GLOBAL TECHNOLOGY ACQUISITION CORP. I References to the "Company," "our," "us" or "we" refer toGlobal 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 Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSEC filings. Overview We are a blank check company incorporated onFebruary 9, 2021 as aCayman Islands exempted company for the purpose of effecting a Business Combination that we have not yet identified. 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;
• 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.
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;
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• 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, industryand 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 condensed financial statements, as ofJune 30, 2022 we had approximately$1,011,000 of cash and approximately$1,166,000 of 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 raise capital or to complete our initial Business Combination will be successful.
Results of Operations and Known Trends or Future Events
Our entire activity fromFebruary 9, 2021 (inception) throughOctober 25, 2021 , was in preparation for a Public Offering, and since our Public Offering throughJune 30, 2022 , our activity has been limited to the search for a prospective 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 endedJune 30, 2022 , we had net income of approximately$4,208,000 and$7,948,000 , respectively, which consisted of an approximately$4,100,000 and$7,995,000 , respectively, in change in fair value of derivative warrant liabilities, and approximately$275,000 and 296,000, respectively, of interest income on investments held in Trust Account, partly offset by approximately$167,000 and$343,000 , 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. For the three months endedJune 30, 2021 and the period fromFebruary 9, 2021 (inception) toJune 30, 2021 , our net loss and loss from operations was$49,000 and$54,000 , respectively, consisting primarily of formation costs since our activities were primarily devoted or organizational activities and those activities necessary to preparation for our Public Offering. As discussed further in Note 5 to the financial statements (and below), the Company accounts for its outstanding Public Warrants and Private Placement Warrants as derivative liabilities in the accompanying 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
Liquidity and Going Concern
Our liquidity needs were satisfied prior to the completion of the Public
Offering through (i)
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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), 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 including the underwriters' over-allotment option exercise. 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 will be invested only inU.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 directU.S. government treasury obligations. The remaining$1,775,000 has not been held in the Trust Account. We believe that we have sufficient working capital atJune 30, 2022 to continue our operations for at least 12 months beyond when we report our current results and likely longer. However, if we cannot complete a Business Combination prior toApril 25, 2023 , we could be forced to wind up our operations and liquidate unless we receive an extension approval from our shareholders. These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. Our plan to deal with this uncertainty is to complete a Business Combination prior toApril 25, 2023 (or up toOctober 25, 2023 in two separate three month extensions subject to satisfaction of certain conditions, including the deposit of$2,000,000 for each three month extension, into the Trust Account, or as extended by the Company's shareholders in accordance with our amended and restated memorandum and articles of association). There is no assurance that our plans to consummate a Business Combination will be successful or successful within 18 months from the closing of the Public Offering (or 24 months as previously described). The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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 exemptCayman Islands company, we do not expect to pay income taxes in theCayman Islands or inthe 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 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. 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 Sponsor, its 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 Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to$1,500,000 of such loans may be convertible into warrants of the post-Business Combination entity at a price of$1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial Business Combination, we do not expect to seek loans from parties other than our Sponsor, its affiliates or our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account. 20
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We expect our primary liquidity requirements during that period to include approximately$300,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful Business Combinations;$260,000 for legal and accounting fees related to regulatory reporting obligations;$650,000 for office space, administrative and other support services;$500,000 for directors and officers insurance liability premiums;$55,000 for Nasdaq continued listing fees; and$135,000 for general working capital that will be used for miscellaneous expenses and reserves. We have entered into an administrative services agreement pursuant to which we pay our Sponsor or an affiliate thereof$10,000 per month (which is a portion of the amounts referenced in the immediately preceding sentence) for office space, utilities, secretarial and administrative services provided to members of our management team as well as the services to be provided by one or more investment professionals, creation and maintenance of our website, and miscellaneous additional services and other expenses and obligations of our Sponsor. Furthermore, we may enter into consulting arrangements directly or indirectly with individuals (who will not be our executive officers) to provide similar services. These amounts are estimates and may differ materially from our actual expenses. 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 Public 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.
Critical Accounting Policies
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. The Company has identified the following as its critical accounting
policies:
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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.
Net Income (Loss) per Ordinary Share:
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." Net income or loss per ordinary share is computed by dividing net income or loss applicable to ordinary 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 warrants sold in the Public Offering and Private Placement to purchase an aggregate of 20,500,000 Class A ordinary shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per ordinary share is the same as basic income (loss) per ordinary share for the periods presented. AtJune 30, 2022 the Company has two classes of 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 For the six months ended
June 30, 2022 June 30, 2022
Class A Class B Class A Class BNumerator:
Allocation of income - basic and diluted 3,366,000 842,000 6,358,000 1,590,000 Denominator: Basic and diluted weighted average ordinary shares outstanding 20,000,000 5,000,000
20,000,000 5,000,000
Basic and diluted net income per ordinary share $ 0.17$ 0.17 $ 0.32 $ 0.32 22
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The Company did not have two classes of shares outstanding during the periods endedJune 30, 2021 and therefore net loss of approximately$49,000 and$54,000 , respectively, in the three months endedJune 30, 2021 and the period fromFebruary 9, 2021 (inception) toJune 30, 2021 was allocated 100% to Class B shareholders, net of shares that were subject to forfeiture, leading to net loss per share in that period of$0.01 and$0.01 respectively.
Investments held in Trust Account:
The Company complies with FASB ASC 820, "Fair Value Measurements," 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$204,000,000 was deposited into the Trust Account. The proceeds in the Trust Account may be invested in eitherU.S. government treasury bills 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 of 1940, as amended, and that invest solely inU.S. government treasury obligations. The Company classifies itsU.S. government treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 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-maturityU.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 three months or less when acquired to be cash equivalents. The Company has no cash equivalents atJune 30, 2022 orDecember 31, 2021 .
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of$250,000 . The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company's assets and liabilities, which qualify as financial instruments under FASB ASC 820, "Fair Value Measurements and Disclosures," 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, "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. 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, 2022 , 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.
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Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 andSEC Staff Accounting Bulletin (SAB) Topic 5A-"Expenses of Offering." Costs incurred in connection with preparation for the Public Offering were approximately$11,725,000 including approximately$725,000 of Company costs together with$11,000,000 of underwriters' discount. Such costs have been allocated to equity instruments ($11,234,000 ) and warrant liability ($491,000 ), based on their relative values, and charged to equity or expense (in the case of the portion allocated to warrant liability) upon completion of the Public Offering. The Company retained an independent financial advisor in connection with the Public Offering and paid an agreed amount of$175,000 that was included in offering costs, net of full reimbursement by the underwriters.
Class A Ordinary Shares Subject to Possible Redemption:
All of the 20,000,000 Class A ordinary shares sold onOctober 25, 2021 as part of a Unit in the Public Offering discussed in Note 3 contain a redemption feature which allows for the redemption of common shares under the Company's liquidation or tender offer/stockholder approval provisions. 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, its articles of association 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$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 the Company's 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, atJune 30, 2022 andDecember 31, 2021 , 20,000,000 of the 20,000,000 Public Shares were classified outside of permanent equity. Class A ordinary shares subject to redemption consist of: Gross proceeds of Public Offering $
200,000,000
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
Remeasurement of carrying value to redemption value at
300,000
Class A ordinary shares subject to redemption$ 204,300,000 24
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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, "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 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. There were no derivative financial instruments as ofJune 30, 2022 andDecember 31, 2021 .
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