,087 and interest earned on marketable securities held in trust account of $7,335, partially offset by operating costs of $550,806, warrant issuance costs of $812,974, and other expense relating to fair value exceeding amount paid for warrants of $2,363,027.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $1.5 million in our operating bank account, and working capital of approximately $1.8 million.
Prior to the completion of the IPO, our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $99,160. On March 25, 2021, we consummated the IPO of 20,000,000 Units at a price of $10.00 per Unit. On March 30, 2021, the underwriter partially exercised the over-allotment option, purchasing an additional 2,047,293 Units, at $10.00 per Unit, on April 1, 2021. In aggregate, gross proceeds of $220,472,930 were generated. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,200,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor. On April 1, 2021, simultaneously with the closing of the over-allotment option, we sold an additional 409,459 Private Placement Warrants to our Sponsor at a price of $1.00 per share. In aggregate, gross proceeds of $7,609,459 were generated.
Following the Initial Public Offering, the closing of the over-allotment option and the sale of the Private Placement Warrants, a total of $220,472,930 was placed in the Trust Account. We incurred $12,693,922 in transaction costs, including $4,409,459 of underwriting fees, $7,716,553 of deferred underwriting fees and $567,910 of other offering costs. The promissory note from the Sponsor was paid in full on March 26, 2021. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In addition, in order to finance transaction costs in connection with an intended initial Business Combination, our Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as our critical accounting policies:
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Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Net Income Per Share of Common Stock
Net income per share of common Stock is computed by dividing net income by the weighted average number of shares of common Stock outstanding for each of the periods. The calculation of diluted income per share of common Stock does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of overallotment and (iii) Private Placement since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable to purchase 18,633,106 shares of Class A Common Stock in the aggregate.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between Class A common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A common stock.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $25,000 for office space and administrative support to the Company. We began incurring these fees on March 22, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,716,553 in the aggregate. Subject to the terms of the underwriting agreement, (i) the deferred fee will be placed in the Trust Account and released to the underwriters only upon the completion of a Business Combination and (ii) the deferred fee will be waived by the underwriters in the event that we do not complete a Business Combination.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our 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, (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 this offering or until we are no longer an “emerging growth company,” whichever is earlier.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our Public Warrants and our Private Placement Warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. Further, the Company corrected certain line items related to the previously audited balance sheet as of March 25, 2021 in the Form 8-K filed with the SEC on April 1, 2021 (the “Post-IPO Balance Sheet”) related to misstatements identified in improperly applying accounting guidance on certain warrants, recognizing them as components of equity instead of a derivative liability.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation and in light of the SEC Statement, our principal executive officer and principal financial and accounting officer have concluded that, solely due to the Company’s misapplication of the accounting for the Company’s warrants as liabilities, a material weakness existed and our disclosure controls and procedures were not effective as of June 30, 2021. In light of such material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements for the three months ended June 30, 2021 and for the period from January 19, 2021 (inception) through June 30, 2021, were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In light of the reclassification of our warrants, we plan to enhance 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. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and 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 the intended effects.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our final prospectus filed with the SEC on March 24, 2021. As of the date of this Quarterly Report there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC, other than as set forth below.
US GAAP required that our warrants be accounted for as liabilities rather than as equity and such requirement resulted in the restatement of our Post-IPO Balance Sheet.
On April 12, 2021, the staff of the SEC issued the SEC Statement. In the SEC Statement, 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 financial statements as opposed to equity. Since issuance, our warrants were accounted for as equity within our Post-IPO Balance Sheet, and after discussion and evaluation, including with our independent auditors, we concluded that our warrants should be presented as liabilities as of the IPO date with subsequent fair value remeasurement at each reporting period. Therefore we conducted a valuation of our warrants and restated our Post-IPO Balance Sheet, which resulted in unanticipated costs and diversion of management resources and may result in potential loss of investor confidence. Although we have completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or NYSE regarding our restated balance sheet or matters relating thereto.
Certain of our warrants are accounted for as a warrant liability and are recorded at fair value upon issuance with changes in fair value each period to be reported in earnings, which may have an adverse effect on the market price of our ordinary shares.
Following the restatement of our Post-IPO Balance Sheet, we account for our warrants as a warrant liability and recorded at fair value upon issuance any changes in fair value each period reported in earnings as determined by the Company based upon a valuation report obtained from its independent third party valuation firm. The impact of changes in fair value on earnings may have an adverse effect on the market price of our ordinary shares.
We have identified a material weakness in our internal control over financial reporting as of June 30, 2021. If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following the issuance of the SEC Statement, our management concluded that, in light of the SEC Staff Statement, our Post-IPO Balance Sheet should be restated. In connection with the foregoing development and solely due to the Company’s misapplication of the accounting for the Company’s warrants as liabilities, we identified a material weakness in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. In light of the material weakness that we identified, we performed additional analysis as deemed necessary to ensure that our financial statements for the three months ended June 30, 2021 and for the period from January 19, 2021 (inception) through June 30, 2021, were prepared in accordance with U.S. generally accepted accounting principles, and we continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 25, 2021, we consummated the Initial Public Offering of 20,000,000 Units. The Units sold in the Initial Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of $200,000,000. Jefferies LLC acted as sole book-running manager. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-252865). The Securities and Exchange Commission declared the registration statement effective on March 22, 2021.
Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement of an aggregate of 7,200,000 warrants at a price of $1.00 per Private Placement Warrant, generating total proceeds of $7,200,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
On March 30, 2021, the underwriter partially exercised the over-allotment option, purchasing an additional 2,047,293 Units, at $10.00 per Unit, on April 1, 2021, generating total gross proceeds of $20,472,930.
Simultaneously with the closing of the over-allotment option, we sold an additional 409,459 Private Placement Warrants to our Sponsor at a price of $1.00 per share, generating total proceeds of $409,459.
Of the gross proceeds received from the Initial Public Offering, the closing of the over-allotment option and the sale of the Private Placement Warrants, $220,472,930 was placed in the Trust Account.
We paid a total of $4,409,459 in underwriting discounts and commissions and $567,910 for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $7,716,553 in underwriting discounts and commissions.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* | Filed herewith. |
** | Furnished. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GLASS HOUSES ACQUISITION CORP. |
Date: August 16, 2021 | By: | /s/ Quincy Fennebresque |
Name: | Quincy Fennebresque | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
Date: August 16, 2021 | By: | /s/ Tonya Clark |
Name: | Tonya Clark | |
Title: | Chief Financial Officer | |
(Principal Accounting and Financial Officer) |
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