References to the "Company," "Glass Houses Acquisition Corp." "our," "us" or
"we" refer to Glass Houses Acquisition Corp. The following discussion and
analysis of the Company's financial condition and results of operations should
be read in conjunction with the unaudited condensed financial statements and the
notes thereto contained elsewhere in this report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
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 the IPO 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 the IPO was declared effective on March 22, 2021.
On March 25, 2021, we consummated the IPO 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 the IPO, we consummated the private placement
of 7,200,000 Private Placement Warrants to the 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 the 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.
Results of Operations
Our entire activity since inception up to September 30, 2022 relates to our
formation, the IPO and, since the closing of the IPO, a search for a Business
Combination candidate. We will not be generating any operating revenues until
the closing and completion of our initial Business Combination, at the earliest.
For the three months ended September 30, 2022, we had net income of $1,034,425,
which was comprised of the change in the fair value of our warrants of $558,994
and interest earned on marketable securities held in trust account of $994,375,
partially offset by operating costs of $318,012 and income tax provision of
$200,932.
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For the three months ended September 30, 2021, we had net income of $5,761,301,
which was comprised of the change in the fair value of our warrants of
$6,046,499 and interest earned on marketable securities held in trust account of
$2,837, partially offset by operating costs of $288,035.
For the nine months ended September 30, 2022, we had net income of $9,664,820,
which was comprised of the change in the fair value of our warrants of
$9,765,310 and interest earned on marketable securities held in trust account of
$1,314,310, partially offset by operating costs of $1,200,010 and income tax
provision of $214,790.
For the period from January 19, 2021 (inception) through September 30, 2021, we
had net income of $6,055,916, which was comprised of the change in the fair
value of our warrants of $10,060,586 and interest earned on marketable
securities held in trust account of $10,172, offset by operating costs of
$838,841, warrant issuance costs of $812,974, other expense relating to fair
value exceeding amount paid for warrants of $2,363,027.
Going Concern and Liquidity
As of September 30, 2022, we had approximately $0.3 million in our operating
bank account, and working capital of approximately $0.5 million (excluding
income tax payable and franchise tax payable).
Prior to the completion of the IPO, our liquidity needs had been satisfied
through a payment from the Sponsor of $25,000 for the founder shares to cover
certain offering costs and the loan under an unsecured promissory note from the
Sponsor of $99,160. On March 25, 2021, we consummated the 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 the IPO, 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 the
Sponsor. On April 1, 2021, simultaneously with the closing of the over-allotment
option, we sold an additional 409,459 Private Placement Warrants to the Sponsor
at a price of $1.00 per share. In aggregate, gross proceeds of $7,609,459 were
generated.
Following the IPO, the closing of the over-allotment option and the sale of the
Private Placement Warrants, a total of $220,472,930 was placed in the trust
account. We incurred $12,693,922 in transaction costs, including $4,409,459 of
underwriting fees, $7,716,553 of deferred underwriting fees and $567,910 of
other offering costs. The promissory note from the Sponsor was paid in full on
March 26, 2021. Subsequent to the consummation of the IPO, 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.
On April 11, 2022, we and the Sponsor entered into a promissory note, pursuant
to which the Sponsor committed to provide up to $200,000 in loans to us for
working capital purposes. We can draw down on such maximum amount during the
term of the promissory note. The loan is non-interest bearing and payable by us
on the earlier of: (i) March 25, 2023 or (ii) the date on which we consummate a
merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses.
In addition, in order to finance transaction costs in connection with an
intended initial Business Combination, the Sponsor or an affiliate of the
Sponsor or certain of 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.
On June 20, 2022, pursuant to the trust agreement dated as of March 22, 2021
between us and CST, the trustee of the Trust Account, we issued a request to CST
to withdraw $156,232 of interest income from the Trust Account for the payment
of our taxes. The proceeds from this withdrawal were deposited into our
operating bank account on July 12, 2022. On September 2, 2022, we withdrew
another $93,740 of interest income from the Trust Account for the payment of our
taxes.
In connection with our assessment of going concern considerations in accordance
with FASB's ASU 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," management determined that the liquidity
condition and date for mandatory liquidation and dissolution raise substantial
doubt about our ability to continue as a going concern through March 25, 2023,
the scheduled liquidation date of us if we do not complete a Business
Combination prior to such date. These unaudited condensed financial statements
do not include any adjustments relating to the recovery of the recorded assets
or the classification of the liabilities that might be necessary should we be
unable to continue as a going concern.
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Critical Accounting Estimates and Policies
The preparation of the unaudited condensed financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the unaudited condensed financial statements 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 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 the IPO 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 and nine months ended September 30, 2022, for
the three months ended September 30, 2021, and for the period from January 19,
2021 (inception) through September 30, 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.
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 statements of operations.
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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 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 unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $25,000 for office space and
administrative support to the Company. We began incurring these fees on March
22, 2021 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and the Company's liquidation.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,716,553
in the aggregate. Subject to the terms of the underwriting agreement, (i) the
deferred fee 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 Public Company
Accounting Oversight Board 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 the
IPO or until we are no longer an "emerging growth company," whichever is
earlier.
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