UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _________ to _________
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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As of August 14, 2024, Class A ordinary shares, par value $ per share, and Class B ordinary shares, par value $ per share, were issued and outstanding, respectively.
GLOBAL TECHNOLOGY ACQUISITION CORP. I
Form 10-Q
For the Quarter Ended June 30, 2024
CONTENTS
| Page | |||
| PART I. FINANCIAL INFORMATION | 3 | ||
| Item 1. | Financial Statements | 3 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 34 | |
| Item 4. | Controls and Procedures | 34 | |
| PART II OTHER INFORMATION | 35 | ||
| Item 1. | Legal Proceedings | 35 | |
| Item 1A. | Risk Factors | 35 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 35 | |
| Item 3. | Defaults upon Senior Securities | 35 | |
| Item 4. | Mine Safety Disclosures | 35 | |
| Item 5. | Other Information | 35 | |
| Item 6. | Exhibits | 35 | |
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL TECHNOLOGY ACQUISITION CORP. I
CONDENSED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Non-current asset – Cash held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Promissory note payable to New Sponsor, net | ||||||||
| Notes payable to related party | ||||||||
| Total current liabilities | ||||||||
| Other liabilities: | ||||||||
| Warrant liabilities | ||||||||
| Deferred underwriting compensation | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (see Note 9) | ||||||||
| Class A ordinary shares, $ par value, subject to possible redemption: shares, at June 30, 2024 and December 31, 2023 (at $ and $ per share, respectively) | ||||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| Preferred shares, $ par value; shares authorized, issued or outstanding | ||||||||
| Class A ordinary shares, $ par value, authorized and issued and outstanding excluding shares subject to possible redemption at each date as of June 30, 2024 and December 31, 2023 | ||||||||
| Class B ordinary shares, $ par value, authorized and issued and outstanding as of June 30, 2024 and December 31, 2023 | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements
| 3 |
GLOBAL TECHNOLOGY ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income on Trust Account | ||||||||||||||||
| Other interest income | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||||||||||
| Waiver of deferred underwriting compensation related to warrants | ||||||||||||||||
| Change in fair value of conversion feature | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average of Class A ordinary shares outstanding – basic and diluted | ||||||||||||||||
| Net (loss) income per Class A ordinary share – basic and diluted | $ | ) | $ | $ | ) | $ | ||||||||||
| Weighted average of Class B ordinary shares outstanding – basic and diluted | ||||||||||||||||
| Net (loss) income per Class B ordinary share – basic and diluted | $ | ) | $ | $ | ) | $ | ||||||||||
See accompanying notes to unaudited condensed financial statements
| 4 |
GLOBAL TECHNOLOGY ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
For the three months ended June 30, 2024:
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, March 31, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Forgiveness of Note payable to related party and Sponsors fees accrued | — | — | ||||||||||||||||||||||||||
| Waiver of deferred underwriters’ compensation | — | — | ||||||||||||||||||||||||||
| Net income | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the three months ended June 30, 2023:
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, March 31, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance, June 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
See accompanying notes to unaudited condensed financial statements
| 5 |
GLOBAL TECHNOLOGY ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(continued)
For the six months ended June 30, 2024:
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Forgiveness of Note payable to related party and Sponsors fees accrued | — | — | ||||||||||||||||||||||||||
| Waiver of deferred underwriters’ compensation | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the six months ended June 30, 2023:
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A ordinary shares subject to redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance, June 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
See accompanying notes to unaudited condensed financial statements
| 6 |
GLOBAL TECHNOLOGY ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Income from cash and investments held in Trust Account | ( | ) | ( | ) | ||||
| Amortization of debt discount | ||||||||
| Change in fair value of warrant liability | ||||||||
| Change in fair value of conversion feature | ( | ) | ||||||
| Wavier of deferred underwriting compensation related to warrant portion of public offering | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in prepaid expenses | ( | ) | ||||||
| Increase in accounts payable | ||||||||
| Increase in accrued liabilities and other | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash deposited in Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account | ||||||||
| Net cash (used) provided from investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Redemption of Class A ordinary shares | ( | ) | ||||||
| Cash received from Promissory note to related party | ||||||||
| Cash received from notes payable to related party | ||||||||
| Net cash (used) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Termination of note payable to prior Sponsor | $ | $ | ||||||
| Forgiveness of Former Sponsor accrual deemed a capital contribution | $ | $ | ||||||
| Waiver of deferred underwriting compensation deemed a capital contribution for equity portion of public offering | $ | $ | ||||||
| Remeasurement of carrying value to redemption value of Class A ordinary shares subject to redemption | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements
| 7 |
GLOBAL TECHNOLOGY ACQUISITION CORP. I
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1—Description of Organization, Business Operations and Liquidity, Including Subsequent Event
Organization and General:
Global
Technology Acquisition Corp. I (the “Company”) was incorporated in the Cayman Islands as an exempted company on
At June 30, 2024, the Company had not commenced any operations. All activity for the period from February 9, 2021 (inception) to June 30, 2024 relates to the Company’s formation and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and completing an initial 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 on investments and cash and cash equivalents from the proceeds derived from the Public Offering.
Former Sponsor and Public Offering:
The
Company’s sponsor was originally Global Technology Acquisition I Sponsor LP, an exempted limited liability partnership registered
in the Cayman Islands (the “Former Sponsor”). The Company intends to finance a business combination with proceeds from the
$
On April 19, 2024, the Company, the Former Sponsor and HCG Opportunity II, LLC (the “New Sponsor,” together with the Former Sponsor, the “Sponsors”) entered into a securities purchase agreement that resulted in a change in control of the Company as discussed below.
Change in Control of the Company, New Working Capital Notes, Extension of Time to Complete a Business Combination and Related Matters:
In April 2024, the Company, the Former Sponsor and the New Sponsor entered into several transactions as follows:
Purchase
Agreement and Change in Control – On April 19, 2024, the Company, the Former Sponsor and the New Sponsor entered into a securities
purchase agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, among other things: (i) the New Sponsor
acquired of the outstanding Class B ordinary shares, par value $ per share (the “Class B Ordinary Shares”
and, together with the Class A Ordinary Shares, the “Ordinary Shares”), of the Company and
| 8 |
Following
the Closing, Former Sponsor retained (i)
The Retained PP Warrants and of the Sponsor Retained Shares are subject to any changes, concessions, amendments, forfeitures, restrictions or other agreements (“Changes”) the New Sponsor determines to make in connection with the Company’s initial business combination or otherwise (provided that all such Changes affect all holders of Private Placement Warrants, including the Former Sponsor and the New Sponsor, equally on a pro rata basis). An aggregate of of the Sponsor Retained Shares and the Director Retained Shares are not be subject to any Changes.
At the closing of the initial business combination, the number of Retained PP Warrants will be equal to at least 30% of the warrants held by the New Sponsor and the Former Sponsor on an aggregate basis and the aggregate number of Sponsor Retained Shares and Director Retained Shares will be equal to at least 30% of the Class A Ordinary Shares and Class B Ordinary Shares held by the New Sponsor, Former Sponsor and the Pre-Closing Independent Directors on an aggregate basis.
On April 19 2024, all of the members of the Board of Directors and officers of the Company resigned and the following persons were appointed to the following positions: (i) Thomas D. Hennessy - Chairman and Chief Executive Officer of the Company, (ii) Nicholas Geeza - Chief Financial Officer of the Company, and (iii) Joseph Beck, Garth Mitchell, Gloria Fu, Courtney Robinson and Javier Saade - independent directors of the Company (together with Mr. Hennessy, the “New Directors”). On June 20, 2024, Courtney Robinson tendered her resignation as a director of the Company, effective immediately. Ms. Robinson’s decision to resign was not a result of any disagreement or dispute with the Board or management of the Company on any matter relating to the Company’s operations, policies or practices.
On
April 19, 2024, in connection with the Purchase Agreement the existing working capital loans payable to the Former Sponsor aggregating
$
Promissory
Note – On April 24, 2024, the Company issued an unsecured promissory note (the “Promissory Note”) to the New Sponsor,
which provides for borrowings from time to time of up to an aggregate of $
Extension
of Time to Complete an Initial Business Combination – On April 25, 2024, the Company borrowed $
The Trust Account:
The
funds in the Trust Account are permitted to be invested only in cash or U.S. government treasury bills with a maturity of one hundred
and eighty-five (
| 9 |
On
April 14, 2023, the Company’s shareholders approved the Articles which provide that, other than the withdrawal of interest to pay
tax obligations, if any, less up to $
On
April 25, 2024, the Company deposited $
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 such 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 business days prior to the consummation of the initial business combination, including interest but less
taxes payable and amounts released for 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 but less taxes payable and amounts released to the Company for working capital. 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 Global Market. If the Company seeks shareholder approval, it will complete its business combination only if a majority
of the outstanding 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 (total assets less intangible assets and liabilities) to be less
than $
| 10 |
If
the Company holds a shareholder vote or there is a tender offer for shares in connection with a business combination, a holder of Public
Shares 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 business days prior to the consummation of the initial business combination, including interest but less
taxes payable and amounts released to the Company for working capital. 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 Standard
Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 (“FASB ASC 480”), “Distinguishing
Liabilities from Equity.” The amount in the Trust Account, upon closing of the Public Offering on October 25, 2021, was initially
$ per Public Share ($
As
amended on April 14, 2023, the Company currently has until July 25, 2024, (which, subsequent to June 30, 2024, was extended to October
25, 2024, at the election of the Company in a three-month extension in July 2024, subject to satisfaction of certain conditions, including
the deposit by the Company of $ per Unit, in each case approximately $
In the event of such distribution, 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.
Risks and Uncertainties:
Ongoing Conflicts – The impact of ongoing and evolving military conflicts, including for example between Russia and Ukraine and Israel and Gaza, including sanctions and countermeasures, on domestic and global economic and geopolitical conditions in general is not determinable as of the date of these condensed financial statements.
Nasdaq
Listing – On June 28, 2023, the Company received a written notice (the “First Notice”) from the Listing Qualifications
Department (the “Nasdaq Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for
On November 22, 2023, the Company issued Class A Ordinary Shares to the Former Sponsor upon the conversion of an equal number of Class B Ordinary Shares (the “Conversion”). The Class A Ordinary Shares issued in connection with the Conversion are subject to the same restrictions as applied to the Class B Ordinary Shares before the Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination, as described in the prospectus for the Public Offering. For the avoidance of doubt, such Class A Ordinary Shares issued in connection with the Conversion do not have any redemption rights and are not entitled to liquidating distributions from the trust account if the Company does not consummate an initial business combination.
| 11 |
Following
the Conversion, there were Class A Ordinary Shares issued and outstanding and Class B Ordinary Shares issued and
outstanding. As a result of the Conversion, the Former Sponsor holds approximately
On November 24, 2023, the Company submitted its application to transfer the listing of its Class A Ordinary Shares, Units and the warrants sold in the Public Offering (the “Public Warrants”) from the Nasdaq Global Market to the Nasdaq Capital Market.
On
November 24, 2023, the Company submitted evidence to the Nasdaq Staff that it is in compliance (the “Plan”) with Nasdaq Listing
Rule 5550(b)(2), which requires the Company to maintain a MVLS of at least $
On January 9, 2024, the Nasdaq Staff approved the Company’s application to transfer the listing of the Class A Ordinary Shares, the Units and the Public Warrants from the Nasdaq Global Market to the Nasdaq Capital Market. The Class A Ordinary Shares, the Units and Public Warrants were transferred to the Nasdaq Capital Market at the opening of business on January 16, 2024 and continue to trade under the symbols “GTAC,” “GTACU” and “GTACW,” respectively. The Company received a written notice from the Nasdaq Staff notifying the Company that, based on the materials submitted by the Company in connection with the Plan and the application to transfer the listing of the Class A Ordinary Shares, Units and Public Warrants from the Nasdaq Global Market to the Nasdaq Capital Market, the deficiencies cited in the First Notice and the Second Notice were cured. As discussed further in Note 2, on May 14, 2024, the Company entered into a Business Combination and Merger Agreement (the “Merger Agreement”) with Global Technology Merger Sub Corporation, a Cayman Islands exempted company limited by shares and a direct, wholly owned subsidiary of GTAC (“Merger Sub”), and Tyfon. Tyfon operates an online art marketplace in China and is based in Suzhou, China.
Liquidity and Going Concern:
In connection with the assessment of going concern considerations in accordance with the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, “Presentation of Financial Statements-Going Concern,” at June 30, 2024 the Company has until July 25, 2024 (which, subsequent to June 30, 2024, was further extended to October 25, 2024, as described above) to consummate an initial business combination. It is uncertain that the Company will be able to consummate an initial business combination by this time. If an initial business combination cannot be completed prior to October 25, 2024, there will be a mandatory liquidation and subsequent dissolution of the Company unless, prior to such date, the Company receives an extension approval from its shareholders or elects to extend the date on which an initial business combination must be consummated.
Further,
as shown in the accompanying unaudited condensed financial statements, the Company had approximately $
Management has determined that 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 these condensed financial statements are released. The Company intends to address this by completing a business combination within the proscribed timeframe, including available extensions, however there is no assurance that this can be done. The condensed interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 12 |
Note 2—Entry into Merger Agreement
Merger Agreement:
On May 14, 2024, the Company entered into the Merger Agreement with Merger Sub and Tyfon. Tyfon operates an online art marketplace in China and is based in Suzhou, China.
Pursuant
to the Merger Agreement, the parties thereto will enter into a business combination transaction (the “Business Combination”)
by which, among other others, Merger Sub will merge with and into Tyfon (the “Merger” and, together with the other transactions
contemplated by the Merger Agreement, the “Transactions”), with Tyfon surviving the Merger as a wholly owned subsidiary of
the Company. Upon closing of the Merger (the “Closing,” and the date on which the Closing occurs, the “Closing Date”),
Tyfon will change its name to “Tyfon Culture Inc.”, and its Class A ordinary shares, par value of $ per share (“New
Tyfon Ordinary Shares”) are expected to trade on the Nasdaq Capital Market under the ticker symbol “TFCI.” The Transactions
reflect an implied pro forma enterprise value for Tyfon of $
The Transactions are expected to be consummated subject to the terms and conditions set forth in the Merger Agreement, including, among others: (i) there being no governmental order or law in force enjoining or prohibiting the consummation of the Transactions, (ii) no proceedings brought by a third-party to enjoin or otherwise restrict the consummation of the Closing and the Merger, (iii) the proxy statement/prospectus have been declared effective by the Securities and Exchange Commission (the “SEC”), (iv) the receipt of the Purchaser Shareholders’ Approval (as defined in the Merger Agreement), (v) approval by the requisite shareholder of Tyfon of the Transactions, (vi) China Securities Regulatory Commission (“CSRC”) filing procedures having been accepted by the CSRC and published on its website, (vii) the New Tyfon Ordinary Shares and warrants to purchase New Tyfon Ordinary Shares having been approved for listing on Nasdaq and our Class A Ordinary Shares will remain listed for trading on Nasdaq, and (viii) other customary closing conditions related to the parties’ respective representations, warranties and pre-Closing covenants set forth in the Merger Agreement. The consummation of the Business Combination is not subject to any minimum cash condition.
On May 15, 2024, the Company filed a Current Report on Form 8-K with the SEC to report the Merger Agreement and other legal agreements relating to the Business Combination.
Sponsor Support Agreement:
In connection with the execution of the Merger Agreement, the Company and the New Sponsor entered into the sponsor support agreement, dated May 14, 2024 (the “Sponsor Support Agreement”), pursuant to which, among other things, the New Sponsor agreed to (i) vote all Ordinary Shares held by it in favor of the Required GTAC Proposals (as defined in the Sponsor Support Agreement) at the GTAC Shareholders Meeting (as defined in the Sponsor Support Agreement), (ii) not redeem any of its Class A Ordinary Shares, (iii) forfeit all of its existing Private Placement Warrant effective as of immediately prior to the Closing, (iv) waive the anti-dilution rights with respect to the Class B Ordinary Shares set forth in the Company’s organizational documents in connection with the consummation of the Transactions and (v) agreed not to transfer any Ordinary Shares or Public Warrants until the earlier of the Closing and termination of the Merger Agreement in accordance with its terms. Tyfon is a third-party beneficiary of the Sponsor Support Agreement, and the New Sponsor and the Company cannot amend the Sponsor Support Agreement without the written consent of Tyfon.
Note 3—Summary of Significant Accounting Policies
Basis of Presentation:
The accompanying unaudited condensed 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 SEC, specifically Article 8.03 of regulation S-X, 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 as of June 30, 2024, 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.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April 1, 2024 (“2023 Form 10-K”).
| 13 |
All dollar amounts are rounded to the nearest thousand dollars.
Emerging Growth Company:
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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.
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260 (“FASB ASC 260”), “Earnings Per Share.” Net income or loss per ordinary share is computed by dividing net income or loss applicable to the holders of Ordinary Shares by the weighted average number of ordinary shares outstanding during the period plus, to the extent dilutive, the incremental number of ordinary shares to settle warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the Public Warrants and Private Placement to purchase an aggregate of Class A Ordinary Shares in the calculation of diluted income (loss) per ordinary share, since their inclusion would be anti-dilutive under the treasury stock method and because they are contingent on the occurrence of a future event. As a result, diluted income (loss) per ordinary share is the same as basic income (loss) per ordinary share for the periods presented.
At June 30, 2024 and 2023, the Company has two classes of ordinary 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 (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding during the respective period.
For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of (loss) income – basic and diluted | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average ordinary shares outstanding – basic and diluted | ||||||||||||||||
| Net (loss) income per ordinary share – basic and diluted | $ | ) | $ | ) | $ | $ | ||||||||||
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For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of (loss) income – basic and diluted | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average ordinary shares outstanding – basic and diluted | ||||||||||||||||
| Net (loss) income per ordinary share – basic and diluted | $ | ) | $ | ) | $ | $ | ||||||||||
Investments held in Trust Account:
The Company complies with FASB ASC Topic 820 (“FASB ASC 820”), “Fair Value Measurements and Disclosures,” 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 $
The Company classifies its U.S. government treasury bills and equivalent securities, when it has them, as held-to-maturity in accordance with FASB ASC Topic 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. Held-to-maturity U.S. government treasury bills are recorded at amortized cost on the balance sheets and adjusted for the amortization of discounts.
Cash and cash equivalents:
The
Company considers all highly liquid instruments with maturities of one year or less when acquired to be cash equivalents. As of June
30, 2024 and December 31, 2024, cash and cash equivalents totaled approximately $
Concentration of Credit Risk:
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions,
which at times, may exceed the Federal depository insurance coverage of $
Financial Instruments:
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, approximates the carrying amounts represented in the balance sheets, primarily due to their short-term nature.
Fair Value Measurements:
The Company complies with FASB ASC 820 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.
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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. 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; | |
| ● | 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 accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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 as of June 30, 2024, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the Public Warrant and the Private Placement Warrant liabilities.
Offering Costs:
The
Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses
of Offering.” Costs incurred in connection with preparation for the Public Offering were approximately $
During
the three and six months ended June 30, 2024, an underwriter representing
Class A Ordinary Shares Subject to Possible Redemption:
All
of the Class A Ordinary Shares sold on October 25, 2021 as part of a Unit in the Public Offering discussed in Note 4 contain
a redemption feature which allows for the redemption of ordinary shares under the Company’s liquidation or tender offer/shareholder
approval provisions. In connection with the Extension, a total of holders of Class A Ordinary Shares elected to redeem an aggregate
of Class A Ordinary Shares, representing approximately
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In
accordance with FASB ASC Topic 480 (“FASB ASB 480”), “Distinguishing Liabilities from Equity, redemption provisions
not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation
events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions
of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its Articles provide that in no event will it redeem
its Public Shares in an amount that would cause its net tangible assets (tangible assets less intangible assets and liabilities) to be
less than $
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, as of June 30, 2024 and December 31, 2023, Class A Ordinary Shares at each date were classified outside of permanent equity, respectively. Class A Ordinary Shares subject to redemption consist of:
| Dollars | Shares | |||||||
| Gross proceeds of Public Offering | $ | |||||||
| Less: Proceeds allocated to Public Warrants | ( | ) | — | |||||
| Offering costs | ( | ) | — | |||||
| Plus: Remeasurement of carrying value to redemption value at Public Offering date | — | |||||||
| Subtotal at the date of the Public Offering and at December 31, 2021 | ||||||||
| Plus: Remeasurement of carrying value to redemption value at December 31, 2022 | — | |||||||
| Subtotal at December 31, 2022 | ||||||||
| Less: Payments to shareholders who elected to redeem Class A Ordinary Shares in connection with the Extension on or around April 21, 2023 | ( | ) | ( | ) | ||||
| Plus: Remeasurement of carrying value to redemption value at December 31, 2023 | — | |||||||
| Subtotal at December 31, 2023 | ||||||||
| Plus: Remeasurement of carrying value to redemption value at June 30, 2024 | — | |||||||
| Class A Ordinary Shares subject to redemption at June 30, 2024 (unaudited) | $ | |||||||
Income Taxes:
FASB
ASC 740 (“FASB ASC 740”), “Income Taxes” prescribes a recognition threshold and a measurement attribute for the
financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to
be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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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 FASB ASC Topic 815 (“FASB ASC 815”), “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value upon issuance, and the liability is then re-valued at each reporting date, as determined by the Company based upon observable inputs or a valuation report obtained from its independent third-party valuation firm, with changes in the fair value reported in the unaudited condensed statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheets 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’s warrant liability is a derivative financial instrument. See Note 7.
Stock-Based Compensation:
The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation—Stock Compensation” (“ASC 718”), which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. The Company recognizes all forms of stock-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest. The Founder Shares were granted subject to certain performance conditions: the occurrence of a Business Combination. Compensation expense related to the Founder Shares is recognized only when the performance conditions are probable of occurrence under the applicable accounting literature in this circumstance. Stock-based compensation expenses are included in general and administrative expenses in the statement of operations. Stock-based payments issued to placement agents are classified as a direct cost of a stock offering and are recorded as a reduction in additional paid in capital.
Recent Accounting Pronouncements:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements and disclosures.
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 financial statements.
Subsequent Events:
The Company evaluated subsequent events and transactions that occurred after the date of the balance sheet through the date that the financial statements were issued. All such events that would require adjustment or disclosure have been so disclosed in the unaudited condensed financial statements – See Note 1 regarding the further extension of time to complete a business combination from July 25, 2024 to October 25, 2024 made in July 2024.
Note 4—Public Offering
On October 25, 2021, the Company closed on the Public Offering and sale, including the underwriters’ partial exercise of their over-allotment option, of Units. Each Unit consists of one Class A Ordinary Share and one-half of one Public Warrant. Each whole Public Warrant offered in the Public Offering is exercisable to purchase one Class A Ordinary Share. See Note 7.
The
Company granted the underwriters a
The
Company paid an underwriting discount of
On
October 3, 2022, one of the underwriters in the Company’s October 25, 2021 Public Offering agreed to forfeit their
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As
of June 30, 2024 and December 31, 2023, the amount outstanding in the Trust Account was approximately $
Note 5—Trust Account and Fair Value Measurement
In March 2023, the Trust Account’s investment in money market funds was transferred to cash and as such, at June 30, 2024 and December 31, 2023, the proceeds of the Trust Account were invested in cash. As such, the Company has no assets in the Trust Account that require fair value measurement.
Note 6—Related Party Transactions
Founder Shares:
On
February 10, 2021, the Former Sponsor purchased Class B Ordinary Shares (the “Founder Shares”) for $
The
Company’s initial shareholders and the New Sponsor have agreed not to transfer, assign or sell any of their Founder Shares until
the earlier of (A) 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 Class A Ordinary Shares equals or exceeds $ per share (as adjusted
for share splits, share dividends, reorganizations, recapitalizations and the like) for any
Private Placement Warrants:
In
connection with the closing of the Public Offering on October 25, 2021 (Note 4), the Former Sponsor purchased from the Company an aggregate
of
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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 to the holders of Public Shares, and the Private Placement Warrants issued to the Former Sponsor will expire worthless.
In
addition, if (x) the Company issues additional Class A Ordinary Shares or equity-linked securities for capital raising purposes in connection
with the closing of the initial business combination at an issue price or effective issue price of less than $ per share of Class
A Ordinary Share (with such issue price or effective issue price to be determined in good faith by the Board of Directors and, in the
case of any such issuance to the Company’s initial shareholders or their affiliates, without taking into account any Founder Shares
or warrants held by the Company’s initial shareholders or such affiliates as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than
Registration Rights:
The Company’s initial shareholders and the holders of the Private Placement Warrants are entitled to registration rights pursuant to the Registration Rights Agreement executed in connection with the closing of the Public Offering on October 25, 2021. These holders are 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 “piggy-back” 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 Rights Agreement. On April 19, 2024, the New Sponsor entered into a joinder to the Registration Rights Agreement.
Related Party Loans:
In
February 2021, the Former Sponsor agreed to loan the Company an aggregate of $
Working Capital Loans:
If
the Former Sponsor, an affiliate of the Former Sponsor or certain of the Company’s officers and directors make any working capital
loans, up to $
On
June 29, 2023, the Company entered into an unsecured convertible promissory note (the “Note”) with the Former Sponsor, providing
for an aggregate amount of loans up to $
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The
Note bore
Promissory Note with New Sponsor:
On
April 24, 2024, the Company issued the Promissory Note to the New Sponsor, which provides for borrowings from time to time of up to an
aggregate of $
During
the three and six months ended June 30, 2024, the Company drew down $
The option to convert the working capital loans into Private Placement Warrants qualifies as an embedded derivative under FASB ASC 815 and is required to be recognized at fair value with subsequent changes in fair value recognized in the Company’s statements of income each reporting period until the loan is repaid or converted. The derivative is recorded as a debt discount and amortized over the life of the loan, in this instance to October 25, 2024. The fair value of the conversion feature into the Private Placement Warrants is determined by reference to the public trading of the nearly identical Public Warrants, considered a Level 2 observable input due to the low volume of trading activity.
The following table presents information about the conversion feature of the Company’s Promissory Note that are measured at fair value on a recurring basis as of June 30, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. There was no such conversion feature to report as of December 31, 2023.
| Description | June 30, 2024 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Warrant liabilities at June 30, 2024 | $ | $ | $ | $ | ||||||||||||
At
inception of each of the four drawdowns under the Promissory Note, the fair value of the derivative liability and debt discount was approximately
$
| Face amount of Promissory Note | $ | |||
| Less: debt discount at June 30, 2024 | ( | ) | ||
| Subtotal | $ | |||
| Add: derivative liability at market at June 30, 2024 | ||||
| Promissory Note, net | $ |
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Administrative Services Agreement:
The
Company has agreed to pay $
In
April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, the Administrative Services Agreement was assigned
to the New Sponsor and approximately $
The
Company pays the New Sponsor $
Agreements with Management:
In
April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, all of the members of the Board of Directors and
officers of the Company resigned. Also in April 2024, the Company appointed new officers and directors including a Chief Financial Officer
and retained his services to be paid at the rate of $
Previously,
effective November 27, 2022, the Board of Directors appointed its Chief Financial Officer and Secretary (“CFO”). Prior to
his appointment as CFO, the CFO served as a paid consultant to the Company. The CFO was not a full-time employee and devoted time to
the Company’s affairs on a part-time basis under a consulting agreement with the Company calling for compensation of approximately
$
Note 7—Warrant liabilities
As
of June 30, 2024 and December 31, 2023, the Company had a total of
The Company accounts for its warrants outstanding consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “Staff Statement”) issued on April 12, 2021 by the staff (the “Staff”) of the Division of Corporation Finance of the SEC. The Company’s management has evaluated its warrants under ASC Subtopic 815-40, Contracts in Entity’s Own Equity including the assistance of accounting and valuation consultants and concluded that the Company’s warrants are not indexed to the Company’s 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. Therefore, the Company accounts for its warrants as warrant liabilities.
The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
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| Description | June 30, 2024 | 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 liabilities at June 30, 2024 | $ | $ | $ | $ | ||||||||||||
| Description | December 31, 2023 | 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 liabilities at December 31, 2023 | $ | $ | $ | $ | ||||||||||||
During the six months ended June 30, 2024, the trading in the Company’s warrants remained less active and so the Company values its Public Warrants based on the significantly other observable inputs – Level 2 using the public trading price ($ and $ per warrant, respectively, as of June 30, 2024 and December 31, 2023) as a guide. Since the Private Placement Warrants are substantially similar to the Public Warrants but do not trade, the Company valued them based on the value of the Public Warrants (significant other observable inputs – Level 2). The Company is required to record the warrants at fair value at each reporting period, with changes in fair value recognized in the statements of operations. Transfers between Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.
The warrant liabilities are not subject to qualified hedge accounting.
Note 8—Shareholders’ Deficit
Ordinary Shares:
The authorized ordinary shares of the Company include Class A Ordinary Shares, par value $, and Class B Ordinary Shares, par value $, or Ordinary Shares in total. Upon completion of the Public Offering, the Company may (depending on the terms of the business combination) be required to increase the authorized number of shares at the same time as its shareholders vote on the business combination to the extent the Company seeks shareholder approval in connection with its business combination. Holders of Class A Ordinary Shares and Class B Ordinary Shares vote together as a single class and are entitled to one vote for each Class A Ordinary Share and Class B Ordinary Share.
In
connection with the Extension, a total of holders of Class A Ordinary Shares elected to redeem an aggregate of Class A
Ordinary Shares, representing approximately % of the Class A Ordinary Shares then issued and outstanding, for an aggregate of approximately
$
On November 22, 2023 the Company issued an aggregate of Class A Ordinary Shares to the Former Sponsor upon the Conversion. The Class A Ordinary Shares issued in connection with the Conversion are subject to the same restrictions as applied to the Class B Ordinary Shares before the Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination and such shares are not entitled to liquidating distributions from the trust account if the Company does not consummate an initial business combination.
As of both June 30, 2024 and December 31, 2023 there were Class B Ordinary Shares issued and outstanding and Class A Ordinary Shares issued and outstanding (excluding Class A Ordinary Shares at both dates that were subject to possible redemption).
Preferred Shares:
The Company is authorized to issue preferred shares, par value $, with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of June 30, 2024 and December 31, 2023, there were preferred shares issued or outstanding.
Note 9—Commitments and Contingencies
Registration Rights:
The Company’s initial shareholders are, and the holders of the Private Placement Warrants will be, entitled to registration rights, as described in Note 5, pursuant to the Registration Rights Agreement executed in connection with the Public Offering. On April 19, 2024, the New Sponsor entered into a joinder to the Registration Rights Agreement.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to Global Technology Acquisition Corp. I. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly 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 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, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the risk factors described in Part I, Item 1A “Risk Factors” included in our 2023 Form 10-K as well as Item 1A, Part II of this Quarterly Report. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on February 9, 2021 as a Cayman Islands exempted company for the purpose of effecting a business combination. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. 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:
| ● | may significantly dilute the equity interest of investors in the Public Offering, 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; | |
| ● | 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; | |
| ● | 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; | |
| ● | 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 | |
| ● | 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. |
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Similarly, if we issue debt or otherwise incur significant debt, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; | |
| ● | 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; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; | |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; | |
| ● | our inability to pay dividends on our Class A Ordinary Shares; | |
| ● | 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; | |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; | |
| ● | 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 unaudited condensed financial statements, as of June 30, 2024 we had approximately $592,000 of cash and cash equivalents and approximately $3,487,000 of negative working capital. Further, we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to complete our initial business combination will be successful.
Recent Developments
Business Combination:
On May 14, 2024, the Company entered into the Merger Agreement with Merger Sub and Tyfon. Tyfon operates an online art marketplace in China and is based in Suzhou, China.
Pursuant to the Merger Agreement, the parties thereto will enter into the Business Combination by which, among other others, Merger Sub will merge with and into Tyfon with Tyfon surviving the Merger as a wholly owned subsidiary of the Company. Upon Closing, Tyfon will change its name to “Tyfon Culture Inc.”, and New Tyfon Ordinary Shares are expected to trade on the Nasdaq Capital Market under the ticker symbol “TFCI.” The Transactions reflect an implied pro forma enterprise value for Tyfon of $428 million, and the consideration payable to the shareholders of Tyfon will consist entirely of New Tyfon Ordinary Shares.
The Transactions are expected to be consummated subject to the terms and conditions set forth in the Merger Agreement, including, among others: (i) there being no governmental order or law in force enjoining or prohibiting the consummation of the Transactions, (ii) no proceedings brought by a third-party to enjoin or otherwise restrict the consummation of the Closing and the Merger, (iii) the proxy statement/prospectus have been declared effective by the SEC, (iv) the receipt of the Purchaser Shareholders’ Approval, (v) approval by the requisite shareholder of Tyfon of the Transactions, (vi) CSRC filing procedures having been accepted by the CSRC and published on its website, (vii) the New Tyfon Ordinary Shares and warrants to purchase New Tyfon Ordinary Shares having been approved for listing on Nasdaq and our Class A Ordinary Share will remain listed for trading on Nasdaq, and (viii) other customary closing conditions related to the parties’ respective representations, warranties and pre-Closing covenants set forth in the Merger Agreement. The consummation of the Business Combination is not subject to any minimum cash condition.
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On May 15, 2024, the Company filed a Current Report on Form 8-K with the SEC to report the Merger Agreement and other legal agreements relating to the Business Combination.
Sponsor Support Agreement:
In connection with the execution of the Merger Agreement, the Company and the New Sponsor entered into the Sponsor Support Agreement, pursuant to which, among other things, the New Sponsor agreed to (i) vote all Ordinary Shares held by it in favor of the Required GTAC Proposals at the GTAC Shareholders Meeting, (ii) not redeem any of its Class A Ordinary Shares, (iii) forfeit all of its existing Private Placement Warrant effective as of immediately prior to the Closing, (iv) waive the anti-dilution rights with respect to the Class B Ordinary Shares set forth in the Company’s organizational documents in connection with the consummation of the Transactions and (v) agreed not to transfer any Ordinary Shares or Public Warrants until the earlier of the Closing and termination of the Merger Agreement in accordance with its terms. Tyfon is a third-party beneficiary of the Sponsor Support Agreement, and the New Sponsor and the Company cannot amend the Sponsor Support Agreement without the written consent of Tyfon.
For more information about the Merger Agreement, the Sponsor Support Agreement and the Transactions, see our Current Report on Form 8-K filed with the SEC on May 15, 2024. Unless specifically stated, this Quarterly Report on Form 10-Q does not give effect to the proposed Transactions and does not contain the risks associated with the proposed Transactions.
Purchase Agreement and Change in Control:
On April 19, 2024, the Company, the Former Sponsor and the New Sponsor entered into the Purchase Agreement on terms substantially consistent with the Term Sheet executed on April 10, 2024 and, on April 19, 2024 (the “Acquisition Closing Date”), consummated the transactions contemplated thereby (the “Acquisition Closing”). Pursuant to the Purchase Agreement, at the Acquisition Closing, among other things: (i) the New Sponsor acquired 3,500,000 of the 3,700,000 Class B Ordinary Shares and 7,350,000 of the 10,500,000 Private Placement Warrants from the Former Sponsor; (ii) the New Sponsor to cause the Company to pay $250,000 in cash consideration upon closing of the Company’s initial business combination at the Former Sponsor’s direction to entities or accounts as directed by the Former Sponsor; (iii) the New Sponsor entered into a joinder to the Registration Rights Agreement; (iv) the Former Sponsor assigned the existing Administrative Services Agreement with the Company to the New Sponsor; (v) all of the directors and officers of the Company resigned, and each of the New Directors and officers designated by the New Sponsor was appointed as directors and officers, respectively, of the Company; (vi) as further described below, the Company, the New Sponsor and the Company’s former officers and directors party to the Original Letter Agreement entered into the Amendment; (vii) the Note was terminated; and (viii) the New Sponsor acquired a new D&O insurance policy, which includes coverage for full prior acts.
Following the Acquisition Closing, Former Sponsor retained (i) 3,150,000 Retained PP Warrants, (ii) 1,300,000 non-redeemable Class A Ordinary Shares and (iii) and 164,000 Class B Ordinary Shares, following the substantially concurrent transfer by the Pre-Closing Independent Directors of 84,000 Class B Ordinary Shares to the Former Sponsor. Following such transfers by the Pre-Closing Independent Directors to the Former Sponsor, the Pre-Closing Independent Directors retained an aggregate of 36,000 Class B Ordinary Shares.
The Retained PP Warrants and 200,000 of the Sponsor Retained Shares are subject to any Changes the New Sponsor determines to make in connection with the Company’s initial business combination or otherwise (provided that all such Changes affect all holders of Private Placement Warrants, including the Former Sponsor and the New Sponsor, equally on a pro rata basis). An aggregate of 1,250,000 of the Sponsor Retained Shares and the Director Retained Shares are not be subject to any Changes.
At the closing of the initial business combination, the number of Retained PP Warrants will be equal to at least 30% of the warrants held by the New Sponsor and Former Sponsor on an aggregate basis and the aggregate number of Sponsor Retained Shares and Director Retained Shares will be equal to at least 30% of the Class A Shares and Class B Ordinary Shares held by the New Sponsor, the Former Sponsor and the Pre-Closing Independent Directors on an aggregate basis.
On the Closing Date, all of the members of the Board of Directors and officers of the Company resigned and the following persons were appointed to the following positions: (i) Thomas D. Hennessy - Chairman and Chief Executive Officer of the Company, (ii) Nicholas Geeza - Chief Financial Officer of the Company, and (iii) Joseph Beck, Garth Mitchell, Gloria Fu, Courtney Robinson and Javier Saade - independent directors of the Company. On June 20, 2024, Courtney Robinson tendered her resignation as a director of the Company, effective immediately. Ms. Robinson’s decision to resign was not a result of any disagreement or dispute with the Board or management of the Company on any matter relating to the Company’s operations, policies or practices.
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Also on the Closing Date, in April 2024, the Working Capital Notes discussed in Note 6 of the accompanying notes to the unaudited condensed financial statements and payable to the Former Sponsor was terminated.
Promissory Note:
On April 24, 2024, the Company issued the Promissory Note to the New Sponsor, which provides for borrowings from time to time of up to an aggregate of $2,500,000 for working capital purposes and/or to finance additional deposits into the Trust Account established by the Company upon the consummation of its Public Offering in connection with the extension of the date by which the Company must consummate an initial business combination as set forth in the Articles. The Promissory Note does not bear interest and is repayable in full by the Company upon the earlier of: (i) the date that the Company consummates a business combination and (ii) the Maturity Date. The Promissory Note may be drawn down by the Company from time to time prior to the Maturity Date. Upon the consummation of a business combination, the New Sponsor will have the option (but not the obligation) to convert all or any portion of the principal balance of the Promissory Note into private placement warrants to purchase Class A Ordinary Shares of the Company at a price of $1.00 per warrant. The terms of such private placement warrants (if issued) will be identical to the private placement warrants issued by the Company to the Former Sponsor in a private placement concurrent with the consummation of the Public Offering. In the event the Company does not consummate a business combination, the Promissory Note will be repaid only to the extent that the Company has funds available to it outside of the Trust Account. The Promissory Note is subject to customary events of default, the occurrence of which automatically trigger the unpaid principal balance of the Promissory Note and all other sums payable with regard to the Promissory Note becoming immediately due and payable.
During the three and six months ended June 30, 2024, the Company borrowed $1,750,000 under the Promissory Note and such amount was outstanding at June 30, 2024.
The option to convert the working capital loans into Private Placement Warrants qualifies as an embedded derivative under FASB ASC 815 and is required to be recognized at fair value with subsequent changes in fair value recognized in the Company’s statements of income each reporting period until the loan is repaid or converted. The derivative is recorded as a debt discount and amortized over the life of the loan, in this instance to October 25, 2024. The fair value of the conversion feature into the Private Placement Warrants is determined by reference to the public trading of the nearly identical Public Warrants, considered a Level 2 observable input due to the low volume of trading activity.
At inception of each of the four drawdowns under the Promissory Note, the fair value of the derivative liability and debt discount was approximately $160,000 at prices ranging from $0.10 to $0.07. During the three and six months ended June 30, 2024, approximately $45,000 was charged to amortization of debt discount, reducing the debt discount to approximately $115,000 at June 30, 2024. The derivative liability is required to be remeasured at June 30, 2024 and the value at that date at $0.05 per warrant was approximately $88,000. As a result, the Promissory Note is presented in the balance sheet at June 30, 2024 as follows:
| Face amount of Promissory Note | $ | 1,750,000 | ||
| Less: debt discount at June 30, 2024 | (115,000 | ) | ||
| Subtotal | $ | 1,635,000 | ||
| Add: derivative liability at market at June 30, 2024 | 88,000 | |||
| Promissory Note, net | $ | 1,723,000 |
Extension of Time to Complete an Initial Business Combination:
On April 25, 2024, the Company borrowed $225,000 under the Promissory Note and deposited $209,000 into the Trust Account to fund the initial three-month extension of the Company’s termination date until July 25, 2024 pursuant to an existing automatic extension option that exists in the Articles. On July 24, 2024, an additional $209,000 was deposited into the Trust Account by Tyfon ( Note 2) on our behalf to fund the further three-month extension of the Company’s termination date until October 25, 2024.
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Waiver of Deferred Underwriting Compensation:
In April 2024, the Company received a waiver from one of the underwriters in the Public Offering of its deferred underwriting compensation of $3,675,000. Such amount was allocated to equity (approximately $3,417,000) and to other income (approximately $258,000, in the case of the portion allocated to warrant liability) in the accompanying condensed financial statements. This followed a similar waiver in October 2022 received from the other underwriter in the Public Offering in 2022.
Nasdaq Compliance and Transfer of Listing:
On June 28, 2023, On June 28, 2023, the Company received the First Notice from the Nasdaq Staff of Nasdaq notifying the Company that, for 30 consecutive business days, the Company’s MVLS was below the Global Market MVLS Standard. The Nasdaq Staff also noted that the Company did not meet the requirements under Nasdaq Listing Rules 5450(b)(1)(A) (Equity Standard) and 5450(b)(3)(A) (Total Assets/Total Revenue Standard).
On October 9, 2023, the Company received the Second Notice from the Nasdaq Staff notifying the Company that the Company was not in compliance with the “Global Market Minimum Public Holders Rule.
On November 22, 2023, the Company issued 1,300,000 Class A Ordinary Shares to the Former Sponsor upon the conversion of an equal number of Class B Ordinary Shares. Following the conversion, there were 3,389,996 Class A Ordinary Shares outstanding.
On November 24, 2023, the Company submitted its application to transfer the listing of its Class A Ordinary Shares, Units and Public Warrants from the Nasdaq Global Market to the Nasdaq Capital Market.
On November 24, 2023, the Company submitted the Plan to the Nasdaq Staff, which requires the Company to comply with the Capital Market MVLS Standard, and Nasdaq Listing Rule 5550(a)(3), which requires the Company comply with the Capital Market Minimum Public Holders Rule. The Company further noted to the Nasdaq Staff that, as a result of its application to transfer the listing of its Class A Ordinary Shares, Units and Public Warrants from the Nasdaq Global Market to the Nasdaq Capital Market it intends to comply with the Capital Market MVLS Standard and the Capital Market Minimum Public Holders Rule instead of the Global Market Minimum Public Holders Rule and the Global Market MVLS Standard.
On January 9, 2024, the Nasdaq Staff approved the Company’s application to transfer the listing of the Class A Ordinary Shares, the Units and the Public Warrants from the Nasdaq Global Market to the Nasdaq Capital Market. The Class A Ordinary Shares, the Units and Public Warrants were transferred to the Nasdaq Capital Market at the opening of business on January 16, 2024 and continue to trade under the symbols “GTAC,” “GTACU” and “GTACW,” respectively. The Company received a written notice from the Nasdaq Staff notifying the Company that, based on the materials submitted by the Company in connection with the Plan and the application to transfer the listing of the Class A Ordinary Shares, Units and Public Warrants from the Nasdaq Global Market to the Nasdaq Capital Market, the deficiencies cited in the First Notice and the Second Notice were cured.
Results of Operations and Known Trends or Future Events
Our entire activity from February 9, 2021 (inception) through October 25, 2021, was in preparation for a Public Offering, and since our Public Offering through June 30, 2024, our activity has been limited to identifying and completing a suitable initial business combination. We will not generate any operating revenues until the closing and completion of our initial business combination.
For the three and six months ended June 30, 2024, we had net loss of approximately $3,191,000 and 3,190,000, respectively, including loss from operations of approximately $3,334,000 and $3,597,000, respectively. The loss from operations for the three and six months ended June 30, 2024 consists of approximately $2,945,000 and $3,011,000, respectively, of costs associated with our business combination efforts and approximately $389,000 and $839,000 of costs associated with our operating as a public company. In the three and six months ended June 30, 2024, these operating costs were partially offset by (a) interest income of approximately $268,000 and 532,000, respectively, plus (b) waiver of deferred underwriting compensation of $258,000 and $258,000, respectively, (c) $72,000 credit to record the increase in fair value of the conversion feature of the Promissory Note, and less $(410,000) and $(410,000), respectively, of cost associated with the change in value of our derivative warrant liabilities and ($45,000) and ($45,000), respectively, of amortization of debt discount costs.
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For the three and six months ended June 30, 2023, we had net income of approximately $956,000 and $1,503,000, respectively, which consisted of an approximately $615,000 and $(820,000), respectively, change in fair value of derivative warrant liabilities, and approximately $720,000 and $2,899,000, respectively, of interest income on cash and investments held in the Trust Account, partly offset by approximately $379,000 and $576,000, respectively, of loss from operations. The loss from operations consists primarily of our costs of operating as a public company, as well as costs of searching for a business combination.
As discussed further in Note 7 to our unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report (and below), the Company accounts for its outstanding Public Warrants and Private Placement Warrants, as well as the conversion feature of its convertible Promissory Note, as derivative liabilities in the accompanying unaudited condensed financial statements. As a result, the Company is required to measure the fair value of the Public Warrants and Private Placement 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.
In addition, since we are organized as an exempt company in the Cayman Islands, we are not subject to income tax in either the Cayman Islands or the United States.
We have entered into an administrative services agreement pursuant to which we pay our New Sponsor $10,000 per month (which is a portion of the amounts of operating costs referenced above) for office space, utilities, secretarial and administrative services provided to members of our management team, as well as the services provided by one or more investment professionals, creation and maintenance of our website, and miscellaneous additional services and other expenses and obligations of our New Sponsor. In April 2024, we employed two individuals under verbal agreements to provide management and other services to us for a monthly compensation of approximately $23,000 plus certain benefits under informal, at will, understandings. Furthermore, we may enter into consulting arrangements directly or indirectly with individuals (who will not be our executive officers) to provide similar services.
In April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, the Administrative Services Agreement was assigned to New Sponsor and in connection therewith, approximately $30,000 of accrued but unpaid Former Sponsor fees were written off and accounted for as a contribution of capital to the Company from a related party.
In April 2024, in connection with the Purchase Agreement defined and discussed in Note 1, all of the officers and directors of the Company resigned. Also in April 2024, the Company appointed a new officers and directors including Nicholas Geeza as Chief Financial Officer and retained his services to be paid at the rate of $5,500 per month, plus certain benefits, under informal, at will, understandings.
Effective November 27, 2022, the Board of Directors appointed its CFO. Prior to his appointment as CFO, the CFO served as a paid consultant to the Company. The CFO is not a full-time employee and devotes time to the Company’s affairs on a part-time basis under a consulting agreement with the Company calling for compensation of approximately $100,000 per year. An aggregate of approximately $0 and $25,000, respectively, was charged to operations for each of the three and six months ended June 30, 2024 and 2023 for his services.
Liquidity and Capital Resources
Our liquidity needs were satisfied prior to the completion of the Public Offering through (i) $25,000 paid by our Former Sponsor to cover certain of our offering and formation costs in exchange for the issuance of the Founder Shares to our Former Sponsor and (ii) the receipt of loans to us of up to $240,000 by our Former Sponsor under an unsecured promissory note through closing of the Public Offering on October 25, 2021 and upon closing of the Public Offering, the entire balance of $240,000 was repaid.
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The net proceeds from (i) the sale of the Units in the Public Offering, after deducting offering expenses of approximately $725,000, underwriting commissions of $4,000,000 including the commission on the underwriters’ over-allotment option exercise (excluding deferred underwriting commissions of $7,000,000, including the deferred commission on the underwriters’ over-allotment option, 47.5% of which has been forfeited on October 3, 2022 by one of the underwriters in the Public Offering, and including the deferred commission on the underwriters’ over-allotment option), and (ii) the sale of the Private Placement Warrants for a purchase price of $10,500,000 including the amount paid in connection with the underwriters’ over-allotment option exercise were approximately $205,775,000. Of this amount, $204,000,000 was deposited in the Trust Account, which includes the deferred underwriting commissions described above. The proceeds held in the Trust Account is required to be, and is invested only in cash or 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 which invest only in direct U.S. government treasury obligations. The remaining $1,775,000 has not been held in the Trust Account.
On April 14, 2023, in connection with the amendment of the Articles, the Company directed the Trust Account trustee to deliver approximately $187,475,000 to the shareholders that requested redemption. Accordingly, approximately $23,626,000 remained in the Trust Account as of June 30, 2024.
On June 29, 2023, the Company entered into the Note with the Former Sponsor, providing for an aggregate amount of loans up to $1,500,000 to fund the Company’s operating expenses. A total of $250,000 and $275,000, respectively, was drawn down during the periods ended December 31, 2023 and June 30, 2024. At March 31, 2024, approximately $525,000 was outstanding under the Note. The terms of the Note are further described above in “—Recent Developments”. In connection with the Purchase Agreement and related agreements entered into subsequent to April 19, 2024, this Note was terminated and the amounts outstanding, $525,000 were reversed as waiver of deferred underwriting compensation related to warrants in the accompanying unaudited condensed statements of operations as of June 30, 2024.
On April 24, 2024, the Company issued the Promissory Note to the New Sponsor which provides for borrowings from time to time of up to an aggregate of $2,500,000 for working capital purposes and/or to finance additional deposits into the Trust Account established by the Company upon the consummation of its Public Offering in connection with the extension of the date by which the Company must consummate an initial business combination as set forth in the Articles. The terms of the Promissory Note are further described in Note 6 to the unaudited condensed financial statements. The Promissory Note does not bear interest and is repayable in full by the Company upon the earlier of: (i) the date that the Company consummates a business combination and (ii) the Maturity Date. The Promissory Note may be drawn down by the Company from time to time prior to the Maturity Date. Upon the consummation of a business combination, the New Sponsor will have the option (but not the obligation) to convert all or any portion of the principal balance of the Promissory Note into private placement warrants to purchase Class A Ordinary Shares at a price of $1.00 per warrant. The terms of such private placement warrants (if issued) will be identical to the private placement warrants issued by the Company to its Former Sponsor in a private placement concurrent with the consummation of the Public Offering. In the event the Company does not consummate a business combination, the Promissory Note will be repaid only to the extent that the Company has funds available to it outside of the Trust Account. The Promissory Note is subject to customary events of default, the occurrence of which automatically trigger the unpaid principal balance of the Note and all other sums payable with regard to the Promissory Note becoming immediately due and payable.
On April 25, 2024, the Company borrowed $225,000 under the Promissory Note and deposited $209,000 into the Trust Account to fund the initial three-month extension of the Company’s termination date until July 25, 2024 pursuant to an existing automatic extension option that exists in the Articles. During the three and six months ended June 30, 2024, the Company borrowed an aggregate $1,750,000 under the Promissory Note which amount remains outstanding at June 30, 2024. See also Recent Events, Promissory Note above.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest income (if any) to pay income taxes, if any. Since we are an exempt Cayman Islands company, we do not expect to pay income taxes in the Cayman Islands or in the United States. To the extent that our equity 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. Prior to the completion of our initial business combination, we had available to us the initial $1,775,000 of proceeds held outside the Trust Account, as well as certain funds from loans from our New Sponsor, its affiliates or members of our management team. We are using these funds to primarily 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 a business combination.
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We do not believe we will need to raise additional funds following the Public Offering in order to meet the expenditures required for operating our business prior to our initial business combination, other than funds available from loans from our New Sponsor, their respective affiliates or members of our management team. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our New Sponsor or an affiliate of our New Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. See Recent Developments—Promissory Note.
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 Class A Ordinary 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 required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
Liquidity and Going Concern:
In connection with the assessment of going concern considerations in accordance with the FASB ASC Topic 205-40, “Presentation of Financial Statements-Going Concern,” as of June 30, 2024 the Company has until July 25, 2024 (which, subsequent to June 30, 2024, was further extended to October 25, 2024, as described above) to consummate an initial business combination. It is uncertain that the Company will be able to consummate an initial business combination by this time. If an initial business combination cannot be completed prior to October 25, 2024, there will be a mandatory liquidation and subsequent dissolution of the Company unless, prior to such date, the Company receives an extension approval from its shareholders or elects to extend the date on which an initial business combination must be consummated.
Further, as shown in the accompanying unaudited condensed financial statements, the Company had approximately $592,000 in cash and cash equivalents at June 30, 2024 and negative cash flows from operations of approximately $1,238,000 for the six months ended June 30, 2024. The Company also has credit available from the Sponsor of up to $2,500,000 in working capital loans, $1,750,000 of which has been drawn as of June 30, 2024, as described in Note 6 to the condensed financial statements. It is not clear that the Company has sufficient funds, or funds available, to enable it to sustain operations to complete a business combination in the time required.
Management has determined that 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 these condensed financial statements are released. The Company intends to address this by completing a business combination within the proscribed timeframe, including available extensions, however there is no assurance that this can be done. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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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.
Net Income (Loss) per Ordinary Share:
The Company complies with accounting and disclosure requirements of FASB ASC 260. Net income or loss per ordinary share is computed by dividing net income or loss applicable to the Ordinary Shares shareholders by the weighted average number of ordinary shares outstanding during the period plus, to the extent dilutive, the incremental number of ordinary shares to settle warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the Public Warrants and Private Placement Warrants to purchase an aggregate of 20,500,000 Class A Ordinary Shares in the calculation of diluted income (loss) per ordinary share, since their inclusion would be anti-dilutive under the treasury stock method and because they are contingent on the occurrence of a future event. As a result, diluted income (loss) per ordinary share is the same as basic income (loss) per ordinary share for the periods presented.
At June 30, 2024 and 2023, the Company has two classes of ordinary 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 (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding during the respective period.
The following table reflects the net income per share after allocating income between the shares based on outstanding shares.
For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of (loss) income – basic and diluted | $ | (1,526,000 | ) | $ | (1,665,000 | ) | $ | 470,000 | $ | 486,000 | ||||||
| Denominator: | ||||||||||||||||
| Weighted average ordinary shares outstanding – basic and diluted | 3,390,000 | 3,700,000 | 4,845,000 | 5,000,000 | ||||||||||||
| Net (loss) income per ordinary share – basic and diluted | $ | (0.45 | ) | $ | (0.45 | ) | $ | 0.10 | $ | 0.10 | ||||||
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For the six months ended June 30, 2024 |
For the six months ended June 30, 2023 |
|||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of (loss) income – basic and diluted | $ | (1,525,000) | $ | (1,665,000) | $ | 1,071,000 | $ | 432,000 | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average ordinary shares outstanding – basic and diluted | 3,390,000 | 3,700,000 | 12,381,000 | 5,000,000 | ||||||||||||
| Net (loss) income per ordinary share – basic and diluted | $ | (0.45) | $ | (0.45 | ) | $ | 0.09 | $ | 0.09 | |||||||
Class A Ordinary Shares Subject to Possible Redemption:
All of the 20,000,000 Class A Ordinary Shares sold on October 25, 2021 as part of a Unit in the Public Offering discussed in Note 4 to our unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report. contain a redemption feature which allows for the redemption of the Ordinary Shares under the Company’s liquidation or tender offer/shareholder approval provisions. In connection with the Extension, a total of 167 holders of Class A Ordinary Shares elected to redeem an aggregate of 17,910,004 Class A Ordinary Shares, representing approximately 89.55% of the Class A Ordinary Shares then issued and outstanding, for an aggregate of approximately $187,475,000 in cash, which was paid on or around April 21, 2023. As such, 2,089,996 Class A Ordinary Shares are subject to redemption remain outstanding as of both June 30, 2024 and December 31, 2023.
In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, the Articles provide that in no event will it redeem its Class A Ordinary Shares in an amount that would cause its net tangible assets (tangible assets less intangible assets and liabilities) to be less than $5,000,001. However, because all of the Class A Ordinary Shares are redeemable, all of the shares are recorded as Class A Ordinary Shares subject to redemption on our condensed balance sheets.
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, at both June 30, 2024 and December 31, 2023, 2,089,996 Class A Ordinary Shares were classified outside of permanent equity, respectively. Class A Ordinary Shares subject to redemption consist of:
| Dollars | Shares | |||||||
| Gross proceeds of Public Offering | $ | 200,000,000 | 20,000,000 | |||||
| Less: Proceeds allocated to Public Warrants | (7,900,000 | ) | — | |||||
| Offering costs | (11,234,000 | ) | — | |||||
| Plus: Remeasurement of carrying value to redemption value at Public Offering date | 23,134,000 | — | ||||||
| Subtotal at the date of the Public Offering and at December 31, 2021 | 204,000,000 | 20,000,000 | ||||||
| Plus: Remeasurement of carrying value to redemption value at December 31, 2022 | 2,946,000 | — | ||||||
| Subtotal at December 31, 2022 | 206,946,000 | 20,000,000 | ||||||
| Less: Payments to shareholders who elected to redeem 17,910,004 Class A ordinary shares in connection with the Extension (as defined below) on or around April 21, 2023 | (187,475,000 | ) | (17,910,004 | ) | ||||
| Plus: Remeasurement of carrying value to redemption value at December 31, 2023 | 3,419,000 | — | ||||||
| Subtotal at December 31, 2023 | 22,890,000 | 2,089,996 | ||||||
| Plus: Remeasurement of carrying value to redemption value at June 30, 2024 | 736,000 | — | ||||||
| Class A ordinary shares subject to redemption at June 30, 2024 (unaudited) | $ | 23,626,000 | 2,089,996 | |||||
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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 FASB ASC815. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value upon issuance, and the liability is then re-valued at each reporting date, as determined by the Company based upon a valuation report obtained from its independent third-party valuation firm, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheets 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’s warrant liability is a derivative financial instrument. See Note 7 to our condensed financial statements included in Part I, Item 1 of this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. As of June 30, 2024, we were not subject to any market or interest rate risk. The net proceeds of the Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. 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 4.5% per annum, but such deposit account carries a variable rate, and we cannot assure you that such rate will not decrease or increase significantly.
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures:
Disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management evaluated, with the participation of our current executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective at June 30, 2024.
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.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2024, covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Certain factors may have a material adverse effect on our business, financial condition and results of operation. An investment in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, in addition to the other information contained herein and our other filings with the SEC, including our financial statements and related notes herein and our other filings with the SEC. In addition to the information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our 2023 Form 10-K which could materially affect our businesses, financial condition, or future results. As of the date of this Quarterly Report, there have been no material changes in our risk factors from those described in our 2023 Form 10-K. We may disclose changes to such factors or disclose additional 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
Not applicable.
Item 5. Other Information
During
the period covered by this report, none of the Company’s directors or officers has
Item 6. Exhibits
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| + | Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. Global Technology Acquisition Corp. I agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request. |
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
Pursuant to 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 hereunto duly authorized.
| Dated: August 14, 2024 | GLOBAL TECHNOLOGY ACQUISITION CORP. I | |
| By: | /s/ Thomas D. Hennessy | |
| Name: | Thomas D. Hennessy | |
| Title: | Chief Executive Officer | |
| Dated: August 14, 2024 | GLOBAL TECHNOLOGY ACQUISITION CORP. I | |
| By: | /s/ Nicholas Geeza | |
| Name: | Nicholas Geeza | |
| Title: | Chief Financial Officer | |
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