UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on Which Registered | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Date File required to be submitted and pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company | ||||
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes
As of May 16, 2023, there were
GLOBAL PARTNER ACQUISITION CORP II
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023
Table of Contents
i
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Global Partner Acquisition Corp II
Condensed Balance Sheets
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets - | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities– | ||||||||
| Accounts payable | $ | $ | ||||||
| Promissory Note – related party | ||||||||
| Extension Promissory Notes – related party, at fair value | ||||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Other liabilities – | ||||||||
| Warrant liability | ||||||||
| Deferred underwriting commission | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A ordinary shares subject to possible redemption; | ||||||||
| Shareholders’ deficit: | ||||||||
| Preference shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities, Class A ordinary shares subject to possible redemption and shareholders’ deficit | $ | $ | ||||||
See accompanying notes to financial statements.
1
Global Partner Acquisition Corp II
Condensed Statements of Operations
(unaudited)
| For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Settlement and release of liabilities | ( | ) | - | |||||
| Income (loss) from operations | ( | ) | ||||||
| Other income (expense) – | ||||||||
| Income from cash and investments held in Trust Account | ||||||||
| Write off contingent warrants associated with shares redeemed | ||||||||
| Change in fair value of Extension Promissory Notes – related party | ( | ) | - | |||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Net income | $ | $ | ||||||
| $ | $ | |||||||
| $ | $ | |||||||
See accompanying notes to financial statements.
2
Global Partner Acquisition Corp II
Condensed Statements of Changes in Shareholders’ Deficit
(unaudited)
For the three months ended March 31, 2023:
| Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Class B | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balances, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Accretion in value of Class A ordinary shares subject to redemption to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Inception date fair value adjustments of Extension Promissory Notes - related party | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balances, March 31, 2023 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
For the three months ended March 31, 2022:
| Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Class B | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balances, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income | - | |||||||||||||||||||
| Balances, March 31, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to financial statements.
3
Global Partner Acquisition Corp II
Condensed Statements of Cash Flows
(unaudited)
| For the three months ended March 31, 2023 | For the three months ended March 31, 2022 | |||||||
| Cash flow from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities | ||||||||
| Income from cash and investments held in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of Extension Promissory Notes – related party | - | |||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in prepaid expenses | ( | ) | ( | ) | ||||
| (Decrease) increase in accounts payable | ( | ) | ( | ) | ||||
| Increase (decrease) in accrued liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash deposited in Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Redemption of | ( | ) | ||||||
| Repayment of Promissory Note – related party | ( | ) | ||||||
| Proceeds of Extension Promissory Note – related party | ||||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash at beginning of the year | ||||||||
| Cash at end of the year | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Deferred underwriter compensation | $ | $ | ||||||
| Offering costs included in accounts payable | $ | $ | ||||||
See accompanying notes to financial statements.
4
Global Partner Acquisition Corp II
Notes to Condensed Financial Statements
(unaudited)
Note 1 – Description of Organization and Business Operations
Global Partner Acquisition Corp II (the “Company”) was incorporated under the laws of the Cayman Islands as an exempted company on November 3, 2020. The Company was formed for the purpose of effecting a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
As of March 31, 2023, the Company had not commenced any operations. All activity for the period from November 3, 2020 (inception) to March 31, 2023 relates to the Company’s formation and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and completing a suitable Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Public Offering.
In January 2023, the shareholders of the Company took various
actions and the Company entered into various agreements resulting in a change of control of the Company, redemption of approximately
All dollar amounts are rounded to the nearest thousand dollars.
Sponsor and Public Offering:
The Company’s sponsor is Global Partner Sponsor II LLC, a Delaware
limited liability company (the “Sponsor”). The Company intends to finance a Business Combination with unredeemed proceeds
from the $
In January 2023, the following material transactions, among others, changed the control over and resources of the Company, all as further discussed in these notes to condensed financial statements, as follows:
| 1. | On January 11, 2023, the Company held an Extension Meeting of its shareholders in which the shareholders approved the proposal to
amend the Company’s amended and restated memorandum and articles of association (the “Extension Amendment Proposal”)
to extend the date required to complete a Business Combination (as described further in Business Combination below). In connection with
the vote to approve the Extension Amendment Proposal the holders of |
| 2. | On January 13, 2023, the Company, entered into an Investment Agreement (the “Investment Agreement”) with the Sponsor and
Endurance Global Partner II, LLC, a Delaware limited liability company (the “Investor”), pursuant to which the Investor agreed
to contribute to the Sponsor an aggregate amount in cash equal to up to $ |
5
| 3. | Pursuant to the Investment Agreement, the Sponsor transferred control of the Sponsor to affiliates of Antarctica Capital Partners LLC. |
| 4. | Pursuant to the Investment Agreement, the Sponsor has agreed to lend to the Company the funds required to pay expenses incurred by the Company and reasonably related to the costs and expenses of facilitating the extension of the term of the Company. |
| 5. | Further, on January 13, 2023, Paul J. Zepf, Pano Anthos, Andrew Cook, James McCann and Jay Ripley tendered their resignations as directors of the Company. Additionally, Paul J. Zepf and David Apseloff resigned as officers of the Company. There was no known disagreement with any of the outgoing directors or officers on any matter relating to the Company’s operations, policies or practices. |
| 6. | The Company made settlements and received releases from several creditors in exchange for cash payments made resulting in the reduction
of approximately $ |
Trust account –
The funds in the Trust Account can only be invested in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940. On January 11, 2023, we liquidated the U.S. government treasury obligations or money market fund held in the trust account. Funds will remain in the Trust Account until the earlier of (i) the consummation of its initial Business Combination or (ii) the distribution of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisition targets, legal and accounting fees related to regulatory reporting obligations, payment for services of investment professionals and support services, continued listing fees and continuing general and administrative expenses.
The Company’s amended and restated memorandum and articles of
association provided that, other than the withdrawal of interest to pay tax obligations, if any, less up to $
On January 11, 2023, the Company’s shareholders voted to
extend the date by which the Company has to consummate a business combination from January 14, 2023 (the “Original Termination
Date”) to April 23, 2023 (the “Articles Extension Date”) and to allow the Company, without another shareholder
vote, to elect to extend the date to consummate a business combination on a monthly basis for up to nine times by an additional one
month each time up until the Termination Date of January 14, 2024. Upon each of the nine one-month extensions, the Sponsor or one or
more of its affiliates, members or third-party designees may contribute to the Company $
6
Business Combination:
The Company’s management has broad discretion with respect to
the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering
are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein,
“Target Business” is one or more target businesses that together have a fair market value equal to at least
The Company, after signing a definitive agreement for a Business Combination,
will either (i) seek shareholder approval of the Business Combination at a meeting called for such purpose in connection with which shareholders
may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro
rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial
Business Combination, including interest earned on funds held in the Trust Account and not previously released to pay income taxes, or
(ii) provide shareholders with the opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid
the need for a shareholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust
Account as of two business days prior to commencement of the tender offer, including interest earned on funds held in the Trust Account
and not previously released to pay income taxes. The decision as to whether the Company will seek shareholder approval of the Business
Combination or will allow shareholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and
will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require
the Company to seek shareholder approval unless a vote is required by the rules of the Nasdaq Capital Market. If the Company seeks shareholder
approval, it will complete its Business Combination only if a majority of the outstanding Class A and Class B ordinary shares voted are
voted in favor of the Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause
its net tangible assets to be less than $
If the Company holds a shareholder vote or there is a tender offer
for shares in connection with a Business Combination, a public shareholder will have the right to redeem its shares for an amount in cash
equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation
of the initial Business Combination, including interest earned on funds held in the Trust Account and not previously released to pay income
taxes. As a result, such Class A ordinary shares are recorded at redemption amount and classified as temporary equity upon the completion
of the Public Offering, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account is initially funded at
$
As further discussed below, the Company will have until the
Termination Date, that was proposed to and approved by the Company’s shareholders in the form of an amendment to the
Company’s amended and restated memorandum and articles of association (the “Combination Period”). If the Company
does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of
winding up and (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public Class A
ordinary shares for a per share pro rata portion of the Trust Account, including interest earned on funds held in the Trust Account
and not previously released to pay income taxes (less up to $
7
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation:
The accompanying unaudited condensed interim financial statements of the Company are presented in U.S. dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year or any future periods.
The accompanying unaudited condensed interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 18, 2022.
Mandatory Liquidation and Going Concern:
At March 31, 2023, the Company has approximately $
Emerging Growth Company:
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Net Income per Ordinary Share:
Net income per ordinary share is computed by dividing net income
applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. The Company has
not considered the effect of the warrants sold in the Public Offering and private placement to purchase an aggregate of
8
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata among the two classes of shares. Net income per ordinary share is calculated by dividing the net income by the weighted average number of ordinary shares outstanding during the respective period. The changes in redemption value that are accreted to Class A ordinary subject to redemption (see below) is representative of fair value and therefore is not factored into the calculation of earnings per share.
The following table reflects the earnings per share after allocating income between the shares based on outstanding shares:
| Three months ended | Three months ended | |||||||||||||||
| March 31, 2023 | March 31, 2022 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Basic and diluted net income per ordinary share: | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Denominator: | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Concentration of Credit Risk:
The Company has significant cash balances at financial institutions
which throughout the year regularly exceed the federally insured limit of $
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at March 31, 2023 and December 31, 2022.
Fair Value Measurements:
The Company complies with FASB ASC 820, “Fair Value Measurements,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. As of March 31, 2023 and December 31, 2022, the carrying values of cash, prepaid expenses, accounts payable, accrued expenses and notes payable – related party approximate their fair values primarily due to the short-term nature of the instruments.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. 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 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
9
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Use of Estimates:
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1
and SEC Staff Accounting Bulletin Topic 5A— “Expenses of Offering.” Costs incurred in connection with preparation for
the Public Offering totaled approximately $
Class A Ordinary Shares Subject to Possible Redemption:
As discussed in Note 3, all of the
On January 11, 2023, in connection with the vote to approve the Extension
Amendment Proposal the holders of
10
The Company recognizes changes immediately as they occur and adjusts
the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable
Class A ordinary shares are affected by adjustments to additional paid-in capital. Accordingly,
| Gross proceeds of Public Offering | $ | |||
| Less: Proceeds allocated to Public Warrants | ( | ) | ||
| Offering costs | ( | ) | ||
| Plus: Accretion of carrying value to redemption value | ||||
| Subtotal at inception and at December 31, 2021 | ||||
| Accretion of carrying value to redemption value | ||||
| Class A ordinary shares subject to possible redemption at December 31, 2022 | $ | |||
| Class A ordinary shares redeemed on January 11, 2023 | ( | ) | ||
| Accretion of carrying value to redemption value | ||||
Income Taxes:
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the balance sheet recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. There were no unrecognized tax benefits as of March 31, 2023 and December 31, 2022. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at March 31, 2023 or December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has been subject to income tax examinations by major taxing authorities since inception.
The Company is considered a Cayman Islands exempted company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the periods presented. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Extension Promissory Notes - Related Party:
The Company has elected the fair value option to account for its Extension Promissory Notes - related party with its Sponsor as defined and more fully described in Note 4. As a result of applying the fair value option, the Company records each draw at fair value with a gain or loss recognized at issuance, and subsequent changes in fair value are recorded as change in the fair value of working capital loan-related party on the statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumption about the assumptions a market participant would use in pricing the asset or liability.
Warrant Liability:
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued.
11
Recent Accounting Pronouncements:
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging — Contracts in Entity’s Own Equity” (Subtopic 815-40) (“ASU 2020-06”), to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis. The Company has adopted this standard for its Extension Promissory Notes - related party as further discussed in Note 4.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 3 – Public Offering
On January 14, 2021, the Company consummated the Public Offering and
sale of
The Company had granted the underwriters a 45-day option to purchase
up to
12
The Company paid an underwriting discount of
The shareholders of the Company approved the Extension Amendment
Proposal (as defined below) at the extraordinary general meeting (the “Extension Meeting”) and on January 11, 2023, in connection with that vote, the holders of
Note 4 – Related Party Transactions
Founder Shares:
During 2020, the Sponsor purchased
The Sponsor agreed to forfeit up to
In addition to the vesting provisions of the Founder Shares discussed
in Note 7, the Company’s initial shareholders have agreed not to transfer, assign or sell any of their Founder Shares until the
earlier of (A) one year after the completion of the Company’s initial Business Combination, or (B), subsequent to the Company’s
initial Business Combination, if (x) the last sale price of the Company’s Class A ordinary shares equals or exceeds $
Private Placement Warrants:
The Sponsor purchased from the Company an aggregate of
13
If the Company does not complete a Business Combination, then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution from the Trust Account to the public shareholders and the Private Placement Warrants issued to the Sponsor will expire worthless.
Registration Rights:
The Company’s initial shareholders and the holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration and shareholder rights agreement. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have piggyback registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the registration and shareholder rights agreement.
Related Party Loans:
Sponsor loans - In November 2020, the Sponsor agreed to loan
the Company up to an aggregate of $
Sponsor working capital loans - On August 1, 2022, the
Company issued a promissory note (the “August 1, 2022 Note” or “August 1, 2022 Notes payable – related
party”) in the principal amount of up to $
On January 13, 2023, the Company and the Sponsor agreed to extend the date of maturity of the Note to the earlier of (i) the Termination Date, (ii) the consummation of a business combination of the Company and (iii) the liquidation of the Company.
On January 3, 2023, the Company issued a promissory note (the
“January 3, 2023 Note”) in the principal
amount of up to $
On January 13, 2023, the Company issued a promissory note (the “January
13, 2023 Note” and together with the January 3, 2023 Note, the “Extension Promissory Notes – related party”) in the principal amount of up to $
During the three months ended March 31, 2023, the Company made
four drawdowns under the January 13, 2023 Note in order to pay extension payments and for working capital. The Company adopted the
fair value option with respect to these notes. At each draw and at March 31, 2023, the company had an independent valuation firm
value the notes. The valuation firm uses a Monte Carlo method to value the notes. Those valuations showed that the fair value of the
notes (approximately $
14
The following table presents information about the Company’s Extension Promissory Notes – related party that are measured at fair value on a recurring basis as of March 31, 2023 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| Fair Value Measured as of March 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Extension Promissory Notes - related party | ||||||||||||||||
| Total fair value | $ | $ | $ | $ | ||||||||||||
The following table provides quantitative information regarding the Level 3 fair value measurements inputs at their measurement dates:
| Exercise price | $ | |||
| Unobserved Deal-Scenario Stock price | $ | |||
| Option term (in years) | ||||
| Volatility | % | |||
| Implied Probability of Merger Success | % |
Subsequent to March 31, 2023, in April and May 2023, the Company borrowed
an aggregate $
Administrative Services Agreement:
The Company has agreed to pay $
Note 5 – Accounting for Warrant Liability
At March 31, 2023 and December 31, 2022, there were
The Company’s warrants are not indexed to the Company’s ordinary shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. As such, the company’s warrants are accounted for as warrant liabilities which are required to be valued at fair value at each reporting period.
The following tables present information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | At December 31, 2021 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Warrant Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Warrant liability at December 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Description | At December 31, 2022 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Warrant Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Warrant liability at March 31, 2023 | $ | $ | $ | $ | ||||||||||||
15
At March 31, 2023 and December 31, 2022, the Company values its (a) Public Warrants based on the closing price at March 31, 2023 and December 31, 2022, respectively, in an active market and (b) Private Placement Warrants based on the closing price of the Public Warrants since they are similar instruments.
The warrant liabilities are not subject to qualified hedge accounting.
The Company’s policy is to record transfers at the end of the reporting period. There were no transfers during the three months ended March 31, 2023 or the year ended December 31, 2022.
Note 6 – Trust Account and Fair Value Measurement
The Company complies with FASB ASC 820, “Fair Value Measurements,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
Upon the closing of the Public Offering and the private placement,
a total of $
On January 11, 2023, shareholders redeemed
The Company classifies its U.S. government treasury bills and equivalent securities (when it owns them) as held to maturity in accordance with FASB ASC 320, “Investments – Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Money market funds are valued at market.
16
The funds in the Trust Account were held in an interest bearing cash account at March 31, 2023. The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of December 31, 2022 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s permitted investments at December 31, 2022 consisted of money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assts or liabilities as follows:
| Carrying Value at | Quoted Price in Active | |||||||
| Description | December 31, 2022 | Markets (Level 1) | ||||||
| Assets: | ||||||||
| Money Market Fund | $ | $ | ||||||
| Total | $ | $ | ||||||
Note 7 – Shareholders’ Deficit
Ordinary Shares:
The authorized ordinary shares of the Company include
The Founder Shares are subject to vesting as follows: 50% upon the completion of a Business Combination and then an additional 12.5% on the attainment of each of a series of certain “shareholder return” targets exceeding 20%, 30%, 40% and 50%, as further defined in the agreement. Certain events, as defined in the agreement, could trigger an immediate vesting under certain circumstances. Founder Shares that do not vest within an eight-year period from the closing of the Business Combination will be cancelled.
At March 31, 2023 and December 31, 2022, there were
Preference Shares:
The Company is authorized to issue
17
Note 8 – Commitments and Contingencies
Business Combination Costs:
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, the Company has entered into, and may enter into additional, engagement letters or agreements with various consultants, advisors, professionals and others. The services under these engagement letters and agreements are material in amount and in some instances include contingent or success fees. Contingent or success fees (but not deferred underwriting commission) would be charged to operations in the quarter that an initial Business Combination is consummated. In most instances (except with respect to the Company’s independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Risks and Uncertainties:
COVID-19 — Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have an effect on the Company’s financial position, results of operations and/or search for a target company and/or a target company’s unaudited condensed financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. These unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Bank Closures — Management acknowledges that the Company depends on a variety of U.S. and multi-national financial institutions for banking services. Market conditions can impact the viability of these institutions, which in effect will affect the Company’s ability to maintain and provide assurances that it can access its cash and cash equivalents in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect the Company’s liquidity, business and financial condition.
Conflict in Ukraine — In February 2022, the Russian Federation and Belarus commenced a military action against the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. The impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited condensed financial statements.
Certain repurchases of stock (including redemptions) by publicly traded
domestic corporations - On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law.
The IR Act provides for, among other things, a new U.S. federal
Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, liquidation or partial redemption would depend on a number of factors.
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section and elsewhere in this Form 10-Q regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
Overview
We are a blank check company incorporated on November 3, 2020 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses or entities. We intend to effectuate our initial Business Combination using cash from the proceeds of the Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, equity and debt.
The issuance of additional shares in a Business Combination:
| 1. | may significantly dilute the equity interest of existing investors, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; |
| 2. | may subordinate the rights of holders of Class A ordinary shares if preference shares are issued with rights senior to those afforded our Class A ordinary shares; |
| 3. | could cause a change in control if a substantial number of our Class A ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| 4. | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| 5. | may adversely affect prevailing market prices for our Units, Class A ordinary shares and/or warrants; and may not result in adjustment to the exercise price of our warrants. |
Similarly, if we issue debt or otherwise incur significant debt, it could result in:
| 6. | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| 7. | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| 8. | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
19
| 9. | our inability to pay dividends on our Class A ordinary shares; |
| 10. | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| 11. | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; and |
| 12. | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying financial statements, as of March 31, 2023, we had approximately $3,000 of cash and negative working capital of approximately $1,989,000. Further, we expect to incur significant costs in the pursuit of our initial Business Combination and if we cannot complete a Business Combination by, as extended on January 11, 2023, April 14, 2023 (or, if up to nine additional monthly extensions thereafter are approved by the board of directors, the Termination Date) we could be forced to wind up our operations and liquidate unless we receive an extension approval from our shareholders. We cannot assure you that our plans to complete our initial Business Combination will be successful.
On January 11, 2023, we held an Extension Meeting to, in part, amend our amended and restated memorandum and articles of association to extend the date by which we have to consummate a business combination. In connection with that vote, the holders of 26,068,281 Class A ordinary shares of the Company properly exercised their right to redeem their shares for an aggregate price of approximately $10.167 per share, for an aggregate redemption amount of approximately $265,050,166.
Results of Operations
For the period from November 3, 2020 (date of inception) to December 31, 2022, our activities consisted of formation and preparation for the public offering and, subsequent to completion of the public offering on January 14, 2021, identifying and completing a suitable initial Business Combination. As such, we had no operations or significant operating expenses until after the completion of the Public Offering in January 2021.
Our normal operating costs since January 14, 2021 include costs associated with our search for an initial Business Combination (see below), costs associated with our governance and public reporting (see below), and a charge of $25,000 per month from our Sponsor for administrative services. Costs for such Sponsor provided administrative services aggregate approximately $75,000 for each of the three months ended March 31, 2023 and 2022. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $248,000 and $116,000, respectively, for the three months ended March 31, 2023 and 2022. The increase in the three months ended March 31, 2023 relates to the costs associated with the Extension Meeting of shareholder held in January 2023. Professional costs associated with the January proxy and Extension Meeting as well as work related to reviewing potential business combinations was approximately $744,000 in the three months ended March 2023.
During the three months ended March 31, 2023, the Company negotiated settlement and release agreements with various creditors in exchange for certain payments made and resulting in the reversal of accruals totaling approximately $2,961,000 which is included as a credit to operating expenses in the accompanying Condensed Statements of Operations.
As we identify and evaluate initial Business Combination candidates, our costs are expected to increase significantly in connection with investigating potential initial Business Combination candidates, as well as additional professional, due diligence and consulting fees and travel costs that will be required and professional and other costs associated with negotiating and executing a definitive agreement and related agreements and related required public reporting and governance matters.
20
Other income (expense) includes both interest income and the change in the fair value of the Public and Private Warrants at each reporting date. Interest income was approximately $921,000 and $25,000 respectively, for the three months ended March 31, 2023 and 2022. The variation in interest income reflect market conditions occurring in connection with the Covid-19 pandemic and its aftermath. The Company is required to measure the fair value of the Public and Private Warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for each current period. The change in fair value of warrants was an other expense of approximately $2,020,000 and other income of approximately $9,029,000, respectively in the three months ended March 31, 2023 and 2022.
There were no income tax expenses for the three months ended March 31, 2023 and 2022 because we are a Cayman Islands exempted company and are not subject to income tax in the United States or in the Cayman Islands. We did not withdraw any interest from the Trust Account in the three months ended March 31, 2023 or 2022.
Liquidity and Capital Resources
On January 14, 2021, we consummated the Public Offering of an aggregate of 30,000,000 Units at a price of $10.00 per unit generating gross proceeds of approximately $300,000,000 before underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the private placement of 5,566,667 Private Placement Warrants, each exercisable to purchase one share of our Class A ordinary shares at $11.50 per share, to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds, before expenses, of approximately $8,350,000. At that time, the proceeds in the Trust Account were initially invested in cash. At December 31, 2022 and 2021, the proceeds in the Trust Account are invested in a money market fund that invests solely U.S. government treasury bills.
The net proceeds from the Public Offering and private placement were approximately $301,471,000, net of the non-deferred portion of the underwriting commissions of $6,000,000 and offering costs and other expenses of approximately $904,000 (including approximately $554,000 of offering expenses and approximately $350,000 of insurance that is accounted for as prepaid expense). $300,000,000 of the proceeds of the Public Offering and the private placement have been deposited in the Trust Account and are not available to us for operations (except certain amounts to pay taxes, if any). At December 30, 2022 and 2021, we had approximately $3,000 and $101,000, respectively, of cash available outside of the Trust Account to fund our activities until we consummate an initial Business Combination.
On January 11, 2023, certain shareholders elected to redeem 26,068,281 Class A ordinary shares at $10.167 per share, approximately $265,050,000, from the Trust Account.
Until the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of our Class B ordinary shares for $25,000 by the Sponsor, and the availability of loans to us of up to $300,000 by our sponsor under an unsecured promissory note, a total of $199,000 was actually loaned by the Sponsor against the issuance of the note. The note was non-interest bearing and was paid in full on January 14, 2021 in connection with the closing of the Public Offering, accordingly, no amounts are available or were outstanding under the Note at March 31, 2023 and 2022.
Mandatory Liquidation and Going Concern:
At March 31, 2023, the Company has approximately $3,000 in cash and approximately $1,989,000 in negative working capital. The Company has incurred significant costs and expects to continue to incur additional costs in pursuit of its Business Combination. Further, if the Company cannot complete a Business Combination within the Combination Period, it could be forced to wind up its operations and liquidate unless it receives an extension approval from its shareholders. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. In connection with its financial position and intention to complete a business combination, the Company has secured financing from it Sponsor. The Company’s plan to deal with these uncertainties is to use the financing from the Sponsor to complete a Business Combination prior to deadline as extended from time to time. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
21
On August 1, 2022, the Company issued a promissory note in the principal amount of up to $2,000,000 to its Sponsor. The note was issued in connection with advances the Sponsor may make to the Company for expenses reasonably related to its business and the consummation of the Business Combination. The note bears no interest and was due and payable upon the earlier to occur of (i) January 14, 2023 and (ii) the effective date of a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination, involving the Company and one or more businesses (the “Business Combination”). On January 13, 2023, the Company and the Sponsor agreed to extend the date of maturity of the note to the earlier of (i) the Termination Date of January 14 2024, (ii) the consummation of a business combination of the Company and (iii) the liquidation of the Company. As of March 31, 2023 and December 31, 2022, the outstanding principal balance under the note was approximately $755,000 and $785,000.
On January 13, 2023, the Company and the Sponsor agreed to extend the date of maturity of the note to the earlier of (i) the Termination Date, (ii) the consummation of a business combination of the Company and (iii) the liquidation of the Company.
On January 3, 2023, the Company issued a promissory note (the “January 3, 2023 Note” or “Extension Promissory Notes – related party”) in the principal amount of up to $250,000 to its Sponsor. The January 3, 2023 Note was issued in connection with advances the Sponsor may make to the Company for expenses reasonably related to its business and the consummation of the Business Combination. The January 3, 2023 Note bears no interest and is due and payable upon the Business Combination. As of March 31, 2023, no amounts have been drawn down and there was no outstanding principal balance under the note. At the election of the Payee, $250,000 of the unpaid principal amount of the January 3, 2023 Note may be converted into warrants of the Company (“Warrants”), at a price of $1.50 per warrant, each warrant exercisable for one Class A ordinary share, $0.0001 par value per share, of the Company. The Warrants shall be identical to the Private Placement Warrants issued to the Sponsor at the time of the Company’s initial public offering.
On January 13, 2023, the Company issued a promissory note (the “January 13, 2023 Note” or “Extension Promissory Notes – related party”) in the principal amount of up to $3,000,000 to its Sponsor. The January 13, 2023 Note was issued in connection with advances the Sponsor may make to the Company for contributions to the Trust Account in connection with the Extension and other expenses reasonably related to its business and the consummation of the Business Combination. The January 13, 2023 Note bears no interest and is due and payable upon the Business Combination. At the election of the Payee, all or a portion of the unpaid principal amount of the Note may be converted into Warrants, at a price of $1.50 per warrant, each warrant exercisable for one Class A ordinary share, $0.0001 par value per share, of the Company. The Warrants shall be identical to the Private Placement Warrants issued to the Sponsor at the time of the Company’s initial public offering.
During the three months ended March 31, 2023, the Company made four drawdowns under the January 13, 2023 Note in order to pay extension payments and for working capital. At each draw and at March 31, 2023, the company had an independent valuation firm value the notes. Those valuations showed that the fair value of the notes (approximately $572,000) was materially less than the drawdown (approximately 377,000 less). The aggregate principal balance outstanding was then revalued to fair value at March 31, 2023 resulting in an increase to the fair value of approximately $32,000 and is stated in the balance stated at March 31, 2023 at fair value of $604,000, approximately $345,000 less than the outstanding principal balance under the note of approximately $949,000.
We expect our principal liquidity requirements during this period to include legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting a successful business combination; legal and accounting fees related to regulatory reporting obligations; payment for investment professionals’ services and support services; Nasdaq continued listing fees; and general working capital that will be used for miscellaneous expenses and reserves.
Our estimates of expenses may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
Moreover, we may need to obtain additional financing to complete our initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our Trust Account, or because we become obligated to redeem a significant number of our public shares upon completion of the Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we have not consummated our initial Business Combination within the Combination Period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
The Company has, as extended on January 11, 2023, until April 14, 2023 (or, if up to nine additional monthly extensions thereafter are approved by the board of directors, the Termination Date) to complete an initial Business Combination (the “initial Business Combination”). If the Company does not complete an initial Business Combination by the end of the Combination Period, the Company will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public Class A ordinary shares for a pro rata portion of the Trust Account, including interest earned on funds held in the Trust Account and not previously released to pay income taxes, but less up to $100,000 of such interest to pay dissolution expenses and (iii) as promptly as reasonably possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining shareholders, as part of its plan of dissolution and liquidation. The initial shareholders have waived their redemption rights with respect to their founder shares; however, if the initial shareholders or any of the Company’s officers, directors or their affiliates acquire Class A ordinary shares in or after the Public Offering, they will be entitled to a pro rata share of the trust account upon the Company’s redemption or liquidation in the event the Company does not complete an initial Business Combination within the required time period.
22
In the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per unit in the Public Offering.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any agreements for non-financial assets.
Contractual obligations
At March 31, 2022, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with the Public Offering, we entered into an Administrative Support Agreement with the Sponsor, pursuant to which the Company pays the Sponsor $25,000 per month for office space, utilities and secretarial and administrative support.
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, the Company may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
23
Critical Accounting Estimates
The requirement under 229.303 (Item 303) Management’s discussion and analysis of financial condition and results of operations is: Critical accounting estimates. Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. Provide qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations to the extent the information is material and reasonably available. This information should include why each critical accounting estimate is subject to uncertainty and, to the extent the information is material and reasonably available, how much each estimate and/or assumption has changed over a relevant period, and the sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation.
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. Management has determined that the Company has no critical accounting estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds of our IPO and a portion of the proceeds of our concurrent sale of Private Placement Warrants are held in a Trust Account invested in U.S. Government Treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, and which invest only in direct U.S. Government Treasury obligations. On January 11, 2023, we liquidated the U.S. government treasury obligations or money market funds held in the Trust Account. The funds in the Trust Account will be maintained in cash in an interest-bearing demand deposit account at a bank until the earlier of our initial Business Combination and our liquidation. Interest on such deposit account is currently approximately 2.5% - 3.0% per anum, but such deposit account carries a variable rate, and we cannot assure you that such rate will not decrease or increase significantly.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We are required to comply with the internal control requirements of the Sarbanes- Oxley Act for the period ending December 31, 2021 and thereafter. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company would we be required to comply with the independent registered public accounting firm attestation requirement on internal control over financial reporting. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.
Disclosure controls are procedures with the objective of ensuring that information required to be disclosed in our reports under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are designed with the objective of ensuring that information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
24
We previously identified a material weakness in 2021 related to our control around the interpretation and accounting for certain complex financial instruments that was not effectively designed or maintained. In light of this assessment, we performed additional analyses as deemed necessary to ensure that our audited financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, our management believes that the financial statements included in this report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented. We expect to assess the internal controls of our target business or businesses prior to the completion of our initial Business Combination and, if necessary, to implement and test additional controls as we may determine are necessary in order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Many small and mid-sized target businesses we may consider for our initial Business Combination may have internal controls that need improvement in areas such as:
| ➤ | staffing for financial, accounting and external reporting areas, including segregation of duties; |
| ➤ | reconciliation of accounts; |
| ➤ | proper recording of expenses and liabilities in the period to which they relate; |
| ➤ | evidence of internal review and approval of accounting transactions; |
| ➤ | documentation of processes, assumptions and conclusions underlying significant estimates; and |
| ➤ | documentation of accounting policies and procedures. |
Management assessed the effectiveness of our internal control over financial reporting on March 31, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (2013). Based on that assessment, management concluded that our disclosure controls and procedures were effective. Accordingly, our management believes that the financial statements included in this report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
This report does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant expenses in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.
25
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
As of the date of this Quarterly Report on Form 10-Q there have been no changes to the risk factors disclosed in our Prospectus filed with the SEC on January 11, 2021 and our Form 10-K filed with the SEC on March 31, 2023. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
26
ITEM 6. EXHIBITS
| * | Filed herewith |
| ** | Furnished herewith |
27
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GLOBAL PARTNER ACQUISITION CORP II | ||
| Dated: May 16, 2023 | /s/ Jarett Goldman | |
| Name: | Jarett Goldman | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
28
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Chandra R. Patel, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| May 16, 2023 | By: | /s/ Chandra R. Patel |
| Chandra R. Patel | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jarett Goldman, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| May 16, 2023 | By: | /s/ Jarett Goldman |
| Jarett Goldman | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II (the “Company”) for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Chandra R. Patel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
| May 16, 2023 | By: | /s/ Chandra R. Patel |
| Chandra R. Patel | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Global Partner Acquisition Corp II (the “Company”) for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Jarett Goldman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the report. |
| May 16, 2023 | By: | /s/ Jarett Goldman |
| Jarett Goldman | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |