The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Overview
We are a blank check company formed under the laws of the State of Delaware on
December 28, 2020 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses. We intend to effectuate our business
combination using cash from the proceeds of the initial public offering and the
sale of the private placement units, our capital stock, debt or a combination of
cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a business
combination will be successful.
Business Combinations
On December 13, 2021, the Company has entered into the following agreements to
acquire two business combination target companies for the purpose of
consummating its initial business combination. Both target companies are in the
home décor and fragrance products industry.
Luminex Home Décor & Fragrance Holding Corporation
On December 13, 2021, we entered into a Stock Purchase Agreement (the "Luminex
SPA") with CLP Luminex Holdings, LLC, a Delaware limited liability company
("Luminex Seller"), and Luminex Home Décor & Fragrance Holding Corporation, a
Delaware corporation ("Luminex"). Pursuant to the terms of the Luminex SPA, a
business combination between Global Consumer and Luminex will be effected by the
acquisition of 100% of the issued and outstanding shares of capital stock of
Luminex from Luminex Seller (the "Luminex Stock Acquisition"). The purchase
price payable by Global Consumer to Luminex Seller in the Luminex Stock
Acquisition is in the form of cash and is based on an enterprise value of 8
times LTM EBITDA of Luminex and its subsidiaries for the trailing twelve months
ending January 31, 2022 (subject to an enterprise value floor of $160 million
and a cap of $200 million). The purchase price is subject to adjustments and
will be determined in good faith by Luminex and will be reviewed and approved
prior to the Closing by an accounting firm.
The foregoing description of the Luminex SPA does not purport to be complete and
is qualified in its entirety by the terms and conditions of the Luminex SPA, a
copy of which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed
with the SEC on December 13, 2022.
GP Global Limited
On December 13, 2021, Global Consumer entered into a Stock Purchase Agreement
(the "GP Global SPA") by and among Global Consumer, TGP Trading FZCO, a freezone
company with limited liability organized in Dubai Airport Free Zone, Dubai,
United Arab Emirates ("GP Global Seller"), and GP Global Limited, an offshore
company with limited liability organized in Jebel Ali Free Zone, Dubai, United
Arab Emirates ("GP Global"). Mr. Gautham Pai, Co-Chairman of the board of GACQ
and a member of the Sponsor owns 100% of the GP Global SPA. Pursuant to the
terms of the GP Global SPA, a business combination between Global Consumer and
GP Global will be effected by the acquisition of 100% of the issued and
outstanding capital shares of GP Global from GP Global Seller (the "GP Global
Stock Acquisition"). The purchase price payable by Global Consumer to GP Global
Seller at the Closing of the GP Global Stock Acquisition is in the form of the
issuance of shares of common stock of Global Consumer (the "Acquisition
Consideration Shares") (valued at $10 per share) and is based on an enterprise
value of $270 Million. The purchase price is subject to adjustments and will be
determined in good faith by GP Global and will be reviewed and approved prior to
the Closing by an accounting firm.
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The foregoing description of the GP Global SPA does not purport to be complete
and is qualified in its entirety by the terms and conditions of the GP Global
SPA, a copy of which was filed as Exhibit 2.2 to the Current Report on Form 8-K
filed with the SEC on December 13, 2022.
Amendments to the Stock Purchase Agreements
On June 24, 2022, the Company, Luminex Seller and Luminex entered into the First
Amendment to Stock Purchase Agreement (the "Luminex SPA Amendment") to, among
other things, extend the Outside Closing Date (as defined in the Luminex SPA) to
August 15, 2022. With the exception of such amended terms, the Luminex SPA
remains in full force and effect.
The foregoing description of the Luminex SPA Amendment does not purport to be
complete and is qualified in its entirety by the terms and conditions of the
Luminex SPA Amendment, a copy of which was filed as Exhibit 2.1 to the Current
Report on Form 8-K filed with the SEC on June 29, 2022 and incorporated by
reference herein.
On June 24, 2022, the Company, GP Global Seller and GP Global entered into the
First Amendment to Stock Purchase Agreement (the "GP Global SPA Amendment") to
extend the Outside Closing Date (as defined in the GP Global SPA) to September
11, 2022. With the exception of such amended terms, the GP Global SPA remains in
full force and effect.
The foregoing description of the GP Global SPA Amendment does not purport to be
complete and is qualified in its entirety by the terms and conditions of the GP
Global SPA Amendment, a copy of which was filed as Exhibit 2.1 to the Current
Report on Form 8-K filed with the SEC on June 29, 2022 and incorporated by
reference herein.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the three months ended June 30, 2022, were
organizational activities and those necessary to prepare for the initial public
offering, described below. We do not expect to generate any operating revenues
until after the completion of our business combination. We expect to generate
non-operating income in the form of interest income on marketable securities
held after the initial public offering. We incur expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the three months ended June 30, 2022, we had a net loss of $230,964, which
consists of operating costs of $952,313, realized and unrealized loss from
marketable securities held in the Trust Account of $132,004, interest expense of
$26,586, and offset by change in fair value of warrant liability of $615,931.
For the three months ended June 30, 2021, we had a net loss of $437,281, which
consists of operating costs of $104,676, non-operating costs $450,846, and
offset by interest income on marketable securities held in the Trust Account of
$2,025 and change in fair value of warrant liability of $116,216.
For the six months ended June 30, 2022, we had a net income of $1,826,345, which
consists of operating costs of $2,144,656, realized and unrealized loss from
marketable securities held in the Trust Account of $88,104, interest expense of
$26,586, and offset by change in fair value of warrant liability of $3,909,483.
For the six months ended June 30, 2021, we had a net loss of $482,911, which
consists of operating costs of $150,306, non-operating costs $450,846, and
offset by interest income on marketable securities held in the Trust Account of
$2,025 and change in fair value of warrant liability of $116,216.
Going Concern
As of June 30, 2022, we had cash and marketable securities of $185,439,396 held
in the Trust Account. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account (which interest shall be net of taxes payable and excluding
deferred underwriting commissions) to complete our initial Business Combination.
To the extent that our common stocks or debt is used, in whole or in part, as
consideration to complete our initial Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and
pursue our growth strategies.
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As of June 30, 2022, we had cash of $83,302 outside of the Trust Account. We
intend to use the funds held outside the Trust Account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete our initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a business combination, we may
repay such loaned amounts out of the proceeds of the trust account released to
us. In the event that a business combination does not close, we may use a
portion of the working capital held outside the trust account to repay such
loaned amounts, but no proceeds from our trust account would be used for such
repayment. Up to $1,500,000 of such loans may be convertible into units, at a
price of $10.00 per unit, at the option of the lender. The units would be
identical to the private placement units.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a business combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our business combination. Moreover, we may need to obtain additional
financing either to complete our business combination or because we become
obligated to redeem a significant number of our public subunits upon
consummation of our business combination, in which case we may issue additional
securities or incur debt in connection with such business combination. Subject
to compliance with applicable securities laws, we would only complete such
financing simultaneously with the completion of our business combination. If we
are unable to complete our business combination because we do not have
sufficient funds available to us, we will be forced to cease operations and
liquidate the trust account. In addition, following our business combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
If the Company is unable to raise additional capital, the Company may be
required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit
of a potential transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all.
The Company intends to complete the proposed Business Combination before
September 8, 2022, and we believe we have sufficient arrangements with our
vendors to continue to operate until we complete our initial Business
Combination. However, there can be no assurance that the Company will be able to
consummate the Business Combination by then. In the event that we are unable to
consummate the Business Combination before September 8, 2022 we anticipate
identifying and accessing additional capital resources in order to extend the
Business Combination period up to 18 months. However, there can be no assurance
that the Company will have access to sufficient capital to extend the deadline
to consummate the Business Combination. As a result, in connection with the
Company's assessment of going concern considerations in accordance with
Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," it is uncertain that the Company will have sufficient
liquidity to fund the working capital needs. Management has determined that the
Company's cash flow deficit raises substantial doubt about the Company's ability
to continue as a going concern within one year after the date that the unaudited
condensed financial statements are issued . No adjustments have been made to the
carrying amounts of assets or liabilities should the Company be required to
liquidate.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2022.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below.
The underwriters are entitled to a deferred fee of $0.325 per unit, or
$5,935,475 in the aggregate. The deferred fee will become payable to the
underwriters solely in the event that the Company completes a business
combination, subject to the terms of the underwriting agreement.
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The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the period reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-06,
"Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU
2020-06"), which simplifies accounting for convertible instruments by removing
major separation models required under current U.S. GAAP. The ASU also removes
certain settlement conditions that are required for equity-linked contracts to
qualify for the derivative scope exception, and it simplifies the diluted
earnings per share calculation in certain areas. The Company adopted ASU 2020-06
on December 28, 2020. Adoption of the ASU did not impact the Company's financial
position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks. The Company evaluates all of its financial
instruments, including issued stock purchase warrants, to determine if such
instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to ASC 480 and ASC 815-15. The classification of
derivative instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period. In
accordance with ASC 825-10 "Financial Instruments", offering costs attributable
to the issuance of the derivative warrant liabilities have been allocated based
on their relative fair value of total proceeds and are recognized in the
statement of operations as incurred.
The 9,131,500 warrants issued in connection with the Initial Public Offering
(the "Public Warrants") and the 226,806 Private Placement Warrants are
recognized as derivative liabilities in accordance with ASC 815-40. Accordingly,
the Company recognizes the warrant instruments as liabilities at fair value and
adjust the instruments to fair value at each reporting period. The liabilities
are subject to re-measurement at each balance sheet date until exercised. The
fair value of the Public Warrants issued in connection with the Public Offering
and Private Placement Warrants have been estimated using a Monte Carlo
simulation model each measurement date. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
Common Stocks Subject to Possible Redemption
We account for our common stocks subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." common stocks subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stocks (including common stocks that
features redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, common
stocks are classified as stockholders' equity (deficit). Our common stocks
feature certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, as of
December 31, 2021, 18,263,000 shares of common stock subject to possible
redemption are presented at redemption value as temporary equity, outside of the
stockholders' deficit section of our interim balance sheets.
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Net Income Per Common Stock
We apply the two-class method in calculating earnings per share. The contractual
formula utilized to calculate the redemption amount approximates fair value. The
Class feature to redeem at fair value means that there is effectively only one
class of stock. Changes in fair value are not considered a dividend of the
purposes of the numerator in the earnings per share calculation. Net income per
common stock is computed by dividing the pro rata net loss between the
redeemable shares and the non-redeemable shares by the weighted average number
of common stocks outstanding for each of the periods. The calculation of diluted
income per common stock does not consider the effect of the warrants issued in
connection with the IPO since the exercise of the warrants are contingent upon
the occurrence of future events and the inclusion of such warrants would be
anti-dilutive. The warrants are exercisable for 9,358,306 shares of common stock
in the aggregate.
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GLOBAL CONSUMER ACQUISITION CORP. 
