References to the "Company," "our," "us" or "we" refer to Glass Houses
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the financial statements and the notes thereto contained elsewhere in this
Report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated as a Delaware corporation on January
19, 2021 and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses, which we refer to herein as our initial
business combination. We have not selected any specific business combination
target. We intend to effectuate our initial business combination using cash from
the proceeds of our initial public offering and the private placement of the
private placement warrants, 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 our initial
business combination will be successful.
The registration statement for our initial public offering was declared
effective on March 22, 2021. On March 25, 2021, we consummated our initial
public offering of 22,047,293 Units, including 2,047,293 additional Units that
were issued pursuant to the underwriter's partial exercise of its over-allotment
option, at $10.00 per Unit, generating gross proceeds of approximately $220.5
million, and incurring offering costs of approximately $12.7 million, inclusive
of $7.7 million in deferred underwriting commissions.
Simultaneously with the closing of our initial public offering, we consummated
the private placement of 7,200,000 private placement warrants to our sponsor, at
a price of $1.00 per private placement warrant, generating gross proceeds of
approximately $7.2 million. Simultaneously with the closing of the
over-allotment option, we sold an additional 409,459 private placement warrants
to our sponsor at a price of $1.00 per private placement warrant, generating
additional gross proceeds of approximately $0.4 million. Each private placement
warrant is exercisable to purchase one share of the Company's Class A common
stock.
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Following our initial public offering, the closing of the over-allotment option
and the sale of the private placement warrants, approximately $220.5 million was
placed in a trust account located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and invested only in U.S.
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations, as
determined by us, until the earlier of: (i) the completion of a Business
Combination and (ii) the distribution of the trust account.
If we are unable to complete an initial business combination within 24 months
from the closing of our initial public offering, or March 25, 2023, we will
(i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than ten business days thereafter, redeem
100% of the public shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account including interest earned
on the funds held in the trust account and not previously released to us to pay
our franchise and income taxes (less up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding public shares,
which redemption will completely extinguish public stockholders' rights as
stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Results of Operations
Our entire activity since inception up to December 31, 2021 relates to our
formation, our initial public offering and, since the closing of our initial
public offering, a search for a business combination candidate. We will not be
generating any operating revenues until the closing and completion of our
initial business combination, at the earliest.
For the period from January 19, 2021 through December 31, 2021, we had net
income of $8,404,938, which was comprised of the change in the fair value of our
warrants of $12,837,032 and interest earned on marketable securities held in
trust account of $14,831, partially offset by operating costs of $1,270,924,
warrant issuance costs of $812,974, and other expense relating to the fair value
exceeding the amount paid for the warrants of $2,363,027.
Liquidity and Capital Resources
As of December 31, 2021, we had approximately $1.0 million in our operating bank
account, and working capital of approximately $1.3 million.
Prior to the completion of our initial public offering, our liquidity needs had
been satisfied through a payment from our sponsor of $25,000 for the founder
shares to cover certain offering costs and the loan under an unsecured
promissory note from our sponsor of $99,160. On March 25, 2021, we consummated
the initial public offering of 20,000,000 Units at a price of $10.00 per Unit.
On March 30, 2021, the underwriter partially exercised its over-allotment
option, purchasing an additional 2,047,293 Units, at $10.00 per Unit, on April
1, 2021. In aggregate, gross proceeds of $220,472,930 were generated.
Simultaneously with the closing of our initial public offering, we consummated
the sale of 7,200,000 private placement warrants at a price of $1.00 per private
placement warrant in a private placement to our sponsor. On April 1, 2021,
simultaneously with the closing of the over-allotment option, we sold an
additional 409,459 private placement warrants to our sponsor at a price of $1.00
per share. In aggregate, gross proceeds of $7,609,459 were generated.
Following our initial public offering, the closing of the over-allotment option
and the sale of the private placement warrants, a total of $220,472,930 was
placed in the trust account. We incurred $12,693,922 in transaction costs,
including $4,409,459 of underwriting fees, $7,716,553 of deferred underwriting
fees and $567,910 of other offering costs. The promissory note from our sponsor
was paid in full on March 26, 2021. Subsequent to the consummation of our
initial public offering, the closing of the over-allotment option and the sale
of the private placement warrants, our liquidity needs have been satisfied
through the proceeds from the consummation of the private placement not held in
the trust account.
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In addition, in order to finance transaction costs in connection with an
intended initial business combination, our sponsor or an affiliate of our
sponsor or certain of our officers and directors may, but are not obligated to,
provide us Working Capital Loans. To date, there were no amounts outstanding
under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet our needs through the earlier of the
consummation of a business combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial business combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the business combination.
Critical Accounting Policies
The preparation of the financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reporting period. Actual results could differ from those estimates. We have
identified the following as our critical accounting policies:
Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ASC Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption are classified as a liability instrument and are
measured at redemption 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.
All of the 22,047,293 shares of Class A common stock sold as part of the Units
in our initial public offering contain a redemption feature which allows for the
redemption of such public shares in connection with the Company's liquidation,
if there is a stockholder vote or tender offer in connection with the business
combination and in connection with certain amendments to the Company's amended
and restated certificate of incorporation. In accordance with the SEC and its
staff's guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within the control of the
Company require common stock subject to redemption to be classified outside of
permanent equity. Therefore, all Class A common stock has been classified
outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net Income Per Share of Common Stock
The Company has two classes of shares, which are referred to as Class A common
stock and Class B common stock. Earnings and losses are shared pro rata between
the two classes of shares. The 18,633,106 potential common shares for
outstanding warrants to purchase the Company's stock were excluded from diluted
earnings per share for the three months ended December 31, 2021 and for the
period from January 19, 2021 (inception) through December 31, 2021 because the
warrants are contingently exercisable, and the contingencies have not yet been
met. As a result, diluted net income per common share is the same as basic net
income per common share for such periods.
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Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives in
accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments
are recorded at fair value on the grant date and re-valued at each reporting
date, with changes in the fair value reported in the statements of operations.
Derivative assets and liabilities are classified on the balance sheet as current
or non-current based on whether or not net-cash settlement or conversion of the
instrument could be required within 12 months of the balance sheet date. The
Company has determined the warrants are a derivative instrument and should be
accounted for as liabilities. As such, the Company recognizes the warrant
liabilities at fair value at each reporting period and records the change in
fair value in the statement of operations.
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation
of proceeds from the issuance of convertible debt into its equity and debt
components. The Company applies this guidance to allocate initial public
offering proceeds from the Units between Class A common stock and warrants,
using the residual method by allocating initial public offering proceeds first
to fair value of the warrants and then the Class A common stock.
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 for smaller reporting
companies for fiscal years beginning after December 15, 2023, including interim
periods within those fiscal years. The Company continues to evaluate the impact
of ASU 2020-06 to its financial statements.
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of our sponsor a monthly fee of $25,000 for office space and
administrative support to the Company. We began incurring these fees on March
22, 2021 and will continue to incur these fees monthly until the earlier of the
completion of the business combination and the Company's liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,716,553
in the aggregate. Subject to the terms of the underwriting agreement, (i) the
deferred fee was placed in the trust account and will be released to the
underwriter only upon the completion of a business combination and (ii) the
deferred fee will be waived by the underwriter in the event that we do not
complete a business combination.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the Chief Executive Officer's
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our initial public offering or
until we are no longer an "emerging growth company," whichever is earlier.
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