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.
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(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
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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 |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of November 14, 2022, there were
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Global Consumer Acquisition Corp.
Condensed Balance Sheets
| September 30 |
| December 31, | |||
2022 | 2021 | |||||
(Unaudited) | (Audited) | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash | $ | $ | ||||
Prepaid expense | | | ||||
Total Current Assets | | | ||||
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Cash and Marketable Securities held in Trust Account | | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ DIFICIT |
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Current Liabilities | ||||||
Due to related parties | $ | | $ | — | ||
Accrued expense | | | ||||
Franchise tax payable | | | ||||
Promissory notes | | — | ||||
Extension note | | — | ||||
Total Current Liabilities | | | ||||
Warrant Liability |
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Deferred underwriting fees |
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Total Liabilities |
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Commitments and Contingencies (NOTE 6) |
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Common stock subject to possible redemption, | | | ||||
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Stockholders’ Deficit |
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Preferred shares, $ |
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Common stocks, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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Total Liabilities and Stockholders’ Deficit | $ | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
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Global Consumer Acquisition Corp.
Condensed Statements of Operations
For Three Months Ended September 30, | For Nine Months Ended September 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Unaudited | Unaudited | Unaudited | Unaudited | |||||||||
Formation and operating costs | $ | | $ | | $ | | $ | | ||||
Franchise tax | | — | | — | ||||||||
Loss from operation costs | ( | ( | ( | ( | ||||||||
Other income and expense: | ||||||||||||
Realized and unrealized gain from marketable securities held in Trust Account | $ | | $ | | $ | | $ | | ||||
Interest expense | ( | — | ( | — | ||||||||
Change in fair value of warrant liability | | | | | ||||||||
Non-operating expense | — | — | — | ( | ||||||||
Net income (loss) | $ | ( | $ | | $ | | $ | | ||||
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Weighted average shares outstanding of redeemable common stock | | | | | ||||||||
Basic and diluted net income (loss) per common stock | ( | | | | ||||||||
Weighted average shares outstanding of non-redeemable common stock | | | | | ||||||||
Basic and diluted net income (loss) per common stock | ( | | | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
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Global Consumer Acquisition Corp.
Condensed Statements of Changes in Stockholders’ Deficit
Three and Nine Months Ended September 30, 2021 and 2022
Additional | Total | |||||||||||||
Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||
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Balance — January 1, 2021 (audited) | — | $ | — | $ | — | $ | ( | $ | ( | |||||
Issuance of common stock to Sponsor | | | | — | | |||||||||
Re-measurement for common stock to redemption amount | — | — | ( | ( | ( | |||||||||
Forfeiture of founder shares | ( | ( | | — | — | |||||||||
Sale of Private Units | | | | — | | |||||||||
Net Loss | — | — | — | ( | ||||||||||
Balance — June 30, 2021 (unaudited) | | $ | | $ | — | $ | ( | $ | ( | |||||
Net Income | — | — | — | | | |||||||||
Balance — September 30, 2021 (unaudited) |
| | $ | | $ | — | $ | ( | $ | ( |
Additional | Total | |||||||||||||
Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||
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| Amount |
| Capital |
| Deficit |
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Balance — January 1, 2022 (audited) | | $ | | $ | — | $ | ( | $ | ( | |||||
Net Income | — | — | — | | | |||||||||
Additional amount deposited into trust ($ | — | — | — | ( | ( | |||||||||
Re-measurement for common stock to redemption amount |
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Balance — June 30, 2022 (unaudited) | | $ | | $ | — | $ | ( | ( | ||||||
Net Loss | — | — | — | ( | ( | |||||||||
Additional amount deposited into trust ($ | — | — | — | ( | ( | |||||||||
Re-measurement for common stock to redemption amount | — | — | — | ( | ( | |||||||||
Balance — September 30, 2022 (unaudited) | | $ | | $ | — | $ | ( | ( |
The accompanying notes are an integral part of the unaudited condensed financial statements.
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Global Consumer Acquisition Corp.
Condensed Statements of Cash Flows
For Nine Months Ended September 30 | ||||||
2022 | 2021 | |||||
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Cash flows from operating activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Realized and unrealized gain from marketable securities held in Trust Account | ( | ( | ||||
Change in fair value of warrant liability | ( | ( | ||||
Offering costs allocated to warrants | — | | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses | | ( | ||||
Due to related parties | | — | ||||
Accrued expenses | | | ||||
Franchise tax payable | ( | — | ||||
Promissory note-interest | | — | ||||
Net cash used in operating activities |
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Cash flows from investing activities: |
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Investment of cash in Trust Account |
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Withdraw from Trust Account for Franchise tax payment | | — | ||||
Net cash used in investing activities | ( | ( | ||||
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Cash flows from financing activities: |
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Proceeds from promissory note | | — | ||||
Proceeds from Extension notes | | — | ||||
Proceeds from issue of founder shares | — | | ||||
Proceeds from sale of units, net underwriting discount paid |
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Proceeds from sale of private placement | — | | ||||
Payment of offering costs |
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Net cash provided by financing activities |
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Net change in cash | ( | | ||||
Cash at beginning of period | | | ||||
Cash at end of period | $ | | $ | | ||
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Non-cash investing and financing activities: |
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Initial classification of common stock subject to possible redemption | $ | — | $ | | ||
Re-measurement of common stock subject to redemption | $ | | $ | | ||
Deferred underwriting fee payable | $ | — | $ | | ||
Initial classification of warrant liability | $ | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
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Global Consumer Acquisition Corp.
Notes to Financial Statements
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND GOING CONCERN
Global Consumer Acquisition Corp. (the “Company”) is a blank check company incorporated in the State of Delaware on December 28, 2020. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with
For the three months ended September 30, 2022 the Company had not commenced any operations. All activity for the three months ended September 30, 2022 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s IPO was declared effective on June 8, 2021. On June 11, 2021, the Company consummated its IPO of
Simultaneously with the closing of the IPO, pursuant to a certain private placement unit subscription agreement, the Company completed the private sale of
Following the closing of the IPO on June 11, 2021 and the partially exercised over-allotment of
Transaction costs amounted to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and sale of the Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. Nasdaq rules provide that the Business Combination must be with
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As of September 30, 2022 and December 31, 2021, the Common Stock issued to the public reflected on the balance sheet are reconciled in the following table:
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| As of December 31, 2021 | |||
(Unaudited) | (Audited) | |||||
Gross Proceeds | $ | | $ | | ||
Less: |
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Proceeds allocated to public warrants |
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Transaction costs |
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Plus: |
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Reverse the cost allocation to warrants |
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Additional amount deposited into trust | | — | ||||
Re-measurement of carrying value to redemption value |
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Common stock subject to possible redemption |
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The Company will provide its Stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to
The stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Sponsor has agreed (a) to vote its Common Stock, the Common Stock included in the Private Units (the “Private Shares”) and any Public Shares purchased during or after the IPO in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Common Stock) and Private Units (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of pre-Business Combination activity and (d) that the Common Stock and Private Units (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the IPO if the Company fails to complete its Business Combination.
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The Company will have until December 11, 2022 to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete a 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
The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor 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 amounts in the Trust Account to below $
On June 6, 2022, the Company issued a press release, announcing that prior to June 11, 2022, the Company’s Sponsor has deposited into the Company’s trust account $
On September 12, 2022, the Company issued a press release, announcing that on September 9, 2022, the Company’s Sponsor has deposited into the Company’s trust account $
Going Concern and Management’s Plan
As of September 30, 2022, the Company had $
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans and will not generate any operating revenues until after the completion of its initial business combination. In addition, the Company expects to have negative cash flows from operations as it pursues an initial business combination target. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company does not currently have adequate liquidity to sustain operations, which consist solely of pursuing a Business Combination.
While the Company expects to have sufficient access to additional sources of capital if necessary, the Sponsor has signed a new Promissory Note with the Company to provide additional capital. On January 22, 2022, a Promissory Note was signed between the Sponsor and the Company. The Sponsor agreed to borrow up to $
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after the date that the financial statements are issued. There is no assurance that the Company’s plans to raise additional capital (to the extent ultimately necessary) or to consummate a Business Combination will be successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As is customary for a special purpose acquisition company, if the Company is not able to consummate a Business Combination during the Combination Period, it will cease all operations and redeem the Public Shares. Management plans to continue its efforts to consummate a Business Combination during the Combination Period.
Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the World. As of the date the financial statement was issued, there was considerable uncertainty around the expected duration of this pandemic. The Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of this financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on March 25, 2022. The accompanying condensed consolidated balance sheet as of December 31, 2021 has been derived from our audited consolidated financial statements included in the aforementioned Form 10-K. The interim results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of 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 independent registered public accounting firm 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.
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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 financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
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. Accordingly, the actual results could differ significantly from those estimates.
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 had $
Marketable Securities Held in Trust Account
At September 30, 2022, substantially all of the assets held in the Trust Account were held in money market funds, which are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet 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 interest earned on marketable securities held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Derivative financial instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. In accordance with ASC 825-10 “Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the statement of operations as incurred.
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Warrant Liabilities
The
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 is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is 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 occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
Net Income (Loss) per Common Stock
The Company applies the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net income (loss) per common stock is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares by the weighted average number of common stocks outstanding for each of the periods. The calculation of diluted income per common stock does not consider the effect of the warrants issued in connection with the IPO 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 for
The following table reflects the calculation of basic and diluted net income per common stock:
For the three months ended | For the nine months ended | |||||||||||
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Redeemable common stock | ||||||||||||
Numerator: |
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Net income (loss) allocable to common stock subject to possible redemption | $ | ( | $ | | $ | | $ | | ||||
Denominator: weighted average number of common stock |
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Basic and diluted net income (loss) per common stock | ( | | | | ||||||||
Non-redeemable common stock |
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Numerator: | ||||||||||||
Net income (loss) allocable to common stock subject to possible redemption | $ | ( | $ | | $ | | $ | | ||||
Denominator: weighted average number of common stock | | | | | ||||||||
Basic and diluted net income (loss) per common stock | ( | | | |
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 $
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Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
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. U.S. 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 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.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC 740, “Income Taxes” (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year’s income taxable for federal and state income tax reporting purposes. Total tax provision may differ from the statutory tax rates applied to income before provision for income taxes due principally to non-taxable items and the valuation allowance recorded on the Company’s deferred tax assets.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 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 U.S. GAAP. The ASU also removes certain settlement
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conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on December 28, 2020. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards update, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the IPO on June 8, 2021, the Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO on June 11, 2021, and the partial exercise by the underwriter of its over-allotment option on June 16, 2021, the initial stockholders purchased an aggregate of
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On January 15, 2021, the Sponsor paid $
The initial stockholders have agreed not to transfer, assign or sell any of the founder shares (except to certain permitted transferees) until the earlier of (i)
Promissory Note – Related Party
On January 31, 2021, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $
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Administrative Services Arrangement
ARC Group Limited, our financial advisor, has agreed, commencing from the date that the Company’s securities are first listed on NASDAQ through the earlier of the Company’s consummation of a Business Combination and its liquidation, to make available to the Company certain general and administrative services, including office space, utilities and administrative services, as the Company may require from time to time. The Company has agreed to pay $
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
On January 22, 2022, a Promissory Note was signed between the Sponsor and the Company. The Sponsor agreed to borrow up to $
Extension Loan
The Company will have until September 8, 2022 to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete a 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 five business days thereafter, redeem
On June 6, 2022, the Company issued a press release, announcing that prior to June 11, 2022, the Company’s Sponsor has deposited into the Company’s trust account $
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NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on January 4, 2021, the holders of the Founder Shares, Placement units, Representative Shares are entitled to make up to
Right of First Refusal
For a period beginning on June 8, 2021 and ending 12 months from the closing of a business combination, we have granted the underwriters a right of first refusal to act as lead-left book running manager and lead left manager for any and all future private or public equity, convertible and debt offerings during such period. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of our Registration Statement.
NOTE 7. WARRANT LIABILITY
As of September 30, 2022, the Company has
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable
The Company will not be obligated to deliver any shares of 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 covering the issuance of the shares of common issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of common stock is available, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than
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Redemption of warrants when the price per common stock equals or exceeds $
● | in whole and not in part; |
● | at a price of $ |
● | if, and only if, the closing price of the Company’s common stock equals or exceeds $ |
Redemption of warrants when the price per common stock equals or exceeds $
● | if, and only if, the closing price of the Company’s common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Window and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Proposed Public Offering, except that the Placement Warrants and the common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or salable until
The Company accounted for the
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The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company classified each warrant as a liability at its fair value and 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. At September 30, 2022 and December 31, 2021, the fair value of total warrant liability is $
NOTE 8. STOCKHOLDER’S EQUITY (DEFICIT)
Common Stock — The Company was authorized to issue
Preferred Shares — The Company was authorized to issue
NOTE 9. FAIR VALUE MEASUREMENTS
The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs: Unadjusted quoted prices for identical assets or instruments in active markets.
Level 2 Inputs: Quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs: Significant inputs into the valuation model are unobservable.
The following table presents information about the Company’s assets and derivative warrant liabilities that are measured at fair value on a recurring basis as of September 30 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
|
| Quoted Prices in |
| Significant Other | Significant Other | ||||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description | (Level 1) | (Level 2) |
| (Level 3) | |||||
(Unaudited) | (Unaudited) | (Unaudited) | |||||||
Asset: | |||||||||
Marketable securities held in Trust Account |
| $ | |
| $ | — | $ | — | |
Warrant Liabilities: | |||||||||
Public Warrants | $ | | $ | — | $ | — | |||
Private Placement Warrants | $ | — | $ | — | $ | |
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Quoted Prices in | Significant Other | Significant Other | |||||||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description | (Level 1) | (Level 2) | (Level 3) | ||||||
| (Audited) |
| (Audited) |
| (Audited) | ||||
Asset: |
|
|
|
|
|
| |||
Marketable securities held in Trust Account | $ | | $ | — | $ | — | |||
Warrant Liabilities: |
|
|
|
|
|
| |||
Public Warrants | $ | | $ | — | $ | — | |||
Private Placement Warrants | $ | — | $ | — | $ | |
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.The Warrants are measured at fair value on a recurring basis.
As of September 30, 2022 and December 31, 2021, assets held in the Trust Account were comprised of $
The Company accounted for the aggregate
The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company classified each warrant as a liability at its fair value and 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. This liability is subject to remeasurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. 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 Company utilizes a binomial Monte-Carlo simulation to estimate the fair value of the private placement warrants at each reporting period for its warrants that are not actively traded. Beginning on July 29, 2021, the Public Warrants began trading under the ticker GACQW. After this date, Public Warrant values per share were based on the observed trading price of the Public Warrants. Accordingly, as of September 30, 2021, the observable input qualifies the liability for treatment as a Level 1 liability. The Company recognized $
The estimated fair value of certain derivative warrant liabilities is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
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The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:
|
| December 31, 2021 |
| September 30, 2022 | ||||||
June 11, 2021 | (Audited) | (Unaudited) | ||||||||
(Public Warrants | ||||||||||
and | ||||||||||
Private Warrants) |
| Private Warrants | Private Warrants | |||||||
Exercise price | $ | | $ | | $ | | ||||
Share price | $ | | $ | | $ | | ||||
Expected term (years) | | |
| | ||||||
Probability of Acquisition | | % | | % | | % | ||||
Volatility | | % | % |
| | % | ||||
Risk-free rate | % | % | % | |||||||
Dividend yield (per share) | % | % | % |
The change in the fair value of the derivative warrant liabilities for the period from June 11, 2021 (Initial Public Offering) through September 30, 2022, is summarized as follows:
| Private Warrant |
| Public Warrant |
| Warrant Liability | ||||
Fair value as of June 11, 2021 (Initial Public Offering) | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions(1) | | | | ||||||
Fair value as of September 30, 2021 | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions(1)(2) | ( | ( | |||||||
Fair value as of September 30, 2021 | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions(1)(2) | | | | ||||||
Fair value as of December 31, 2021 | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions(1)(2) | ( | ( | ( | ||||||
Fair value as of March 31, 2022 (unaudited) | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions(1)(2) | ( | ( | ( | ||||||
Fair value as of June 30, 2022 (unaudited) | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions(1)(2) | ( | ( | ( | ||||||
Fair value as of September 30, 2022 (unaudited) | $ | | $ | | $ | |
(1) | Changes in valuation inputs or other assumptions are recognized in change in fair value of warrant liability in the statement of operations. |
(2) | Changes are due to the use of quoted prices in an active market (Level 1) and the use of unobservable inputs based on assessment of the assumptions (Level 3) for Public Warrants (after becoming actively traded) and Private Placement Warrants, respectively. |
NOTE 10. 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. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
- | The Company held a Special Meeting on November 10, 2022. On the meeting, a quorum was presented and the following Proposals has been approved: |
o | The transactions contemplated under the Stock Purchase Agreement (as amended on June 24, 2022, August 21, 2022 and September 27, 2022) by and among GACQ, CLP Luminex Holdings, LLC, (which we refer to as “Luminex Seller”), and Luminex Home Décor & Fragrance Holding Corporation, (which we refer to as “Luminex”). Pursuant to the terms of the Luminex Stock Purchase Agreement, a business combination between GACQ and Luminex will be effected by the acquisition of 100% of the issued and outstanding shares of capital stock of Luminex from Luminex Seller ( refer as the “Luminex Business Combination Proposal”). |
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o | The transactions contemplated under the Stock Purchase Agreement (as amended on June 24, 2022 and on September 22, 2022) by and among GACQ, TGP Trading FZCO, (which we refer to as “GP Global Seller”), and GP Global Limited (which we refer to as “GP Global”). Pursuant to the terms of the GP Global Stock Purchase Agreement, a business combination between GACQ and GP Global will be effected by the acquisition of 100% of the issued and outstanding capital shares of GP Global from GP Global Seller ( refer as the “GP Global Business Combination Proposal”). |
o | The proposed Second Amended and Restated Certificate of Incorporation of GACQ ( refer as the“Charter Proposal”). |
o | On a non-binding advisory basis, certain material differences between the Proposed Charter and GACQ’s current charter that is in effect on the date hereof, which differences are being presented in accordance with the requirements of the U.S. Securities and Exchange Commission as separate sub-proposals which are referred to in the Proxy Statement collectively, as such separate sub-proposals are expressly described in the Proxy Statement ( refer as the “Advisory Charter Proposals”). |
o | The issuance of more than 20% of the issued and outstanding shares of GACQ Common Stock in connection with the issuance of a maximum of 8,170,000 shares of GACQ Common Stock (subject to adjustment as described in the Proxy Statement) pursuant to the terms of the GP Global Stock Purchase Agreement, which will result in a change of control, as required by Nasdaq Listing Rule 5635(a) and 5635(b) (refer as the “Nasdaq Proposal”). |
o | Effective as of the consummation of the Business Combination, Sergio Pedreiro, Rohan Ajila, Gautham Pai, Art Drogue, Tom Clausen, and Dennis Tse to serve on the board of directors of the Combined Company until their respective successors are duly elected and qualified ( refer as the “Directors Proposal”). |
o | The Ascense Brands Inc. 2022 Omnibus Incentive Plan (refer as the “Incentive Plan Proposal”). |
o | Modify Article SIXTH (D) of GACQ’s Current Charter in order to expand the methods that GACQ may employ in order to not become subject to the “penny stock” rules of the Securities and Exchange Commission (refer as the “Current Charter Amendment Proposal”). |
- | As of November 8, 2022, stockholders holding 18,133,785 shares of the Company’s common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s trust account. As a result, the redemption rate was approximately 99.29%. |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on December 28, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our business combination using cash from the proceeds of the initial public offering and the sale of the private placement units, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Business Combinations
On December 13, 2021, the Company has entered into the following agreements to acquire two business combination target companies for the purpose of consummating its initial business combination. Both target companies are in the home décor and fragrance products industry.
Luminex Home Décor & Fragrance Holding Corporation
On December 13, 2021, we entered into a Stock Purchase Agreement (the “Luminex SPA”) with CLP Luminex Holdings, LLC, a Delaware limited liability company (“Luminex Seller”), and Luminex Home Décor & Fragrance Holding Corporation, a Delaware corporation (“Luminex”). Pursuant to the terms of the Luminex SPA, a business combination between Global Consumer and Luminex will be effected by the acquisition of 100% of the issued and outstanding shares of capital stock of Luminex from Luminex Seller (the “Luminex Stock Acquisition”). The purchase price payable by Global Consumer to Luminex Seller in the Luminex Stock Acquisition is in the form of cash and is based on an enterprise value of 8 times LTM EBITDA of Luminex and its subsidiaries for the trailing twelve months ending January 31, 2022 (subject to an enterprise value floor of $160 million and a cap of $200 million). The purchase price is subject to adjustments and will be determined in good faith by Luminex and will be reviewed and approved prior to the Closing by an accounting firm.
The foregoing description of the Luminex SPA does not purport to be complete and is qualified in its entirety by the terms and conditions of the Luminex SPA, a copy of which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on December 13, 2022.
GP Global Limited
On December 13, 2021, Global Consumer entered into a Stock Purchase Agreement (the “GP Global SPA”) by and among Global Consumer, TGP Trading FZCO, a freezone company with limited liability organized in Dubai Airport Free Zone, Dubai, United Arab Emirates (“GP Global Seller”), and GP Global Limited, an offshore company with limited liability organized in Jebel Ali Free Zone, Dubai, United Arab Emirates (“GP Global”). Mr. Gautham Pai, Co-Chairman of the board of GACQ and a member of the Sponsor owns 100% of the GP Global SPA. Pursuant to the terms of the GP Global SPA, a business combination between Global Consumer and GP Global will be effected by the acquisition of 100% of the issued and outstanding capital shares of GP Global from GP Global Seller (the “GP Global Stock Acquisition”). The purchase price payable by Global Consumer to GP Global Seller at the Closing of the GP Global Stock Acquisition is in the form of the issuance of shares of common stock of Global Consumer (the “Acquisition Consideration Shares”) (valued at $10 per share) and is based on an enterprise value of $270 Million. The purchase price is subject to adjustments and will be determined in good faith by GP Global and will be reviewed and approved prior to the Closing by an accounting firm.
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The foregoing description of the GP Global SPA does not purport to be complete and is qualified in its entirety by the terms and conditions of the GP Global SPA, a copy of which was filed as Exhibit 2.2 to the Current Report on Form 8-K filed with the SEC on December 13, 2022.
Amendments to the Stock Purchase Agreements
On June 24, 2022, the Company, Luminex Seller and Luminex entered into the First Amendment to Stock Purchase Agreement (the “Luminex SPA Amendment”) to, among other things, extend the Outside Closing Date (as defined in the Luminex SPA) to August 15, 2022. With the exception of such amended terms, the Luminex SPA remains in full force and effect.
The foregoing description of the Luminex SPA Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the Luminex SPA Amendment, a copy of which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on June 29, 2022 and incorporated by reference herein.
On June 24, 2022, the Company, GP Global Seller and GP Global entered into the First Amendment to Stock Purchase Agreement (the “GP Global SPA Amendment”) to extend the Outside Closing Date (as defined in the GP Global SPA) to September 11, 2022. With the exception of such amended terms, the GP Global SPA remains in full force and effect.
The foregoing description of the GP Global SPA Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the GP Global SPA Amendment, a copy of which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on June 29, 2022 and incorporated by reference herein.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the three months ended September 30, 2022, were organizational activities and those necessary to prepare for the initial public offering, described below. We do not expect to generate any operating revenues until after the completion of our business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the initial public offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a net loss of $78,402, which consists of operating costs of $1,286,030, realized and unrealized gain from marketable securities held in the Trust Account of $594,522, interest expense of $20,971, and offset by change in fair value of warrant liability of $634,077.
For the three months ended September 30, 2021, we had a net income of $5,140,218, which consists of operating costs of $130,145, and offset by interest income on marketable securities held in the Trust Account of $10,541 and change in fair value of warrant liability of $5,259,822.
For the nine months ended September 30, 2022, we had a net income of $1,747,943, which consists of operating costs of $3,430,686, realized and unrealized gain from marketable securities held in the Trust Account of $682,626, interest expense of $47,557, and offset by change in fair value of warrant liability of $4,543,560.
For the nine months ended September 30, 2021, we had a net income of $4,687,307, which consists of operating costs of $250,451, non-operating costs $450,846, and offset by interest income on marketable securities held in the Trust Account of $12,567 and change in fair value of warrant liability of $5,376,037.
Going Concern
As of September 30, 2022, we had cash and marketable securities of $187,837,498 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 (which interest shall be net of taxes payable and excluding deferred underwriting commissions) to complete our initial Business Combination. To the extent that our common stocks 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.
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As of September 30, 2022, we had cash of $8,929 outside of the Trust Account. 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 our initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that a business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $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. The units would be identical to the private placement units.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of our public subunits upon consummation of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. If we are unable to complete our business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
The Company intends to complete the proposed Business Combination before December 11, 2022, and we believe we have sufficient arrangements with our vendors to continue to operate until we complete our initial Business Combination. However, there can be no assurance that the Company will be able to consummate the Business Combination by then. In the event that we are unable to consummate the Business Combination before December 11, 2022 we anticipate identifying and accessing additional capital resources in order to extend the Business Combination period up to 18 months. However, there can be no assurance that the Company will have access to sufficient capital to extend the deadline to consummate the Business Combination. As a result, in connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” it is uncertain that the Company will have sufficient liquidity to fund the working capital needs. Management has determined that the Company’s cash flow deficit raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed financial statements are issued . No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2022.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.
The underwriters are entitled to a deferred fee of $0.325 per unit, or $5,935,475 in the aggregate. The deferred fee will become payable to the underwriters solely in the event that the Company completes a business combination, subject to the terms of the underwriting agreement.
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The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 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 U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on December 28, 2020. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. In accordance with ASC 825-10 ”Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the statement of operations as incurred.
The 9,131,500 warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the 226,806 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Common Stocks Subject to Possible Redemption
We account for our common stocks subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” common stocks subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stocks (including common stocks that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stocks are classified as stockholders’ equity (deficit). Our common stocks feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of December 31, 2021, 18,263,000 shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of our interim balance sheets.
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Net Income Per Common Stock
We apply the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net income per common stock is computed by dividing the pro rata net loss between the redeemable shares and the non-redeemable shares by the weighted average number of common stocks outstanding for each of the periods. The calculation of diluted income per common stock does not consider the effect of the warrants issued in connection with the IPO 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 for 9,358,306 shares of common stock in the aggregate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2022, we were not subject to any market or interest rate risk. The net proceeds held in the Trust Account have been invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less, or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including Mr. Rohan Ajila, our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, solely due to the Company’s lack of ability to account for complex financial instrument, the Company’s disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2022.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the evaluation of the SEC Statement and management’s subsequent re-evaluation of its Prior Financials, the Company determined that there were errors in its accounting for its warrants. Management concluded that a deficiency in internal control over financial reporting existed relating to the accounting treatment for complex financial instruments and that the failure to properly account for such instruments constituted a material weakness. This material weakness resulted in the need to restate the Prior Financials.
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Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, with the exception of the below.
The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for Temporary Equity and the restatement of the Prior Financials. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation of the material weakness and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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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 are any of the risks described in our final prospectus for our Initial Public Offering filed with the SEC on June 10, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our Initial Public Offering filed with the SEC on June 10, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the company.
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.
No. |
| Description of Exhibit | |
2.1 | |||
2.2 | |||
2.3 | |||
31.1* |
| ||
31.2* |
| ||
32.1** |
| ||
32.2** |
| ||
101.INS* |
| XBRL Instance Document | |
101.CAL* |
| XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH* |
| XBRL Taxonomy Extension Schema Document | |
101.DEF* |
| XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* |
| XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* |
| XBRL Taxonomy Extension Presentation Linkbase Document |
* 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.
| Global Consumer Acquisition Corp. | |
|
|
|
Date: November 14, 2022 | By: | /s/ Rohan Ajila |
| Name: | Rohan Ajila |
| Title: | Chief Executive Officer and Chief Financial Officer |
|
| (Principal Executive Officer, Principal Financial and Accounting Officer) |
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