UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
| (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) |
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 subunit and one-half of one redeemable warrant | GLSPU | The Nasdaq Stock Market LLC | ||
| Redeemable Warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 warrants | GLSPW | 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.
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 | |
| ☒ | ||
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of May 12, 2022, there were
GLOBAL SPAC PARTNERS CO.
Quarterly Report on Form 10-Q
Table of Contents
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL SPAC PARTNERS CO.
CONDENSED BALANCE SHEETS
March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Marketable securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Accrued offering costs and expenses | $ | $ | ||||||
| Deferred underwriting discount | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares subject to possible redemption, | ||||||||
| Shareholders’ Deficit: | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ December 31, 2021 | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | - | |||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
GLOBAL SPAC PARTNERS CO.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | |||||||
| Formation and operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Bank interest income | ||||||||
| Change in fair value of warrants | ||||||||
| Trust interest income | ||||||||
| Total other income | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to possible redemption | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, non-redeemable ordinary shares | ||||||||
| Basic and diluted net income (loss) per share | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
GLOBAL SPAC PARTNERS CO.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(UNAUDITED)
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Subsequent measurement of Class A ordinary shares subject to redemption (interest earned on trust account) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements
3
GLOBAL SPAC PARTNERS CO.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Change in fair value of warrants | ( | ) | ||||||
| Trust interest income | ( | ) | ||||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accrued offering costs and expenses | ||||||||
| Due to related parties | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Payments of offering costs | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of the year | ||||||||
| Cash, end of the year | $ | $ | ||||||
| Supplemental Disclosure of Non-cash Financing Activities: | ||||||||
| Subsequent measurement of Class A ordinary shares subject to redemption (interest earned on trust account) | $ | $ | ||||||
| Deferred offering costs paid by Sponsor loan | $ | $ | ||||||
| Accrued deferred offering costs | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
GLOBAL SPAC PARTNERS CO.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
Global SPAC Partners Co. (the “Company”) is a newly organized blank check company incorporated as a Cayman Islands exempted company on August 6, 2020 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination” or “Initial Business Combination”). The Company has not selected any specific business combination target with respect to the Initial Business Combination.
The Company has selected December 31 as its fiscal year end.
As of March 31, 2022, the Company had not commenced any operations. All activity for the period from August 6, 2020 (inception) through March 31, 2022 relates to the Company’s formation and the initial public offering (the “IPO”), which is described below, and, since the closing of the IPO, the search for target companies for the Initial Business Combination. The Company will not generate any operating revenue 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 Global SPAC Sponsors LLC (formerly known as Global SPAC Partners Sponsors LLC), a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s
IPO was declared effective on April 8, 2021 (the “Effective Date”). On April 13, 2021, the Company consummated the
IPO of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Each Public Unit consists of (i) one subunit (the “Public Subunit”), which consists of one Class A ordinary share (the “Public Shares”) and one-quarter of one warrant (the “Public Warrants”), and (ii) one-half of one warrant (the “Public Warrants”); each whole warrant will be exercisable to purchase one Class A ordinary share. Each Private Unit also consists of (i) one subunit (the “Private Subunit”), which consists of one Class A ordinary share (the “Private Shares”) and one-quarter of one warrant (the “Private Warrants”), and (ii) one-half of one warrant (the “Private Warrants”).
Transaction costs amounted to $
The Company granted I-Bankers a 45-day option
to purchase up to an additional
5
Trust Account
Following the closing of the IPO on April 13,
2021 and I-Bankers’ partial exercise of the over-allotment option on April 14, 2021, an aggregate of $
On April 11, 2022, the Company’s shareholders
approved a Charter Amendment to extend the date by which the Company must consummate its Initial Business Combination from April 13, 2022
to July 13, 2022. At the Meeting, shareholders holding
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 has 12 months from the closing of
the IPO to consummate a Business Combination (the “Combination Period”).
The Sponsor, officers and directors of the Company, and I-Bankers have agreed (i) to waive their redemption rights with respect to their Founder Shares, Private Subunits, Representative Shares (See Note 4, Note 6) and any Public Subunits they may hold in connection with the completion of the Initial Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares, Private Subunits and Representative Shares 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 Subunits they hold if the Company fails to complete the Initial Business Combination within the Combination Period).
The Sponsor has agreed that it will be liable
to the Company if and to the extent any claims by a third-party (other than the Company’s independent auditors) for services rendered
or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (i) $
6
On December 21, 2021, the Company entered into a business combination agreement (“Business Combination Agreement”) with Gorilla Technology Group Inc., a Cayman Islands exempted company (“Gorilla”), and Gorilla Merger Sub, Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Gorilla (“Merger Sub”). Pursuant to the Business Combination Agreement, at the closing, (i) the Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and a wholly owned subsidiary of Gorilla; (ii) the ordinary shares of the Company (including Class A ordinary shares and Class B ordinary shares) will be converted into Gorilla ordinary shares on a one-for-one basis; (iii) warrants to purchase the ordinary shares of the Company will be converted into warrants to purchase the same number of Gorilla ordinary shares at the same exercise price and for the same exercise period; and (iv) the Company will have a restated certificate of incorporation.
Consummation of the transactions contemplated by the Business Combination Agreement is subject to customary conditions of the respective parties, including the approval of the proposed Business Combination with Gorilla (“Transactions”) by our shareholders in accordance with our amended and restated memorandum and articles of association and the completion of a redemption offer whereby we will be providing our public shareholders with the opportunity to redeem their shares of ordinary shares.
On February 10, 2022, to raise additional proceeds in connection with the Transactions, the Company, Gorilla and certain investors (“PIPE Investors”) entered into certain subscription agreements (the “PIPE Subscription Agreement”), providing for the purchase by the PIPE Investors at the effective time of the Transactions an aggregate of 5,000,000 subunits of the Company at a price per subunit of $10.10, for gross proceeds to the Company of $50.5 million; provided, however, that if a PIPE Investor acquires ownership of subunits of Gorilla in the open market or in privately negotiated transactions with third parties at least prior to the Company’s meeting of shareholders to approve the Transactions and the PIPE Investor does not redeem or convert such PIPE Subunits in connection with any redemption (such subunits, “non-redeemed subunits”), the number of subunits for which the PIPE Investor is obligated to purchase under the PIPE Subscription Agreement shall be reduced by the number of non-redeemed subunits.
Liquidity and Going Concern
As of March 31, 2022, the Company had cash of
$
Subsequent to the consummation of the IPO, partial
exercise of the over-allotment option, and associated private placements, $
The Company’s initial shareholders, officers,
directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event
that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working
Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans, other than the interest on such
proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any,
have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid
upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
On April 11, 2022, the Company’s shareholders approved an amendment
to the Company’s Amended and Restated Memorandum and Articles of Association (“Charter Amendment”). The Charter Amendment
extends the date by which the Company must consummate its Initial Business Combination from April 13, 2022 to July 13, 2022. On April
13, 2022, the Company issued an unsecured promissory note to Gorilla, pursuant to which the Company may borrow up to an aggregate principal
amount of $
7
The Company anticipates that the $
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 periods presented. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Form 10-K filed by the Company with the SEC on March 31, 2022.
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 our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the 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 shareholder 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.
Use of Estimates
The preparation of these unaudited condensed financial statements in conformity with 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. Actual results could differ from those estimates.
One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the Company’s 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.
8
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2022 and December 31, 2021.
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 $
Investment Held in Trust Account
As of March 31, 2022 and December 31, 2021, the
Company had $
The Company classifies its investment in money market funds as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in trust interest income in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
The Company classifies its United States Treasury securities as held-to-maturity in accordance with Financial Standards Accounting Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 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. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “Trust interest income” line item in the condensed statements of operations. Interest income is recognized when earned.
Class A Ordinary Shares (underlying the Public Subunits) Subject to Possible Redemption
The Company accounts for its Class A ordinary
shares (underlying the Public Subunits) subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and
are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s
Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject
to the occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption
value of $
9
Offering Costs associated with the IPO
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. 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 are allocated to the Public Warrants issued in the IPO based on the Public Warrants’ fair value at inception compared to the total IPO proceeds received. Offering costs associated with warrant liabilities are expensed, and offering costs associated with the Class A ordinary shares are allocated to temporary equity.
Fair Value of Financial Instruments
The Company follows the guidance in ASC 820, “Fair Value Measurement”, 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 on a non-recurring basis. The non-recurring fair value measurements are not applicable as of March 31, 2022 and December 31, 2021.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1 — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. |
| Level 2 — | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| March 31, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2022 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities held in Trust Account | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liabilities – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liabilities – Private Warrants | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| December 31, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liabilities – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liabilities – Private Warrants | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
10
The fair value of the Company’s U.S. Treasuries held in Trust Account approximate their carrying amount and is a level 1 measurement. The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on December 31, 2021 are as follows:
| Carrying Value/Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value 1 | |||||||||||||
| U.S. Treasury Securities held in Trust Account | $ | $ | $ | ( | ) | $ | ||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
The fair value of the Company’s prepaid expenses, and accrued offering costs and expenses approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
The fair value of the Private Warrants is based on a Monte Carlo 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 fair value of the Private Warrants is classified as Level 3. See Note 5 for additional information on assets and liabilities measured at fair value.
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 at inception 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 in 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.
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 ordinary shares and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A ordinary shares.
11
Net Income (Loss) Per Ordinary Share
The Company complies with accounting and disclosure
requirements of FASB ASC 260, Earnings Per Share. The statements of operations include a presentation of income per redeemable Class A
ordinary share and income (loss) per non-redeemable share following the two-class method of income (loss) per share. In order to determine
the net income (loss) attributable to both the redeemable Class A ordinary shares and the non-redeemable shares, the Company first considered
the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid.
For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A ordinary
shares subject to possible redemption was considered to be dividends paid to the public shareholders. Subsequent to calculating the total
income (loss) allocable to both sets of shares, the Company split the amount to be allocated using a ratio of
The earnings per share presented in the condensed statements of operations is based on the following:
| For the three months ended March 31, 2022 | ||||
| Net income | $ | |||
| Accretion of temporary equity to redemption value | ( | ) | ||
| Net income including accretion of temporary equity to redemption value | $ | |||
| For the three months ended March 31, 2022 | ||||||||
| Class A | Non- redeemable | |||||||
| Basic and diluted net income per share: | ||||||||
| Numerator: | ||||||||
| Allocation of net income including accretion of temporary equity | $ | $ | ||||||
| Accretion of temporary equity to redemption value | ||||||||
| Allocation of net income | $ | $ | ||||||
| Denominator: | ||||||||
| Weighted-average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
For the three months ended March 31, 2021, net
loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, excluding
ordinary shares subject to forfeiture by the Sponsor. Weighted average shares were reduced for the effect of an aggregate of
As of March 31, 2022 and December 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the Company’s earnings. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.
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.
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.
12
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented.
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.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduced a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to maturity debt securities, trade receivables and other receivables measured at amortized cost at the time the financial asset is originated or acquired. After the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company plans to adopt this standard in the first quarter of 2023 and does not expect the adoption will have a significant impact on its financial statements and related disclosures.
Other than as noted above, Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 3 — Initial Public Offering
Public Units
In connection with the IPO on April 13, 2021,
the Company sold
Following the closing of the IPO on April 13,
2021, on a basis of $
The Company granted I-Bankers a 45-day option
from the date of the IPO to purchase up to an additional
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Note 4 — Private Placements
Private Units
Simultaneously with the closing of the IPO, the
Sponsor and I-Bankers purchased an aggregate of
On April 14, 2021, simultaneous with the exercise
of the over-allotment option, the Sponsor and I-Bankers purchased an aggregate of
Note 5 — Warrant Liabilities
Public Warrants
There were
The warrants will become exercisable 30 days after
the completion of the Initial Business Combination, and will expire
Redemption of Public Warrants When the Class A Ordinary Share 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 |
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The Company will not redeem the warrants unless a registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those ordinary shares is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification. The Company will use its best efforts to register or qualify such shares under the blue-sky laws of the state of residence in those states in which the warrants were offered by the Company in the IPO.
If the Company calls the warrants for redemption as described above, the management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect on the shareholders of issuing the maximum number of Class A ordinary shares issuable upon the exercise of the warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” (defined below) over the warrant price of the warrants by (y) the fair market value. The “fair market value” will mean the average closing price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Private Warrants
There were
The Private Warrants will not be transferable, assignable or salable until 30 days after the completion of the Company’s Initial Business Combination (except pursuant to limited exceptions as described under “Principal Shareholders — Transfers of Founder Shares and Placement Units” in the final prospectus filed by the Company with the SEC on April 12, 2021) and they will not be redeemable by the Company so long as they are held by the Sponsor, I-Bankers, their designees, or their permitted transferees. The Sponsor, I-Bankers, their designees, or their permitted transferees has the option to exercise the Private Warrants on a cashless basis. If the Private Warrants are held by holders other than the Sponsor, I-Bankers, their designees, or their permitted transferees, the Private Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.
If holders of the Private Warrants elect to exercise them on a cashless basis, the holders would pay the exercise price by surrendering his, her or its warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “historical fair market value” (defined below) over the exercise price of the warrants by (y) the historical fair market value. The “historical fair market value” will mean the average reported closing price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the holders of warrants.
The warrant agreement contains an Alternative
Issuance provision that if less than
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The Company accounted for the
The accounting treatment of derivative financial instruments requires that the Company recorded a derivative liability upon the closing of the IPO. The warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Subsequent Measurement
The fair value of the Public Warrants at March
31, 2022 and December 31, 2021 is classified as Level 1 due to the use of an observable market quote in an active market. As of March
31, 2022 and December 31, 2021, the aggregate value of Public Warrants was $
The estimated fair value of the Private Warrants on March 31, 2022 and December 31, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its ordinary shares based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing a Business Combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values at the end of the reporting period represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The key inputs into the Monte Carlo simulation model for the Private Warrants were as follows at March 31, 2022 and December 31, 2021:
| Inputs | March 31, 2022 | December 31, 2021 | ||||||
| Exercise price | $ | $ | ||||||
| Stock price | $ | $ | ||||||
| Volatility | 9.2% post-merger | |||||||
| Expected term of the warrants | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | ||||||||
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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 three months ended March 31, 2022. The fair value of Public Warrants was a level 3 measurement upon their initial issuance at the IPO but transferred to a level 1 measurement on May 10, 2021 when the Public Warrants underlying the Public Units were allowed to be separated from the Public Subunits and began trading on the Nasdaq Capital Market:
| Warrant Liability | ||||
| Fair value as of December 31, 2021 | $ | |||
| Change in fair value | ( | ) | ||
| Fair value as of March 31, 2022 | $ | |||
Note 6 — Related Party Transactions
Founder Shares
On August 7, 2020, the Company issued
On September 17, 2020,
On March 5, 2021, the Sponsor transferred
On April 8, 2021,
On April 14, 2021, I-Bankers partially exercised
the over-allotment option to purchase
Related Party Loans
On August 7, 2020, the Company issued an unsecured
promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
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Administrative Service Fee
The Company has agreed, commencing on the Effective
Date of the Company’s registration statement for the IPO, to pay an affiliate of the Company’s CEO a monthly fee of an aggregate
of $
For the three months ended March 31, 2022, the
Company incurred $
Management Expenses
During the three months ended March 31, 2022, Mr. Jayesh Chandan, the
Chairman of the Company, incurred $
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, Representative Shares (as defined below), Private Units (including securities contained therein) and units (including securities contained therein) that may be issued upon conversion of loans made by the Sponsor or one of its affiliates, and their permitted transferees, will have registration rights to require the Company to register a sale of any of the securities held by them (in the case of the Founder Shares, only after conversion to the Class A ordinary shares) pursuant to a registration rights agreement signed on April 8, 2021. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include such securities in other registration statements filed by the Company and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriting Agreement
The Company granted I-Bankers (the “underwriter”)
a 45-day option from the date of the IPO to purchase up to
On April 13, 2021,
The Company also issued the underwriter
On April 14, 2021, the underwriter partially exercised
the over-allotment option to purchase
The underwriter has agreed that the deferred underwriting discount will be reduced pro rata for redemptions from the Trust Account prior to completion of the Initial Business Combination, up to a maximum reduction of 20%. In addition, the underwriter has agreed that the Company may allocate up to 30% of the net deferred underwriting commissions, after any reductions due to redemptions, to a firm or firms who assists the Company in connection with completing the Initial Business Combination.
Representative Shares
The Company issued to the underwriter
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Promissory Note
On April 13, 2022, the Company issued an unsecured promissory note to
Gorilla, pursuant to which the Company may borrow up to an aggregate principal amount of $
Note 8 — Shareholders’ Equity
Preference Shares — The
Company is authorized to issue
Class A Ordinary Shares —
The Company is authorized to issue
Class B Ordinary Shares —
The Company is authorized to issue
On April 8, 2021, the Sponsor returned to the
Company for cancellation, at no cost, an aggregate of
On April 14, 2021, I-Bankers partially exercised
the over-allotment option to purchase
As of March 31, 2022 and December 31, 2021, there
were
Class A ordinary shareholders and Class B ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders and vote together as a single class, except as required by law; provided, that holders of the Class B ordinary shares will have the right to appoint all of the Company’s directors prior to the Initial Business Combination and holders of the Class A ordinary shares will not be entitled to vote on the appointment of directors during such time.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the Initial Business Combination on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like.
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 issued.
On April 11, 2022, the Company’s shareholders approved a Charter
Amendment to extend the date by which the Company must consummate its Initial Business Combination from April 13, 2022 to July 13, 2022.
At the Meeting,
On April 13, 2022, the Company issued an unsecured
promissory note to Gorilla (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal
amount of $
On April 20, 2022, the Company borrowed $
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 in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Global SPAC Partners Co. References to our “management” refer to our officers and directors, and references to the “Sponsor” refer to Global SPAC Sponsors LLC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included herein.
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 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 SEC filings.
Overview
We were incorporated on August 6, 2020 as a Cayman Islands exempted company 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 or entities, which we refer to throughout this Report as our “Business Combination” or “initial business combination”.
On April 13, 2021, we consummated the initial public offering (“IPO”) of 16,000,000 public units (“Public Units”) at a price of $10.00 per public unit, generating gross proceeds of $160,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 675,000 placement units (“Private Units”), at a price of $10.00 per Private Unit, in a private placement to the Sponsor and I-Bankers Securities, Inc. (“I-Bankers”), generating gross proceeds of $6,750,000.
On April 14, 2021, I-Bankers partially exercised the over-allotment option to purchase an additional 750,000 Public Units, at a purchase price of $10.00 per public unit, generating gross proceeds to us of $7,500,000. Simultaneously with the exercise of the over-allotment option, we consummated the sale of an additional 22,500 Private Units, at a price of $10.00 per Private Unit, in a private placement to the Sponsor and I-Bankers, generating gross proceeds to us of $225,000.
Of the net proceeds from the IPO, partial exercise of the over-allotment option, and associated private placements, $169,175,000 of cash was placed in the trust account (“Trust Account”).
On December 21, 2021, we entered into a business combination agreement (“Business Combination Agreement”) with Gorilla Technology Group Inc., a Cayman Islands exempted company (“Gorilla”), and Gorilla Merger Sub, Inc., a Cayman Islands exempted company and a wholly-owned subsidiary of Gorilla (“Merger Sub”). Gorilla is a leading market provider of video intelligence, Internet of Things security, edge AI data analytics and operational technology security solutions and services in Asia Pacific with operations and established distribution and sales channels in the United States, Europe, the Middle East and Latin America.
Pursuant to the Business Combination Agreement, at the Closing, and following the recapitalization, (i) Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and a wholly owned subsidiary of Gorilla; (ii) the ordinary shares of the Company (including Class A ordinary shares and Class B ordinary shares) will be converted into Gorilla ordinary shares on a one-for-one basis; (iii) warrants to purchase the ordinary shares of the Company will be converted into warrants to purchase the same number of Gorilla ordinary shares at the same exercise price and for the same exercise period; and (iv) the Company will have a restated certificate of incorporation.
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Additionally, to raise additional proceeds in connection with the transactions contemplated by the Business Combination Agreement (“Transactions”), the Company, Gorilla and certain PIPE Investors (as defined below) entered into a series of subscription agreements (the “PIPE Subscription Agreements”), providing for the purchase by certain investors (the “PIPE Investors”) at the effective time of the Gorilla Business Combination an aggregate of 5,000,000 PIPE Subunits at a price of $10.10 per subunit, for gross proceeds to the Company of $50.5 million; provided, however, that if a PIPE Investor acquires ownership of subunits of Gorilla in the open market or in privately negotiated transactions with third parties (along with any related rights to redeem or convert such subunits in connection with any redemption conducted by the Company in accordance with the Company’s organizational documents and the prospectus for the Company’s IPO in conjunction with the Closing or in conjunction with an amendment to the Company’s organizational documents to extend the Company’s deadline to consummate its Initial Business Combination) at least prior to the Company’s meeting of shareholders to approve the Transactions and the PIPE Investor does not redeem or convert such PIPE Subunits in connection with any redemption, the number of subunits for which the PIPE Investor is obligated to purchase under the PIPE Subscription Agreement shall be reduced by the number of non-redeemed subunits.
For a more detailed description of the Business Combination Agreement and the Transactions, see the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2022 (the “Form 10-K”) and Gorilla’s Registration Statement on Form F-4 filed with the SEC, as amended (the “Gorilla Form F-4”).
On April 11, 2022, we held a shareholder meeting (the “Meeting”), where our shareholders approved an amendment to the Company’s amended and restated memorandum and articles of association (“Charter Amendment”). The Charter Amendment extends the date by which we must consummate our Initial Business Combination from April 13, 2022 to July 13, 2022. The terms of the Charter Amendment are set forth in our definitive proxy statement filed with the Securities and Exchange Commission on March 28, 2022.
At the Meeting, shareholders holding 3,801,787 Public Subunits exercised their right to redeem their Public Subunits for a pro rata portion of the funds in the Trust Account. As a result, approximately $38,411,748.01 (approximately $10.10 per Public Subunit) was removed from the Trust Account to pay such holders. Furthermore, as a result of the redemption, the one fourth of one warrant contained in each Public Subunit (resulting in an aggregate of approximately 950,446 warrants) were also forfeited by such holders and automatically extinguished by us.
Following the redemption, our remaining Public Subunits outstanding were 12,948,213. We have submitted a drawdown request under the promissory note dated April 13, 2022 to fund into the Trust Account the required $0.03 per remaining Public Subunit into the Trust Account for the first month past April 13, 2022 that we need to complete the Initial Business Combination. After such funding, the Trust Account will contain approximately $10.13 per remaining Public Subunit outstanding.
On April 13, 2022, the Company issued an unsecured promissory note to Gorilla, pursuant to which the Company may borrow up to an aggregate principal amount of $1,165,339 to be used for deposit into the Company’s Trust Account to extend the Company’s time to complete a Business Combination (See Note 9). This loan is non-interest bearing, unsecured and due at the earlier of the date that the Company consummates the Business Combination or the liquidation of the Company.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an Initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an Initial Business Combination.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. The only activities through March 31, 2022 were activities related to our formation, the IPO and search for prospective targets for an Initial Business Combination, such as Gorilla. We do not expect to generate any operating revenues until after the completion of our Initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses for due diligence on prospective targets.
For the three months ended March 31, 2022, we had net income of $915,225, which consisted of $15,703 in interest earned on marketable securities held in the Trust Account, $5 in interest earned in our operating bank account, and $1,736,138 in change in fair value of warrants, offset by $836,621 in formation and operating costs.
For the three months ended March 31, 2021, we had net loss of $13,165, which consisted of $13,166 in operating costs, offset by $1 in interest earned in our operating bank account.
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Liquidity and Capital Resources
As of March 31, 2022, we had cash of $18,034. Until the consummation of the IPO, our only source of liquidity was an initial purchase of ordinary shares by our Sponsor and loans from our Sponsor.
Subsequent to the consummation of the IPO, partial exercise of the over-allotment option, and associated private placements, $169,175,000 of cash was placed in the Trust Account, and our liquidity needs have been satisfied through the proceeds from the consummation of the private placement not held in the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting commissions and income taxes payable) to complete our Initial Business Combination, such as the Gorilla Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an Initial Business Combination.
In order to finance transactions costs in connection with an Initial Business Combination, post the initial public offering, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete an Initial Business Combination, we would repay the Working Capital Loans. In the event that an Initial Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit at the option of the lender at the time of the Business Combination. The units would be identical to the Private Units sold in the private placements.
On April 13, 2022, we issued an unsecured promissory note to Gorilla, pursuant to which we may borrow up to an aggregate principal amount of $1,165,339 to be used for deposit into our Trust Account to extend our Combination Period from April 13, 2022 to July 13, 2022. This loan is non-interest bearing, unsecured and due at the earlier of the date that we consummate the Business Combination or the liquidation.
We anticipate that the $18,034 outside of the Trust Account as of March 31, 2022 will not be sufficient to allow us to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. We may need to obtain additional financing to consummate our Initial Business Combination but there is no assurance that new financing will be available to us on commercially acceptable terms. Furthermore, if we are unable to complete an Initial Business Combination by July 13, 2022, it will trigger our automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about our ability to continue as a going concern.
Critical Accounting Policies and Estimates
The preparation of these unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States of America (“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 statement. Actual results could differ from those estimates.
One of the more significant accounting estimates included in these financial statements is the determination of the fair value of our 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 (See Note 5).
Class A Ordinary Shares (underlying the Public Subunits) Subject to Possible Redemption
The Company accounts for its Class A ordinary shares (underlying the Public Subunits) subject to possible redemption in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares 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) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value of $10.10 per share (plus any interest earned on the Trust Account) as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets.
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Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. 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 are allocated to the public warrants issued in the IPO based on the public warrants’ fair value at inception compared to the total IPO proceeds received. Offering costs associated with warrant liabilities are expensed, and offering costs associated with the Class A ordinary shares are allocated to temporary equity.
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 FASB ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value at inception 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 in 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.
FASB ASC Topic 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 ordinary shares and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then the Class A ordinary shares.
Net Income (Loss) Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” The statements of operations include a presentation of income per redeemable Class A ordinary share and income (loss) per non-redeemable share following the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to both the redeemable Class A ordinary shares and the non-redeemable shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A ordinary shares subject to possible redemption was considered to be dividends paid to the public shareholders. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated using a ratio of 77.1% for the redeemable Class A ordinary shares and 22.9% for the non-redeemable shares for the three months ended March 31, 2022.
For the three months ended March 31, 2021, net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture by the Sponsor. Weighted average shares were reduced for the effect of an aggregate of 750,000 ordinary shares that were subject to forfeiture if the underwriter’s over-allotment option was not exercised by the underwriter.
As of March 31, 2022 and December 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the Company’s earnings. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.
Recent Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduced a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to maturity debt securities, trade receivables and other receivables measured at amortized cost at the time the financial asset is originated or acquired. After the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company plans to adopt this standard in the first quarter of 2023 and does not expect the adoption will have a significant impact on its financial statements and related disclosures.
Other than as noted above, management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
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Off-Balance Sheet Arrangements
We had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities. 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 purchased any non-financial assets.
Commitments and Contractual Obligations
Registration Rights Agreement
Pursuant to a registration rights agreement entered into on April 8, 2021, the holders of the Founder Shares, the Representative Shares, the units and underlying securities issuable upon conversion of the Working Capital Loans and the Private Units and its underlying securities are entitled to certain registration rights. See “Item 1. Business” and Notes 4 and 6 of the financial statements included herein. The Company will bear the expenses incurred in connection with the filing of any registration statements pursuant to such registration rights.
Underwriting Agreement
Pursuant to the underwriting agreement, the underwriters received a cash underwriting discount of $3,350,000 following the consummation of the IPO and the partial exercise of the over-allotment option. In addition, the underwriters also received 100,000 representative shares upon the consummation of the IPO.
Additionally, the underwriter will be entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the IPO and partial exercise of the over-allotment option, or $5,862,500, upon the completion of the Company’s Initial Business Combination subject to the terms of the underwriting agreement.
The underwriter has agreed that the deferred underwriting discount will be reduced pro rata for redemptions from the Trust Account prior to completion of the Initial Business Combination, up to a maximum reduction of 20%. In addition, the underwriter has agreed that the Company may allocate up to 30% of the net deferred underwriting commissions, after any reductions due to redemptions, to a firm or firms who assists the Company in connection with completing the Initial Business Combination.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
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.
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 such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2022. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that, as of March 31, 2022, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter ended March 31, 2022, we have enhanced our internal controls over financial reporting relating to redeemable equity instruments by continuing to recognize all Public Shares underlying Public Subunits as temporary equity. We further improved this process by expanding and improving our review for complex securities and related accounting standards, enhancing access to accounting literature, identification of third-party professionals with whom to 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. There have been no changes in our internal controls over financial reporting, except as previously noted, that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not required for smaller reporting companies. However, as of the date of this Quarterly Report, except as set forth below, there have been no material changes with respect to those risk factors previously disclosed in the Company’s final prospectus as filed with the SEC on April 12, 2021 and its Form 10-K. For risks related to Gorilla and the Transactions, see Gorilla Form S-4.
Changes in laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete our initial business combination.
We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments and applicable non-U.S. jurisdictions. In particular, our consummation of a business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications, and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with the foregoing may be difficult, time consuming and costly. Laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, disclosures in business combination transactions involving SPACs and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which special purpose acquisition companies (“SPACs”) could become subject to regulation under the Investment Company Act of 1940, as amended, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in a revised form, may increase the costs of and the time needed to negotiate and complete an initial business combination, and may constrain the circumstances under which we could complete an initial business combination.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For a description of the use of the proceeds generated in our IPO, see Part II, Item 2 of the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2021. There has been no material change in the planned use of the proceeds from the IPO and private placements as is described in the Company’s final prospectus related to the IPO.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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. |
| (1) | Previously filed as exhibit 3.1 to our Current Report on Form 8-K filed on April 15, 2022 and incorporated by reference herein. |
| (2) | Previously filed as exhibit 10.1 to our Current Report on Form 8-K filed on April 15, 2022 and incorporated by reference herein. |
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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.
| GLOBAL SPAC PARTNERS CO. | ||
| Date: May 12, 2022 | By: | /s/ Bryant B. Edwards |
| Name: | Bryant B. Edwards | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: May 12, 2022 | By: | /s/ Long Long |
| Name: | Long Long | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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