References to the "Company," "G&P Acquisition Corp.," "our," "us" or "we" refer
to G&P Acquisition Corp., references to "management" or "management team" refer
to the Company's officers and directors and references to the "Sponsor" refer to
G&P Sponsor, LLC. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed financial statements and the notes thereto contained
elsewhere in this Quarterly Report on Form 10-Q (this "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, and oral statements made from time to time by
representatives of the Company may include, forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act and are intended to be covered by the safe
harbor created thereby. The Company has based these forward-looking statements
on management's current expectations, projections and forecasts about future
events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about the Company that may cause its actual
business, financial condition, results of operations, performance and/or
achievements to be materially different from any future business, financial
condition, results of operations, performance and/or achievements expressed or
implied by these forward-looking statements. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those
described in the Company's other filings with the SEC. The words "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intends," "may," "might,"
"plan," "possible," "potential," "predict," "project," "target," "goal,"
"shall," "should," "will," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking. In addition, any statements that refer to
expectations, projections, forecasts or other characterizations of future events
or circumstances, including any underlying assumptions, are forward-looking
statements.
Overview
We are a blank check company originally incorporated in Delaware on December 16,
2020 for the purpose of effecting a merger, amalgamation, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our initial
Business Combination using cash from the proceeds of the Initial Public Offering
and the Private Placement of the Private Placement Warrants and our capital
stock, debt or a combination of the foregoing.
As of September 30, 2022 we held cash and cash equivalents of $18,051, current
liabilities of $626,044, derivative warrant liabilities of $480,000 and deferred
underwriting fees of $6,125,000. Further, we expect to continue to incur
significant costs in the pursuit of our acquisition plans. We cannot assure you
that our plans to complete a Business Combination will be successful.
Results of Operations
We have not generated any revenues to date, and we will not be generating any
operating revenues until the closing and completion of our initial Business
Combination. Our entire activity up to September 30, 2022 was related to our
formation, the Initial Public Offering and, since the closing of the Initial
Public Offering, a search for a Business Combination target. We have, and expect
to continue to generate, non-operating income in the form of interest income on
treasury securities held in the Trust Account. We expect to continue to incur
increased expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as for due diligence
expenses in connection with the search for a Business Combination target.
For the three months ended September 30, 2022, we had a net income of
$1,514,064, which consisted of $60,000 of administrative fees and $189,112 of
general and administrative expenses, offset primarily by the change in fair
value of the derivative warrant liabilities of $960,000 and investment income
from the Trust Account of $803,176.
For the three months ended September 30, 2021, we had net income of $2,239,613,
which consisted of $60,000 of administrative fees and $262,662 of general and
administrative expenses, offset primarily by the change in fair value of the
derivative warrant liabilities of $2,560,000 and investment income from the
Trust Account of $2,275.
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For the nine months ended September 30, 2022, we had a net income of $8,642,616,
which consisted of $180,000 of administrative fees and $600,536 of general and
administrative expenses, offset primarily by the change in fair value of the
derivative warrant liabilities of $8,368,875 and investment income from the
Trust Account of $1,054,277.
For the nine months ended September 30, 2021, we had a net income of $4,941,423,
which consisted of $130,000 of administrative fees and $458,461 of general and
administrative expenses, offset primarily by the change in fair value of the
derivative warrant liabilities of $6,007,500 and investment income from the
Trust Account of $10,409. In addition, we recorded offering costs allocated to
the Public Warrants and the Private Placement Warrants totaling $488,025.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial sale of the Founder Shares to the Sponsor.
On March 15, 2021, we consummated the Initial Public Offering of 17,500,000
Units, which did not include the exercise by the underwriters of their
over-allotment option to purchase up to 2,625,000 additional Units. Each Unit
consists of one share of the Class A Common Stock and one-half of one redeemable
Public Warrant, with each whole Public Warrant entitling the holder thereof to
purchase one share of the Class A Common Stock at a price of $11.50 per share,
subject to adjustment. The Units were sold at a price of $10.00 per unit,
generating gross proceeds of $175,000,000 to us. BMO Capital Markets Corp. acted
as the sole book-running manager for the Initial Public Offering. The securities
sold in the Initial Public Offering were registered under the Securities Act on
the Registration Statement. The SEC declared the Registration Statement
effective on March 10, 2021.
Concurrently with the consummation of the Initial Public Offering, we
consummated the Private Placement of an aggregate of 7,250,000 Private Placement
Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant,
generating gross proceeds of $7,250,000 to us. The Private Placement Warrants
are identical to the Public Warrants included as part of the Units sold in the
Initial Public Offering, except that the Private Placement Warrants, so long as
they are held by the Sponsor or its permitted transferees, (i) are not
redeemable by us, subject to certain limited exceptions set forth in the
Registration Statement, (ii) may not (including the shares of Class A Common
Stock issuable upon the exercise of the Private Placement Warrants) be
transferred, assigned or sold until thirty (30) days after the completion of the
initial Business Combination, subject to certain limited exceptions set forth in
the Registration Statement, (iii) may be exercised on a cashless basis and (iv)
are entitled to registration rights. No underwriting discounts or commissions
were paid with respect to the Private Placement of the Private Placement
Warrants to the Sponsor. The issuance and sale of the Private Placement Warrants
was made pursuant to the exemption from registration contained in Section
4(a)(2) of the Securities Act.
We presently have no operating revenue. Our net income was $1,514,064 and
$8,642,616 for the three and nine months ended September 30, 2022, respectively,
and net income of $2,239,613 and $4,941,423 for the three and nine months ended
September 30, 2021, respectively, and consisted primarily of administrative
fees, professional fees and costs related to our search for a Business
Combination target, offset primarily by the change in fair value of the
derivative warrant liabilities and investment income from the Trust Account.
Through September 30, 2022, our liquidity needs were satisfied through receipt
of $18,051 held outside of the Trust Account from the sale of the Private
Placement Warrants upon the closing of the Initial Public Offering. In the
future, a portion of interest income on the funds held in the Trust Account may
be released to us to pay tax obligations.
In order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the Sponsor, or certain of the Company's
executive officers and directors may loan the Company funds as may be required
(the "Working Capital Loans"). The Working Capital Loans would be evidenced by
promissory notes. The notes may be repaid upon completion of a Business
Combination, without interest or, at the lender's discretion, up to $2,000,000
of the Working Capital Loans may be converted upon completion of a Business
Combination into warrants at a price of $1.00 per warrant. Such warrants would
be identical to the Private Placement Warrants. In the event that a Business
Combination does not close, the Company may use a portion of the proceeds held
outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. As
of September 30, 2022 and December 31, 2021, there were no amounts outstanding
under the Working Capital Loans.
We may also need to obtain additional financing either to complete an initial
Business Combination or because we become obligated to redeem a significant
number of shares of the Class A Common Stock upon completion of the Business
Combination, in which case we may issue additional capital stock, debt or a
combination of the foregoing in connection with the initial Business
Combination.
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Going Concern and Management's Plan
As of September 30, 2022, the Company had a working capital deficit of
approximately $446,100 and cash and cash equivalents of approximately $18,100.
There is no current commitment on the part of any financing source to provide
additional capital and no assurances can be provided that such additional
capital will ultimately be available. In addition, the Company currently has
less than 12 months from the date these financial statements were issued to
complete a Business Combination within the Combination Period (November 15,
2022). These conditions raise substantial doubt about the Company's ability to
continue as a going concern for a period of time within one year after the date
that the financial statements are issued. There is no assurance that the
Company's plans to raise additional capital (to the extent ultimately necessary)
or to consummate a Business Combination will be successful or successful within
the Combination Period. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As is customary for a special purpose acquisition company, if the Company is not
able to consummate a Business Combination during the Combination Period, it will
cease all operations and redeem the Public Shares. Management plans to continue
its efforts to consummate a Business Combination during the Combination Period.
Critical Accounting Estimates and Policies
The preparation of financial statements and related disclosures in conformity
with U.S. 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. The Company has identified the following as its critical accounting
estimates and policies:
Class A Common Stock Subject to Possible Redemption
The Company accounts for the shares of Class A Common Stock subject to possible
redemption in accordance with the guidance in Topic 480, "Distinguishing
Liabilities from Equity." Shares of Class A Common Stock subject to mandatory
redemption are classified as a liability instrument and are measured at fair
value. Conditionally redeemable shares of Class A Common Stock (including shares
of Class A Common Stock that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company's control) are classified as
temporary equity. At all other times, shares of Class A Common Stock are
classified as stockholders' equity. The shares of Class A Common Stock feature
certain redemption rights that are considered to be outside of the Company's
control and subject to occurrence of uncertain future events. Accordingly, as of
September 30, 2022 and December 31, 2021, shares of Class A Common Stock subject
to possible redemption are presented as temporary equity, outside of the
stockholders' deficit section of the Company's condensed balance sheets.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable shares of Class A Common Stock to equal
the redemption value at the end of each reporting period. (less amounts to be
paid for taxes and $100,000 of interest to pay dissolution expenses).
Immediately upon the closing of the Initial Public Offering, the Company
recognized a measurement adjustment from initial book value to redemption amount
value. The change in the carrying value of redeemable shares of Class A Common
Stock resulted in charges against additional paid-in capital and accumulated
deficit.
Derivative Financial Instruments
The Company evaluates its financial instruments, including the Public Warrants,
the Private Placement Warrants and the over-allotment option, to determine if
such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 480, "Distinguishing Liabilities from
Equity", and ASC Topic 815, "Derivatives and Hedging." The assessment considers
whether the instruments are freestanding financial instruments pursuant to ASC
480, meet the definition of a liability pursuant to ASC 480, and whether the
instruments meet all of the requirements for equity classification under ASC
815. Under the guidance in ASC 815, the Public Warrants, the Private Placement
Warrants and the overallotment option do not meet the criteria for equity
treatment and must be recorded as a liability at fair value as of the closing
date of the Initial Public Offering (i.e., March 15, 2021) and re-valued at each
reporting date in accordance with ASC 820, "Fair Value Measurement," with
changes in the fair value reported in the statements of operations. Derivative
assets and liabilities are classified on 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 twelve (12) months of the balance sheet
date.
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Income Taxes
The Company follows the asset and liability method of accounting for income
taxes under ASC 740, "Income Taxes." 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.
ASC 740 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. The Company recognizes accrued interest and penalties related to
unrecognized tax benefits as income tax expense. There were no unrecognized tax
benefits and no amounts accrued for interest and penalties as of September 30,
2022 and December 31, 2021. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material
deviation from its position.
The provision for income taxes was deemed to be de minimis for the three and
nine months ended September 30, 2022 and 2021. As of September 30, 2022 and
December 31, 2021, the Company's deferred tax asset had a full valuation
allowance of $144,377 and $201,863 recorded against it, respectively.
The Company has identified the United States as its only "major" tax
jurisdiction. The Company is subject to income taxation by major taxing
authorities since inception. These examinations may include questioning the
timing and amount of deductions, the nexus of income among various tax
jurisdictions and compliance with federal and state tax laws. The Company's
management does not expect that the total amount of unrecognized tax benefits
will materially change over the next twelve months.
Recent Accounting Standards
Our management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" and under the JOBS Act are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We elected to delay the adoption of new or
revised accounting standards and, as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an independent registered public accounting firm's
attestation report on our system of internal control over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, as amended, (iii) comply with any requirement that may be adopted by the
Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the independent registered public accounting firm's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis), and (iv) disclose certain
executive compensation related items such as the correlation between executive
compensation and performance and comparisons of our Chief Executive Officer's
compensation to median employee compensation. These exemptions are applicable to
us for a period of five (5) years from the date of completion the Initial Public
Offering or until we are no longer an "emerging growth company," whichever is
earlier.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2022 and
December 31, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an administrative services
agreement to pay monthly recurring expenses of up to $20,000 for office space
and administrative and support services to our Sponsor. The administrative
services agreement terminates upon the earlier of the completion of a Business
Combination or our liquidation.
The underwriters are entitled to deferred underwriting fees of $6,125,000. The
deferred underwriting fees will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we complete an
initial Business Combination, subject to the terms of the underwriting
agreement. The underwriters are not entitled to any interest accrued on the
deferred underwriting fees.
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